UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant
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Preliminary Proxy Statement
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Confidential, For Use of the Commission Only (as Permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or
schedule and
the date of its filing.
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Date Filed:
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May 27, 2008
Dear Stockholders:
You are invited to attend a special meeting of stockholders of Sport Supply Group, Inc., which
will be held at The Omni Dallas Hotel at Park West, 1590 LBJ Freeway, Dallas, Texas 75234, on
Thursday, July 10, 2008, at 10:00 a.m., Central Time.
At this special meeting, you will be asked to consider and vote upon a proposal to approve the
Sport Supply Group, Inc. Amended and Restated 2007 Long-Term Incentive Plan. The Board of
Directors unanimously recommends a vote FOR this proposal.
It is important that your shares be represented and voted at the special meeting regardless of
the size of your holdings. Whether or not you plan to attend the special meeting, it is important
that you ensure your representation by either voting your shares electronically on the Internet or
on the telephone by following the instructions on the accompanying proxy card, or complete, sign,
date and return the accompanying proxy card in the postage-paid envelope provided. If you attend
the special meeting, you may revoke your proxy and vote in person if you wish.
I look forward to greeting those of you who will be able to attend the special meeting.
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Sincerely,
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Adam Blumenfeld
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Chairman of the Board and Chief Executive Officer
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Notice of Special Meeting of Stockholders
to be held Thursday, July 10, 2008
To our Stockholders:
A special meeting of stockholders of Sport Supply Group, Inc., a Delaware corporation (the
Company
), will be held at The Omni Dallas Hotel at Park West, 1590 LBJ Freeway, Dallas,
Texas 75234, on Thursday, July 10, 2008, at 10:00 a.m., Central Time, for the following purpose:
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To consider and vote upon a proposal to approve the Sport
Supply Group, Inc. Amended and Restated 2007 Long-Term Incentive Plan.
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Only stockholders of record of the Companys common stock (NASDAQ: RBI) at the close of
business on Tuesday, May 20, 2008, are entitled to notice of and to vote at the special meeting or
any and all postponements or adjournments thereof.
Only stockholders of record may attend the special meeting. If your shares are registered in
your name, you should bring a form of identification to the meeting. If your shares are held in
the name of a broker, trust, bank or other nominee, you will need to bring a proxy or letter from
that broker, trust, bank or other nominee that confirms you are the beneficial owner of those
shares. Cameras, recording devices, and other electronic devices will not be permitted at the
special meeting.
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By Order of the Board of Directors,
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Terrence M. Babilla
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President, Chief Operating Officer, General
Counsel and Secretary
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Farmers Branch, Texas
May 27, 2008
IMPORTANT
Your vote is important. Whether or not you plan to attend the special meeting, it is
important that you ensure your representation by either voting your shares electronically on the
Internet or on the telephone by following the instructions on the accompanying proxy card, or
complete, sign, date and return the accompanying proxy card in the postage-paid envelope provided.
If you attend the special meeting, you may revoke your proxy and vote in person if you wish.
TABLE OF CONTENTS
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SPORT SUPPLY GROUP, INC.
1901 Diplomat Drive
Farmers Branch, Texas 75234
PROXY STATEMENT
for
SPECIAL MEETING
to be held on
Thursday, July 10, 2008
This Proxy Statement (first made available to stockholders on or about May 27, 2008) is being
furnished to holders of common stock, par value $0.01 per share (
Common Stock
), of Sport
Supply Group, Inc. (the
Company
) in connection with the solicitation of proxies by the
Board of Directors (the
Board
) of the Company for use at a special meeting of
stockholders (the
Special Meeting
) to be held for the purpose described in this Proxy
Statement. This Proxy Statement is accompanied by a form of proxy for use at the Special Meeting.
At the Special Meeting, the Companys stockholders will be asked:
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To consider and vote upon a proposal to approve the Sport
Supply Group, Inc. Amended and Restated 2007 Long-Term Incentive Plan
(the
Amended and Restated Plan
).
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Date, Time and Place of Meeting
The Special Meeting will be held on Thursday, July 10, 2008, at 10:00 a.m., Central Time, at
The Omni Dallas Hotel at Park West, 1590 LBJ Freeway, Dallas, Texas 75234.
Record Date; Shares Outstanding and Entitled to Vote
Only holders of record of Common Stock at the close of business on May 20, 2008 (the
Record Date
) are entitled to notice of, and will be entitled to vote at, the Special
Meeting. Each share of Common Stock entitles the holder to cast one vote per share. At the close
of business on the Record Date, there were 12,362,060 shares of Common Stock outstanding and
entitled to vote.
Voting and Revocation of Proxies
The proxy conferred by the proxy card accompanying this Proxy Statement is solicited on behalf
of the Board for use at the Special Meeting. Stockholders of record may vote their shares
electronically on the Internet or on the telephone by following the instructions on the
accompanying proxy card. Stockholders may also vote their shares by completing, signing, dating
and returning the accompanying proxy card in the postage-paid envelope provided. In addition,
stockholders may appear and vote their shares in person at the Special Meeting.
All proxies properly submitted, and that are not revoked, will be voted at the Special Meeting
in accordance with the instructions indicated thereon. If no instructions are provided, such
proxies will be voted FOR the proposal described in this Proxy Statement.
1
A stockholder who has given a proxy may revoke it at any time before it is exercised at the
Special Meeting by (i) delivering to Broadridge Financial Solutions, Inc. a written notice, bearing
a date later than the proxy, stating that the proxy is revoked, (ii) submitting a later-dated proxy
relating to the same shares prior to the vote at the Special Meeting, or (iii) attending the
Special Meeting and voting in person (although attendance at the Special Meeting will not, by
itself, revoke a proxy). You should send any written notice or new proxy card to Sport Supply
Group, Inc. c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717. You may also submit a new
proxy electronically on the Internet or on the telephone by following the instructions on the
accompanying proxy card.
If you hold your shares through a bank or broker, follow the voting instructions on the form
you receive from your bank or broker.
Your vote is important. Whether or not you plan to attend the Special Meeting, it is
important that you ensure your representation by either voting your shares electronically on the
Internet or on the telephone by following the instructions on the accompanying proxy card, or
complete, sign, date and return the accompanying proxy card in the postage-paid envelope provided.
If you attend the Special Meeting, you may revoke your proxy and vote in person if you wish.
The Board does not presently intend to bring any business before the Special Meeting other
than the proposal discussed in this Proxy Statement and specified in the Notice of the Special
Meeting.
Quorum; Broker Non-Votes; Vote Required
The presence of a quorum, a majority of the outstanding shares of the Companys Common Stock
entitled to vote, is required for the transaction of business at the Special Meeting. Both
abstentions and broker non-votes are counted for purposes of determining the presence or absence of
a quorum. A broker non-vote occurs when a person holds shares through a broker, bank or other
nominee and (i) such person does not provide voting instructions to the broker, bank or other
nominee and (ii) applicable stock exchange rules require such broker, bank or other nominee to have
received voting instructions from the beneficial owner to vote on such proposal. Shares
represented by broker non-votes on a matter submitted to stockholders are not considered present
and entitled to vote on that matter. Approval of the Amended and Restated Plan will require the
affirmative vote of a majority of the shares present and entitled to vote. Consequently, broker
non-votes will have no effect, but abstentions will have the effect of a vote against such matter.
If a quorum is not obtained, it is expected that the Special Meeting will be postponed or
adjourned in order to permit additional time for soliciting and obtaining additional proxies or
votes, and at any subsequent reconvening of the Special Meeting, all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of the Special Meeting,
except for any proxies that theretofore have been effectively revoked or withdrawn.
Dissenters Rights
The Company was formed as a corporation under the laws of the State of Delaware, including the
General Corporation Law of the State of Delaware. Under those laws, dissenters rights are not
available to stockholders with respect to the matter to be voted on at the Special Meeting.
Solicitation of Proxies and Expenses
The Company will bear the cost of the solicitation of proxies from its stockholders. In
addition to solicitation by mail, the directors, officers and employees of the Company may solicit
proxies from stockholders by telephone, letter, email, facsimile or in person. The Company will
provide brokers, custodians, nominees and other record holders with copies of the proxy and other
soliciting materials for
2
forwarding to persons for whom they hold shares of Common Stock. In such cases, the Company,
upon the request of the record holders, will reimburse such holders for their reasonable expenses.
Electronic Availability of Proxy Statement
As permitted under the Securities and Exchange Commissions (the
SEC
) new rules
regarding the internet availability of proxy materials, the Company is making this proxy statement
available to its stockholders electronically on the Internet. The Company is sending a Notice of
Internet Availability of Proxy Materials to its stockholders of record as of the Record Date on or
about May 27, 2008, which Notice will include (i) instructions on how to access the Companys proxy
materials electronically, (ii) the date, time and location of the Special Meeting, (iii) a
description of the matter intended to be acted upon at the Special Meeting, (iv) a list of the
materials being made available electronically, (v) instructions on how a stockholder can request to
receive paper or email copies of the Companys proxy materials, (vi) any control/identification
numbers that a stockholder needs to access his or her proxy card and instructions on how to access
the proxy card, and (vii) information about attending the Special Meeting and voting in person.
3
ITEM 1
Approval of the Sport Supply Group, Inc. Amended and Restated 2007 Long-Term Incentive
Plan
The Sport Supply Group, Inc. 2007 Stock Option Plan (formerly the Collegiate Pacific Inc. 2007
Stock Option Plan) (the
2007 Plan
) was originally approved by the stockholders of the
Company on December 15, 2006. Currently, the maximum number of shares of Common Stock, covered by
the 2007 Plan is 500,000 shares. As of May 20, 2008, 52,500 shares were available for future
awards under the 2007 Plan and 447,500 shares were the subject of outstanding options under the
2007 Plan. Presently, the exercise prices for outstanding stock options under the 2007 Plan range
from $9.56 to $9.75.
On May 22, 2008, the Board unanimously approved and adopted an amendment and restatement of
the 2007 Plan (the
Amended and Restated Plan
), subject to the receipt of stockholder
approval. Among other things, the Amended and Restated Plan, as proposed, (i) increases the number
of shares of Common Stock available for awards, (ii) provides for the grant of restricted stock
awards, (iii) provides for awards based upon certain performance criteria, including awards
intended to constitute performance-based compensation (within the meaning of section 162(m) of
the Internal Revenue Code of 1986, as amended (the
Code
)), and (iv) changes the name of
the 2007 Plan to the Sport Supply Group, Inc. Amended and Restated 2007 Long-Term Incentive Plan.
Reasons for the Proposal
The Board has determined that, in order to give the Company the ability to attract and retain
the executive and key employee talent necessary for the Companys continued growth and success, the
number of shares of Common Stock reserved and available for issuance under the Amended and Restated
Plan, from the inception of the 2007 Plan, will be increased by 1,500,000 to a total of 2,000,000
shares. The 2007 Plan, as currently in effect, requires the Board to obtain stockholder approval
to increase the aggregate number of shares (other than pursuant to the 2007 Plans adjustment
provision) that may be issued under the plan. See
Summary of the Amended and Restated Plan
Other Provisions Amendment and Termination
and
Summary of the Amended and Restated Plan
Shares Subject to the Amended and Restated Plan.
