SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
THE SPORTS AUTHORITY, INC.
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No Fee Required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
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|_| Check box if any part of the fee is offset as provided by Exchange Act
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the Form or Schedule and the date of its filing.
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THE SPORTS AUTHORITY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 1, 2000
---------------------------------
Dear Stockholder:
The 2000 annual meeting of stockholders of The Sports Authority, Inc. will
be held on Thursday, June 1, 2000, at 9:00 A.M. at the Company's corporate
headquarters, 3383 North State Road 7, Fort Lauderdale, Florida 33319. At the
meeting, stockholders will act on the following matters:
1. Election of three Class III Directors, each for a term of three
years;
2. Approval of the 2000 Stock Option and Stock Award Plan;
3. Approval of the amendment of the Director Stock Plan;
4. Ratification of the appointment of Ernst & Young LLP as the
Company's independent public accountants for fiscal 2000; and
5. Any other matters that properly come before the meeting.
You must be a stockholder of record at the close of business on April 3,
2000 to vote at the meeting or any adjournments or postponements of the meeting.
If you plan to attend the meeting, please mark the appropriate box on the
enclosed proxy card. You may be asked to present valid picture identification,
such as a driver's license or passport, at the meeting. If you do not indicate
attendance on the proxy card you will be required to present acceptable proof of
stock ownership for admission to the meeting. This will include a copy of a
brokerage statement reflecting your stock ownership as of the record date if you
hold your shares in "street name" (that is, through a broker or other nominee).
Regardless of whether you will attend, please vote by completing and
promptly mailing your proxy card in the prepaid return envelope provided. Voting
by mail will not prevent you from voting in person at the meeting.
By Order of the Board of Directors,
/s/ Frank W. Bubb
Ft. Lauderdale, Florida FRANK W. BUBB
April 28, 2000 Secretary
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TABLE OF CONTENTS
ABOUT THE MEETING ......................................................... 1
What is the purpose of the annual meeting? ............................ 1
Who can vote? ......................................................... 1
Who can attend the meeting? ........................................... 1
What constitutes a quorum? ............................................ 1
How do I vote? ........................................................ 2
Can I change my vote after I return my proxy card? .................... 2
How do I vote my 401(k) and Employee Stock Purchase Plan shares? ...... 2
Who counts votes? ..................................................... 2
What are the Board's recommendations? ................................. 2
What vote is required to approve each item? ........................... 3
Who pays the proxy solicitation costs? ................................ 3
How do I submit stockholder proposals and Director nominations? ....... 3
STOCK OWNERSHIP ........................................................... 3
Who are the largest owners of the Company's stock? .................... 3
How much stock do the Company's Directors and executive officers own? . 4
PROPOSAL 1: ELECTION OF DIRECTORS ......................................... 5
Nominees for Election as Class III Directors .......................... 5
Directors Continuing in Office ........................................ 6
How often did the Board meet during fiscal 1999? ...................... 7
What committees has the Board established? ............................ 7
How are Directors compensated? ........................................ 7
Executive Compensation ................................................ 8
Compensation Committee Report on Executive Compensation ............. 8
Executive Compensation for Last Three Fiscal Years .................. 10
Stock Options ....................................................... 11
Retirement Benefits ................................................. 13
Employment and Severance Agreements ................................. 13
Comparative Stockholder Return ...................................... 15
Section 16(A) Beneficial Ownership Reporting Compliance ............... 16
Certain Transactions .................................................. 16
PROPOSAL 2: APPROVAL OF THE 2000 STOCK OPTION AND STOCK AWARD PLAN ........ 17
PROPOSAL 3: APPROVAL OF THE AMENDMENT OF THE DIRECTOR STOCK PLAN .......... 21
PROPOSAL 4: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS .................................................... 24
EXHIBIT A The Sports Authority, Inc. 2000 Stock Option and Stock Award Plan
EXHIBIT B The Sports Authority, Inc. Director Stock Plan
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THE SPORTS AUTHORITY, INC.
3383 North State Road 7
Ft. Lauderdale, Florida 33319
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PROXY STATEMENT
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This proxy statement is being mailed on or about April 28, 2000, in
connection with the solicitation of proxies by the Board of Directors of The
Sports Authority, Inc. for use at the annual meeting of stockholders and at any
postponements or adjournments of the meeting. The meeting will be held on
Thursday, June 1, 2000, at 9:00 A.M. at the Company's corporate headquarters,
3383 North State Road 7, Fort Lauderdale, Florida 33319.
ABOUT THE MEETING
What is the purpose of the annual meeting?
At the Company's annual meeting, stockholders will act upon the matters
outlined in the notice of meeting on the cover page of this proxy statement,
including the election of three Class III Directors for three-year terms,
approval of the 2000 Stock Option and Stock Award Plan (which will not increase
the number of shares reserved for issuance under the Company's stock option
plans), approval of the amendment to the Director Stock Plan (which will
increase the number of shares reserved for issuance by approximately 450,000),
and ratification of the appointment of the Company's independent public
accountants. In addition, the Company's management will report on the
performance of the Company during fiscal 1999 and respond to questions from
stockholders.
Who can vote?
If you owned stock at the close of business on the record date, April 3,
2000, you are entitled to receive notice of the annual meeting and to one vote
for each share you owned on that date on each matter to be acted upon at the
meeting, or any postponements or adjournments of the meeting.
Who can attend the meeting?
All stockholders as of the record date, or their duly appointed proxies,
may attend the meeting. A list of stockholders entitled to notice of and to vote
at the meeting will be available for inspection at the meeting and at the
Company's corporate offices for at least ten days before the meeting. Each
stockholder may be asked to present valid picture identification, such as a
driver's license or passport. If you did not indicate attendance on the proxy
card you will be required to present acceptable proof of stock ownership for
admission to the meeting. This will include a copy of a brokerage statement
reflecting your stock ownership as of the record date if you hold your shares in
"street name" (that is, through a broker or other nominee).
What constitutes a quorum?
A quorum is necessary to hold a valid meeting of stockholders. A majority
of the shares outstanding on the record date must be present in person or
represented by proxy to constitute a quorum. If a quorum is not present at the
meeting, the stockholders present in person or represented by proxy will have
the power to adjourn the meeting until a quorum is present in person or by
proxy, with no other notice than announcement at the meeting. Any business that
could have been transacted at the originally noticed meeting can be transacted
at the adjourned meeting at which a quorum is present in person or by proxy. As
of the record date, there were 32,208,176 shares of common stock of the Company
outstanding. Proxies received but marked as "WITHHOLD VOTE", abstentions and
broker non-votes will be included in the calculation of the number of shares
considered to be present at the meeting.
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How do I vote?
If you complete and properly sign the accompanying proxy card and return
it to the transfer agent (as agent for the Company), it will be voted as you
direct. If you attend the meeting, you may deliver your completed proxy card in
person.
Can I change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised if you file with the Secretary of the
Company either a notice of revocation or a duly executed proxy bearing a later
date. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, although attendance at the meeting will not by
itself revoke a previously granted proxy.
How do I vote my 401(k) and Employee Stock Purchase Plan shares?
If you participate in The Sports Authority 401(k) Savings and Profit
Sharing Plan, you may vote the shares allocated to your account (including
unvested shares), as of the record date. You may vote by instructing State
Street Bank and Trust Company, the trustee of the Plan, by completing, properly
signing and returning the proxy card being mailed with this proxy statement to
plan participants.
If you do not send instructions, the shares allocated to your account will
be voted by the trustee in the same proportion that it votes shares for which it
did receive timely instructions.
You may also revoke previously given voting instructions at any time
before the proxy is exercised by filing with the trustee either a written notice
of revocation or a properly completed and signed proxy card bearing a later
date.
If you participate in the Employee Stock Purchase Plan, you may vote your
shares as if you owned them outside the plan.
Who counts votes?
American Stock Transfer and Trust Company, the Company's stock transfer
agent, will count the votes represented by proxy. An employee of American has
been appointed by the Board as an independent inspector of the election.
What are the Board's recommendations?
Unless you give other instructions on your proxy card, the persons named
as proxy holders on the proxy card will vote in accordance with the
recommendations of the Board of Directors. The Board's recommendation follows
the description of each item in this proxy statement. In summary, the Board
recommends a vote:
o For election of the nominated slate of Directors (see page 5);
o For approval of the 2000 Stock Option and Stock Award Plan (see page
17);
o For approval of the amendment of the Director Stock Plan (see page
21); and
o For ratification of the appointment of Ernst & Young LLP as the
Company's independent public accountants for fiscal 2000 (see page
24).
The Company does not know of any business that will be presented for
consideration at the annual meeting other than the items referred to above. If
other matters are properly brought before the meeting, the proxy holders will
vote as recommended by the Board of Directors or, if no recommendation is given,
in their own discretion.
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What vote is required to approve each item?
Election of Directors. The affirmative vote of a plurality of the shares
represented and voting in person or by proxy and entitled to vote at the meeting
is required to elect the Directors nominated. Abstentions and broker non-votes
will not be counted as votes cast in connection with determining the plurality
required to elect a Director and, as a result, will have no effect on the
outcome of that vote.
Other Items. For each other item, the affirmative vote of a majority of
the shares represented and voting in person or by proxy and entitled to vote at
the meeting is required for approval. In determining whether a 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.
Who pays the proxy solicitation costs?
Your proxy is solicited by the Board of Directors. The Company pays the
cost of soliciting your proxy and reimburses banks, brokerage firms, voting
trustees and other custodians, nominees and fiduciaries for reasonable costs
incurred by them in forwarding proxy material to you. The Company has retained
Corporate Investor Communications, Inc. to aid in the solicitation of proxies
for a fee of approximately $4,000. Solicitation will be made by mail, and may be
made personally or by telephone by officers and regular employees of the Company
without compensation other than their regular compensation.
How do I submit stockholder proposals and Director nominations?
Under Rule 14a-8 under the Securities Exchange Act of 1934, any proposal
you intend to present at the Company's 2001 annual meeting must be received by
the Company's Secretary at the corporate headquarters no later than December 29,
2000 to be eligible for inclusion in the proxy materials for the meeting.
Under the Company's bylaws, you can nominate a person for election to the
Board or propose any matter for consideration at an annual meeting if you are a
stockholder of record on the record date for the meeting and on the date you
give the Secretary of the Company at the corporate headquarters timely notice of
the nomination or proposal in proper written form. The notice must be delivered
not less than 60 or more than 90 days prior to the date of the annual meeting.
If the Company gives less than 70 days notice to stockholders, or prior public
disclosure of the date of the annual meeting, then your notice does not have to
be received by the Company's Secretary until the close of business on the tenth
day after the earlier of the day the Company discloses the annual meeting date
or mails notice of the meeting date. To be in proper written form, your notice
must contain specified information about you and the matter to be presented at
the meeting or the person whom you propose to nominate.
STOCK OWNERSHIP
Who are the largest owners of the Company's stock?
The following table sets forth certain information concerning the
beneficial ownership of shares by each stockholder who is known by the Company,
to own beneficially more than 5% of the outstanding shares. This information is
shown as of December 31, 1999 and is based on the most recent Schedules 13G
filed by these stockholders with the Securities and Exchange Commission, unless
otherwise indicated. Except as otherwise indicated, these stockholders have sole
voting power and sole dispositive power with respect to the number of shares
shown.
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Percent of Shares
Name and Address Number of Shares Outstanding
- ---------------- ---------------- -----------------
JUSCO Co., Ltd. ......................... 3,030,000 9.4%
51-1, 1-chome,
Nakase, Mihama-ku,
Chiba-shi, Chiba 261, Japan
Joseph L. Harrosh ....................... 3,202,707(1) 9.9%(1)
40900 Grimmer Blvd.
Fremont, CA 94538
Dimensional Fund Advisors Inc. .......... 2,031,600(2) 6.3%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
- ----------
(1) These shares include 960,807 shares which Mr. Harrosh had the right to
acquire upon the conversion of $31,356,000 of the Company's 5.25%
Convertible Subordinated Notes due 2001 (at a conversion price of $32.635
per share). The Company purchased $33,356,000 of the Notes from Mr.
Harrosh after December 31, 1999.
(2) Dimensional Fund Advisors Inc. possesses voting and/or investment power
over the shares that are owned by the four investment companies, group
trusts and accounts that it furnishes investment advice to. Dimensional
disclaims beneficial ownership of the shares.
How much stock do the Company's Directors and executive officers own?
The following table shows the amount of common stock of the Company beneficially
owned by each Director, each Director nominee and the executive officers named
in the Summary Compensation Table on Page 11, and by all Directors, nominees and
executive officers as a group, as of April 3, 2000. 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.
Percent of Shares
Name and Address Number of Shares Outstanding
- ---------------- ---------------- -----------------
Brown, A. David ......................... 233(1) *
Buoniconti, Nicholas A. ................. 19,978(2) *
Burton, Mary Elizabeth .................. 5,800 *
Cohen, Cynthia R. ....................... 8,406 *
Crudele, Anthony F. ..................... 38,229(3) *
Dougherty, Steve ........................ 284,021(2) *
Erving, Julius W. ....................... 9,291 *
Farmer, Carol A. ........................ 18,675(2) *
Flieck, Henry ........................... 57,500(4) *
Hanaka, Martin E. ....................... 253,420(5) *
Mihalko, George R. ...................... 30,000(6) *
Moore, Charles H. ....................... 11,000 *
Quintana, Arthur ........................ 10,654(7) *
Tener, James R. ......................... 10,000(8) *
All Directors, nominees and executive
officers as a group (14 persons) ....... 757,207 2.3%
- ----------
* Represents less than one percent.
(1) This number does not include 6,773 restricted shares granted to Mr. Brown
under the Director Stock Plan, receipt of which he has elected to defer
under the terms of that Plan.
(2) Included in the number shown for each of these Directors is 5,607 shares
with respect to which options were granted under the Director Stock Plan.
(3) Includes 3,434 shares held under the 401(k) Savings and Profit Sharing
Plan; 14,307 shares with respect to which employee stock options are
exercisable; and 20,487 unrestricted shares.
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(4) Includes 7,500 restricted shares granted under the 1996 Stock Option and
Restricted Stock Plan and 50,000 unrestricted shares.
(5) Includes 50,000 restricted shares granted under the 1996 Stock Option and
Restricted Stock Plan and 203,420 unrestricted shares.
(6) Includes 7,500 restricted shares granted under the 1996 Stock Option and
Restricted Stock Plan and 22,500 unrestricted shares.
(7) Includes 10,000 restricted shares granted under the 1996 Stock Option and
Restricted Stock Plan; 454 shares held under the 401(k) Savings and Profit
Sharing Plan; and 200 unrestricted shares.
(8) Consists of 10,000 restricted shares granted under the 1996 Stock Plan.
PROPOSAL 1
ELECTION OF DIRECTORS
Nominees for Election as Class III Directors
The Board is divided into three classes, having three-year terms that
expire in successive years. There are currently nine Directors, of whom three
are in each class. Mary Elizabeth Burton, who was elected to the Board as a
Class I Director in July 1999, was reassigned by the Board to Class III on March
28, 2000.
The current term of office of the Directors in Class III, A. David Brown,
Mary Elizabeth Burton and Carol Farmer, expires at the 2000 annual meeting. The
Board proposes that each of these current Class III Directors be re-elected for
a new term of three years commencing at the meeting and ending in 2003 or until
their respective successors are elected and qualified or until their earlier
death, resignation or removal.
Each of the nominees has consented to serve a three-year term as a
Director. To the best knowledge of the Board, each of the nominees is and will
be able to serve if elected at the annual meeting. If any of them becomes
unavailable to serve as a Director, the Board may designate a substitute
nominee. In that case, the persons named as proxies will vote for the substitute
nominee designated by the Board.
The Board recommends that stockholders vote "FOR" the Company's nominees
as Directors.