If the Amended and Restated Plan is approved,
the 1,500,000 additional shares will be immediately available for future awards (including the
contemplated awards described in the
Amended and Restated Plan Benefits Table
section of this
Proxy Statement, the grant of which awards is contingent upon stockholder approval of the Amended
and Restated Plan) and the maximum number of shares reserved and available for issuance under the
Amended and Restated Plan from the inception of the 2007 Plan will increase from 500,000 to
2,000,000. While the Board is cognizant of the potential dilutive effect of compensatory stock
awards, it also recognizes the significant motivation and performance benefits that are achieved
from making such awards.
The 2007 Plan presently provides for the granting of incentive stock options and nonqualified
stock options. The Board has determined that additional flexibility is needed with respect to the
types of awards that may be granted under the 2007 Plan in order to appropriately motivate
employees and other service providers who participate in the 2007 Plan. Approval of the Amended
and Restated Plan will make Restricted Stock Awards an available compensatory vehicle that may be
granted under the Amended and Restated Plan.
In addition, the Board has determined that the 2007 Plan should be amended to (i) provide that
the compensation committee of the Board (the
Compensation Committee
) may require the
satisfaction of certain performance standards before awards are granted or before such awards vest
and (ii) ensure the
deductibility of certain performance-based awards intended to qualify as performance-based
4
compensation (within the meaning of section 162(m) of the Code). Under section 162(m) of the
Code, the federal income tax deductibility of compensation paid to the Companys chief executive
officer and the three other most highly compensated officers (other than the Companys principal
financial officer) (
Covered Employees
) determined pursuant to the executive compensation
disclosure rules under the Securities and Exchange Act of 1934, as amended (the
Exchange
Act
), may be limited to the extent such compensation exceeds $1,000,000 in any taxable year.
However, the Company may deduct compensation paid to its Covered Employees if such compensation
qualifies as performance-based compensation. Please see
Federal Tax Consequences Tax Code
Limitations on Deductibility
for a complete discussion of the rules associated with the deduction
of such performance-based compensation under section 162(m) of the Code.
In addition to certain other requirements, in order for awards under the Amended and Restated
Plan to constitute performance-based compensation, the material terms of the Amended and Restated
Plan must be disclosed to and approved by the Companys stockholders before the compensation is
paid. Under the section 162(m) regulations, the material terms of the Amended and Restated Plan
are (i) the maximum amount of compensation that may be paid to a participant who is a Covered
Employee under the Amended and Restated Plan in any fiscal year, (ii) the employees eligible to
receive compensation under the Amended and Restated Plan, and (iii) the business criteria on which
the performance goals are based. The Company intends that certain performance awards to Covered
Employees made under the Amended and Restated Plan qualify for exemption from the deduction
limitations of section 162(m) of the Code. Accordingly, the Company is requesting that
stockholders approve the material terms of the Amended and Restated Plan. See
Summary of the
Amended and Restated Plan Awards Performance and Annual Incentive Awards.
The Amended and Restated Plan also incorporates certain clarifying and other changes to the
2007 Plan, including but not limited to conforming the definition of Change of Control in the
Amended and Restated Plan to the definition used in the Companys Executive Officer Change in
Control Agreements.
Summary of the Amended and Restated Plan
The following is a summary of the Amended and Restated Plan but does not purport to be a
complete description of all the provisions thereof. This summary is qualified in its entirety by
reference to the Amended and Restated Plan, a copy of which is attached to this Proxy Statement as
Exhibit A and is incorporated in its entirety herein by reference.
Purposes of the Amended and Restated Plan
The purposes of the Amended and Restated Plan are to (i) promote the long-term financial
interests and growth of the Company, (ii) motivate directors, employees and consultants of the
Company by providing growth-oriented incentives, and (iii) further the alignment of interests of
directors, employees and consultants with those of the stockholders of the Company. The Company
intends to achieve the Amended and Restated Plans purpose by primarily providing grants of (i)
options intended to qualify as incentive stock options under U.S. federal income tax laws
(
ISOs
), (ii) options that do not constitute incentive stock options (
Nonqualified
Options
and, together with ISOs,
Options
), (iii) restricted stock awards
(
Restricted Stock
), (iv) annual incentive awards for a specified fiscal year (
Annual
Incentive Awards
), (v) awards, the grant, vesting, exercise and/or settlement of which may be
based on specified performance criteria (
Performance Awards
), or (vi) any combination of
such awards (collectively referred to as
Awards
). See
Summary of the Amended and
Restated Plan Shares Subject to the Amended and Restated Plan.
If specified in an applicable
Award agreement or otherwise
with respect to an Award, certain Awards may be settled in cash instead of Common Stock.
5
The Amended and Restated Plan, in part, is intended to qualify under the provisions of section
422 of the Code. See
Federal Tax Consequences.
The Amended and Restated Plan is not subject to
the provisions of the Employee Retirement Income Security Act of 1974, as amended
(
ERISA
).
Administration of the Amended and Restated Plan
The Board has appointed the Compensation Committee to administer the Amended and Restated Plan
pursuant to its terms and all applicable state, federal or other rules or laws. Unless limited
otherwise by the Amended and Restated Plan, Rule 16b-3 of the Exchange Act, or any provisions of
the Code, the Compensation Committee has broad discretion to administer the Amended and Restated
Plan, interpret its provisions, prescribe rules and regulations relating to the Amended and
Restated Plan, determine recipients of Awards and the terms of their Award agreements, and execute
all other responsibilities permitted or required under the Amended and Restated Plan.
Persons Who May Participate in the Amended and Restated Plan
Any employee, director or consultant who provides services to the Company (an
Eligible
Person
) and who is designated by the Compensation Committee to receive an Award under the
Amended and Restated Plan will be a
Participant
. Any individual granted an Award that
remains outstanding under the Amended and Restated Plan, including an individual who is no longer
an Eligible Person, will continue to be a Participant for purposes of the Amended and Restated
Plan. The Company currently has four non-employee directors, five executive officers, 803 other
employees and one consultant who are eligible to participate in the Amended and Restated Plan.
A Participant in the Amended and Restated Plan will be eligible to receive an Award pursuant
to the terms of the Amended and Restated Plan and subject to any limitations imposed by appropriate
action of the Compensation Committee. No Award may be granted if the Award relates to a number of
shares of Common Stock that exceeds the number of shares that remains available under the Amended
and Restated Plan minus the number of shares issuable in settlement of or relating to outstanding
Awards. In any calendar year, during any part of which the Amended and Restated Plan is in effect,
a Covered Employee may not be granted (i) Awards (other than Awards designated to be paid only in
cash, or the settlement of which is not based on a number of shares of Common Stock) relating to
more than 200,000 shares of Common Stock, subject to adjustment in a manner consistent with other
provisions of the Amended and Restated Plan and (ii) Awards designated to be paid only in cash, or
the settlement of which is not based on a number of shares of Common Stock, having a value
determined on the date of grant in excess of $1,000,000.
With respect to a grant of ISOs, a Participant must be an employee of the Company, or of a
parent or subsidiary of the Company, at the time the ISO is granted and, immediately before the
time the ISO is granted, the Participant may not own stock possessing more than 10% of the total
combined voting power or value of all classes of stock of the Company, or any parent or subsidiary
of the Company, unless at the time the ISO is granted, the exercise price of the ISO is at least
110% of the fair market value of the Common Stock subject to the ISO and the ISO, by its terms, is
not exercisable until after the expiration of five years from the date of grant.
Shares Subject to the Amended and Restated Plan
The maximum aggregate number of shares of Common Stock that may be issued pursuant to any and
all Awards under the 2007 Plan is currently 500,000 shares. If the Amended and Restated Plan as
proposed by the Board is adopted, the maximum aggregate number of shares of Common Stock in respect
of which Awards may be granted under the plan, from the inception of the 2007 Plan, will increase
by 1,500,000 to 2,000,000 shares, subject to adjustment due to recapitalization or reorganization
as provided
6
under the Amended and Restated Plan.
Shares shall be deemed to have been issued under the Amended and Restated Plan only to the
extent actually issued and delivered pursuant to an Award. If an Award expires or is canceled,
forfeited, settled in cash or otherwise terminated without an issuance of shares to the
Participant, any shares of Common Stock subject to such Award (including any shares withheld or
delivered to satisfy the exercise price or taxes associated with an Award) shall again be available
for the grant of an Award under the Amended and Restated Plan, except to the extent limited by
applicable law. Subject to certain limitations set forth in the Amended and Restated Plan, Common
Stock to be offered under the Amended and Restated Plan may be authorized but unissued shares or
shares that have been reacquired by the Company.
Awards
Stock Options
. The Compensation Committee may award Options to Eligible Persons under the
terms of the Amended and Restated Plan. An Option represents the right to purchase a share of
Common Stock at a predetermined exercise price. Options granted under the Amended and Restated
Plan may be in the form of ISOs (only to employees of the Company, or a parent or subsidiary of the
Company) or Nonqualified Options, as determined in the discretion of the Compensation Committee.
The terms of each Option, including the number of shares, exercise price, vesting period, and
expiration date (which may not be more than ten years from the date of grant), will be set forth in
an Option agreement. The exercise price of each Option may vary; provided that the exercise price
of an Option must not be less than the greater of (a) the par value per share of Common Stock or
(b) 100% of the fair market value per share of the Common Stock on the date of grant of the Option.
Options may be exercised as the Compensation Committee determines (including the method and form
of payment of the exercise price, which, in the discretion of the Compensation Committee, may be
paid in cash, in shares of Common Stock otherwise deliverable upon exercise of the Option, or in
shares of Common Stock already owned by the Participant), but not later than the Options
expiration date, which will be the date set forth in the applicable Option agreement as the
expiration date or, if earlier, the Participants termination of employment). Under certain
conditions, as determined by the Compensation Committee, an Option may be exercised for a period of
time after a Participants termination of employment (
e.g
., retirement, death, disability), but not
later than the expiration date of the Option.
ISOs will not be granted under the Amended and Restated Plan more than ten years after the
earlier of the adoption of the Amended and Restated Plan or the approval of the Amended and
Restated Plan by the Companys stockholders. Any ISO that fails to comply with section 422 of the
Code for any reason will result in the reclassification of the Option as a Nonqualified Option,
which will be exercisable as such.
Restricted Stock Awards
. A Restricted Stock Award is a grant of shares of Common Stock
subject to a risk of forfeiture, restrictions on transferability, and any other restrictions
imposed by the Compensation Committee in its discretion. Restrictions may lapse at such times and
under such circumstances as determined by the Compensation Committee. Except as otherwise provided
under the terms of the Amended and Restated Plan or an Award agreement, the holder of a Restricted
Stock Award may have rights as a stockholder, including the right to vote the Common Stock subject
to the Restricted Stock Award or to receive dividends on the Common Stock subject to the Restricted
Stock Award. Unless otherwise determined by the Compensation Committee, Common Stock distributed
to a holder of a Restricted Stock Award in connection with a stock split or stock dividend, and
other property (other than cash) distributed as a dividend, will be subject to restrictions and a
risk of forfeiture to the same extent as the Restricted Stock Award with respect to which such
Common Stock or other property has
been distributed. During the restricted period applicable to the Restricted Stock, the Restricted
Stock may not be sold, transferred, pledged, hypothecated, margined or otherwise encumbered by the
Participant.
7
Performance and Annual Incentive Awards
. The Compensation Committee may designate that
certain Awards granted under the Amended and Restated Plan constitute Performance Awards or may
grant separate Annual Incentive Awards that may be settled in cash, shares of Common Stock or other
Awards. A Performance Award is any Award the grant, exercise or settlement of which is subject to
one or more performance standards. If a Performance Award or an Annual Incentive Award is granted
to a person designated by the Compensation Committee, at the time of grant of the Award, as likely
to be a Covered Employee (within the meaning of section 162(m) of the Code and the regulations
thereunder, including Treasury Regulation section 1.162-27 and successor regulations thereto) for
the specified year, such Award may be designed to constitute performance-based compensation under
section 162(m) of the Code. One or more of the following business criteria for the Company, on a
consolidated basis, and/or for specified subsidiaries or business or geographical units of the
Company (except with respect to the total stockholder return criteria) shall be used by the
Compensation Committee in establishing performance goals: (i) earnings per share; (ii) increase in
earnings; (iii) revenues, (iv) increase in revenues; (v) increase in cash flow; (vi) increase in
cash flow return; (vii) return on net assets; (viii) return on assets; (ix) return on investment;
(x) return on capital; (xi) return on equity; (xii) economic value added; (xiii) operating margin;
(xiv) contribution margin; (xv) net income before taxes; (xvi) net income after taxes; (xvii)
pretax earnings; (xviii) pretax earnings before interest, depreciation and amortization; (xix)
pretax operating earnings after interest expense and before incentives, service fees, and
extraordinary or special items; (xx) total stockholder return; (xxi) debt reduction; (xxii) market
share; (xxiii) change in the fair market value of the Common Stock; (xxiv) selling, general and
administrative expenses (SG&A) as a percentage of net income or revenues; and (xxv) any of the
above goals determined on an absolute or relative basis or as compared to the performance of a
published or special index deemed applicable by the Compensation Committee including, but not
limited to, the Standard & Poors 500 Stock Index or a group of comparable companies.
Other Provisions
Tax Withholding
. To satisfy a Participants minimum statutory tax withholding with respect to
an Award, the Company has the right to deduct any taxes required by law to be withheld and to
require any payments from the Participant required to enable it to satisfy its withholding
obligations.
Subdivision, Consolidation or Recapitalization
. In the event of a subdivision or
consolidation of shares of Common Stock or the payment of stock dividends on Common Stock without
receipt of consideration by the Company, the number of shares of Common Stock subject to an Award
theretofore granted will be proportionately increased or decreased, as applicable, and the purchase
price, if any, shall be proportionately decreased or increased, as applicable. In the event of a
recapitalization, reclassification, or other change in the Companys capital structure, the number
and class of shares of Common Stock subject to an Award previously granted shall be adjusted so
that it covers the number and class of shares of stock and securities that the Participant would be
entitled to if the Participant was a holder of record of the number of shares of Common Stock
subject to the Award immediately prior to such change. In the event of other changes in the
outstanding Common Stock, the Compensation Committee may make adjustments at its discretion as to
the number and price of shares of Common Stock or other consideration subject to the Award.
Change of Control
. In the event of a Change of Control, all outstanding Awards shall become
fully vested. A
Change of Control
for purposes of the Amended and Restated Plan will have
occurred if:
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any person or related group of persons directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing
40% or more of the total
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8
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voting power of the Company entitled to vote generally in the
election of directors, and during any two consecutive year period, individuals who were
members of the Board at the beginning of such period (or whose election or nomination to
the Board was approved by a majority of the then current directors and directors whose
election or nomination was previously so approved) cease to constitute a majority of the
Board;
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any person or related group of persons directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing
50% or more of the total voting power of the Company entitled to vote generally in the
election of directors; or
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a merger or consolidation of the Company, or a sale of all or substantially all of the
assets of the Company, other than a merger, consolidation or sale (i) effected solely to
change the Companys jurisdiction of incorporation and that results in a reclassification,
conversion or exchange of outstanding shares of Common Stock into solely shares of Common
Stock or (ii) that (a) does not result in any reclassification, conversion, exchange or
cancellation of outstanding Company shares (except if such reclassification, conversion,
exchange or cancellation is solely for shares of publicly traded common stock) and (b)
results in holders of 50% or more of the total voting power of the Company immediately
prior to such transaction holding more than 50% of the total voting power of the continuing
or surviving company immediately after the transaction.
|
In the event a Change of Control is triggered by a merger or consolidation of the Company with or
into another company pursuant to which shares of Common Stock of the Company are converted into the
right to receive cash, then in such event each outstanding Option not otherwise exercised prior to
the effective time of such merger will become exchangeable after the effective time of such merger
only for the excess, if any, of the per share merger consideration paid in such merger over the per
share exercise price of the Option. In the event a Change of Control is triggered by a merger or
consolidation of the Company with or into another company pursuant to which shares of Common Stock
of the Company are converted into the right to receive any securities and/or property, then in such
event each outstanding Option not otherwise exercised prior to the effective time of such merger
will become exercisable after the effective time of such merger only for such securities and/or
property into which shares of Common Stock of the Company would have been converted if such Option
had been exercised immediately prior to the effective time of such merger.
Amendment and Termination
. The Board may amend, alter or discontinue the Amended and Restated
Plan at any time; provided that no amendment will be made to the Amended and Restated Plan without
stockholder approval if stockholder approval of such amendment is required by law or if such
amendment would:
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increase the maximum aggregate number of shares (other than pursuant to the Amended and
Restated Plans adjustment provisions) that may be issued or deemed to be issued under the
Amended and Restated Plan;
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extend the term of the Amended and Restated Plan;
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reduce the price at which Options may be granted below the fair market value of the
Common Stock; or
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change the class of individuals eligible to receive Awards under the Amended and
Restated Plan.
|
In addition, no change to the Amended and Restated Plan may be made that would impair the rights of
any Participant with respect to a previously granted Award without his or her consent.
9
Transferability of Awards
. An Award may not be transferred other than (i) by will or the laws
of descent and distribution, (ii) pursuant to a qualified domestic relations order (within the
meaning of the Code or Title I of ERISA), or (iii) with the written consent of the Compensation
Committee. Notwithstanding the foregoing, ISOs are transferable only by will or the laws of
descent and distribution.
Federal Tax Consequences
The following discussion is for general information only and is intended to summarize briefly
the U.S. federal tax consequences to Participants arising from participation in the Amended and
Restated Plan. This description is based on current law, which is subject to change (possibly
retroactively). The tax treatment of Participants in the Amended and Restated Plan may vary
depending on the particular situation and may, therefore, be subject to special rules not discussed
below. No attempt has been made to discuss any potential foreign, state, or local tax consequences.
ISOs and Nonqualified Stock Options
. A Participant will not recognize any income upon the
grant of a Nonqualified Option. Upon the exercise of a Nonqualified Option, a Participant will
recognize ordinary compensation income (subject to withholding) in an amount equal to the excess of
(i) the amount of cash and the fair market value of the Common Stock received over (ii) the
exercise price paid therefor. A Participant will generally have a tax basis in any shares of Common
Stock received pursuant to the cash exercise of a Nonqualified Option that equals the fair market
value of such shares on the date of exercise. Subject to the discussion under
Federal Tax
Consequences Tax Code Limitations on Deductibility
,
the Company or any of its subsidiaries, as
applicable, will be entitled to a deduction for federal income tax purposes that corresponds as to
timing and amount with the compensation income recognized by a Participant under the foregoing
rules.
Participants eligible to receive an ISO will not recognize taxable income on the grant of an
ISO. Upon the exercise of an ISO, a Participant will not recognize taxable income, although the
excess of the fair market value of the shares of Common Stock received upon exercise of the ISO
(
ISO Stock
) over the exercise price will increase the alternative minimum taxable income
of the Participant, which may cause such Participant to incur alternative minimum tax. The payment
of any alternative minimum tax attributable to the exercise of an ISO would be allowed as a credit
against the Participants regular tax liability in a later year to the extent the Participants
regular tax liability is in excess of the alternative minimum tax for that year.
Upon the disposition of ISO Stock that has been held for the requisite holding period
(generally, at least two years from the date of grant and one year from the date of exercise of the
ISO), a Participant will generally recognize capital gain (or loss) equal to the excess (or
shortfall) of the amount received in the disposition over the exercise price paid by the
Participant for the ISO Stock. However, if a Participant disposes of ISO Stock that has not been
held for the requisite holding period (a
Disqualifying Disposition
), the Participant will
recognize ordinary compensation income in the year of the Disqualifying Disposition in an amount
equal to the amount by which the fair market value of the ISO Stock at the time of exercise of the
ISO (or, if less, the amount realized in the case of an arms length disposition to an unrelated
party) exceeds the exercise price paid by the Participant for such ISO Stock. A Participant would
also recognize capital gain to the extent the amount realized in the Disqualifying Disposition
exceeds the fair market value of the ISO Stock on the exercise date. If the exercise price paid for
the ISO Stock exceeds the amount realized (in the case of an arms-length disposition to an
unrelated party), such excess would ordinarily constitute a capital loss.
Generally, the Company will not be entitled to any federal income tax deduction upon the grant
or exercise of an ISO, unless a Participant makes a Disqualifying Disposition of the ISO Stock. If
a Participant makes a Disqualifying Disposition, the Company will then, subject to the discussion
under
Federal Tax Consequences Tax Code Limitations on Deductibility,
be entitled to a tax
deduction
10
that corresponds as to timing and amount with the compensation income recognized by a
Participant under the rules described in the preceding paragraph.
Under current rulings, if a Participant transfers previously held shares of Common Stock
(other than ISO Stock that has not been held for the requisite holding period) in satisfaction of
part or all of the exercise price of a Nonqualified Option or ISO, no additional gain will be
recognized on the transfer of such previously held shares in satisfaction of the Nonqualified
Option or ISO exercise price (although a Participant would still recognize ordinary compensation
income upon exercise of a Nonqualified Option in the manner described above). Moreover, that
number of shares of Common Stock received upon exercise that equals the number of shares of
previously held Common Stock surrendered therefor in satisfaction of the Nonqualified Option or ISO
exercise price will have a tax basis that equals, and a capital gains holding period that includes,
the tax basis and capital gains holding period of the previously held shares of Common Stock
surrendered in satisfaction of the Nonqualified Option or ISO exercise price. Any additional shares
of Common Stock received upon exercise will have a tax basis that equals the amount of cash (if
any) paid by the Participant, plus the amount of compensation income recognized by the Participant
under the rules described above.
The Amended and Restated Plan allows the Compensation Committee to permit the transfer of
Awards in limited circumstances. See
Summary of the Amended and Restated Plan Other Provisions
Transferability of Awards.
For income and gift tax purposes, certain transfers of Nonqualified
Options generally should be treated as completed gifts, subject to gift taxation.
The Internal Revenue Service (the
IRS
) has not provided formal guidance on the
income tax consequences of a transfer of Nonqualified Options (other than in the context of
divorce). However, the IRS has informally indicated that after a transfer of Options (other than
in the context of divorce pursuant to a domestic relations order), the transferor will recognize
income, which will be subject to withholding, and FICA/FUTA taxes will be collectible at the time
the transferee exercises the Options. If Nonqualified Options are transferred pursuant to a
domestic relations order, the transferee will recognize ordinary income upon exercise by the
transferee, which will be subject to withholding, and FICA/FUTA taxes (attributable to and reported
with respect to the transferor) will be collectible from the transferee at such time.