Set forth below is a brief biography of each nominee and of all other
Directors who will continue in office after the meeting.
CLASS III
Term Expiring in 2003
A. David Brown, age 57. Director since December 1998
Mr. Brown has served as the Managing Director of Pendleton James
Associates since May 1997, after having served as Vice President of the
Worldwide Retail/Fashion Specialty Practice at Korn/Ferry International from
June 1994 to May 1997, as Senior Vice President for Human Resources at R. H.
Macy & Co. from 1983 to June 1994, and as a director of R. H. Macy & Co. from
1987 to 1992. Mr. Brown is also a director of Zale Corporation (a jewelry
retailer) and Selective Insurance Group, Inc. (insurance) and a member of the
Board of Trustees of Drew University.
Mary Elizabeth Burton, age 48. Director since July 1999
Ms. Burton currently serves as Chairman and Chief Executive Officer of BB
Capital, Inc., a company which she founded in 1992 to provide advisory services
and make investments in small to medium sized retail businesses. Previously, Ms.
Burton served as the Chief Executive Officer of a number of companies, including
Supercuts, Inc., PIP Printing and Cosmetic Center, Inc. Ms. Burton is also a
director of Staples, Inc. (an office supply retailer).
Carol Farmer, age 55. Director since January 1995
Ms. Farmer has been the President of Carol Farmer Associates, Inc., a
trend forecasting and retail consulting firm, since she founded it in 1984.
Prior to that, Ms. Farmer was Executive Vice President of Lerner Stores and
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Vice President of American Can Company (now Primerica). She is also a director
of The Lowes Companies, Inc. (a home improvement retailer).
Directors Continuing in Office
CLASS I
Term Expiring in 2001
Charles H. Moore, age 70. Director since May 1999
Mr. Moore has served as Deputy to the Chairman of The Committee to
Encourage Corporate Philanthropy since November 1999 and as Chairman of Xpander
Pak, Inc., a manufacturer of protective packaging since 1992. Mr. Moore served
as the Director of Athletics at Cornell University, between 1994 and August
1999. Previously, Mr. Moore served as Executive Vice President of Illinois Tool
Works, Inc. in 1991 and 1992, and as President and Chief Executive Officer of
Ransburg Corporation from 1988 to 1992. Mr. Moore is a director of Elcotel, Inc.
(telecommunications). In addition, Mr. Moore serves as a Public Sector Director
of the United States Olympic Committee and as Chairman of that organization's
Audit Committee; as a Governor of the National Art Museum of Sport, of which he
is the former Chairman and Chief Executive Officer; as a Commissioner of the
Smithsonian American Art Museum; and as a Regent of Mercersburg Academy.
Julius W. Erving, age 50. Director 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 Converse, Inc.
(athletic shoes), Saks Holdings Inc. (retail department stores), Darden
Restaurants, Inc. and Clark Atlanta University.
Martin E. Hanaka, age 50. Director since February 1998
Mr. Hanaka was elected as Chairman in November 1999, after having been
elected as Chief Executive Officer in September 1998, and having been elected as
Vice Chairman in February 1998. From August 1994 until October 1997, Mr. Hanaka
served as President and Chief Operating Officer and a director of Staples, Inc.,
an office supply 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 Trans-World Entertainment (movie and video retail
chain under several brands).
CLASS II
Term expiring in 2002
Nicholas A. Buoniconti, age 59. Director since January 1996
Mr. Buoniconti serves as a national spokesman and fundraiser for The Miami
Project to Cure Paralysis, as co-host of "Inside the NFL" on the HBO cable
network, and as a consultant to Columbia Laboratories (pharmaceutical research
and development), after having served as Vice Chairman, Chief Operating Officer
and a director of that company from 1992 through 1998. Mr. Buoniconti is also a
director of American Bankers Insurance Group (insurance).
Cynthia R. Cohen, age 47. Director since December 1998
Ms. Cohen is the founder of Strategic Mindshare, a strategic management
consulting firm serving the retail, distribution, and commercial development
industries, and has served as its President since the Company's inception in
1990. Prior to that, Ms. Cohen was a partner in management consulting with
Deloitte & Touche. Ms.
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Cohen is a director of Loehmann's (a clothing retailer) and Office Depot (an
office supply retailer). In addition, Ms. Cohen serves on the Executive Advisory
Board for the Center for Retailing Education at the University of Florida and is
a director of the New World Symphony.
Steve Dougherty, age 52. Director 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 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.
How often did the Board meet during fiscal 1999?
The Board of Directors held five regular meetings and three special
meetings during fiscal 1999. All of the Directors attended at least 75% of the
meetings of the Board and the committees on which they served, except Mr.
Erving, who missed three of ten meetings.
What committees has the Board established?
The Board of Directors has standing Audit, Compensation, Governance and
Executive Committees. These committees held a total of fourteen meetings. The
membership and functions of the committees are as follows.
Audit Committee. 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 four meetings during fiscal 1999. The
Directors on the Audit Committee are Messrs. Dougherty (Chair) and Brown and Ms.
Burton.
Compensation Committee. 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 four
meetings during fiscal 1999. The Directors on the Compensation Committee are Ms.
Cohen (Chair), Mr. Buoniconti and Ms. Farmer.
Governance Committee. The purpose of the Governance Committee is to
consider nominees for election as Directors, including those recommended by
stockholders, and to nominate individuals for election as Directors, to consider
issues relating to the governance of the Board and other matters prescribed by
the Board. The Governance Committee held two meetings during fiscal 1999. The
Directors on the Governance Committee are Ms. Farmer (Chair) and Messrs.
Buoniconti, Erving and Moore.
Executive Committee. 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 four meetings
during fiscal 1999. The Directors on the Executive Committee are Messrs. Hanaka
(Chair), Buoniconti and Dougherty, and Ms. Cohen and Ms. Farmer.
How are Directors compensated?
Directors who are also employees of the Company receive no additional
compensation for service as Directors. Non-employee Directors receive the
following compensation.
During the current Director Stock Plan Year. On April 1, 1999, the Board
approved the following compensation to be paid to Directors under the Director
Stock Plan, as amended on February 1, 1999, for their service on the Board
during the plan year beginning May 28, 1999 and ending on the date of the 2000
annual meeting:
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Annual Retainer $25,000 paid in the form of restricted shares
having a fair market value* equal to that
amount
Committee Chair Retainer $2,500 paid in the form of restricted shares
having a fair market value* equal to that
amount
Stock Options to purchase 1,500 shares at fair market
value*
Meeting Fees $2,500 in cash for each Board meeting
attended in person
$500 in cash for each Board meeting attended
by telephone
$500 in cash for each committee meeting
attended
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* fair market value is the closing price on the NYSE transactions tape of a
share on the trading day immediately prior to the date of grant.
The restricted shares and options described above were granted on May 28,
1999 to members of the Board who were Directors or committee chairs on that date
and on the last business day of the plan quarter in which a member became a
Director or committee chair after that date in proportion to the number of days
remaining in the plan year. Meeting fees are paid quarterly.
The restrictions on restricted shares lapse on the earlier of the end of
the plan year or proportionally on the date the member ceases being a Director,
in which case the remaining restricted shares are forfeited. The stock options
are nonqualified under the Internal Revenue Code of 1986, as amended, and 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
member ceases being a Director. If a member 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 stock options will be fully vested
and exercisable. No shares granted or purchased under the plan may be sold until
at least six months after the date of grant or purchase.
Other amounts received during fiscal 1999. During fiscal 1999,
non-employee Directors received the following compensation under the Director
Stock Plan before amendment on February 1, 1999 in effect for the plan year
beginning May 1998 and ending May 27, 1999: $25,000 annual retainer paid in the
form of restricted shares with a fair market value equal to that amount, $1,000
worth of unrestricted shares for each Board meeting attended and $500 worth of
unrestricted shares for each committee meeting attended. In addition, on
February 1, 1999, the Compensation Committee, acting under the Director Stock
Plan as amended on that date, granted an option to purchase 3,600 shares at
$4.0625 per share to Messrs. Buoniconti, Dougherty, Erving and Kemp, and Ms.
Farmer, as compensation for their attendance at several special meetings and
availability for consultation on merger activities and management changes during
1998.
Effective with the Director Stock Plan Year beginning on June 2, 2000. If
the stockholders approve the proposed amendment of the Director Stock Plan at
the meeting, Directors will have the option to elect in advance to receive all
or part of their annual retainer in the form of options to purchase shares
rather than receiving restricted shares. See Proposal 3, "Approval of the
Amendment of the Director Stock Plan", on page 21.
Executive Compensation
Compensation Committee Report on Executive Compensation
The Compensation 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 and long-term compensation
opportunities which facilitate the Company's ability to attract,
retain and motivate executive talent;
8
<PAGE>
o In determining short-term compensation, a greater emphasis on annual
incentive bonus opportunities than on base salary;
o Share ownership opportunities that align the interests of Company
executives with the long-term interests of stockholders;
o Performance unit opportunities that focus management's attention on
creating sustained growth in earnings per share; 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 ownership and other incentives and less
upon base salary.
The primary components of the Company's fiscal 1999 executive compensation
program are: (1) base salary; (2) annual cash incentive opportunities provided
through the Annual Incentive Bonus Plan; and (3) long-term incentive
opportunities provided through the grant of stock options and restricted stock
under the Company's stock option plans and the grant of performance units under
the Company's Performance Unit Plan. Each of these components is discussed
separately in this report.
Short-Term Compensation. In determining fiscal 1999 compensation, the Committee
compared total cash compensation levels for executive officers to compensation
paid to executives at other retail companies with which the Company competes for
executive talent. 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 15. 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 uses an independent compensation consulting firm
to analyze competitive data and develop executive officer salary ranges, and
generally attempts to set base salaries of executive officers at 40% of the
"market" rate. Mr. Hanaka's base salary rate of $666,750 was established in
September 1998 when he became Chief Executive Officer and was not changed during
fiscal 1999.
Annual Incentive Bonuses. Under the Company's Annual Incentive 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, and are set at 75% of the "market" rate,
based upon information provided by the Committee's independent compensation
consulting firm. The Bonus Plan requires that a threshold level of performance
be established, below which no bonus award would be made, levels of performance
at which specified percentages of the target bonus would be paid, and a maximum
level of performance above which no additional bonus would be paid. The Bonus
Plan specifies that the maximum bonus payable to the Chief Executive Officer of
the Company is limited to three times the salary range midpoint for the
position. All other executive officers are limited to a maximum bonus payment of
two times their salary range midpoint.
The Bonus Plan is coordinated with the Company's stock option plans 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.
For fiscal 1999, 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 under the Bonus Plan.
Long-Term Compensation. The Company intends to provide executive officers with
long-term compensation opportunities that align the executive's interest with
the long-term interests of stockholders and fosters an ownership culture. The
combination of stock options, stock grants and a cash based Performance Unit
Plan are
9
<PAGE>
intended to provide executive officers with long-term compensation opportunities
at the 75th percentile of the market based upon information provided by the
Committee's independent compensation consulting firm.
Stock Options and Restricted Stock. The current 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, and 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 Option and Restricted 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 current plans provide 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 fiscal 1999,
no bonus replacement options were granted.
As noted on page 17, the Board has merged the 1994 Stock Option Plan and
the 1996 Stock Option and Restricted Stock Plan, and the merged plan has been
restated as the 2000 Stock Option and Stock Award Plan, subject to stockholder
approval at the meeting. A description of the 2000 plan and the reasons for
adopting it are set forth starting on page 17.
Performance Units. Under the Company's Performance Unit Plan, executive
officers and certain other employees are eligible to receive cash payments based
upon the Company's attainment of an earnings per share target measured over a
three year performance period unless otherwise specified by the Committee. The
number of target performance units (with an initial unit value of $1.00 and a
maximum unit value of $2.00) are established at the beginning of a performance
period for each participant based on the participant's role and responsibilities
and competitive levels of long-term compensation. The Plan is designed to be
self-funding out of the Company's earnings and involves no stockholder dilution.
The Committee intends to make periodic grants of performance units to the
Company's management, including its executive officers. During fiscal 1999, Mr.
Hanaka received a grant of (1) 350,000 performance units on April 1, 1999, of
which 50% are eligible for payment at the completion of fiscal 2000 with the
balance eligible for payment at the completion of fiscal 2001; and (2) 500,000
performance units on January 11, 2000, of which 100% are eligible for payment at
the completion of fiscal 2002.
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.
Cynthia Cohen (Chair)
Nicholas Buoniconti
Carol Farmer
Executive Compensation for Last Three Fiscal Years
The following table shows the compensation for each of the last three
fiscal years awarded to (1) the Chief Executive Officer of the Company at any
time during fiscal 1999, (2) the four other most highly compensated executive
officers of the Company who served in those capacities at the end of fiscal 1999
and whose annual compensation during fiscal 1999 exceeded $100,000, and (3)
other persons who served as executive officers during fiscal 1999 who would have
been included in this table as an executive officer if they had been serving in
such capacity at the end of fiscal 1999.
10
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- --------------------------
Shares
Fiscal Restricted Underlying All Other
Name and Principal Position Year Salary Bonus Stock Awards Options(#) Compensation(1)
- --------------------------- ------ -------- -------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Martin E. Hanaka (2) 1999 $666,750 $ -0- $ -0- 250,000 $ 18,464
Chairman and Chief 1998 550,671 -0- 618,750(3) 350,000 -0-
Executive Officer
James R. Tener (4) 1999 209,654 -0- 20,625(6) 175,000 -0-
Executive Vice President
and Chief Operating
Officer
George R. Mihalko (4) 1999 108,192 -0- 15,469(6) 150,000 -0-
Executive Vice President
and Chief Financial
Officer
Henry Flieck (5) 1999 286,154 -0- 15,469(6) 67,000 100,000(7)
Executive Vice President 1998 86,154 -0- -0- 20,000 -0-
-Growth and Development
Arthur Quintana (5) 1999 243,538 -0- 20,625(6) 67,000 72,100(8)
Senior Vice President- 1998 64,615 -0- -0- 40,000 -0-
Supply Chain
Anthony F. Crudele (9) 1999 201,444 -0- -0- 7,000 59,545(9)
Senior Vice President 1998 198,692 -0- -0- 7,000 9,190
and Chief Financial 1997 180,000 -0- -0- 7,000 4,736
Officer
</TABLE>
- ----------
(1) "All Other Compensation" in fiscal 1999 includes Company contributions
credited under the 401(k) Savings and Profit Sharing Plan and the
Supplemental 401(k) Savings and Profit Sharing Plan.
(2) Mr. Hanaka became Chairman in November 1999, after having become Chief
Executive Officer in September 1998.
(3) This amount represents the value of the 50,000 restricted shares granted
to Mr. Hanaka under the 1996 Stock Option and Restricted Stock Plan on
February 2, 1998 which vest on February 2, 2001. As of January 29, 2000,
the value (based on the closing price of the shares of $2.5625 on that
date) of these 50,000 restricted shares was $128,125.
(4) Messrs. Tener and Mihalko joined the Company in June and September 1999,
respectively.
(5) Messrs. Flieck and Quintana both joined the Company in October 1998.
(6) This amount represents the value of the 10,000 restricted shares granted
to each of Messrs. Tener and Quintana and the 7,500 restricted shares
granted to each of Messrs. Mihalko and Flieck, all under the 1996 Stock
Option and Restricted Stock Plan on November 9, 1999 which vest on January
2, 2001. As of January 29, 2000, the value (based on the closing price of
the shares of $2.5625 on that date) of each of Messrs. Tener and
Quintana's 10,000 restricted shares was $25,625 and of each of Messrs.
Mihalko and Flieck's 7,500 restricted shares was $19,219.
(7) This amount represents a guaranteed bonus payment made in conjunction with
Mr. Flieck's employment by the Company.