In addition, if a participant transfers a vested Nonqualified Option to another person and
retains no interest in or power over it, the transfer is treated as a completed gift. The amount
of the transferors gift (or generation-skipping transfer, if the gift is to a grandchild or later
generation) equals the value of the Nonqualified Option at the time of the gift. The value of the
Nonqualified Option may be affected by several factors, including the difference between the
exercise price and the fair market value of the stock, the potential for future appreciation or
depreciation of the stock, the time period of the Nonqualified Option and the illiquidity of the
Nonqualified Option. The transferor will be subject to a federal gift tax, which will be limited
by (i) the annual exclusion of $12,000 per donee, (ii) the transferors lifetime unified credit, or
(iii) the marital or charitable deduction rules. The gifted Nonqualified Option will not be
included in the Participants gross estate for purposes of the federal estate tax or the
generation-skipping transfer tax.
This favorable tax treatment for vested Nonqualified Options has not been extended to unvested
Nonqualified Options. Whether such consequences apply to unvested Nonqualified Options is
uncertain and the gift tax implications of such a transfer is a risk the transferor will bear upon
such a disposition.
Restricted Stock Awards; Cash Awards
. A Participant will recognize ordinary compensation
income upon receipt of cash pursuant to a cash award or, if earlier, at the time the cash is
otherwise made available for the Participant to draw upon. In general, a Participant will
recognize ordinary compensation income as a result of the receipt of Common Stock pursuant to a
Restricted Stock Award in an amount equal to the fair market value of the Common Stock when such
stock is received; provided, however, that
11
if the stock is not transferable and is subject to a substantial risk of forfeiture when
received, a Participant will recognize ordinary compensation income in an amount equal to the fair
market value of the Common Stock when (i) the Common Stock first becomes transferable or is no
longer subject to a substantial risk of forfeiture, in cases where a Participant does not make an
valid election under section 83(b) of the Code or (ii) the Common Stock is received, in cases where
a Participant makes a valid election under section 83(b) of the Code.
A Participant will be subject to withholding for federal, and generally for state and local,
income taxes at the time he recognizes income under the rules described above with respect to
Common Stock or cash received. Dividends that are received by a Participant prior to the time that
the Common Stock is taxed to the Participant under the rules described in the preceding paragraph
are taxed as additional compensation, not as dividend income. The tax basis in the Common Stock
received by a Participant will equal the amount recognized by him as compensation income under the
rules described in the preceding paragraph, and the Participants capital gains holding period in
those shares will commence on the later of the date the shares are received or the restrictions
lapse.
Subject to the discussion immediately below, the Company or any of its subsidiaries will be
entitled to a deduction for federal income tax purposes that corresponds as to timing and amount
with the compensation income recognized by a Participant under the foregoing rules.
Tax Code Limitations on Deductibility
. In order for the amounts described above to be
deductible by the Company or any of its subsidiaries, such amounts must constitute reasonable
compensation for services rendered or to be rendered and must be ordinary and necessary business
expenses.
The ability of the Company or any of its subsidiaries to obtain a deduction for future
payments under the Amended and Restated Plan could also be limited by the golden parachute payment
rules of section 280G of the Code, which prevent the deductibility of certain excess parachute
payments made in connection with a change in control of an employer-corporation.
Finally, the ability of the Company or any of its subsidiaries to obtain a deduction for
amounts paid under the Amended and Restated Plan could be limited by section 162(m) of the Code,
which limits the deductibility, for federal income tax purposes, of compensation paid to the
Covered Employees of a publicly traded corporation to $1,000,000 with respect to any such Covered
Employee during any taxable year of the corporation. However, an exception applies to this
limitation in the case of certain performance-based compensation. In order to exempt
performance-based compensation from the $1,000,000 deductibility limitation, the grant or vesting
of the Award relating to the compensation must be based on the satisfaction of one or more
performance goals as selected by the Compensation Committee. Performance Awards intended to comply
with section 162(m) of the Code may not be granted in a given period if such Awards relate to
shares of Common Stock that exceed a specified limitation or, alternatively, if the Performance
Awards may result in compensation, for a Covered Employee, in a given period that exceeds a
specified limitation. If the Amended and Restated Plan is approved at the Special Meeting, a
Participant who receives an Award or Awards intended to satisfy the performance-based exception to
the $1,000,000 deductibility limitation may not receive Performance Awards relating to more than
200,000 shares of Common Stock or, with respect to Awards not related to shares of Common Stock,
$1,000,000, in any given year. Although the Amended and Restated Plan has been drafted to satisfy
the requirements for the performance-based compensation exception, the Company may determine that
it is in its best interests not to satisfy the requirements for the exception. See
Summary of the
Amended and Restated Plan Awards Performance and Annual Incentive Awards.
12
Amended and Restated Plan Benefits Table
The following table sets forth all currently contemplated Awards under the Amended and
Restated Plan. Any future awards under the Amended and Restated Plan are subject to the discretion
of the Compensation Committee and, therefore, are not determinable at this time.
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Name and Position
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Dollar Value ($)
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Adam Blumenfeld
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$
|
675,000
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Chief Executive Officer and Chairman of the Board
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William R. Estill
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Former Chief Financial Officer
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Terrence M. Babilla
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$
|
581,000
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President, Chief Operating Officer, General Counsel
and Secretary
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Tevis Martin
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$
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112,500
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Executive Vice President, U.S. Operations
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Kurt Hagen
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$
|
112,500
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Executive Vice President, Sales & Marketing
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Michael J. Blumenfeld
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Former Chief Executive Officer
|
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All Executive Officers as a Group
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$
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1,687,250
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Non-Executive Director Group
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$
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60,000
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Non-Executive Officer Employee Group
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If the Amended and Restated Plan is approved, the Compensation Committee will award long-term
incentive awards to the individuals listed above in an amount equal to the respective dollar values
listed above. Seventy-percent of such long-term incentives will be in the form of Options to
purchase shares of Common Stock and thirty-percent of such long-term incentives will be in the form
of Restricted Stock Awards, each subject to a vesting schedule that will be specified in the
applicable Award agreement. The exercise price of the Options to be awarded will be set on the
grant date. In addition, if the Amended and Restated Plan is approved, each non-executive director
of the Company (other than Mr. William M. Lockhart who joined the Board on April 25, 2008 and who
is not expected to accept compensation in connection with his service on the Board) will receive a
fiscal 2009 annual long-term incentive award in the form of restricted stock with a value of
approximately $20,000.
Equity Compensation Plan Information
The following table provides certain information, as of June 30, 2007, about the Companys
Common Stock that may be issued upon the exercise of Options under the 2007 Plan and the Amended
and Restated 1998 Collegiate Pacific Inc. Stock Option Plan, which are the only existing equity
compensation plans of the Company.
13
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(c)
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Number of Securities
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(a)
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(b)
|
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Remaining Available
|
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Number of
|
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Weighted
|
|
|
for Future Issuance
|
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Securities to be
|
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Average Exercise
|
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Under Equity
|
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Issued Upon Exercise of
|
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Price of Outstanding
|
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Compensation Plans
|
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Outstanding Options
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Options,
|
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(Excluding Securities
|
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Warrants, Awards
|
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Warrants and
|
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Reflected in
|
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Plan Category
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and Rights (1)
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Rights (2)
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Column (a))
|
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Equity Compensation
Plans Approved by
Securityholders
|
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977,950
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$
|
9.00
|
|
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46,550
|
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Equity Compensation
Plans Not Approved
by Securityholders
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Total
|
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977,950
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|
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$
|
9.00
|
|
|
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46,550
|
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(1)
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These amounts do not include any outstanding options granted under the Companys equity
compensation plans during fiscal 2008. Please refer to the discussion under
Compensation
Discussion and Analysis
for information on options granted to the Named Executive Officers in
fiscal 2008.
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(2)
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These amounts represent the weighted average exercise price for the total number of outstanding
options.
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If the Amended and Restated Plan submitted to stockholders is not approved by the stockholders
at the Special Meeting, the Amended and Restated Plan will not be adopted and no Awards, including
the contemplated Awards described in the Amended and Restated Plan Benefits Table above, will be
granted thereunder.
The Board recommends a vote FOR approval of the Amended and Restated Plan. Because the
proposed Amended and Restated Plan will increase the number of shares of Common Stock that may be
issued to directors and executive officers of the Company pursuant to Awards granted thereunder and
provides for the grant of additional types of Awards (namely, Restricted Stock Awards, Performance
Awards and Annual Incentive Awards) to such directors and executive officers, each of the directors
and executive officers has an interest in, and may benefit from, the adoption of the Amended and
Restated Plan.
14
Fiscal 2007 Executive Compensation
This section sets forth certain information pertaining to the compensation of the Chief
Executive Officer, the former Chief Financial Officer who served as such during fiscal 2007, the
Companys three most highly compensated executive officers other than the Chief Executive Officer
and the former Chief Financial Officer during the fiscal year ended June 30, 2007, and the
Companys former Chief Executive Officer, Michael J. Blumenfeld, who served in such capacity until
November 13, 2006 (the
Named Executive Officers
).
Compensation Discussion and Analysis
The Companys last completed fiscal year was fiscal 2007, which ran from July 1, 2006 through
June 30, 2007. Therefore, the focus of this
Compensation Discussion and Analysis
is on fiscal
2007 executive compensation. However, compensation decisions and actions regarding executive
compensation taken after June 30, 2007 are also discussed herein as they are expected to affect a
readers understanding of the Companys current compensation programs and policies.
Executive Compensation Philosophy and Program Objectives
The Company bases its executive compensation philosophy on the same principles that guide the
Company in establishing all of its compensation programs. In particular, the objectives of the
Companys compensation programs are:
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To attract, retain and motivate highly-talented individuals at all levels of the
organization;
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To reflect the value of each individuals job in the marketplace and to remain
competitive with the pay of other premier employers who compete with the Company for
talent; and
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To provide long-term equity-based compensation to foster the long-term focus required
for the Companys success, thereby further aligning the interests of the Companys
executives and other employees with those of its stockholders.
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These objectives are designed to reward (i) past individual performance and contributions to
the Companys performance, (ii) level and scope of job responsibility and experience, and (iii)
ability to influence the Companys future performance.
Elements of Compensation
. The Companys compensation program consists of annual compensation
in the form of salary and bonus and long-term equity incentive compensation. The Compensation
Committee views cash as a key element of overall compensation and considers base salary and merit
increases thereto annually based on Company and individual performance for the previous fiscal year
and market conditions. Consistent with this view, cash bonuses for the Named Executive Officers
are also considered annually and are designed to reward each executives individual performance, as
well as contributions to Company performance, during the previous fiscal year. Finally, the Named
Executive Officers are each also eligible to receive annual equity grants. Equity awards are
intended to retain and motivate such executives, while simultaneously linking their interests to
enhancing stockholder value. The size of such equity awards are generally based on an evaluation
of the size and value of past awards to an individual, the individuals performance and level and
scope of responsibility within the organization.
Methodology and Compensation Consultant Engagement
. With respect to fiscal 2007
15
compensation for the Companys Named Executive Officers, the Compensation Committee considered various factors
to determine an individuals compensation level, including the individuals level of responsibility
within the organization, the individuals prior experience, and the Compensation Committees
judgment as to the individuals performance and ability to shape the Companys overall performance.
The Compensation Committee did not apply formulas or assign these factors relative weights, but
instead, exercised judgment and discretion in making a subjective determination after considering
all such factors collectively. In fiscal 2007, a benchmarking study of the compensation of the
Named Executive Officers against the compensation of similarly situated executives at other
companies was not conducted.
Following the conclusion of fiscal 2007, the Compensation Committee retained Mercer (US) Inc.
(
Mercer
) to provide information, analyses and advice regarding executive compensation, as
described below. The Mercer consultant who performs these services reports directly to the
Chairman of the Compensation Committee.
The Compensation Committee has established procedures that it considers adequate to ensure
that Mercers advice to the Compensation Committee remains objective is not influenced by the
Companys management. These procedures include a direct reporting relationship of the Mercer
consultant to the Compensation Committee; a provision in the Compensation Committees engagement
letter with Mercer specifying the information, data and recommendations that can and cannot be
shared with management; an annual update to the Compensation Committee on Mercers financial
relationship with the Company, including a summary of any work performed for the Company during the
preceding 12 months; and written assurances from Mercer that, within the Mercer organization, the
Mercer consultant who performs services for the Company has a reporting relationship and
compensation determined separately from Mercers other lines of business and from any other work
that it may provide for the Company.
During the course of its engagement, Mercer has:
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evaluated the competitive positioning of the Companys Named Executive Officers
base salaries, annual incentive and long-term incentive compensation relative to its
broader industry;
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advised the Compensation Committee on the Chief Executive Officer and other Named
Executive Officer target award levels within the annual and long-term incentive program
and, as needed, on actual compensation actions;
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provided ongoing advice as needed on the design of Companys annual and long-term
incentive plans;
|
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briefed the Compensation Committee on executive compensation trends among the
Companys peers and broader industry;
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advised the Compensation Committee with regard to executive share ownership
guidelines; and
|
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advised the Compensation Committee with regard to market best practices related to
change in control agreements.
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In the course of conducting its activities, Mercer attended meetings of the Compensation
Committee by telephone and presented its findings and recommendations for discussion. With the
consent of the Chairman of the Compensation Committee, Mercer has, from time to time, consulted the
Companys executive officers for information necessary to fulfill its assignment and may make
reports
16
and presentations to and on behalf of the Compensation Committee that the executive
officers also receive. All decisions with respect to determining the actual amount or form of
executive compensation under the Companys executive compensation programs are ultimately made by
the Compensation Committee and may reflect factors and considerations other than the information
and advice provided by Mercer.
Specifically, with respect to setting fiscal 2008 compensation for the Named Executive
Officers, Mercer was requested to assist with a review of the Companys executive compensation
program to ensure that the compensation of the Companys executives was reasonable and appropriate
relative to the median compensation of similarly situated executives at other companies and was
consistent with general market practices and trends and with the Companys compensation objectives.
To that end, and due to the difficulties associated with determining a broad enough peer group of
companies within the Companys industry due in large part to the Companys acquisition of several
of its peers in recent years, Mercer presented the Compensation Committee with general industry
survey data for companies with revenues similar to that of the Company, as opposed to custom peer
group compensation data. Competitive data sources included published survey data from Mercer,
including the 2006 Mercer Long-Term Incentive and Equity Survey, and other survey sources.
Following such review, in August 2007, the Compensation Committee approved fiscal 2008 compensation
packages for each of the Companys continuing Named Executive Officers as discussed in greater
detail below.
With respect to setting upcoming fiscal 2009 compensation for the Named Executive Officers,
Mercer was re-engaged to conduct a detailed review of the Companys existing executive pay program
and provide recommendations for improvement of the program where necessary. The Compensation
Committees general objective as part of such review was to adopt compensation packages for the
Companys executive officers that targeted market median. In connection with such engagement,
Mercer collected total direct compensation data (including base salary, target short-term incentive
opportunity, target total cash, long-term incentive value, total direct compensation and
perquisites) from the following sources for companies across all industries that generate revenues
similar to those of the Companys revenues, and presented such data to the Compensation Committee:
(i) Mercers Proxy Compensation Database, its proprietary database that houses compensation data
for the top five executives of public companies disclosed in public filings; (ii) the 2007 Mercer
Americas Executive Remuneration Database; and (iii) Mercers long-term incentive interpolation
tool, which uses grant data gathered in the 2007 survey cycles from all Mercer U.S. surveys to
develop long-term incentive values as a percentage of base salary. Following such review, in April
2008, the Compensation Committee approved fiscal 2009 compensation packages for each of the
Companys continuing Named Executive Officers as discussed in greater detail below.
Compensation Approval Process and Chief Executive Officer Involvement
. Pursuant to its
charter, the Compensation Committee is responsible for reviewing and approving, on behalf of the
Board, the compensation of the Companys executive officers and senior executives. In addition to
engaging a compensation consultant as discussed above, the Compensation Committee regularly seeks
the opinions and recommendations of the Companys Chairman of the Board and Chief Executive Officer
with respect to the compensation of the Companys executives other than himself. For example, in
connection with the fiscal 2008 compensation review led by Mercer and discussed above, Mr. Adam
Blumenfeld provided the Compensation Committee with input as to what were, in his opinion, the
significant accomplishments of the management team as a whole and of individual executives during
fiscal 2007, as well as his recommendations as to appropriate salary, bonus and long-term incentive
compensation levels for such executives going forward. Mr. Blumenfeld performed a similar advisory
role with respect to the fiscal 2009 compensation review led by Mercer as well. Mr. Blumenfeld may
attend Compensation Committee meetings in connection with this advisory role. With respect to the
compensation of Mr. Blumenfeld, the Compensation Committee independently reviews and makes
decisions regarding such compensation.
17
Fiscal 2007 Compensation of the Named Executive Officers
During fiscal 2007, the compensation of the Companys Named Executive Officers consisted
solely of annual base salary and bonus compensation, each as discussed in greater detail below.
The Named Executive Officers were not awarded any long-term incentives during fiscal 2007.
Mr. Adam Blumenfeld
. Mr. Adam Blumenfeld served as the Companys President until being
appointed Chief Executive Officer in November 2006. In addition, since July 1, 2007, Mr.
Blumenfeld has served as the Companys Chairman of the Board. The primary elements of Mr.
Blumenfelds fiscal 2007 compensation were a base salary of $375,000 and a cash bonus of $100,000.
In connection with his appointment as Chief Executive Officer in November 2006, the
Compensation Committee determined to maintain Mr. Blumenfelds base salary at $375,000. Mr.
Blumenfelds fiscal 2007 cash bonus was awarded in two parts, each of $50,000, and each on a
discretionary basis rather than pursuant to a formal bonus plan with pre-established performance
targets. The first half was awarded upon consideration of Mr. Blumenfelds contributions toward
successfully completing the Companys acquisition (the
SSG Sub Acquisition
) of the
balance of the outstanding shares of the company formerly known as Sport Supply Group, Inc.
(
Old SSG
). The second half was awarded upon consideration of (i) Mr. Blumenfelds
contributions toward the successful integration and realization of synergies in connection with the
SSG Sub Acquisition, (ii) his role in leading the Company toward several fiscal 2007 financial
successes, including improvements in sales, gross margin, earnings per share and in the Companys
balance sheet, and (iii) his contributions toward various other Company achievements during fiscal
2007, including the Companys implementation and compliance with Section 404 of the Sarbanes-Oxley
Act of 2002 (
Sarbanes-Oxley
), the migration of a large portion of the Companys catalog
application onto the SAP ERP system, and the motivation and sustainment of the morale of the
Companys employee base despite a fiscal year of significant organizational change.
Mr. William R. Estill
. Mr. Estill served as the Companys Chief Financial Officer during
fiscal 2007 before retiring from the Company on September 30, 2007. The primary elements of Mr.
Estills fiscal 2007 compensation were a base salary of $245,000 and a cash bonus of $50,000.
The Compensation Committee did not approve an increase in Mr. Estills base salary during
fiscal 2007. Mr. Estills fiscal 2007 cash bonus was awarded on a discretionary basis rather than
pursuant to a formal bonus plan with pre-established performance targets upon consideration of Mr.
Estills contributions toward successfully completing the SSG Sub Acquisition.
In addition, in August 2007, and in connection with his anticipated retirement from the
Company on September 30, 2007, the Compensation Committee approved a $50,000 lump sum cash
severance payment for Mr. Estill, less applicable taxes and other withholding. The Compensation
Committee approved such payment upon consideration of Mr. Estills dedicated service to the Company
since July 1999 as Chief Financial Officer.
Mr. Terrence M. Babilla
. Mr. Babilla has served as the Companys President since November 13,
2006, and as its Chief Operating Officer, General Counsel and Secretary since July 1, 2007. The
primary elements of Mr. Babillas fiscal 2007 compensation were a base salary of $350,000 and a
cash bonus of $75,000.
In connection with his appointment as President in November 2006, the Compensation Committee
determined to award Mr. Babilla a base salary of $350,000 upon consideration of the level of
responsibility Mr. Babilla was assuming with the Company at the time and upon review of the amount
of salary that had been awarded to the Companys prior President, Mr. Adam Blumenfeld, of $375,000.
Mr. Babillas fiscal 2007 cash bonus was awarded by the Compensation Committee on a discretionary
basis
18
rather than pursuant to a formal bonus plan with pre-established performance targets upon
consideration of (i) his contributions toward the successful integration and realization of
synergies in connection with the SSG Sub Acquisition, (ii) his significant contributions toward the
Companys cost containment initiatives and related role with respect to the Companys achievement
of its fiscal 2007 financial successes, (iii) his contributions toward various other Company
achievements during fiscal 2007, including the Companys implementation and compliance with Section
404 of Sarbanes-Oxley and the migration of a large portion of the Companys catalog application
onto the SAP ERP system, and (iv) that he was willing and able to successfully assume the roles of
Chief Operating Officer, General Counsel and Secretary of the Company following the conclusion of
the fiscal 2007 year.
Mr. Tevis Martin
. Mr. Martin serves as the Companys Executive Vice President, U.S.
Operations. The primary elements of Mr. Martins fiscal 2007 compensation were a base salary of
$180,775 and a cash bonus of $10,000.
The Compensation Committee awarded Mr. Martin a merit increase during fiscal 2007 of $5,775,
bringing his base salary from $175,000 for fiscal 2006 to $180,775 for fiscal 2007. Mr. Martins
merit increase was determined primarily upon consideration of the extraordinary amount of hard work
and dedication to the Company exhibited by him during fiscal 2006. Mr. Martins fiscal 2007 cash
bonus was awarded by the Compensation Committee on a discretionary basis rather than pursuant to a
formal bonus plan with pre-established performance targets upon consideration of (i) his
contributions toward the successful integration and realization of synergies in connection with the
SSG Sub Acquisition, particularly with respect to the Companys Road Sales Group, (ii) the fiscal
2007 earnings performance of the Companys Road Sales Group, (iii) his commitment toward his job
and related ability to motivate and maintain the morale of the employees that report to him, and
(iv) his contributions toward the Companys implementation and compliance with Section 404 of
Sarbanes-Oxley.
Mr. Kurt Hagen
. Mr. Hagen serves as the Companys Executive Vice President, Sales &
Marketing. The primary elements of Mr. Hagens fiscal 2007 compensation were a base salary of
$200,000 and a cash bonus of $25,000.
The Compensation Committee did not approve an increase in Mr. Hagens base salary during
fiscal 2007. Mr. Hagens fiscal 2007 cash bonus was awarded on a discretionary basis rather than
pursuant to a formal bonus plan with pre-established performance targets upon consideration of (i)
his contributions toward the successful integration and realization of synergies in connection with
the SSG Sub Acquisition, particularly with respect to the Companys Catalog Group, (ii) the fiscal
2007 earnings performance of the Companys Catalog Group, (iii) his ability to motivate and
maintain the morale of the employees that report to him, (iv) his contributions toward various
other Company achievements during fiscal 2007, including the Companys implementation and
compliance with Section 404 of Sarbanes Oxley and the migration of a large portion of the Companys
catalog application onto the SAP ERP system.