(8) This amount includes a $70,000 guaranteed bonus payment made in
conjunction with Mr. Quintana's employment by the Company.
(9) Mr. Crudele's employment terminated effective November 1, 1999. See
"Employment and Severance Agreements" on page 13 for a description of the
termination agreement between the Company and Mr. Crudele pursuant to
which he received severance payments totaling $52,589 in fiscal 1999.
Stock Options
The following table shows stock options granted during fiscal 1999 to the
executive officers named in the Summary Compensation Table on this page. These
option grants are also included under the heading "Shares Underlying Options" in
that table. The hypothetical realizable values for each option grant are shown
based on compound annual rates of share price appreciation of 0%, 5% and 10%
from the grant date to the expiration date for each option. The assumed rates of
appreciation are for illustration purposes only and are not intended to predict
future share prices, which will depend upon market conditions and the Company's
future performance and prospects.
11
<PAGE>
Stock Options Granted in Fiscal 1999
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates
Number of % of Total of Share Price
Shares Number of Options Appreciation
Underlying Granted to Exercise For Option Term ($)
Options Employees in Price Expiration ------------------------------
Name Granted(1) Fiscal 1999 ($/Share) Date 0% 5% 10%
- ----- ----------- ---------------- -------- --------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Martin E. Hanaka 250,000 17.01 $5.00 05/27/09 -0- $786,118 $1,992,178
James R. Tener 100,000 6.80 2.81 01/11/10 -0- 176,877 448,240
75,000 5.10 4.44 06/14/09 -0- 209,304 530,417
George R. Mihalko 75,000 5.10 2.81 01/11/10 -0- 132,657 336,180
75,000 5.10 3.31 09/09/09 -0- 156,241 395,945
Henry Flieck 50,000 3.40 2.81 01/11/10 -0- 88,438 224,120
17,000 1.16 4.06 02/01/09 -0- 43,433 110,068
Arthur Quintana 50,000 3.40 2.81 01/11/10 -0- 88,438 224,120
17,000 1.16 4.06 02/01/09 -0- 43,433 110,068
Anthony F. Crudele (2) 7,000 .48 4.06 11/01/99 -0- -0- -0-
</TABLE>
- ----------
(1) All options granted in fiscal 1999 are exercisable at a price equal to the
fair market value of a share on the date of grant. All such options become
exercisable three years after date of grant if the executive remains in
the employ of the Company through that date. Exercisability is accelerated
upon death, total and permanent disability or a change in control of the
Company.
(2) These options terminated on November 1, 1999 upon the termination of Mr.
Crudele's employment.
The following table shows for the executive officers named in the Summary
Compensation Table on page 11 the number and value of all stock options
exercised during fiscal 1999 and the stock options held at the end of the fiscal
year.
Aggregated Option Exercises in Fiscal 1999 and
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 Fiscal 1999 at End of Fiscal 1999
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ---- ----------- -------- --------------------------- ----------------------------
<S> <C> <C> <C> <C>
Martin E. Hanaka -0- -0- -0-/600,000 $-0-/$-0-
James R. Tener -0- -0- -0-/175,000 -0-/-0-
George R. Mihalko -0- -0- -0-/150,000 -0-/-0-
Henry Flieck -0- -0- -0-/87,000 -0-/-0-
Arthur Quintana -0- -0- -0-/107,000 -0-/-0-
Anthony F. Crudele -0- -0- 19,557/-0- -0-/-0-
</TABLE>
- ----------
(1) Calculated based on the closing price of the shares of $2.5625 on January
29, 2000, less the option exercise price.
12
<PAGE>
Long-Term Incentive Plans - Awards in Fiscal 1999
<TABLE>
<CAPTION>
Estimated Future Payouts
Number of Performance -----------------------------------------
Name Units (#) Period (1) Threshold Target Maximum
- ---- --------- ---------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Martin E. Hanaka 500,000 2000-2002 $250,000 $500,000 $1,000,000
350,000 1999-2000(50%) 175,000 350,000 700,000
1999-2001(50%)
James R. Tener 200,000 2000-2002 100,000 200,000 400,000
George R. Mihalko 175,000 2000-2002 87,500 175,000 350,000
Henry Flieck 175,000 2000-2002 87,500 175,000 350,000
170,000 1999-2000(50%) 85,000 170,000 340,000
1999-2001(50%)
Arthur Quintana 100,000 2000-2002 50,000 100,000 200,000
90,000 1999-2000(50%) 45,000 90,000 180,000
1999-2001(50%)
Anthony F. Crudele 90,000(2) 1999-2000(50%) 45,000 90,000 180,000
1999-2001(50%)
</TABLE>
- ----------
(1) References are to the Company's fiscal years.
(2) These unvested units were forfeited upon Mr. Crudele's termination of
employment effective November 1, 1999.
Retirement Benefits
The Company has an unfunded Supplemental Executive Retirement Plan for its
senior executives, including the executive officers named in the Summary
Compensation Table on page 11. The following table shows the annual retirement
benefits that a plan participant 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, 2000. Plan
benefits vest after seven years of employment or upon a change in control, as
defined in the Plan, of the Company.
Pension Plan Table
Annual Retirement Benefits
Years of Service (1)
Average Final
Compensation(2) 5 10 15 20
- -------------- --------- --------- ---------- ---------
$ 200,000 $ 17,500 $ 35,000 $ 52,500 $ 70,000
400,000 35,000 70,000 105,000 140,000
600,000 52,500 105,000 157,500 210,000
800,000 70,000 140,000 210,000 280,000
- ----------
(1) For purposes of calculating years of service, no more than twenty years of
service is used to calculate retirement benefits. As of February 1, 2000,
Messrs. Hanaka, Tener, Flieck, Quintana and Crudele had 2, 1, 1, 1 and 9
years of service, respectively, as defined in the plan.
(2) Average final compensation under the plan is the average of compensation
for the three 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.
Employment and Severance Agreements
The Company has entered into a new employment agreement with Mr. Hanaka
and new severance agreements with each of the other executives named in the
Summary Compensation Table on page 11 except Mr. Crudele, all as approved by the
Board on January 11, 2000. The Company also entered into a termination
13
<PAGE>
agreement with Mr. Crudele in connection with the termination of his employment.
Each of these agreements is described below.
Martin E. Hanaka
Mr. Hanaka serves as Chief Executive Officer of the Company pursuant to an
employment agreement dated January 11, 2000 and expiring December 31, 2001
(subject to earlier termination in certain circumstances as described below).
Under the agreement the Company agrees to pay Mr. Hanaka, if it terminates his
employment other than for cause (as defined in the agreement), or if his
employment is terminated by death, monthly payments through December 31, 2001
equal to his monthly base salary rate at the date 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. In addition, all of Mr.
Hanaka's unvested stock options would vest on the termination of his employment.
If there is a change in control (as defined in the agreement) of the
Company, and if Mr. Hanaka's employment is terminated (1) by the Company other
than for cause (as defined in the agreement), (2) at his election for good
reason (as defined in the agreement), or (3) by his death, in each case within
two years after the change in control, the Company will pay him a lump sum cash
payment equal to 2.99 times the sum of (a) his annual base salary rate at the
date of termination or immediately prior to the change in control, whichever is
greater, and (b) the "on plan" bonus amount targeted for him under the Bonus
Plan for the fiscal year in which he is terminated or the fiscal year
immediately prior to the change in control, whichever is greater. If Mr. Hanaka
terminates his employment (other than for good reason) within one year after a
change in control and before December 31, 2001, and at such time he is not the
chief executive officer (other than due to his resignation from or his refusal
to serve in the position) of (1) the surviving entity of any merger or
consolidation resulting from the change in control, if the surviving entity is
not more than 50% owned by any other entity, or (2) the entity which, as a
result of the change in control, owns more than 50% of the stock of the Company
or the surviving entity of any merger or consolidation, the Company will pay him
severance pay for one year consisting of twelve monthly payments equal to the
sum of (a) one-twelfth of his annual base salary rate at the date of
termination, and (b) one-twelfth of the "on plan" bonus amount targeted for him
under the Bonus Plan for the fiscal year in which he is terminated or the fiscal
year immediately prior to the change in control, whichever is greater. Under the
agreement, the Company is required to pay a gross-up for any excise taxes due if
a severance payment made following a change in control of the Company
constitutes an "excess parachute payment" under section 280G of the Internal
Revenue Code.
The agreement obligates Mr. Hanaka not to compete against the Company,
solicit its employees, disparage it, or disclose confidential information about
the Company for one year after the termination of his employment (or the later
of one year or until December 31, 2001 if the Company terminates his employment
other than for cause and in the absence of a change in control).
Messrs. Tener, Mihalko, Flieck and Quintana
In conjunction with Mr. Mihalko's employment in September 1999, the
Company agreed to pay him guaranteed bonus amounts of $50,000 after 6 months of
employment on March 9, 2000 and after 12 months of employment on September 9,
2000.
The Company has entered into new severance agreements dated January 11,
2000 and expiring November 30, 2001 with each of Messrs. Tener, Mihalko, Flieck
and Quintana. Each agreement will automatically renew for successive one-year
periods unless either party notifies the other at least 60 days prior to the end
of the current term that the agreement will not be renewed.
Under each agreement, the Company agrees to pay the executive if it
terminates his employment other than for cause (as defined in the agreement),
severance pay for one year at his base salary rate at the date of termination.
In addition, on the next date when bonuses are paid under the Company's Bonus
Plan in which the executive participated when he was terminated, the Company
will pay him a lump sum amount equal to the bonus the executive would have
received if he had remained employed by the Company through that date. However,
if there is a change in control (as defined in the agreement) of the Company,
and if the executive's employment is terminated within two years thereafter (1)
by the Company other than for cause (as defined in the agreement) or (2) at his
election for good reason (as defined in the agreement), the Company will pay him
a lump sum cash
14
<PAGE>
payment equal to two times the sum of (a) his annual base salary rate at the
date of termination or immediately prior to the change in control, whichever is
greater, and (b) the "on plan" bonus amount targeted for him under the Bonus
Plan for the fiscal year in which he is terminated or the fiscal year
immediately prior to the change in control, whichever is greater. Under each
agreement, the Company is required to pay a gross-up for any excise taxes due if
a severance payment made following a change in control of the Company
constitutes an "excess parachute payment" under Section 280G of the Internal
Revenue Code.
Each agreement obligates the executive not to compete against the Company,
solicit its employees, disparage it, or disclose confidential information about
the Company for one year after his employment is terminated by the Company other
than for cause, and for two years after any other termination of his employment,
except that these obligations do not apply if the Company is required to pay the
executive as described above for termination following a change in control of
the Company.
Anthony F. Crudele
Mr. Crudele's employment was terminated by mutual consent with the Company
on November 1, 1999. The Company and Mr. Crudele entered into a termination
agreement dated October 11, 1999. Under the agreement, the Company agreed to pay
Mr. Crudele severance pay at his then current base salary rate for seven months.
Mr. Crudele agreed not to compete against the Company for seven months after the
date of the agreement, and to not solicit its employees, disparage it, or
disclose confidential information about the Company for a period of one year
from the date of the agreement.
Comparative Stockholder Return
The following line graph compares the cumulative total stockholder return
on the shares from January 20, 1995 through January 29, 2000 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 period from January 31, 1995 through January 31, 2000. In
accordance with the rules of the Securities and Exchange Commission, the returns
are indexed to a value of $100 at the beginning date 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
[LINE CHART]
<TABLE>
<CAPTION>
Cumulative Total Return
------------------------------------------------------
1/20/95 1/26/96 1/24/97 1/23/98 1/24/99 1/29/00
<S> <C> <C> <C> <C> <C> <C>
THE SPORTS AUTHORITY, INC. 100 105 152 95 39 22
S & P 500 100 139 175 222 295 325
DOW JONES RETAILERS - ALL SPECIALTY 100 106 126 192 334 314
</TABLE>
15
<PAGE>
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 and any holders of more than ten
percent of the shares 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 of these Section 16(a) reports are required to be furnished to the
Company. To the Company's knowledge, based solely on a review of the copies of
Section 16(a) reports furnished to the Company for fiscal 1999, and on
representations furnished to the Company indicating that no Form 5 was due, all
reports were filed on a timely basis.
Certain Transactions
JUSCO Co., Ltd.
In March 1999, the Company and JUSCO Co., Ltd., a major Japanese retailer
that owns 9.4% of the Company's outstanding shares, entered into a comprehensive
restructuring of the ownership, service and license agreements governing their
joint venture, Mega Sports Co., Ltd. Mega Sports was formed in 1995 for the
purpose of developing and operating The Sports Authority stores in Japan. At the
end of fiscal 1999, Mega Sports operated 19 stores in Japan. Under the
restructuring, JUSCO paid $1.1 million to the Company for 32% of the shares of
Mega Sports, reducing the Company's ownership interest in Mega Sports from 51%
to 19%. In May 1999 JUSCO made an additional capital contribution to Mega
Sports, not matched by the Company, which further reduced the Company's
ownership to 8.4%. As a result of the reduction in ownership, in fiscal 1999 the
Company discontinued consolidation of the results of operations of Mega Sports.
The Company has an option to purchase additional shares of Mega Sports from
JUSCO at the same price per share in yen as the price received by the Company,
escalated at 5% per year for three years, and at market value thereafter. The
option expires when Mega Sports' shares become publicly traded, or when the
Company owns 30% of Mega Sports' shares, whichever is earlier. The new joint
venture agreement confirms that the Company has no liability for Mega Sports'
debt, but if the Company owns 30% of Mega Sports, it would have proportionate
liability for that debt.
In conjunction with the ownership restructuring, the Company entered into
a new trademark, technology and know-how license agreement with Mega Sports, for
which Mega Sports must pay the Company royalties at the rate of 1.0% of gross
sales in 1999, 1.1% of gross sales in 2000 and 1.2% of gross sales in 2001 and
thereafter until 2005. In fiscal 1999, the total amount of this royalty was
$1,649,000. Mega Sports has the option of extending the license agreement for
three ten-year periods expiring in 2035. JUSCO has guaranteed Mega Sports'
payments to the Company under the new license agreement under certain
conditions. Under the Company's new services agreement with Mega Sports, the
Company has agreed to furnish certain services, for which Mega Sports has agreed
to fully reimburse the Company for costs and make two payments of $500,000 each
to the Company in May 1999 and January 2000.
Global Sports, Inc.
On September 24, 1999, Global Sports, Inc., the Company's joint venture
partner in TheSportsAuthority.com, Inc., granted to each of Messrs. Tener,
Mihalko, Flieck and Quintana a nonqualified option to purchase 2,000 shares of
Global's common stock, in each case at an exercise price of $21.625 per share
under Global's 1996 Equity Incentive Plan. On November 15, 1999, Global granted
to Mr. Flieck a nonqualified option to purchase 2,500 shares of Global's common
stock and granted to each Director, except Mr. Hanaka, a nonqualified option to
purchase 5,000 shares of Global's common stock, at an exercise price of $21.50
per share under the same Plan. The Compensation Committee approved the grants to
non-employee Directors on November 9, 1999. These options vest over a five year
period at the rate of twenty percent per year on each anniversary of the grant
date and have a ten year term.
16
<PAGE>
PROPOSAL 2
APPROVAL OF THE 2000 STOCK OPTION AND STOCK AWARD PLAN
On March 28, 2000, upon the recommendation of its Compensation Committee,
the Board approved the 2000 Stock Option and Stock Award Plan (the 2000 Plan),
as a continuation and restatement of the 1994 Stock Option Plan (the 1994 Plan)
and the 1996 Stock Option and Restricted Stock Plan (the 1996 Plan) which have
been merged into the new 2000 Plan, subject to approval by the Company's
stockholders at the meeting. The complete text of the 2000 Plan is set forth in
Exhibit A. APPROVAL OF THE 2000 PLAN WILL NOT RESULT IN ANY INCREASE IN THE
TOTAL NUMBER OF SHARES FOR WHICH GRANTS MAY BE MADE. If the stockholders do not
approve the 2000 Plan at the meeting, the 1994 Plan and the 1996 Plan will each
separately remain in effect according to their terms.
The Board recommends that Stockholders vote "FOR" approval of the 2000
Plan.
Reasons for Establishing the 2000 Plan
The Board has established the 2000 Plan in order to consolidate the 1994
and 1996 Plans and provide greater flexibility in structuring grants of stock
options and stock awards, and to attract, retain and reward officers and other
key employees, and consultants and advisors who perform services for the
Company. The principal differences between the 2000 Plan and the 1994 and 1996
Plans are as follows:
o The 2000 Plan permits grants to consultants and advisors who perform
services for the Company, while the 1994 and 1996 Plans do not.
o The 2000 Plan gives the Compensation Committee broad authority to
establish the vesting, exercise periods and other terms of options
and stock awards. Under the 1994 and 1996 Plans, there was a minimum
one-year vesting period for all options and a minimum six-month
vesting period for all restricted shares, among other requirements.
o The 2000 Plan allows the Compensation Committee to designate stock
awards granted to an employee as performance-based compensation
under Section 162(m) of the Internal Revenue Code (see "Federal
Income Tax Consequences" below). Restricted shares under the 1996
Plan did not qualify as performance-based compensation under Section
162(m).
o The 2000 Plan permits the grant of unrestricted stock awards, in
addition to options and restricted shares. The 1994 Plan only
permitted the grant of options, and the 1996 Plan permitted the
grant of options and restricted shares.
o The 2000 Plan increases the maximum number of shares for which
options and stock awards may be granted to any person during any
calendar year to 1,000,000 shares. Under the 1994 Plan, the maximum
number of shares for which options may be granted to any person
during any fiscal year is 250,000. Under the 1996 Plan, the maximum
number of shares for which options may be granted to any person
during the term of the Plan is 300,000 and the maximum number of
restricted shares that may be granted to any person is 120,000.
o The 2000 Plan provides that each option must be granted at an
exercise price not less than the fair market value of a share on the
date of grant. The 1994 and 1996 Plans allowed options to be granted
at a price below fair market value under certain circumstances.
o The 2000 Plan allows an optionee to pay the option price (1) in
cash, (2) in shares, (3) by payment through a broker, or (4) by any
other method approved by the Compensation Committee. The 1994 and
1996 Plans only allowed the optionee to pay the option price in cash
or shares.
o The 2000 Plan allows an optionee to exercise options before they
vest and to receive restricted shares that will vest over the
remainder of the option's vesting period.
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o The 2000 Plan allows the Compensation Committee to pay optionees in
cash or shares for the amount by which their options are "in the
money" on a change in control of the Company, but only in the case
of options granted after the 2000 Plan is approved.
Description of the Plan
Effective Date, Effect on Previously Granted Options, and Term
The 2000 Plan will become effective on June 1, 2000, subject to approval
by the stockholders at the meeting. The 2000 Plan will not affect any rights of
holders of outstanding options and restricted shares under the terms of the 1994
and 1996 Plans. The term during which options or stock awards may be granted
under the Plan will expire on March 28, 2006, the expiration date of the 1996
Plan; the 1994 Plan's scheduled expiration date is December 31, 2004.
Administration
The 2000 Plan is administered by the Compensation Committee. The Committee
has discretion and authority to construe and interpret the Plan, to make factual
determinations and to establish and amend rules for the administration of the
Plan. However, the Board may ratify or approve any grants it deems appropriate.
Shares Subject to the 2000 Plan; Adjustments
Approval of the 2000 Plan will not result in an increase in the number of
shares for which options and stock awards may be granted. The total number of
shares which remain authorized for issuance under the 1994 and 1996 Plans
together is 4,273,783 of which 3,204,338 shares are subject to currently
outstanding option grants, 283,010 shares are subject to currently outstanding
restricted share grants, and 786,435 shares remain available for grants. The
number of shares reserved for grants under the 2000 Plan is also 4,273,783
shares. All shares subject to grants that expire or are canceled, surrendered or
terminated for any reason (including grants made under the 1994 and 1996 Plans)
will be available for new grants under the 2000 Plan.
The 2000 Plan limits the aggregate number of shares for which options or
stock awards may be granted to any person during any calendar year to 1,000,000
shares, and limits the number of shares that may be granted as stock awards to
2,000,000.
The Compensation Committee will adjust these limits, the number or class
of shares covered by outstanding grants, and the price per share of outstanding
grants if there is any change in the number or class of shares through share
dividends, recapitalization, or similar corporate transactions.
Amendment of the 2000 Plan
The Board may amend, suspend or discontinue the 2000 Plan from time to
time. The stockholders must approve any amendment for which stockholder approval
is required under applicable provisions of the Internal Revenue Code or stock
exchange requirements.
Eligibility
The Compensation Committee may grant options and stock awards to officers
and other key employees of the Company, and consultants and advisors who perform
services for the Company. The Company estimates that there are currently
approximately 650 employees eligible to participate in the 2000 Plan, 30 of whom
are officers.
Stock Options
The Compensation Committee determines who will receive options, the number
of options granted, and each option's term, vesting and other provisions. Each
option will be a non-qualified stock option, unless it is specifically
designated by the Compensation Committee as an incentive stock option under
Section 422 of the Internal Revenue Code.
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In addition to the Compensation Committee's broad discretion to grant
options, it may grant options to employees in lieu of bonuses under any annual
bonus plan. The Compensation Committee will determine the method of valuing
options and bonuses for this purpose, and may grant options of equal, greater or
lesser value than the bonuses the options would replace. The Compensation
Committee may also grant options that permit the optionee to exercise the
options before they vest and receive restricted shares that will vest over the
option's vesting period. An optionee may elect to terminate any unexercised
non-qualified option at any time.
The option price of each option granted under the 2000 Plan may not be
less than the fair market value of a share on the date of grant. The optionee
may pay the option price in:
o Cash,
o Shares (subject to any restrictions the Compensation Committee may
impose),
o Payment through a broker, or
o Any other method as approved by the Compensation Committee.
The term of each option may not exceed ten years from the date of grant.
The Compensation Committee will establish the terms for vesting, the exercise
period in the event of termination of employment and other conditions of the
option. However, upon termination of employment as a result of death,
disability, or after attaining age 65 and completing ten years of service, an
optionee's options will automatically vest and may be exercised for up to three
years after termination of employment.
Options are not transferable except to a beneficiary upon death or by will
or the laws of descent and distribution, except that the Compensation Committee
may permit an optionee to transfer non-qualified stock options to members of the
optionee's family or to a trust or other entity established for family members.
Stock Awards
The Compensation Committee determines to whom stock awards are granted,
the number of stock awards, the nature and duration of any restrictions and the
terms and conditions of each grant. The Compensation Committee will determine
for each grant any period during which transferability will be restricted and
any conditions which must be met in order for the grant to become vested.
Generally, a grantee must remain an employee or continue to provide services in
order for stock awards to vest. However, this requirement will be waived upon
termination of employment as a result of death, disability, or after attaining
age 65 and completing ten years of service.
The Compensation Committee may designate the grant of a stock award to an
officer or other key employee as performance-based compensation under Section
162(m) of the Internal Revenue Code (see the description of Section 162(m) under
"Federal Income Tax Consequences" below). The Compensation Committee may
determine that the grant of, or lapse of restrictions with respect to, stock
awards will be based on the attainment of objective performance goals that are
established by the Compensation Committee at the beginning of a designated
performance period. The performance goals for performance-based grants may
relate to the grantee, the grantee's business unit or the performance of the
Company as a whole, or any combination. The performance goals will be based on
one or more of the following objective business criteria relating to the Company
or its business units: return on equity, assets, capital or investment, pre-tax
or after-tax profit levels, expense reduction levels, implementation of critical
projects or processes, level of sales, changes in stock price, market share, or
other strategic objective business criteria relating to revenue, market
penetration, geographic business expansion, cost targets or acquisitions or
divestitures. At the end of the performance period, the Compensation Committee
will determine whether and to what extent the performance goals were met and the
extent to which stock awards will be granted or the restrictions on stock awards
will lapse. The maximum number of shares for which stock awards that are
designated as performance-based compensation may be granted to any employee for
any year in a performance period is 500,000 shares. The Compensation Committee
may establish terms for the lapse of restrictions on stock awards in the event
of death, disability, or other circumstances.
Restricted stock awards are not transferable except by will or the laws of
descent and distribution. Except for the restrictions and limitations imposed by
the Compensation Committee, a grantee holding stock awards will have
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all of the rights of a record holder of the shares, including the right to
receive dividends paid on those shares and the right to vote them at meetings of
the Company's stockholders.
General Condition
All unexercised options and non-vested stock awards may be terminated if
an optionee or grantee engages in behavior such as fraud, embezzlement, or gross
negligence that is not in the best interest of the Company.
Change in Control
If a change in control occurs, all outstanding options will automatically
accelerate and become fully exercisable, and the restrictions and conditions on
all outstanding stock awards will immediately lapse. Upon a change in control,
the Compensation Committee may also determine that unexercised options granted
after the 2000 Plan is approved must be surrendered for a payment in cash or
stock equal to the amount by which the fair market value of the shares subject
to the options exceeds the exercise price, or the Compensation Committee may
terminate unexercised options after giving optionees an opportunity to exercise
the options.
A change in control means any of the following:
o any person acquires more than 20% of the voting power of the
Company's stock;
o the Company's stockholders approve a merger with or into another
corporation or a sale or other disposition of the Company's assets,
or adopt a plan of liquidation; or
o during any three-year period, the persons who at the beginning of
the period constitute a majority of the Board cease to constitute a
majority of the Board, unless the nomination or election of each new
Director was approved by at least a majority of the Directors then
still in office who were Directors at the beginning of the period.
Federal Income Tax Consequences
The current federal income tax consequences of grants under the 2000 Plan
are described below.
Tax Deductibility under Section 162(m)
Section 162(m) of the Internal Revenue Code disallows a public company's
deductions for employee compensation exceeding $1,000,000 per year for the chief
executive officer and the four other most highly compensated executive officers.
Section 162(m) contains an exception for performance-based compensation that
meets specific requirements. The 2000 Plan is intended to permit all options to
qualify as performance-based compensation. The Compensation Committee may grant
stock awards that are based on the attainment of objective performance goals and
are intended to qualify as performance-based compensation.
Tax Treatment of Options
An optionee will not be subject to federal income tax upon the grant of a
non-qualified stock option. Upon the exercise of a non-qualified stock option,
the optionee will recognize ordinary compensation income in an amount equal to
the excess, if any, of the then fair market value of the shares acquired over
the exercise price. The Company will generally be able to take a deduction with
respect to this compensation income for federal income tax purposes. The
optionee's tax basis in the shares acquired will equal the exercise price plus
the amount taxable as compensation to the optionee. Upon a sale of the shares
acquired upon exercise, any gain or loss is generally long-term or short-term
capital gain or loss, depending on how long the shares are held. The required
holding period for long-term capital gain is presently more than one year. The
optionee's holding period for shares acquired upon exercise will begin on the
date of exercise.
An employee who receives incentive stock options generally incurs no
federal income tax liability at the time of grant or upon exercise of the
options. However, the spread will be an item of tax preference which may give
rise to alternative minimum tax liability at the time of exercise. If the
optionee does not dispose of the shares before the date that is two years from
the date of grant and one year from the date of exercise, the difference between
the
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exercise price and the amount realized upon disposition of the shares will
constitute long-term capital gain or loss, as the case may be. Assuming both
holding periods are satisfied, no deduction will be allowable to the Company for
federal income tax purposes in connection with the option. If, within two years
of the date of grant or within one year from the date of exercise, the optionee
disposes of the shares, the optionee will generally realize ordinary
compensation income at the time of the disposition equal to the difference
between the exercise price and the lesser of the fair market value of the stock
on the date of exercise or the amount realized on the disposition. The amount
realized upon such a disposition will generally be deductible by the Company for
federal income tax purposes.
Tax Treatment of Stock Awards
If a grantee receives an unrestricted stock award, the grantee will
recognize compensation income upon the grant of the stock award. If a grantee
receives restricted shares, the grantee normally will not recognize taxable
income upon receipt of the restricted shares until the shares are transferable
by the grantee or no longer subject to a substantial risk of forfeiture,
whichever occurs earlier. When the shares are either transferable or no longer
subject to a substantial risk of forfeiture, the grantee will recognize
compensation income in an amount equal to the fair market value of the shares
(less any amount paid for such shares) at that time. A grantee may, however,
elect to recognize ordinary compensation income in the year the restricted
shares are granted in an amount equal to the fair market value of the shares
(less any amount paid for the shares) at that time, determined without regard to
the restrictions. The Company will generally be entitled to a corresponding
deduction at the same time, and in the same amount, as the grantee recognizes
compensation income with respect to a stock award. Any gain or loss recognized
by the grantee upon subsequent disposition of the shares will be capital gain or
loss.
The preceding 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 options and stock
awards under the 2000 Plan.
Benefits Under the 2000 Plan
On February 10, 2000 the Compensation Committee granted options to
purchase 250,000 shares to Mr. Hanaka under the 1994 Plan at an option price of
$2.4375 per share. On February 15, 2000, the Compensation Committee granted
options to purchase an additional 250,000 shares to Mr. Hanaka, subject to and
effective upon stockholder approval of the 2000 Plan, at an option price equal
to the fair market value of a share on the date of approval by stockholders.
These options will vest on the third anniversary of their grant date and have a
term of ten years.
Market Price of Shares
The closing price of the Company's shares, as reported in The Wall Street
Journal, New York Stock Exchange--Composite Transactions, for April 18, 2000 was
$2.75.
PROPOSAL 3
APPROVAL OF THE AMENDMENT OF THE DIRECTOR STOCK PLAN
In April 2000, upon the recommendation of the Compensation Committee, the
Board amended the Director Stock Plan, subject to approval by the Company's
stockholders. The complete text of the Plan, as amended, is set forth in Exhibit
B. On May 29, 1997, the stockholders approved the amendment and restatement of
the Plan. On February 1, 1999, the Board amended the Plan to eliminate the
ability of Directors to elect to receive their annual retainers in the form of
options rather than restricted shares, to permit discretionary option grants to
Directors, and to permit the payment of meeting fees in cash rather than shares.
On November 9, 1999, the Board amended the plan to increase the number of shares
issuable thereunder from 150,000 to 156,861 to accommodate grants of options and
restricted shares in accordance with pre-existing Director compensation policy
to Mary Elizabeth Burton, who joined the Board during the current Plan Year.
The Board recommends that stockholders vote "FOR" approval of the
amendment of the Plan.
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Reasons for Amending the Plan
The Board amended the Plan in order to
o increase the number of shares issuable thereunder from 156,861 to
600,000,
o extend the Plan's term from December 31, 2004 to the end of the Plan
Year ending at the 2009 annual meeting of stockholders, and
o allow Directors to elect to receive their annual retainers and
committee chair retainers in the form of options rather than
restricted shares.
Description of the Plan
Purpose
The purpose of the Plan is to increase the proprietary interest in the
Company of its non-employee Directors by providing further opportunity for
ownership of shares, and to increase the incentives for the non-employee
Directors to contribute to the success of the Company's business.
Effective Date and Term
The amended Plan will become effective upon approval by the stockholders
at the meeting, and will expire at the end of the Plan Year ending at the 2009
annual meeting of stockholders. Grants may be made during the term of the Plan,
and grants outstanding on the Plan's expiration will continue in accordance with
their terms.