Mr. Michael J. Blumenfeld
. Mr. Michael J. Blumenfeld served as the Companys Chief Executive
Officer until November 13, 2006, when he was succeeded by his son Mr. Adam Blumenfeld. Upon
consideration of the expectation that he would be stepping down from his role as Chief Executive
Officer in November 2006, the Compensation Committee determined to maintain Mr. Blumenfelds base
salary at $375,000 for fiscal 2007. He was not awarded a fiscal 2007 cash bonus.
Mr. Blumenfeld continued as the Companys Chairman of the Board throughout the remainder of
fiscal 2007, and subsequent to his stepping down as the Companys Chief Executive Officer in
November 2006, has served as the Companys Director of Corporate Development. Mr. Michael
Blumenfeld is expected to remain in this capacity for the foreseeable future and, beginning with
fiscal 2008, will receive
an annual salary of $150,000 for serving in such capacity.
19
Fiscal 2008 Compensation of the Continuing Named Executive Officers
As discussed above, following a review by Mercer of the Companys existing executive
compensation program, the Compensation Committee adopted fiscal 2008 compensation packages for each
of the continuing Named Executive Officers in August 2007. These packages consisted of annual base
salary, bonus compensation and long-term incentive awards in the form of stock options, each as
discussed below. With the exception of Mr. Babilla, fiscal 2008 pay adjustments approved by the
Compensation Committee positioned the compensation of the Named Executive Officers closer to the
median of the survey benchmarks used, with the anticipation that further adjustments to bring
compensation levels to the market median would be made in fiscal 2009 in an effort to give the
Company more time to absorb the additional costs associated therewith. The fiscal 2008 bonus
program works similarly for each Named Executive Officer, except that performance measures differ
by individual based on the Compensation Committees evaluation of what aspect of Company
performance each individual has the ability to impact. For example, Messrs. Blumenfeld and Babilla
are each in a position to impact the Companys overall performance, while Mr. Martin is in a
position to directly impact the performance of the Companys Road Sales Group and Mr. Hagen is in a
position to directly impact the performance of the Companys Catalog Group. As fiscal 2008 remains
underway, actual bonus payouts for each of the Named Executive Officers cannot yet be determined.
Mr. Adam Blumenfeld
. According to survey market data provided by Mercer, Mr. Blumenfelds
fiscal 2007 compensation fell below the twenty-fifth percentile as compared to the total
compensation of chief executive officers at similarly sized companies. As such, and in an effort
to bring Mr. Blumenfelds total compensation closer to the market median, Mr. Blumenfelds base
salary was increased to $400,000 per year. Mr. Blumenfeld is also eligible for a targeted fiscal
2008 cash bonus of 50% of his base salary, or $200,000, such bonus to be based on the Companys
achievement of an approved level of EBITDA (earnings before interest, taxes, depreciation and
amortization) for fiscal 2008 of $22.3 million (representing a 34.3% increase over fiscal 2007
actual performance). Mr. Blumenfelds fiscal 2008 bonus may range from zero (if less than 80% of
the EBITDA goal is achieved) to two times (if 120% or more of the EBITDA goal is achieved) his
target bonus depending on the Companys actual performance against the EBITDA goal. In addition,
in an effort to foster long-term focus and further align the interests of Mr. Blumenfeld with those
of the Companys other stockholders, on September 7, 2007, Mr. Blumenfeld was granted 150,000
options to purchase shares of the Companys Common Stock at an exercise price of $9.56, which was
equal to the opening sales price of the Companys Common Stock on the grant date. The options vest
in equal installments over three years beginning on July 1, 2008, and expire on September 7, 2017.
In addition, the options will accelerate in the event of a change in control of the Company.
Mr. Terrence M. Babilla
. According to survey market data provided by Mercer, Mr. Babillas
fiscal 2007 compensation fell below the twenty-fifth percentile as compared to the total
compensation of chief operating officers at similarly sized companies. Mr. Babilla performs
multiple roles for the Company in that he serves as President, Chief Operating Officer, General
Counsel and Secretary. In order to recognize these multiple roles, the Compensation Committee
determined that it was appropriate for Mr. Babillas compensation to be positioned higher than the
market median for chief operating officers. In light of this determination, Mr. Babillas base
salary was increased to $375,000 per year. Mr. Babilla is also eligible for a targeted fiscal 2008
cash bonus of 40% of his base salary, or $150,000, such bonus to be based on the Companys
achievement of an approved level of EBITDA (earnings before interest, taxes, depreciation and
amortization) for fiscal 2008 of $22.3 million (representing a 34.3% increase over fiscal 2007
actual performance). Mr. Babillas fiscal 2008 bonus may range from zero (if less than 80% of the
EBITDA goal is achieved) to two times (if 120% or more of the EBITDA goal is achieved) his target
bonus depending on the Companys actual performance against the EBITDA goal. In
addition, in an effort to foster long-term focus and further align the interests of Mr.
Babilla with those of
20
the Companys other stockholders, on September 7, 2007, Mr. Babilla was
granted 130,000 options to purchase shares of the Companys Common Stock at an exercise price of
$9.56, which was equal to the opening sales price of the Companys Common Stock on the grant date.
The options vest in equal installments over three years beginning on July 1, 2008, and expire on
September 7, 2017. In addition, the options will accelerate in the event of a change in control of
the Company.
Mr. Tevis Martin
. According to survey market data provided by Mercer, Mr. Martins fiscal
2007 compensation fell below the twenty-fifth percentile as compared to the total compensation of
top divisional executives at similarly sized companies. As such, and in an effort to bring Mr.
Martins total compensation closer to the market median, Mr. Martins base salary was increased to
$200,000 per year. Mr. Martin is also eligible for a targeted fiscal 2008 cash bonus of 30% of his
base salary, or $60,000, such bonus to be based on the achievement by the Companys Road Sales
Group of an approved level of EBIT (earnings before interest and taxes) for fiscal 2008 of $7.14
million (representing a 91.4% increase over fiscal 2007 actual performance). Mr. Martins fiscal
2008 bonus may range from zero (if less than 80% of the EBIT goal is achieved) to two times (if
120% or more of the EBIT goal is achieved) his target bonus depending on the Companys Road Sales
Groups actual performance against the EBIT goal. In addition, in an effort to foster long-term
focus and further align the interests of Mr. Martin with those of the Companys other stockholders,
on July 2, 2007, Mr. Martin was granted 25,000 options to purchase shares of the Companys Common
Stock at an exercise price of $9.75, which was equal to the opening sales price of the Companys
Common Stock on the grant date. The options vest in equal installments over three years beginning
on July 2, 2008 and expire on July 2, 2017. In addition, the options will accelerate in the event
of a change in control of the Company. The size of Mr. Martins option award was based on an
evaluation of prior option awards made to Mr. Martin, as well as his level and scope of job
responsibility and individual performance during fiscal 2007 as discussed above.
Mr. Kurt Hagen
. According to survey market data provided by Mercer, Mr. Hagens fiscal 2007
compensation fell slightly above the seventy-fifth percentile as compared to the total compensation
of top sales and marketing divisional executives at similarly sized companies. However, as
discussed immediately below, Mr. Hagen had recently received his first option award from the
Company, and without including the value of such option award, Mr. Hagens fiscal 2007 compensation
would have fallen below the twenty-fifth percentile as compared to the total compensation of top
sales and marketing divisional executives at similarly sized companies. As such, and in an effort
to ensure that Mr. Hagens total compensation going forward was closer to the market median, Mr.
Hagens base salary was increased to $210,000 per year. Mr. Hagen is also eligible for a targeted
fiscal 2008 cash bonus of 30% of his base salary, or $63,000, such bonus to be based on the
achievement by the Companys Catalog Group of an approved level of EBIT (earnings before interest
and taxes) for fiscal 2008 of $25.0 million (representing a 20.4% increase over fiscal 2007 actual
performance). Mr. Hagens fiscal 2008 bonus may range from zero (if less than 80% of the EBIT goal
is achieved) to two times (if 120% or more of the EBIT goal is achieved) his target bonus depending
on the Companys Catalog Groups actual performance against the EBIT goal. In addition, in an
effort to foster long-term focus and further align the interests of Mr. Hagen with those of the
Companys other stockholders, on July 2, 2007, Mr. Hagen was granted 50,000 options to purchase
shares of the Companys Common Stock at an exercise price of $9.75, which was equal to the opening
sales price of the Companys Common Stock on the grant date. The options vest in equal
installments over three years beginning on July 2, 2008 and expire on July 2, 2017. In addition,
the options will accelerate in the event of a change in control of the Company. The size of Mr.
Hagens option award was based on his level and scope of job responsibility and individual
performance during fiscal 2007 as discussed above.
Fiscal 2009 Compensation of the Continuing Named Executive Officers
As discussed above and in continuation of the Compensation Committees objective to align
executive compensation with market median levels, the Compensation Committee recently commissioned
21
Mercer to review the Companys fiscal 2008 executive compensation program in light of updated
market data and the changes made in fiscal 2008 to the compensation of the Named Executive
Officers. The overall findings of this study indicated that pursuant to the 2008 pay adjustments,
executive pay levels were higher than market twenty-fifth percentile but continued to lag the
median. Following such review, in April 2008, the Compensation Committee approved fiscal 2009
compensation packages for each of the continuing Named Executive Officers that generally bring the
total compensation of such Named Executive Officers in line with the market median for comparable
positions. Mr. Babillas total compensation is targeted above the market median for chief
operating officers due to the multiple roles he plays within the organization as discussed above.
Fiscal 2009 compensation packages will consist of annual base salary, bonus compensation set at
target percentages of base salary and to be based on yet to be established performance criteria,
and long-term incentives set at target percentages of base salary, 70% of which will be in the form
of options to purchase shares of the Companys Common Stock and 30% of which will be in the form of
restricted shares of the Companys Common Stock. The Compensation Committee believes that an
emphasis on stock options provides an explicit link to stockholder value creation and that
restricted stock enhances the retentive value of the long-term incentive program. The options and
restricted stock will each be subject to a yet to be determined vesting schedule that will be
specified in the applicable award agreement, and the exercise price of the options to be awarded
will be set on a yet to be determined grant date.
Fiscal 2009 compensation for the Named Executive Officers will be as follows:
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Mr. Blumenfeld will receive a base salary of $450,000, a target annual bonus
incentive of 65% of his base salary and target long-term incentives valued at 150% of
his base salary;
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Mr. Babilla will receive a base salary of $415,000 a target annual bonus incentive
of 65% of his base salary and target long-term incentives valued at 140% of his base
salary;
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Mr. Martin will receive a base salary of $225,000, a target annual bonus incentive
of 40% of his base salary and target long-term incentives valued at 50% of his base
salary; and
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Mr. Hagen will receive a base salary of $225,000, a target annual bonus incentive of
40% of his base salary and target long-term incentives valued at 50% of his base
salary.
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Additionally, as partial consideration for increases in their base salaries, each of Messrs.
Blumenfeld and Babilla have agreed to forego tax gross ups on any perquisites that each may receive
during fiscal 2009.