Administration
The Plan is administered by the Compensation Committee, except that the
Board may reserve the right to approve grants under the Plan. The Committee has
authority and discretion to construe and interpret the Plan. All actions by the
Committee will be conclusive and binding on all parties.
Shares Subject to the Plan; Adjustments
The number of shares reserved for the grants under the current Plan is
156,861, substantially all of which have been issued or reserved for issuance.
The number of shares reserved for grants under the amended Plan is 600,000. If
any outstanding grants are forfeited, expire unexercised or otherwise terminate,
the shares allocable to the terminated portion of such grant may again be
subject to a grant under the Plan. If there is any extraordinary dividend, share
dividend, recapitalization, merger, share split, warrant or rights issuance,
combination or exchange of shares or similar transaction, the number and type of
shares available for grant, the number and type of shares covered by outstanding
grants and the price per share of outstanding option grants shall be
appropriately adjusted by the Committee, and the Committee may make other
adjustments as it deems appropriate.
Amendment of the Plan
The Board may from time to time amend or terminate the Plan, provided that
no amendment that requires stockholder approval in order to comply with
applicable law will be effective unless the amendment is approved by the
Company's stockholders.
Eligibility
Non-employee Directors are eligible to participate in the Plan. There are
currently eight non-employee Directors. Grants are to be made under the Plan as
compensation for services as a Director.
Elections
Under the current Plan, non-employee Directors receive their annual
retainers (currently $25,000) and committee chair retainers (currently $2,500),
if any, in the form of restricted shares and, if the Board so determines,
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will receive their meeting fees (currently cash payments of $2,500 for each
Board meeting and $500 for each committee meeting and each meeting attended
telephonically) in unrestricted shares. Under the amended Plan, each Director
will be able to elect to receive all or any portion of these retainers in the
form of restricted shares or in the form of options to purchase shares, and to
defer the receipt of restricted shares. Each Director's election must be made
before the beginning of the Plan Year to which the election applies. If a
Director joins the Board or is elected chair of a committee during a Plan Year,
the election must be made before the next Board or committee meeting, as
applicable. If a Director makes no election, the Director's retainer(s) will be
paid in the form of restricted shares.
Restricted Shares
Under the Plan, restricted shares are granted on the first business day of
the Plan Year, and will have a fair market value on that date equal to the
portion of the annual retainer and committee chair retainer, if any, which the
Director elects to receive in the form of restricted shares. If a Director joins
the Board or is elected chair of a committee during a Plan Year, restricted
shares which are granted will be granted on the last business day of the Plan
Quarter during which such event occurs, based on the fair market value of the
shares on that date.
Restricted shares may not be sold or transferred (except by will or by the
laws of descent and distribution) between the date of grant and the end of the
Plan Year for which they are granted, except as described below. Except for the
restrictions described in the Plan, a Director holding restricted shares will
have all the rights of a stockholder during such period, including the right to
receive dividends and the right to vote the shares at meetings of stockholders
of the Company.
If a Director ceases to be a member of the Board during the Plan Year for
which restricted shares are granted, the Director will receive a number of
shares based on the portion of the Plan Year during which he or she served as a
Director. Any additional restricted shares will be forfeited. The shares issued
generally cannot be sold for six months after the original date of grant.
However, if a Director ceases to be a Director as a result of death or
disability, or if a change in control of the Company occurs, the restrictions on
the Director's restricted shares will lapse. The definition in the Plan of
"change in control" is identical to that in the 2000 Stock Option and Stock
Award Plan, as described beginning on page 17.
Deferral Election
A Director may elect to defer the receipt of all or part of the shares and
restricted shares to a date after the Director ceases to be a member of the
Board. Deferred shares will be distributed in one or more installments. Deferred
shares will be credited with dividend equivalents as dividends are paid on
outstanding shares. The dividend equivalents will be converted into additional
deferred shares as of the payment date of the dividend.
Options
Under the amended Plan, each Director who elects to receive options for a
Plan Year will have the portion of the annual retainer and committee chair
retainer, if any, which the Director elects to receive in the form of options
converted into an option to purchase shares as of the first business day of the
Plan Year. Each option will be a nonqualified stock option under the Internal
Revenue Code. For purposes of determining the number of options a Director may
receive, the Committee will have sole discretion to determine the value of an
option, but this value may not be less than the greater of $2.50 or the value of
an option to purchase shares for a ten-year period, as determined by the
Black-Scholes option pricing formula.
The option exercise price of each option will be the fair market value of
a share on the date of grant. An option may not be exercised after the first to
occur of (i) ten years after the date of grant or (ii) three months after the
Director ceases to be a Director.
If a Director joins the Board or is elected chair of a committee during a
Plan Year, options which are granted will be granted on the last business day of
the Plan Quarter during which such event occurs, based on the value of an option
and the fair market value of a share on that date.
An option may not be exercised until the end of the Plan Year for which it
is granted and will become exercisable as of that date only if the Director has
continued to serve as a Director throughout the Plan Year. If a
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Director ceases to be a Director during that Plan Year, the option will
terminate, and the Company will grant restricted shares in the amount that would
have been computed for the year if the Director had elected to have his or her
retainer(s) paid in the form of restricted shares. However, if a Director ceases
to be a Director on account of death or disability, or if a change in control of
the Company occurs, his or her options will be fully vested and exercisable.
A Director may pay the option exercise price in cash or in shares (subject
to any restrictions the Committee may impose) valued at the fair market value on
the date notice is received by the Company, or a combination thereof. No option
will be subject to any debts or liabilities of the Director or be assignable or
transferable, except by will or the laws of descent and distribution, and except
that options may be transferred if and to the extent permitted by the Committee.
Federal Income Tax Consequences
The following discussion is based on the Internal Revenue Code as
presently in effect, which is subject to change, and does not purport to be a
complete description of the federal income tax aspects of grants under the Plan.
Tax Treatment of Options
A Director will not be subject to federal income tax upon the grant of an
option. Upon the exercise of an option, the Director will recognize ordinary
compensation income in an amount equal to the excess, if any, of the then fair
market value of the shares acquired over the exercise price. The Company will
generally be able to take a deduction with respect to this compensation income
for federal income tax purposes. The Director's tax basis in the shares acquired
will equal the exercise price plus the amount taxable as compensation to the
Director. Upon a sale of the shares acquired upon exercise, any gain or loss is
generally long-term or short-term capital gain or loss, depending on how long
the shares are held. The required holding period for long-term capital gain is
presently more than one year. The Director's holding period for shares acquired
upon exercise will begin on the date of exercise.
Tax Treatment of Shares and Restricted Shares
Unrestricted shares and restricted shares will be taxed to the Director at
the date they are issued, and the Company will receive a corresponding income
tax deduction at that time. If a Director elects to defer receipt of shares, the
Director will not be taxed on the shares when they are granted. Instead, the
Director will be taxed on the then value of the shares when they are
distributed, and the Company will receive a corresponding income tax deduction
at that time.
Market Price of Common Stock
The closing price of the Company's shares, as reported in The Wall Street
Journal, New York Stock Exchange Composite Transactions, for April 18, 2000 was
$2.75.
PROPOSAL 4
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Subject to stockholder ratification, the Board has reappointed Ernst &
Young LLP as the Company's independent accountants for fiscal 2000. The same
firm has served in this capacity since April 1, 1999, when the Board, acting
upon the recommendation of the Audit Committee, voted to replace the Company's
prior independent accountants, PricewaterhouseCoopers LLP. The stockholders
voted to ratify the appointment of Ernst & Young for fiscal 2000 at the 1999
annual meeting. PricewaterhouseCoopers had served as the independent public
accountants of the Company since 1987. Its report on fiscal 1998 did not contain
any adverse opinion or a disclaimer of opinion and was not qualified or modified
as to uncertainty, audit, scope or accounting principles. During fiscal 1998 and
the subsequent interim period preceding the replacement of
PricewaterhouseCoopers, there
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were no disagreements between the Company and PricewaterhouseCoopers on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of PricewaterhouseCoopers, would have caused it to make a reference
to the subject matter of the disagreements in connection with its report. In
addition, during fiscal 1998 and the subsequent interim period preceding the
replacement of PricewaterhouseCoopers, there were no "reportable events" within
the meaning of Item 304 of the Securities and Exchange Commission's Regulation
S-K. Representatives of Ernst &Young will be present at the annual meeting to
respond to appropriate questions and to make a statement if they desire.
The Board recommends that stockholders vote "FOR" ratification of the
appointment of Ernst & Young LLP as the Company's independent accountants for
fiscal 2000.
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EXHIBIT A
THE SPORTS AUTHORITY, INC.
2000 STOCK OPTION AND STOCK AWARD PLAN
1. Purpose. The Sports Authority, Inc. 2000 Stock Option and Stock Award
Plan (the "Plan") has been established as a continuation and restatement of The
Sports Authority, Inc. 1994 Stock Option Plan (the "1994 Plan") and The Sports
Authority, Inc. 1996 Stock Option and Restricted Stock Plan (the "1996 Plan"),
which have been merged into the Plan, subject to approval by the shareholders of
The Sports Authority, Inc. (the "Company") at its 2000 Annual Meeting of
Shareholders.
The Plan is intended to attract, retain and reward (i) officers and other
key employees of the Company and its "Subsidiaries" (business entities which
have a majority of their equity interests owned directly or indirectly by the
Company), and (ii) consultants and advisors who perform services for the Company
and its Subsidiaries. The Plan is intended to increase the proprietary interest
in the Company of such persons by providing further opportunity for ownership of
the Company's common shares, $.01 par value (the "Shares") and to increase the
incentives to such persons to contribute to the success of the Company's
business.
2. Administration. The Plan shall be administered by the Compensation
Committee of the Board of Directors (the "Board") consisting of not less than
two directors of the Company appointed by the Board (the "Committee"). Members
of the Committee shall be appointed by and serve at the pleasure of the Board.
The Committee may consist of "outside directors" as defined under section 162(m)
of the Internal Revenue Code of 1986, as amended from time to time (the "Code"),
and related Treasury regulations, and "non-employee directors" as defined under
Rule 16b-3, as amended from time to time ("Rule 16b-3") under the Securities
Exchange Act of 1934, as amended from time to time (the "Exchange Act").
The Committee shall have sole discretion and authority to construe and
interpret the Plan, to make factual determinations and to establish and amend
rules for the administration of the Plan. The Committee shall have no obligation
to treat persons uniformly, except to the extent otherwise specifically provided
in the Plan. All actions which may be taken by the Committee under the Plan may
be taken by the Board. All actions by the Committee or the Board may be taken in
its sole discretion and shall be conclusive and binding on all parties.
3. Grants Under the Plan; Shares Reserved. Grants under the Plan may
consist of grants of incentive stock options ("Incentive Stock Options"),
nonqualified stock options ("Nonqualified Stock Options") (Incentive Stock
Options and Nonqualified Stock Options are collectively referred to as
"Options") or restricted or unrestricted stock awards ("Stock Awards"). All
Options and Stock Awards shall be subject to the terms and conditions set forth
herein and to such other terms and conditions consistent with this Plan as the
Committee deems appropriate and as are specified in writing by the Committee to
the individual in (i) a Stock Option Agreement for the grant of an Option or
(ii) a Stock Award Agreement for the grant of Stock Awards (or an amendment to
either of the foregoing). The Committee shall approve the form and provisions of
each Stock Option Agreement and Stock Award Agreement.
The number of Shares reserved for issuance pursuant to Options and Stock
Awards under the Plan shall be 4,273,783 Shares, which is the number of Shares
reserved for issuance under the 1994 Plan and the 1996 Plan (and which includes
all Shares subject to stock options or restricted share grants under the 1994
Plan or 1996 Plan which are cancelled, surrendered or terminated for any
reason), subject to adjustment as described in Section 9 below. In no event may
more than 2,000,000 Shares be used for grants of Stock Awards, subject to
adjustment as described in Section 9 below. The maximum aggregate number of
Shares that shall be subject to grants made under the Plan to any individual
during any calendar year shall be 1,000,000 Shares, subject to adjustment as
described in Section 9 below. Shares to be issued under the Plan may be either
authorized and unissued Shares or issued Shares which shall have been reacquired
by the Company. In the event that any outstanding Options or Stock Awards
(including stock options or restricted shares granted under the 1994 Plan or
1996 Plan) expires or is cancelled, surrendered or terminated for any reason,
the Shares allocable to the unexercised portion of such Options or the unvested
portion of such Stock Awards may again be subjected to a grant or be issued
under the Plan.
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Outstanding stock options and restricted shares granted under the 1994
Plan and the 1996 Plan shall continue in effect according to their terms and
shall not be considered to be amended by this restatement of the prior Plans.
4. Grant of Options.
(a) General Powers of Committee. The Committee may grant Options to
(x) officers and other key employees of the Company or its Subsidiaries
("Employees"), including Employees who are members of the Board, and (y)
consultants and advisors who perform services for the Company or any of its
Subsidiaries ("Key Advisors") (Employees and Key Advisors who receive Options
are referred to as "Optionees"). The Committee shall have sole discretion, in
accordance with the provisions of the Plan, to determine to whom an Option is
granted, the number of Shares covered by the Option and the terms and conditions
of the Option, and shall have the authority to accelerate the vesting or
exercisability of any Option. In making such determinations, the Committee may
consider the position and responsibilities of the Optionee, the nature and value
to the Company of his or her services and accomplishments, his or her present
and potential contribution to the success of the Company, and such other factors
as the Committee may deem relevant, but shall not be required to treat Optionees
uniformly.
(b) Types of Options. Each Option granted under the Plan shall be a
Nonqualified Stock Option unless it is specifically designated by the Committee
at the time of grant as an Incentive Stock Option. An Incentive Stock Option is
intended to meet the requirements of Section 422 of the Code. Incentive Stock
Options may be granted only to Employees of the Company and its subsidiaries
(within the meaning of section 424(f) of the Code). Nonqualified Stock Options
may be granted to Employees and Key Advisors.
(c) Options In Lieu of Bonuses. Pursuant to its powers under Section
4(a), and without limiting the foregoing, the Committee may grant Options to
Employees wholly or partially in lieu of bonuses otherwise payable under any
annual bonus plan of the Company. The Committee shall have sole discretion to
determine the method of valuing such Options and bonuses for this purpose, and
shall be entitled to grant Options of equal, greater or lesser value, as so
determined, than the bonuses that such Options replace. The Committee shall have
sole discretion to vary such valuation methods among individual Optionees and
from one grant to the next.
(d) General Provisions. All Options granted under the Plan shall be
subject to and governed by the provisions of the Plan, including the terms and
conditions set forth in this Section 4 and Section 5 hereof and by such other
terms and conditions, not inconsistent with the Plan, as shall be determined by
the Committee. The date on which an Option shall be granted shall be the date
that the Optionee, the number of Shares optioned and the terms and conditions of
the Option are determined by the Committee, or as otherwise specified by the
Committee. Each Option shall be evidenced by a Stock Option Agreement in such
form as the Committee may from time to time approve.
5. Terms and Conditions of Options.
(a) Option Price. The purchase price of each Option granted under
the Plan shall be determined by the Committee and shall not be less than the
Fair Market Value (as defined below) of a Share on the date of grant of such
Option. An Incentive Stock Option may not be granted to an Employee who, at the
time of grant, owns stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company or any parent or subsidiary,
unless the exercise price per share is not less than 110% of the Fair Market
Value of a Share on the date of grant. Fair Market Value of a Share for purposes
of the Plan shall be deemed to be the closing price on the New York Stock
Exchange Composite Transactions Tape (or its equivalent as determined by the
Committee, if the Shares are not traded on the New York Stock Exchange) of a
Share for the relevant valuation date or, if Shares are not traded on that date,
the trading day immediately prior to the relevant valuation date.
(b) Period of Option, Vesting and When Exercisable.