Timing of Equity Awards
With respect to the timing of long-term incentive awards, the Compensation Committee has
historically made equity awards on a discretionary basis at various times throughout the Companys
fiscal year. Some prior awards, such as those made during fiscal 2008 for Messrs. Martin and
Hagen, were made on the first business day of the Companys fiscal year. Going forward, the
Compensation Committee intends to make equity awards as soon as practicable following the start of
each fiscal year. The exercise price of such awards has traditionally been, and will continue to
be, set at the fair market price of the Companys Common Stock on the date of grant.
Stock Ownership Guidelines
In May 2008, the Compensation Committee adopted Stock Ownership Guidelines for the Companys
executive officers. The Stock Ownership Guidelines encourage ownership of the Companys Common
Stock at three times each of Messrs. Blumenfeld and Babillas annual base salaries at July 1, 2008
and at one times the annual base salaries of the Companys other executive officers at July 1,
2008. The Companys executive officers have five years to attain such stock ownership levels and
the Stock
Ownership Guidelines will expire upon the occurrence of a change in control of the Company.
22
Change in Control Agreements with the Named Executive Officers
As discussed under
Potential Payments upon Termination or Change in Control
, in February
2007, upon the recommendation of the Compensation Committee, the Board adopted an amended and
restated form of change in control agreement for certain key executive officers and other employees
of the Company, including the Named Executive Officers. The Board adopted the change in control
agreements as part of its ongoing review of the Companys compensation programs. The form of
change in control agreement includes several scenarios upon which payment would be made to an
executive in the event of a change in control, including (i) if the executives employment is
terminated by the Company without cause, by the executive for good reason, or upon the death or
disability of the executive at any time during six month period prior to a change in control, (ii)
if the executive has not been terminated by the Company for cause or resigned from the Company
without good reason as of the six month anniversary of a change in control, or (iii) if the
executives employment is terminated by the Company without cause, by the executive for good reason
or upon the death or disability of the executive prior to the six month anniversary of a change in
control, each so long as the Company is not in default of any of its payment obligations under any
of its senior debt or subordinated convertible notes at the time of the change in control. The
Board selected these triggers for payment because it believed that they would best address and
protect against the concerns of the Companys key executives in the event of rumored or actual
fundamental corporate changes, thereby best serving the Company and its stockholders by avoiding
the distraction and loss of key executives in such event. Please see
Potential Payments upon
Termination or Change in Control
for a more detailed discussion of these agreements.
Deductibility Cap on Executive Compensation
Section 162(m) of the Code generally limits to $1,000,000 the federal tax deductibility of
compensation paid to the Companys executive officers, but provides an exception to this limitation
for certain performance-based compensation. The Companys general policy is to qualify its
incentive compensation programs for full corporate deductibility to the extent feasible and
consistent with the Companys overall compensation goals, and to the extent that the compensation
of one or more of the Companys executive officers is expected to exceed $1,000,000. The Company
may in the future make payments that are not fully deductible if, in the Compensation Committees
judgment, such payments are necessary to achieve the Companys compensation objectives and to
protect stockholders interests.
Conclusion
The Compensation Committee believes that the caliber and motivation of all of the Companys
employees, and especially the Companys executive leadership, are essential to the Companys
performance. The Compensation Committees goal is to adopt management compensation programs that
contribute to the Companys ability to differentiate its performance from others in the
marketplace. The Compensation Committee believes that the compensation of the Named Executive
Officers has been and continues to be consistent with the Companys compensation philosophy and
objectives, and the Compensation Committee will continue to evolve and administer the Companys
compensation programs in a manner that it believes will be in stockholders interests and worthy of
stockholder support.
23
Compensation Committee Report
The following Compensation Committee Report does not constitute soliciting material and should
not be deemed filed or incorporated by reference into any other of the Companys filings under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company
specifically incorporates this Report by reference therein, or subject to the liabilities of
Section 18 of the Securities Exchange Act of 1934.
The Compensation Committee has reviewed and discussed with management the foregoing
Compensation Discussion and Analysis. Based on this review and discussion, the Compensation
Committee has recommended to the Board that the Compensation Discussion and Analysis be included in
the Companys proxy statement with respect to the Special Meeting.
Members of the Compensation Committee:
Jeff Davidowitz, Chairman
Richard Ellman
William H. Watkins, Jr.
May 27, 2008
Compensation Committee Interlocks and Insider Participation
Messrs. Davidowitz, Robert W. Hampton and Watkins served as members of the Compensation
Committee for fiscal 2007. For such fiscal year, Messrs. Davidowitz, Hampton and Watkins were not
officers or employees, or former officers or employees, of the Company or any of its subsidiaries.
No interlocking relationship exists between the members of the Board or the Compensation Committee
and the board of directors or compensation committee of any other company, nor has any such
interlocking relationship existed in the past.
Fiscal 2007 Summary Compensation
The following table presents information concerning compensation earned by the Named Executive
Officers for services rendered during fiscal 2007. The Company does not have employment agreements
with the Named Executive Officers. Fiscal 2007 compensation for each of the Named Executive
Officers consisted of salary, bonus and all other compensation, which includes the value of
perquisites, gross ups and employer contributions to the Companys 401(k) plan, as applicable.
In proportion to total compensation, on average, salary accounted for approximately 84% and bonus
accounted for approximately 13%.
24
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Fiscal
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All Other
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Name and Principal Positions
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Year
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Salary
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Bonus
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Compensation
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Total
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Adam Blumenfeld
Chairman of the Board and
Chief Executive Officer
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2007
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$
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375,000
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$
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100,000
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$
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22,294
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(1)
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$
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497,294
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William R. Estill
Former Chief Financial Officer(2)
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2007
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$
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245,000
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$
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50,000
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$
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16,720
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(3)
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$
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311,720
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Terrence M. Babilla
President, Chief Operating
Officer, General Counsel and
Secretary
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2007
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$
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350,000
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$
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75,000
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$
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38,239
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(4)
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$
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463,239
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Tevis Martin
Executive Vice President, U.S.
Operations
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2007
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$
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180,775
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$
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10,000
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$
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1,400
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(5)
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$
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192,175
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Kurt Hagen
Executive Vice President, Sales &
Marketing
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2007
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$
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200,000
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$
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25,000
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$
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225,000
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Michael J. Blumenfeld
Former Chairman of the Board
and Chief Executive Officer(6)
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2007
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$
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375,000
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$
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375,000
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(1)
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This includes (i) executive perquisites consisting of country club membership dues, an auto
allowance and auto insurance, none of which exceeds the greater of $25,000 or 10% of the total
amount of perquisites for Mr. Blumenfeld and (ii) reimbursement for taxes not exceeding
$10,000.
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(2)
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Mr. Estill served as the Companys Chief Financial Officer until October 1, 2007.
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(3)
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This includes (i) executive perquisites consisting of an auto allowance, auto insurance and
auto expenses, none of which exceeds the greater of $25,000 or 10% of the total amount of
perquisites for Mr. Estill, (ii) employer contributions to the Companys 401(k) plan not
exceeding $10,000, and (iii) reimbursement for taxes not exceeding $10,000.
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(4)
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This includes (i) executive perquisites consisting of country club membership dues, an auto
allowance, auto insurance and auto expenses, none of which exceeds the greater of $25,000 or
10% of the total amount of perquisites for Mr. Babilla and (ii) reimbursement for taxes in the
amount of $15,850.
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(5)
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This consists of employer contributions to the Companys 401(k) plan.
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(6)
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Mr. Michael Blumenfeld served as the Companys Chief Executive Officer until November 13,
2006 and as the Companys Chairman of the Board until July 1, 2007.
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Outstanding Option Awards at 2007 Fiscal Year-End
The following table presents information concerning the outstanding options held by the Named
Executive Officers at June 30, 2007. Awards made subsequent to June 30, 2007 are discussed in
greater
25
detail above under
Compensation Discussion and Analysis
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
|
|
|
|
|
Options
|
|
Options
|
|
Option Exercise
|
|
|
|
|
(#)
|
|
(#)
|
|
Price
|
|
Option Expiration
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
($)
|
|
Date
|
Adam Blumenfeld
|
|
|
20,000
|
|
|
|
|
|
|
$
|
6.125
|
|
|
|
08/15/2010
|
|
|
|
|
25,000
|
|
|
|
|
|
|
$
|
3.890
|
|
|
|
05/08/2011
|
|
|
|
|
25,000
|
|
|
|
|
|
|
$
|
4.900
|
|
|
|
07/25/2012
|
|
|
|
|
25,000
|
|
|
|
|
|
|
$
|
6.080
|
|
|
|
06/24/2013
|
|
|
|
|
20,000
|
|
|
|
|
|
|
$
|
9.460
|
|
|
|
05/21/2014
|
|
William R. Estill
|
|
|
20,000
|
|
|
|
|
|
|
$
|
6.125
|
|
|
|
08/15/2010
|
|
|
|
|
20,000
|
|
|
|
|
|
|
$
|
6.080
|
|
|
|
06/24/2013
|
|
|
|
|
10,000
|
|
|
|
|
|
|
$
|
9.460
|
|
|
|
05/21/2014
|
|
Terrence M. Babilla
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tevis Martin
|
|
|
100,000
|
|
|
|
|
|
|
$
|
14.340
|
|
|
|
12/01/2014
|
|
|
|
|
25,000
|
|
|
|
|
|
|
$
|
13.300
|
|
|
|
12/08/2014
|
|
Kurt Hagen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J.
Blumenfeld
|
|
|
10,000
|
|
|
|
|
|
|
$
|
9.375
|
|
|
|
02/24/2009
|
|
Option Exercises during Fiscal 2007
The following table presents information concerning the exercise of options held by the Named
Executive Officers during fiscal 2007.
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Number of Shares Acquired on Exercise
|
|
Value Realized on Exercise
|
Name
|
|
(#)
|
|
($)
|
Adam Blumenfeld
|
|
|
|
|
|
|
|
|
William R. Estill
|
|
|
|
|
|
|
|
|
Terrence M. Babilla
|
|
|
(1
|
)
|
|
$
|
1,937,500
|
(1)
|
Tevis Martin
|
|
|
|
|
|
|
|
|
Kurt Hagen
|
|
|
|
|
|
|
|
|
Michael J. Blumenfeld
|
|
|
120,000
|
|
|
$
|
543,750
|
(2)
|
|
|
|
(1)
|
|
Under the terms of the merger agreement between Old SSG and the Company, all options to
purchase Old SSG common stock outstanding immediately prior to the merger vested and became
exercisable. All options that were not exercised prior to the merger were converted into the
right to receive a cash payment equal to the product of the number of shares of Old SSG common
stock subject to such options multiplied by the excess of $8.80 per share over the exercise
price of each such option. Prior to the merger, Mr. Babilla held 250,000 options to purchase
shares of the common stock of Old SSG. At the time of the merger on November 13, 2006, Mr.
Babilla had not yet exercised such options, which were therefore converted into the right to
receive a cash payment of $1,937,500, which is the product of 250,000 and $7.75, or the
difference between $8.80 and the $1.05 exercise price of his options.
|
|
(2)
|
|
Calculated by determining the difference between the market price of the underlying
securities at
exercise and the exercise price of the options.
|
26
Potential Payments upon Termination or Change in Control
Change in Control Agreements
On February 12, 2007, the Board, upon the recommendation of the Compensation Committee,
adopted an amended and restated form of change in control arrangement for certain key executive
officers and other employees of the Company, including the Named Executive Officers, and approved
the form of Amended and Restated Change in Control Agreement prior to execution by the Company and
each Named Executive Officer.