(i) The Committee shall establish the term of each Option,
which shall not exceed ten years from the date of grant. An Incentive Stock
Option that is granted to an Employee who, at the time of grant, owns stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company, or any parent or subsidiary, may not have a
term that exceeds five years from the date of grant. An Option granted under the
Plan may not be exercised after its term or the applicable time limit specified
in Section 5(b)(iii). Any
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Option not exercised within the aforementioned time period shall automatically
terminate at the expiration of such period.
(ii) The time or times during which Options may become
nonforfeitable ("vest") or become exercisable, and any conditions pertaining to
the vesting or exercisability thereof, shall be determined by the Committee and
specified in the Stock Option Agreement. The Committee may grant Options that
permit the Optionee to exercise the Options before they vest and receive
restricted Shares that will vest over the remainder of the Option's vesting
period. Notwithstanding the foregoing, vesting and exercisability shall be
accelerated if termination of the employment of the Optionee results from death
or total and permanent disability, if termination of the employment of the
Optionee occurs at or after age 65 and the Optionee has ten or more years of
full-time service with the Company or a Subsidiary, or if and to the extent that
the Committee may so determine in its sole discretion.
(iii) An Option may be exercised by an Optionee only while
such Optionee is in the employ of, or providing services to, the Company or a
Subsidiary or within three months thereafter, or within such longer period as
the Committee may establish in its sole discretion, and only if any limitation
upon the vesting of and the right to exercise such option under Section 5(b)(ii)
has been removed or has expired prior to termination of employment and exercise
is not otherwise precluded hereunder; provided that (i) if at the date of
termination of employment, the optionee has ten or more years of full-time
service with the Company or a Subsidiary or if termination of employment results
from death or total and permanent disability, such three month period shall be
extended to three years, and (ii) for then-vested options granted in lieu of
bonuses, such three month period shall be extended to three months after the
date such options were scheduled to first become exercisable. Employment or
service with a Subsidiary shall be deemed terminated on the date a former
Subsidiary ceases to be a Subsidiary of the Company.
(iv) In the event of the disability of an Optionee, an Option
which is otherwise exercisable may be exercised as provided in the Stock Option
Agreement by the Optionee's legal representative or guardian. In the event of
the death of an Optionee, either before or after termination of employment, an
Option which is otherwise exercisable may be exercised as provided in the Stock
Option Agreement (i) in the case of Nonqualified Stock Options, by the person or
persons whom the Optionee shall have designated in writing on forms prescribed
by and filed with the Committee ("Beneficiaries"), or, if no such designation
has been made, by the person or persons to whom the Optionee's rights shall have
passed by will or the laws of descent and distribution ("Successor(s)") or (ii)
in the case of Incentive Stock Options, by the Optionee's Successor. The
Committee may require an indemnity and or such evidence or other assurances as
it may deem necessary in connection with an exercise by a legal representative,
guardian, Beneficiary or Successor.
(c) Exercise and Payment.
(i) Subject to the provisions of Section 5(b), an Option may
be exercised by notice (in the form prescribed by the Committee) to the Company
specifying the number of Shares to be purchased. Payment for the number of
Shares purchased upon the exercise of an Option shall be made in full at the
price provided for in the applicable Stock Option Agreement. Such purchase price
shall be paid (x) by the delivery to the Company of cash (including check or
similar draft) in United States dollars or whole Shares (subject to any
restrictions the Committee may impose), or a combination thereof; (y) by payment
through a broker in accordance with procedures permitted by Regulation T of the
Federal Reserve Board, or (z) by such other method as the Committee approves.
Shares used in payment of the purchase price shall be valued at their Fair
Market Value as of the date notice of exercise is received by the Company. Any
Shares delivered to the Company shall be in such form as is acceptable to the
Company and shall have been held by the Optionee for the requisite period to
avoid adverse accounting consequences to the Company with respect to the Option.
(ii) The Company may defer making delivery of Shares under the
Plan until satisfactory arrangements have been made for the payment of any tax
attributable to exercise of the Option. The Committee may, in its sole
discretion, permit an Optionee to elect, in such form and at such time as the
Committee may prescribe, to pay all or a portion of all taxes arising in
connection with the exercise of an Option by electing to (y) have the Company
withhold whole Shares, or (z) deliver other whole Shares previously owned by the
Optionee having a Fair Market Value not greater than the amount to be withheld;
provided that the Fair Market Value of any
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Shares to be withheld shall not exceed the Optionee's minimum applicable
withholding tax rate for federal (including FICA), state and local tax
liabilities associated with the transaction.
(d) Limits on Incentive Stock Options. Each Incentive Stock Option
shall provide that, if the aggregate Fair Market Value of the stock on the date
of the grant with respect to which Incentive Stock Options are exercisable for
the first time by an Optionee during any calendar year, under the Plan or any
other stock option plan of the Company or a parent or subsidiary, exceeds
$100,000, then the Option, as to the excess, shall be treated as a Nonqualified
Stock Option. The terms "parent" and "subsidiary", when used in the context of
Incentive Stock Option requirements, shall have the meanings given those terms
in Section 424(f) of the Code.
(e) Termination of Option by Optionee. An Optionee may at any time
elect, in a written notice filed with the Committee, to terminate a Nonqualified
Stock Option with respect to any number of shares as to which such Option shall
not have been exercised.
(f) Nontransferability. No Option or any rights with respect thereto
shall be subject to any debts or liabilities of an Optionee, nor be assignable
or transferable except by will or the laws of descent and distribution or, in
the case of Nonqualified Stock Options, as described in subsection (b)(iv)
above; provided that, if and to the extent permitted by the Committee,
Nonqualified Stock Options and related rights may be transferred during the
Optionee's lifetime to one or more of the Optionee's family members or trusts or
other entities established for the benefit of family members, and such
transferees may exercise rights thereunder in accordance with the terms hereof.
(g) Rights as a Stockholder. An Optionee shall have no rights as a
record holder with respect to Shares covered by his or her Option until the date
of issuance to him or her of a certificate evidencing such Shares after the
exercise of such Option and payment in full of the purchase price. No adjustment
will be made for cash dividends for which the record date is prior to the date
such certificate is issued.
6. Grant of Stock Awards
(a) General Powers of Committee. The Committee may grant Stock
Awards, consisting of restricted or unrestricted Shares, to an Employee or Key
Advisor ("Grantees") of the Company or its Subsidiaries upon such terms as the
Committee deems appropriate. The Committee shall have sole discretion, in
accordance with the provisions of the Plan, to determine to whom Stock Awards
are granted, the number of Shares subject to the Stock Awards, the nature and
duration of any restrictions, and the terms and conditions of each grant. In
making such determinations, the Committee may consider the position and
responsibilities of the Employee or Key Advisor, the nature and value to the
Company of his or her services and accomplishments, his or her present and
potential contribution to the success of the Company, and such other factors as
the Committee may deem relevant, but shall not be required to treat eligible
persons uniformly.
(b) General Provisions. Stock Awards granted under the Plan shall be
subject to and governed by the provisions of the Plan and by the terms and
conditions set forth in this Section 6 and by such other terms and conditions,
not inconsistent with the Plan, as shall be determined by the Committee. The
date on which Stock Awards shall be granted shall be the date that the Grantee,
the number of Shares granted and the terms and conditions of the grant are
determined by the Committee, or as otherwise specified by the Committee. Each
grant of Stock Awards shall be evidenced by a Stock Award Agreement in such form
as the Committee may from time to time approve.
(c) Restrictions; Restricted Period.
(i) The Committee shall determine for each grant of Stock
Awards the period, if any, during which transferability shall be restricted and
any conditions which must be met during or at the expiration of such period in
order for the grant to become vested (the "Restricted Period"). If any condition
contained in a grant of Stock Awards is not met within the period of time it is
required to be met, the grant shall be forfeited. Stock Awards may be granted
with or without vesting restrictions, as the Committee determines.
(ii) The conditions which must be met for a grant of Stock
Awards to become vested may include performance goals of whatever type or nature
as the Committee may determine, to be met by the Grantee, the Grantee's business
unit, the Company and its Subsidiaries as a whole, or any combination of the
foregoing. Any
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such performance goal may be waived in whole or in part at any time by the
Committee, in its sole discretion. If the Stock Awards are intended to meet the
requirements of "qualified performance-based compensation" under section 162(m)
of the Code, the provisions of subsection (e) below shall apply.
(iii) Except as otherwise determined by the Committee in the
Stock Award Agreement, the conditions which must be met for a grant of Stock
Awards to become vested shall include the Grantee's continued employment by, or
service to, the Company or its Subsidiaries during the Restricted Period. This
condition shall be deemed satisfied and the Restricted Period shall be deemed
completed (subject to the satisfaction or waiver by the Committee of any
performance goals described in subsection (ii) above) if termination of
employment of the grantee results from death or total and permanent disability,
if termination of employment of the grantee occurs at or after age 65 and the
grantee has ten or more years of full-time service with the Company or a
Subsidiary, or if and to the extent that the Committee may determine in its sole
discretion.
(iv) The Committee may allow Grantees to defer the payment of
Stock Awards and may provide for the payment of dividend equivalents with
respect to deferred Shares.
(d) Designation as Qualified Performance-Based Compensation. The
Committee may determine that Stock Awards granted to an Employee shall be
considered "qualified performance-based compensation" under section 162(m) of
the Code. The provisions of this Section 6(e) shall apply to grants of Stock
Awards that are to be considered "qualified performance-based compensation"
under section 162(m) of the Code.
(i) Performance Goals. When Stock Awards that are to be
considered "qualified performance-based compensation" are to be granted, the
Committee shall establish in writing (i) the objective performance goals that
must be met in order for the Stock Awards to be granted or the restrictions on
the Stock Awards to lapse, (ii) the performance period during which the
performance goals must be met, (iii) the threshold, target and maximum amounts
of Stock Awards that will be granted or for which the restrictions on Stock
Awards shall lapse if the performance goals are met, and (iv) any other
conditions that the Committee deems appropriate and consistent with the Plan and
section 162(m) of the Code. The performance goals may relate to the performance
of the Employee, the Employee's business unit or the Company and its
Subsidiaries as a whole, or any combination of the foregoing. The Committee
shall use objectively determinable performance goals which shall be based on one
or more of the following criteria: (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.
(ii) Establishment of Goals. The Committee shall establish the
performance goals in writing either before the beginning of the performance
period or during a period ending no later than the earlier of (i) 90 days after
the beginning of the performance period or (ii) the date on which 25% of the
performance period 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," 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. The Committee shall not have discretion to increase the
amount of compensation that is payable upon achievement of the designated
performance goals.
(iii) Maximum Payment. If Stock Awards are granted to an
Employee under this subsection (e), not more than 500,000 Shares may be granted
to such Employee for any year in the performance period.
(iv) Announcement of Grants. The Committee shall certify and
announce the results for each performance period to all Grantees immediately
following the announcement of the Company's financial results for the
performance period. If and to the extent that the Committee does not certify
that the performance goals have been met, the Stock Awards for the performance
period shall not be granted or the Stock Awards shall be forfeited, as the case
may be.
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(v) Death, Disability, Change in Control or Other
Circumstances. The Committee may provide that restrictions on the grant or
vesting of Stock Awards shall lapse, in whole or in part, in the event of the
Grantee's death or disability during the performance period, or under other
circumstances consistent with the Treasury regulations and rulings under section
162(m) of the Code.
(f) Manner of Holding and Delivering Certificates for Stock Awards.
Each certificate issued for Stock Awards shall be registered in the name of the
Grantee and deposited with the Company or its designee in an escrow account,
accompanied by a stock power executed in blank by the Grantee covering the Stock
Awards. At the end of the Restricted Period, certificates representing the
number of Shares to which the Grantee is then entitled shall be released from
escrow and delivered to the Grantee free and clear of all restrictions. As an
alternative, the Committee may establish appropriate procedures with respect to
non-certificated Shares. The Company may defer delivering Shares until
satisfactory arrangements have been made for the payment of any tax attributable
to the grant or vesting of such Shares. The Committee may, in its sole
discretion, permit a Grantee to elect, in such form and at such time as the
Committee may prescribe, to pay all or a portion of all taxes arising in
connection with a Stock Award by electing to have the Company withhold whole
Shares, provided that the amount to be withheld shall not exceed the Grantee's
minimum applicable withholding tax rate for federal (including FICA), state and
local tax liabilities associated with the transaction.
(g) Nontransferability. No restricted Stock Awards granted or held
under the Plan shall be subject to any debts or liabilities of a Grantee, nor be
assignable or transferable except by will or the laws of descent and
distribution.
(h) Rights as a Stockholder. Except for the restrictions and
limitations described in the Plan, a Grantee holding Stock Awards shall have all
of the rights of a record holder of the Shares, including the right to receive
dividends paid on those Shares and the right to vote them at meetings of
shareholders of the Company.
7. Limitations on Rights of Optionees and Grantees.
(a) Employment or Service. No provision of the Plan, nor any term or
condition of any grant of an Option or Stock Awards, nor any action taken by the
Committee, the Company or a Subsidiary pursuant to the Plan, shall give or be
construed as giving an Optionee or Grantee any right to be retained in the
employ of the Company or any Subsidiary or to serve as a Key Advisor, or affect
or limit in any way the right of the Company or any Subsidiary to terminate such
employment or service by any Optionee or Grantee.
(b) Conditions. Notwithstanding anything contained herein to the
contrary, all rights with respect to all Options and Stock Awards are subject to
the conditions that the Optionee or Grantee not engage or have engaged in fraud,
embezzlement, defalcation, gross negligence in the performance or nonperformance
of the Optionee's or Grantee's duties (other than as a result of total and
permanent disability) or material failure or refusal to perform the Optionee's
or Grantee's duties at any time while in the employ of the Company or a
Subsidiary, and all rights with respect to all Options and Stock Awards are
subject to the conditions that the Optionee or Grantee not engage or have
engaged in activity directly or indirectly in competition with any business of
the Company or a Subsidiary, or in other conduct inimical to the best interests
of the Company or a Subsidiary, during the employment or service of the Optionee
or Grantee or following the Optionee's or Grantee's termination of employment or
service. If it is determined by the Committee that there has been a failure of
any such condition, all Options, and all rights with respect to all Options
granted to such Optionee, and all rights with respect to Stock Awards which
shall not have then vested shall immediately terminate and be null and void. If
a restriction in this Section 7(b) is determined to be overbroad or
unenforceable in any respect, such restriction may be modified or narrowed,
either by a court or by the Committee, so as to preserve and protect the
legitimate interests of the Company and its Subsidiaries, and without negating
or impairing any other restrictions or agreements set forth herein. The
provisions of this Section 7(b) shall inure to the benefit of any successor of
the Company or a Subsidiary by merger or otherwise.
8. Change in Control.
(a) As herein used a Change in Control shall be deemed to have
occurred if:
(i) the "beneficial ownership" (as defined in Rule l3d-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
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in section 13(d) or section 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
(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,
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).
(b) Notice and Acceleration. Upon a Change in Control, (i) the
Company shall provide each Optionee and Grantee with outstanding Options and
Stock Awards written notice of such Change in Control, (ii) all outstanding
Options shall automatically accelerate and become fully exercisable and (iii)
the restrictions and conditions on all outstanding Stock Awards shall
immediately lapse.
(c) Assumption of Options. Upon a Change in Control where the
Company is not the surviving corporation (or survives only as a subsidiary of
another corporation), unless the Committee determines otherwise, all outstanding
Options that are not exercised shall be assumed by, or replaced with comparable
options by, the surviving corporation.
(d) Other Alternatives. Notwithstanding the foregoing, in the event
of a Change in Control, the Committee may take one or both of the following
actions (other than with respect to stock options or restricted shares granted
under the 1994 Plan or the 1996 Plan which are outstanding when this Plan
becomes effective): the Committee may (i) require that Optionees surrender their
outstanding Options in exchange for a payment by the Company, in cash or Shares
as determined by the Committee, in an amount equal to the amount by which the
then Fair Market Value of the Shares subject to the Optionee's unexercised
Options exceeds the exercise price of the Options, or (ii) after giving
Optionees an opportunity to exercise their outstanding Options, terminate any or
all unexercised Options at such time as the Committee deems appropriate. Such
surrender or termination shall take place as of the date of the Change in
Control or such other date as the Committee may specify.
9. Adjustments. If there is any change in the number or class of Shares
through the declaration of Share dividends, or recapitalization, or combinations
or exchanges of such Shares or similar corporate transactions, or if the
Committee otherwise determines that, as a result of a corporate transaction
involving a change in the Company's capitalization, it is appropriate to effect
the adjustments described in this Section, the aggregate number or class of
Shares with respect to which Options or Stock Awards may be granted or which may
be issued under the Plan, the per-person limits on grants, the number or class
of Shares covered by each outstanding Option and Stock Award grant, and the
price per Share of each Option, shall all be appropriately adjusted by the
Committee; provided that any fractional Shares resulting from such adjustment
shall be eliminated. If a new Option is substituted for the Option granted
hereunder, or an assumption of an Option granted hereunder is made, by reason of
a corporate merger, consolidation, acquisition of property or stock, split-up,
reorganization or liquidation, the new or assumed Option shall pertain to and
apply to the securities to which a holder of the number of Shares subject to the
Option would have been entitled.
10. Application of Funds. The proceeds received by the Company from the
sale of Shares pursuant to Options and Stock Awards granted under the Plan will
be used for general corporate purposes.
11. Effective Date and Term of Plan. The Plan shall become effective on
June 1, 2000, subject to approval by the Company's shareholders. The term during
which Options and Stock Awards may be granted under the Plan shall expire on
March 28, 2006. The term of Options granted and Stock Awards made prior thereto,
however, may extend beyond such date and the provisions of the Plan shall
continue to apply thereto.
12. Amendments. The Board may from time to time alter, amend, suspend or
discontinue the Plan; provided that stockholder approval shall be required for
any amendment that requires stockholder approval in order for the exemption
available under section 162(m) of the Code to be applicable to the Plan, or in
order for the applicable Incentive Stock Option or stock exchange requirements
to be met.
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The Plan, each Option under the Plan and the grant and exercise thereof,
each grant of Stock Awards under the Plan, and the obligation of the Company to
sell and issue Shares under the Plan shall be subject to all applicable laws,
rules, regulations and governmental, stock exchange and stockholder approvals,
and the Committee may make such amendment or modification thereto as it shall
deem necessary to comply with any such laws, rules and regulations or to obtain
any such approvals.
13. Severability. If any provision of the Plan, any term or condition of
any Option or Stock Awards granted or form executed or to be executed thereunder
or any application thereof to any person or circumstance is invalid or would
result in an Incentive Stock Option failing to meet the requirements of section
422 of the Code, such provision, term, condition or application shall to that
extent be void (or, in the sole discretion of the Committee, such provision,
term or condition may be amended so as to avoid such invalidity or failure), and
shall not affect other provisions, terms or conditions or applications thereof,
and to this extent such provision, term or condition is severable.
14. Grants in Connection with Corporate Transactions and Otherwise.
Nothing contained in this Plan shall be construed to (i) limit the right of the
Committee to make grants under this Plan in connection with the acquisition, by
purchase, lease, merger, consolidation or otherwise, of the business or assets
of any corporation, firm or association, including grants to employees thereof
who become Employees of the Company, or for other proper corporate purposes, or
(ii) limit the right of the Company to grant stock options or make other grants
outside of this Plan. Without limiting the foregoing, the Committee may make a
grant to an employee of another corporation who becomes an Employee by reason of
a corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or any of its subsidiaries
in substitution for a stock option or stock award grant made by such
corporation. The terms and conditions of the substitute grants may vary from the
terms and conditions required by the Plan and from those of the substituted
stock incentives. The Committee shall prescribe the provisions of the substitute
grants.
15. Governing Law. The Plan shall be applied and construed in accordance
with and governed by the laws of the State of Delaware, without regard to the
conflict of laws principles thereof, and applicable Federal law.
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EXHIBIT B
THE SPORTS AUTHORITY, INC.
DIRECTOR STOCK PLAN
1. Purpose.
1.1 The Sports Authority, Inc. Director Stock Plan is intended to increase
the proprietary interest of non-employee members of the Board of Directors of
The Sports Authority, Inc. by providing further opportunity for ownership of the
Company's common shares. By means of such increased proprietary interest, the
Plan is intended to increase their incentive to contribute to the success of the
Company's business.
1.2 The Plan is intended to comply with Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, as such Rule may be amended from time to time,
and shall be interpreted in a manner consistent with the requirements thereof,
as now or hereafter construed, interpreted and applied by regulations, rulings
and cases.
2. Definitions.
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "Annual Retainer" shall mean the annual retainer fee paid by the
Company to a Participant for his or her services as a director, and shall not
include meeting fees.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Change in Control" shall mean the occurrence of an event
described in Article 11 hereof.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Committee" shall mean the Compensation Committee of the Board.
(f) "Committee Chair Retainer" shall mean the portion of the annual
retainer fee, if any, paid by the Company to a Participant for his or her
services as chair of one of the Board's committees.
(g) "Company" shall mean The Sports Authority, Inc., a corporation
organized under the laws of the State of Delaware, or any successor corporation.
(h) "Date of Grant" shall mean the date on which an Option is
granted pursuant to Article 10.
(i) "Deferred Shares" means Shares or Restricted Shares that are
deferred at the election of a Participant pursuant to Article 7.
(j) "Disability" shall mean a Participant's total and permanent
inability to perform his or her duties to the Company by reason of any medically
determinable physical or mental impairment, as determined by a physician
selected by the Participant and acceptable to the Company.
(k) "Dividend Equivalents" shall mean amounts credited pursuant to
Article 8.
(l) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time, and as now or hereafter construed, interpreted and
applied by regulations, rulings and cases.
(m) "Fair Market Value" per Share shall mean the closing price on
the New York Stock Exchange Composite Transactions Tape (or its equivalent if
the Shares are not traded on the New York Stock Exchange) of a Share on the
relevant valuation date or, if the Shares are not traded on that date, the
trading day immediately prior to the relevant valuation date.
(n) "Option" shall mean an option to purchase Shares granted
pursuant to Article 10.
(o) "Participant" shall mean a non-employee member of the Board.
(p) "Plan" shall mean The Sports Authority, Inc. Director Stock
Plan, as amended from time to time.
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(q) "Plan Quarter" shall mean a calendar quarter ending on the date
of the annual meeting of the Company's shareholders and on each of August 31,
November 30 or February 28 (or 29).
(r) "Plan Year" shall mean the approximately 12-month period
beginning on the day after the date of each annual meeting of the Company's
shareholders and ending on the date of the next following annual meeting of the
Company's shareholders.
(s) "Restricted Period" shall have the meaning given in Section
6.3(c).
(t) "Restricted Share" shall mean a Share granted subject to
restrictions pursuant to Article 6.
(u) "Rule 16b-3" shall mean Rule 16b-3, as in effect from time to
time, promulgated by the Securities and Exchange Commission under Section 16 of
the Exchange Act, including any successor to such Rule.
(v) "Shares" shall mean the common shares of the Company, $.01 par
value.
3. Shares.
The maximum number of Shares which shall be reserved for the grant of
Shares, Restricted Shares and Options under the Plan shall be 600,000 Shares,
which number shall be subject to adjustment as provided in Article 12 hereof.
Such Shares may be either authorized but unissued Shares or Shares that shall
have been or may be reacquired by the Company. If any Restricted Shares under
the Plan are forfeited and reacquired by the Company, or if any Options
terminate or expire unexercised, the Shares forfeited or covered by the
terminated or expired Option shall (unless the Plan shall have been terminated)
again become available for use under the Plan.
4. Grants of Shares for Meeting Fees.
4.1 Meeting Fees. The meeting fees of each Participant may be provided in
the form of a grant of Shares made on the last business day of the Plan Quarter
in which the relevant meetings occur, if the Board so determines. Shares so
granted shall have a Fair Market Value on such date equal to the aggregate
amount of the meeting fees for the Participant with respect to meetings
occurring in such Plan Quarter. Such Shares shall not be sold until at least six
months after their date of grant. Fractional Shares shall be paid in cash.
4.2 Grants Subject to Deferral Election, if Any. The provisions of this
Article 4 with respect to grants of Shares shall be subject to any deferral
election made with respect to such Shares by a Participant in accordance with
Article 7.
5. Election to Receive Annual Retainer and Committee Chair Retainer in the
Form of Options or Restricted Shares.
5.1 Elections. Before the beginning of each Plan Year, each Participant
may elect to receive his or her Annual Retainer and Committee Chair Retainer, if
applicable, for the Plan Year in the form of Restricted Shares as described in
Article 6 or in the form of Options as described in Article 10, or as a
combination of Restricted Shares and Options. The election shall be made by
filing a written election with the Secretary of the Company before the beginning
of the Plan Year. The election shall be irrevocable as of the first day of the
Plan Year.
5.2 Elections for New Participants. If an individual becomes a Participant
during a Plan Year, the Participant may elect to receive his or her Annual
Retainer and Committee Chair Retainer, if applicable, for the Plan Year in the
form of Restricted Shares or Options, or as a combination thereof, by filing a
written election with the Secretary of the Company before the date of the next
Board meeting or the next meeting of such Board committee thereafter and shall
become irrevocable on the last day prior to such date.
5.3 Failure to Make an Election. If a Participant makes no election under
this Article 5 for a Plan Year, the Participant's Annual Retainer and Committee
Chair Retainer, if applicable, shall be paid in the form of Restricted Shares.
6. Grant of Restricted Shares for Annual Retainer and Committee Chair
Retainer.
6.1 Grants of Restricted Shares for Annual Retainer and Committee Chair
Retainer. Each individual who is a Participant at the beginning of a Plan Year
shall receive his or her Annual Retainer, and each individual who is a chair of
a Board committee at the beginning of a Plan Year shall receive his or her
Committee Chair Retainer,
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in the form of a grant of Restricted Shares made on the first business day of
the Plan Year, except to the extent such Participant elects to receive Options
pursuant to Section 5.1. The Restricted Shares so granted shall have a Fair
Market Value on such date equal to the amount of the Annual Retainer or the
Committee Chair Retainer, as the case may be, in effect on such date for the
Participant. Fractional Shares shall be paid in cash.
In the case of an individual who becomes a Participant or the chair of a
Board committee during a Plan Year, his or her Annual Retainer or Committee
Chair Retainer, as the case may be, with respect to such Plan Year shall be
provided in the form of a grant of Restricted Shares made on the last business
day of the Plan Quarter in which he or she becomes a Participant or chair of a
Board committee, except to the extent such Participant elects to receive Options
pursuant to Section 5.2. The Restricted Shares so granted shall have a Fair
Market Value on such date equal to the amount of the applicable Annual Retainer
or Committee Chair Retainer, as the case may be, multiplied by a fraction, the
numerator of which is the number of days remaining in such Plan Year from and
after the date the individual becomes a Participant or chair of a Board
committee, as the case may be, and the denominator of which is the number of
days in the Plan Year. Fractional Shares shall be paid in cash.
If an increase in the Annual Retainer or Committee Chair Retainer becomes
effective during a Plan Year, an additional grant of Restricted Shares shall be
made on the last day of the Plan Quarter in which the increase in the Annual
Retainer or Committee Chair Retainer, as the case may be, becomes effective. The
Restricted Shares so granted shall have a Fair Market Value on such date equal
to the amount of such increase multiplied by a fraction, the numerator of which
is the number of days remaining in the Plan Year from and after the effective
date of the increase and the denominator of which is 365. Fractional Shares
shall be paid in cash. Any increase in the Annual Retainer or Committee Chair
Retainer during a Plan Year shall be paid in Restricted Shares, without regard
to whether the Participant elected to receive such retainer as of the beginning
of the Plan Year in the form of Options.
6.2 Grants Subject to Deferral Election, if Any. All provisions of this
Article 6 with respect to grants of Restricted Shares shall be subject to any
deferral election made with respect to all or any portion of such Restricted
Shares by a Participant in accordance with Article 7.
6.3 Terms of Restricted Shares. Each grant of Restricted Shares under the
Plan shall comply with the following terms and conditions:
(a) Each grant shall state the number of Restricted Shares to be
granted.
(b) Restricted Shares may not be sold, assigned, transferred,
pledged, hypothecated or otherwise disposed of (except by will or the applicable
laws of descent and distribution) during the Restricted Period.
(c) Subject to Sections 6.3(d) and 6.3(f) hereof, the Restricted
Period for Restricted Shares granted under the Plan shall begin with their grant
and end upon completion of the Plan Year in which they are granted.
(d) Except as provided in Section 6.3(f) hereof, if during the
Restricted Period a Participant's service as a member of the Board (whether or
not a nonemployee member) or as chair of a Board committee terminates, the
Participant shall receive a number of unrestricted Shares (except as described
below) determined by multiplying the number of Restricted Shares held by the
Participant by a fraction, the numerator of which shall be the number of days
during which the Participant served as a director or as chair of a Board
committee, as the case may be, during the Restricted Period and the denominator
of which shall be the number of days in the Restricted Period. Any additional
Shares shall be forfeited. The Shares issued shall be subject to the six-month
sale restriction of Section 6.3(g) below.
(e) During the Restricted Period, the Participant shall possess all
incidents of ownership of such Restricted Shares, including the right to vote
and to receive dividends with respect to such Restricted Shares, subject to the
restrictions and limitations described in this Article.
(f) Upon the termination of a Participant's service as a member of
the Board which results from the Participant's death or Disability, or upon the
occurrence of a Change in Control of the Company, all restrictions then
outstanding with respect to Restricted Shares granted hereunder shall
automatically expire and be of no further force and effect.
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(g) Notwithstanding any other provisions hereof, unless an event
described in Section 6.3(f) occurs, no Shares from a grant of Restricted Shares
may be sold until at least six months after the date of grant of the Restricted
Shares.
(h) Upon the grant of Restricted Shares, either (i) a share
certificate or certificates representing such Restricted Shares shall be
registered in the Participant's name, shall bear an appropriate legend referring
to the restrictions applicable thereto, and shall be held in custody by an
escrow agent appointed by the Committee for the account of the Participant, or
(ii) the Company's share transfer agent or other designee shall credit such
Restricted Shares to the Participant's Restricted Shares account, which Shares
shall be subject to the restrictions applicable thereto under the Plan. Any
attempt to dispose of any such Shares in contravention of such restrictions
shall be null and void and without effect.
7. Deferral Elections.
7.1 Elections. Each Participant may elect to defer the receipt (a
"Deferral Election") of all or a portion of the Shares under Article 4 and the
Restricted Shares under Article 6 that are otherwise deliverable to the
Participant with respect to his or her services as a director during a Plan Year
("Deferred Shares"). When the applicable deferral period ends, such Deferred
Shares shall be deliverable in unrestricted Shares.
The Participant shall elect (a) that Deferred Shares be distributed in a
lump sum or in equal annual installments (not exceeding ten), and (b) that the
lump sum or first installment be distributed on the tenth day of the calendar
year immediately following either (i) the year in which the Participant ceases
to be a director of the Company, or (ii) the earlier of the year in which the
Participant ceases to be a director of the Company or a date designated by the
Participant, provided, however, that any such election shall be subject to
Article 9 hereof. Installments subsequent to the first installment shall be
distributed on the tenth day of each succeeding calendar year until all of the
Participant's Deferred Shares shall have been distributed.
In the event the Participant should die before all of the Participant's
Deferred Shares have been distributed, the balance of the Deferred Shares shall
be distributed in a lump sum to the person or persons whom the Participant shall
have designated in writing on a form prescribed by and filed with the Committee,
or, if no such designation has been made, to the person or persons to whom the
Participant's rights shall have passed by will or the laws of descent and
distribution. The Committee may require an indemnity and such evidence or other
assurances as it may deem necessary in connection with an exercise by a legal
representative, guardian, beneficiary or successor.
In the event the Participant should terminate his or her service as a
member of the Board during the period which would have been a Restricted Period
with respect to a particular grant of Deferred Shares hereunder, except that the
Participant made an effective Deferral Election with respect to such grant, such
Deferred Shares shall be treated in the same manner as Restricted Shares under
Sections 6.3(d) and 6.3(f) hereof.
7.2 Timing and Form of Deferral Elections. Any deferral election:
(a) shall be in the form of a document executed by the Participant
and filed with the Secretary of the Company,
(b) shall be made before the first day of the Plan Year in which the
applicable retainer fee or meeting fees are earned and shall become irrevocable
on the last day prior to the beginning of such Plan Year (except that an
election with respect to the first Plan Year in which an individual becomes a
Participant or the chair of a Board committee shall be made before the date of
the next Board meeting or the next meeting of such Board committee thereafter
and shall become irrevocable on the last day prior to such date), and
(c) shall continue until a Participant ceases to be a director or
until he or she terminates or modifies such election by written notice, any such
termination or modification to be effective as of the end of the Plan Year in
which such notice is given with respect to fees payable in subsequent Plan
Years.
8. Dividend Equivalents.
Deferred Shares shall be credited with an amount equivalent to the
dividends which have been paid on an equal number of outstanding Shares
("Dividend Equivalents"). Dividend Equivalents shall be credited as of the
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payment date of such dividends. Deferred Shares held pending distribution shall
continue to be credited with Dividend Equivalents.
Dividend Equivalents so credited shall be converted into an additional
whole number of Deferred Shares as of the payment date of the dividend (based on
the Fair Market Value of a Share on such payment date). Such Deferred Shares
shall thereafter be treated in the same manner as any other Deferred Shares
under the Plan. Dividend Equivalents resulting in fractional shares shall be
held for the credit of the Participant until the next dividend payment date and
shall be converted into Deferred Shares on such date. Upon the final
distribution of the Participant's Deferred Shares, any Dividend Equivalents not
previously converted into Deferred Shares shall be paid in cash.
9. Effect of Certain Events.
Notwithstanding a deferral election pursuant to Article 7 hereof:
(a) If, as determined by the Board in its sole discretion, the
Participant (during or following his or her membership on the Board) engages in
any activity or association in competition with or adverse or detrimental to the
interests of the Company (i) all of such Participant's Deferred Shares shall be
distributed immediately in the form of Shares, (ii) Dividend Equivalents not yet
converted into Deferred Shares shall be distributed immediately in cash, and
(iii) all of such Participant's fees earned and not yet converted into Shares,
Restricted Shares or Deferred Shares under the terms of this Plan shall be
distributed in the form of Shares as soon as practicable, with any fractional
Share being distributed in cash.
(b) Upon the occurrence of a Change in Control, (i) all Deferred
Shares to the extent credited prior to the Change in Control shall be
distributed immediately in the form of Shares, and (ii) all Dividend Equivalents
not yet converted into Deferred Shares and all fees earned and not yet converted
into Shares, Restricted Shares, Deferred Shares or Options under the terms of
this Plan shall be distributed immediately in cash.
10. Grant of Options.
10.1 Grant of Options With Respect to Annual Retainers and Committee Chair
Retainers. Each individual who is a Participant at the beginning of a Plan Year
and who has elected to receive Options for the Plan Year pursuant to Article 5
shall have that portion of his or her Annual Retainer and Committee Chair
Retainer, if any, for the Plan Year which he or she designates converted into an
Option to purchase Shares. The Company shall grant the Option, at the direction
of the Committee, on the first business day of the Plan Year (the "Date of
Grant"). The Board may determine that Option grants shall be subject to approval
of the Board. Each Option shall be a non-qualified stock option and shall be
evidenced by a Share Option Agreement in such form as the Committee shall
approve. The number of Shares to be covered by the Option shall be determined by
dividing the designated portion of the Annual Retainer or Committee Chair
Retainer by the value of an option and shall be rounded down to the nearest
whole Share. The Committee shall have sole discretion to determine the value of
an option, provided that the value of an option shall in no event be less than
the greater of (i) $2.50, or (ii) the value (as of the last trading day
immediately before the Date of Grant) of an option to purchase Shares for a
ten-year period, as determined by the Black-Scholes option pricing formula. Any
portion of an Annual Retainer or Committee Chair Retainer that is not converted
into an Option shall be paid in the form of Restricted Shares, except that
fractional Shares shall be paid in cash.
10.2 Discretionary Option Grants. The Committee shall have authority from
time to time to grant Options to Participants, provided that all such grants
shall be on a uniform basis.
10.3 Option Price. The option exercise price of each Option granted under
the Plan shall be the Fair Market Value on the Date of Grant of the Shares
covered by the Option.
10.4 New Participants. An individual who becomes a Participant or the
chair of a Board committee during a Plan Year and who elects to receive an
Option for the Plan Year pursuant to Article 5 shall receive an Option on the
last business day of the Plan Quarter in which he or she becomes a Participant
or the chair of a Board committee. The Committee shall grant the Participant an
Option based on the Participant's Annual Retainer or Committee Chair Retainer
multiplied by a fraction, the numerator of which is the number of days remaining
in such Plan Year from and after the date the individual becomes a Participant
or the chair of a Board committee and
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the denominator of which is the number of days in the Plan Year. The Option
shall be based on the Fair Market Value of Shares in the manner described in
Section 10.1, except that the Date of Grant shall be the last business day of
the Plan Quarter in which the individual becomes a Participant or the chair of a
Board committee.
10.5 Option Term; Vesting.
(a) An Option may not be exercised after the first to occur of (i)
ten years from the Date of Grant or (ii) three months after the Participant
ceases to be a Director for any reason. Any Option not exercised within the
foregoing Option term shall automatically terminate at the expiration of such
Option term.
(b) Except as set forth below, an Option may not be exercised until
the end of the Plan Year in which the Option is granted, and shall be
exercisable as of that date only if the Participant has continued to serve as a
director of the Company through that Plan Year. Except as provided below, if a
Participant ceases to be a member of the Board during such Plan Year, the Option
shall terminate. In that event, the Company shall grant to the Participant
unrestricted Shares (except as provided below) in the amount that would have
been computed for the Plan Year pursuant to Section 6.3(d) if the Participant
had elected to have his or her Annual Retainer paid in the form of Restricted
Shares. The Shares issued shall be subject to the six-month sale restriction of
Section 6.3(g), with the six-month period measured from the Date of Grant of the
Option.
(c) If a Participant ceases to be a member of the Board on account
of the Participant's death or Disability, or upon the occurrence of a Change in
Control of the Company, the Participant's outstanding Options shall be fully
vested and exercisable. In the event of the death of a Participant, the
Participant's outstanding Options may be exercised by the person or persons whom
the Participant shall have designated in writing on a form prescribed by and
filed with the Committee, or, if no such designation has been made, by the
person or persons to whom the Participant's rights shall have passed by will or
the laws of descent and distribution. The Committee may require an indemnity and
such evidence or other assurances as it may deem necessary in connection with an
exercise by a legal representative, guardian, beneficiary or successor.
10.6 Exercise and Payment.
(a) An exercisable Option may be exercised by notice (in the form
prescribed by the Committee) to the Company specifying the number of Shares to
be purchased. Payment for the number of Shares purchased upon the exercise of an
Option shall be made in full at the price provided for in the applicable Share
Option Agreement. Such purchase price shall be paid by the delivery to the
Company of cash (including check or similar draft) in United States dollars or
whole Shares (subject to any restrictions the Committee may impose), or a
combination thereof. Shares used in payment of the purchase price shall be
valued at their Fair Market Value as of the date the notice of exercise is
received by the Company. Any Shares delivered to the Company shall be in such
form as is acceptable to the Company.
(b) The Company may defer making delivery of Shares under the Plan
until satisfactory arrangements have been made for the payment of any tax
attributable to exercise of the Option. The Committee may, in its sole
discretion, permit a Participant to elect, in such form and at such time as the
Committee may prescribe, to pay all or a portion of any taxes arising in
connection with the exercise of an Option by electing to (a) have the Company
withhold whole Shares, or (b) deliver other whole Shares previously owned by the
Participant having a Fair Market Value not greater than the amount to be
withheld; provided that the amount to be withheld shall not exceed the total
Federal, State and local tax withholding obligations associated with the
transaction.
10.7 Nontransferability. No Option or any rights with respect thereto
shall be subject to any debts or liabilities of a Participant, nor shall they be
assignable or transferable except by will or the laws of descent and
distribution; provided that, if the Committee deems it appropriate, an Option
may permit the Participant to transfer the Option to one or more transferees
during the Participant's lifetime, and such transferees may exercise rights
thereunder in accordance with the terms hereof, but only if and to the extent
permitted by the Committee.
10.8 Rights as a Shareholder. A Participant shall have no rights as a
record holder with respect to Shares covered by his or her Option until the date
of issuance to him or her of a certificate evidencing such Shares after the
exercise of such Option and payment in full of the purchase price. No adjustment
will be made for cash dividends for which the record date is prior to the date
such certificate is issued.
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11. Change in Control of the Company.
The first to occur of any of the following events shall be deemed a Change
in Control of the Company; provided, however, that in no event shall the initial
public offering of the Shares be deemed a Change in Control of the Company for
purposes of this Plan:
(i) the "beneficial ownership" (as defined in Rule 13d-3 under the
Exchange Act) of securities representing more than 20% of the combined voting
power of the Company is acquired by any "person," as defined in sections 13(d)
and 14(d) of the Exchange Act (other than the Company or any trustee or other
fiduciary holding securities under an employee benefit plan of the Company), or
(ii) the shareholders of the Company approve a definitive agreement
to merge or consolidate the Company with or into another corporation or to sell
or otherwise dispose of all or substantially all of its assets, or adopt a plan
of liquidation, or
(iii) during any period of three consecutive years beginning after
the completion of the initial public offering of the Shares, individuals who at
the beginning of such period were members of the Board cease for any reason to
constitute at least a majority thereof (unless the election, or the nomination
for election by the Company's shareholders, of each new director was approved by
a vote of at least a majority of the directors then still in office who were
directors at the beginning of such period or whose election or nomination was
previously so approved).
12. Effect of Certain Changes.
In the event of any extraordinary dividend, share dividend,
recapitalization, merger, consolidation, share split, warrant or rights
issuance, or combination or exchange of such shares, or other similar
transactions, the number and type of Shares available for grant, the number and
type of outstanding Restricted Shares, Deferred Shares and Options, and the
Option price of outstanding Options shall be equitably adjusted by the Committee
to reflect such event and preserve the value of such grants, and the Committee
may make such other adjustments to the terms of outstanding Restricted Shares,
Deferred Shares and Options as it may deem equitable under the circumstances;
provided, however, that any fractional Shares resulting from such adjustment
shall be eliminated.
13. No Rights to Continuance as Director.
Nothing in the Plan or in any grant made pursuant hereto shall confer upon
any Participant the right to continue to serve as a member of the Company's
Board or to be entitled to any remuneration or benefits not set forth in the
Plan.
14. Administration.
The Plan shall be administered by the Committee, except as otherwise
specifically provided in the Plan. The Committee shall have the full authority
and discretion to make such interpretations and constructions of the Plan as are
necessary to administer the Plan in accordance with, and subject to, the Plan's
provisions. Without limiting the foregoing, the Committee is specifically
authorized to make such modifications to the administration of the Plan as it
deems appropriate if an annual meeting of the Company's shareholders is not held
on a date that is approximately 12 months after the last annual shareholders
meeting. If the Board deems it appropriate, the Board may reserve the right to
approve grants under the Plan.
The Board shall fill all vacancies, however caused, in the Committee. The
Board may from time to time appoint additional members to the Committee, and may
at any time remove one or more Committee members and substitute others. The
Committee may appoint a chairperson and a secretary and make such rules and
regulations for the conduct of its business as it shall deem advisable, and
shall keep minutes of its meetings. The Committee shall hold its meetings at
such times and places as it shall deem advisable. All determinations of the
Committee shall be made by a majority of its members either present in person or
participating by conference telephone at a meeting or by unanimous written
consent. The Committee may delegate to one or more of its members or to one or
more agents such administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may employ
one or more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan.
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All decisions, determinations and interpretations of the Committee and the
Board shall be final and binding on all persons, including the Company, the
Participant (or any person claiming any rights under the Plan from or through
any Participant) and any shareholder. No member of the Board or Committee shall
be liable for any action taken or determination made in good faith with respect
to the Plan or any grant hereunder.
15. Amendment and Termination of the Plan.
The Board at any time and from time to time may suspend, terminate, modify
or amend the Plan; provided, however, that an amendment which requires
shareholder approval in order for the Plan to continue to comply with any law,
regulation or stock exchange requirement shall not be effective unless approved
by the requisite vote of shareholders. Except as provided in Article 12 hereof,
no suspension, termination, modification or amendment of the Plan may adversely
affect any grant previously made, unless the written consent of the Participant
is obtained.
16. Governing Law.
The Plan and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the laws of the State of Delaware
without giving effect to the choice of law principles thereof, except to the
extent that such law is preempted by federal law.
17. Term.
The Plan shall remain in effect until the last day of the Plan Year ending
in 2009, but in no event later than June 30, 2009, unless sooner terminated by
the Board; provided, however, that Shares and Dividend Equivalents may be
delivered pursuant to a Deferral Election after such date, the Restricted Period
of Restricted Shares granted prior to such date may extend beyond such date,
Options granted prior to such date may be exercised after such date, and the
provisions of the Plan shall continue to apply to such Deferred Shares, Dividend
Equivalents, Restricted Shares and Options.
18. Miscellaneous.
18.1 The right of a Participant to Restricted Shares, Deferred Shares,
Dividend Equivalents and Options shall be non-assignable (except as specifically
provided otherwise in the Plan) and shall not be subject in any manner to the
debts or other obligations of the Participant or any other person.
18.2 The Company shall not be required to reserve or otherwise set aside
funds with respect to grants under the Plan.
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<PAGE>
THE SPORTS AUTHORITY, INC.
PROXY
2000 ANNUAL MEETING OF STOCKHOLDERS
This Proxy is Solicited on Behalf of the Board of Directors
The Undersigned hereby appoints MARTIN E. HANAKA and FRANK W. BUBB 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 sahres of Common Stock the undersigned is entitled to
vote at the 2000 Annual Meeting of Stockholders of THE SPORTS AUTHORITY, INC. to
be held on June 1, 2000 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 A. David Brown, Mary Elizabeth Burton and Carol Farmer as
Class III Directors to serve until the Annual Meeting of Stockholders in
2003 or until their successors are duly elected and qualified; except vote
withheld from the following nominee(s):__________________________________.
|_| FOR |_| WITHHOLD VOTE
2. Approval of the 2000 Stock Option and Stock Award Plan;
|_| FOR |_| AGAINST |_| ABSTAIN
3. Approval of the amendment of the Director Stock Plan;
|_| FOR |_| AGAINST |_| ABSTAIN
4. Ratification of the appointment of Ernst & Young LLP as the Company's
independent accountants for the 2000 fiscal year; and
|_| FOR |_| AGAINST |_| ABSTAIN
(see reverse side)
<PAGE>
(continued from other side)
5. 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.
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, 3 AND 4.
Dated:_____________________, 2000
_________________________________
_________________________________
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.