The Board adopted the Change in Control Agreement as part of its ongoing review of the
Companys compensation programs and in recognition of the importance to the Company and its
stockholders of avoiding the distraction and loss of key executive officers and other important
employees that may occur in connection with rumored or actual fundamental corporate changes.
The Change in Control Agreement provides that if the Named Executive Officers employment with
the Company is terminated by the Company without cause (e.g., conviction of a felony, acts of
dishonesty or breach of confidentiality), by the Named Executive Officer for good reason (e.g.,
reduction in salary or responsibilities, or mandatory relocation) or upon the death or disability
of the Named Executive Officer at any time during the six month period prior to a change in
control, each of the Named Executive Officers other than Messrs. Martin and Hagen, will receive a
lump sum payment on the next business day following the change in control in an amount equal to
2.99 times the sum of (i) the highest of (a) the Named Executive Officers then current annual base
salary or (b) the Named Executive Officers highest base salary with the Company or any of its
subsidiaries in effect during the one-year period before the change in control of the Company and
(ii) the cash bonus, if any, paid to the Named Executive Officer by the Company or any of its
subsidiaries for the most recently completed fiscal year (the
Severance Payment
);
provided that no Severance Payment shall be made to any Named Executive Officer if the Company is
in default of any of its payment obligations under any of its senior debt or subordinated
convertible notes at the time of the change in control. Any Severance Payment to be paid to Messrs.
Martin and Hagen will be subject to the same terms and conditions as the other Named Executive
Officers, except their Severance Payment will be in the amount of 1.00 times the sum of the salary
and bonus components described above.
In addition, with respect to each Named Executive Officer that is employed by the Company as
of the date of a change in control, the Change in Control Agreement provides that so long as (i)
the Named Executive Officer has not been terminated by the Company for cause or resigned from the
Company without good reason prior to the six month anniversary of the change of control and (ii)
the Company is not in default of any of its payment obligations under any of its senior debt or
subordinated convertible notes at the time of the change in control, the Named Executive Officer
will receive the Severance Payment in the applicable amounts described above on the six month
anniversary of the change in control. If, however, after the occurrence of a change in control and
prior to the six month anniversary thereof, the Named Executive Officers employment with the
Company is terminated by the Company without cause, by the Named Executive Officer for good reason
or upon the death or disability of the Named Executive Officer, the Severance Payment shall be due
and payable by the Company to the Named Executive Officer on the effective date of termination so
long as the Company was not in default of any of its payment obligations under any of its senior
debt or subordinated convertible notes at the time of the change in control.
27
A change in control under the terms of the Change in Control Agreement means the occurrence
of any of the following events at any time while the Named Executive Officer is employed by the
Company:
|
|
|
the acquisition by any person of beneficial ownership, directly or indirectly, through a
purchase, merger or other acquisition transaction or series of transactions, of shares of
capital stock of the Company entitling such person to exercise 40% or more of the total
voting power of all shares of capital stock of the Company entitled to vote generally in
the elections of directors, other than any such acquisition by (i) Michael J. Blumenfeld or
any other syndicate or group that includes Michael J. Blumenfeld as a member, (ii) the
Company, or (iii) any subsidiary or any employee benefit plan of the Company, and during
any period of two consecutive years, individuals who at the beginning of such period
constituted the board of directors (together with any new directors whose election to the
board of directors, or whose nomination for election by the stockholders of the Company,
was approved by a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for election was
previously approved) cease for any reason to constitute a majority of the board of
directors then in office;
|
|
|
|
|
the acquisition by any person of beneficial ownership, directly or indirectly, through a
purchase, merger or other acquisition transaction or series of transactions, of shares of
capital stock of the Company entitling such person to exercise 50% or more of the total
voting power of all shares of capital stock of the Company entitled to vote generally in
the elections of directors, other than any such acquisition by (i) Michael J. Blumenfeld or
any other syndicate or group that includes Michael J. Blumenfeld as a member, (ii) the
Company, or (iii) any subsidiary or any employee benefit plan of the Company; or
|
|
|
|
|
any consolidation of the Company with, or merger of the Company into, any other person,
any merger of another person into the Company, or any conveyance, sale, transfer or lease
or disposal of all or substantially all of the assets of the Company to another person
(other than (i) any such transaction (a) involving a merger or consolidation that does not
result in any reclassification, conversion, exchange or cancellation of outstanding shares
of capital stock of the Company (other than any reclassification, conversion, exchange or
cancellation of outstanding shares of capital stock of the Company solely for shares of
publicly traded common stock listed on the American Stock Exchange or on an established
national securities exchange or automated over-the-counter trading market in the United
States) and (b) pursuant to which the holders of 50% or more of the total voting power of
all shares of the Companys capital stock entitled to vote generally in the election of
directors immediately prior to such transaction have the entitlement to exercise, directly
or indirectly, more than 50% of the total voting power of all shares of capital stock
entitled to vote generally in the election of directors of the continuing or surviving
corporation immediately after such transaction or (ii) any transaction which is effected
solely to change the jurisdiction of incorporation of the Company and results in a
reclassification, conversion or exchange of outstanding shares of common stock solely into
shares of common stock).
|
If any amount of the Severance Payment to be received by a Named Executive Officer after the
occurrence of a change of control would be a parachute payment under Section 280G of the Code and
subject to any excise taxes that may be payable under Section 4999 of the Code, the amount of the
payment to the Named Executive Officer will be reduced so that no excise tax is payable. Further,
the Change in Control Agreement provides the agreements shall be amended, if necessary, to comply
with Section 409A of the Code.
28
Each Named Executive Officer has agreed not to compete with the Company for a period of
one-year following the termination of the Named Executive Officers employment with the Company for
any reason so long as the Named Executive Officer has received the Severance Payment from the
Company.
Assuming that any of the triggering events under the Change in Control Agreement took place on
June 29, 2007, the last business day of the Companys 2007 fiscal year, and absent any reduction in
the amount of such Severance Payments necessary to ensure that no excise tax is payable as
discussed above, the Named Executive Officers would have been entitled to receive the following
lump sum Severance Payments from the Company or any successor or assign to the Company, as
applicable:
|
|
|
|
|
Named Executive Officer
|
|
Severance Payment
|
Adam Blumenfeld
|
|
$
|
1,420,250
|
|
William R. Estill
|
|
$
|
882,050
|
|
Terrence M. Babilla
|
|
$
|
1,270,750
|
|
Tevis Martin
|
|
$
|
190,775
|
|
Kurt Hagen
|
|
$
|
225,000
|
|
Michael J. Blumenfeld
|
|
$
|
1,121,250
|
|
The Severance Payments listed above do not give effect to the fiscal 2008 base salary
increases that took effect on July 1, 2007, nor do they give effect to the fiscal 2009 base salary
increases that will take effect on July 1, 2008, each as discussed under
Compensation Discussion
and Analysis
.
Employment Arrangement with Michael J. Blumenfeld
Mr. Michael J. Blumenfeld served as the Companys Chief Executive Officer until November 13,
2006 and as the Companys Chairman of the Board until July 1, 2007. Mr. Michael Blumenfeld is the
father of the Companys current Chairman of the Board and Chief Executive Officer, Adam Blumenfeld.
Subsequent to his stepping down as the Companys Chief Executive Officer in November 2006, Mr.
Michael Blumenfeld has served as the Companys Director of Corporate Development, and, as disclosed
in
Fiscal 2007 Summary Compensation
, received $375,000 in total compensation for his services
during fiscal 2007. Mr. Michael Blumenfeld is expected to continue to serve the Company as its
Director of Corporate Development for the foreseeable future and, beginning with the 2008 fiscal
year, will receive an annual salary of $150,000 for serving in such capacity.
Severance Payment to William R. Estill
As discussed in
Compensation Discussion and Analysis
, in connection with William R. Estills
retirement from the Company on September 30, 2007, he was awarded a lump sum cash severance payment
of $50,000, less applicable taxes and other withholding. Such payment was to be made to Mr. Estill
as soon as administratively feasible following September 30, 2007 and was conditioned on Mr. Estill
otherwise completing his duties as determined by the Company and Mr. Estill. The payment was
awarded upon consideration of Mr. Estills dedicated service to the Company since July 1999 as
Chief Financial Officer.
Fiscal 2007 Director Compensation
The following table presents information concerning compensation earned by the Companys
non-employee directors for services rendered during fiscal 2007.
29
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned or Paid in Cash ($)(1)
|
|
Option Awards ($)(2)
|
|
Total ($)
|
Jeff Davidowitz
|
|
$
|
26,000
|
|
|
|
|
|
|
$
|
26,000
|
|
Robert W. Hampton
|
|
$
|
25,500
|
|
|
|
|
|
|
$
|
25,500
|
|
William H. Watkins, Jr.
|
|
$
|
28,000
|
|
|
|
|
|
|
$
|
28,000
|
|
|
|
|
(1)
|
|
Represents fees earned or paid in cash for services as a director during fiscal 2007,
including the annual cash retainer, committee chairmanship annual cash retainers and meeting
fees incurred in connection with service on the Board or any committee of the Board.
|
|
(2)
|
|
The aggregate number of option awards outstanding for each non-employee director at June 30,
2007 was as follows: Mr. Davidowitz held 18,500 options to purchase shares of the Companys
Common Stock; Mr. Hampton held 15,000 options to purchase shares of the Companys Common
Stock; and Mr. Watkins held 18,500 options to purchase shares of the Companys Common Stock.
Messrs. Davidowitz, Hampton and Watkins were also each granted 5,000 additional options to
purchase shares of the Companys Common Stock on July 2, 2007. The options granted on July 2,
2007 were awarded at an exercise price of $9.75 per option, which was equal to the opening
sales price of the Companys Common Stock on the grant date, vest in equal installments over
three years beginning on July 2, 2008, and expire on July 2, 2017. In addition, the options
will accelerate in the event of a change of control of the Company.
|
Fiscal 2007 Standard Director Compensation Arrangements
During fiscal 2007, each director of the Company who was not an employee of the Company or any
of its subsidiaries received an annual cash retainer of $15,000 and $500 for each meeting of the
full Board and any meetings of the committees on which a director served. In addition, the
Chairman of the Audit Committee received an annual cash retainer of $4,000 and the Chairman of the
Compensation and Nominating Committees each received an annual cash retainer of $2,000. The
Company also reimbursed directors for their reasonable travel and related expenses associated with
attending Board and Board committee meetings.
Fiscal 2008 Standard Director Compensation Arrangements
Following the conclusion of the 2007 fiscal year, the Compensation Committee engaged Mercer to
assist it in reviewing the Companys director compensation program. Specifically, Mercer was asked
to collect and analyze compensation data for directors at similarly sized companies and to make
recommendations for changes to the Companys director compensation if warranted. Mercer used the
Watson Wyatt 2006/2007 Survey Report on Board of Directors Compensation and the 2006-2007 National
Association of Corporate Directors (NACD) Director Compensation Report in its review. Following
such review, a new compensation program was approved for the Companys directors. Effective July
1, 2007, each director of the Company who is not an employee of the Company or any of its
subsidiaries will receive an annual cash retainer of $20,000 and will receive $1,000 for each
meeting of the full Board and $750 for each meeting of a committee on which a director serves. In
addition, the Chairman of the Audit Committee will receive an annual cash retainer of $8,000 and
the Chairman of the Compensation and Nominating Committees will each receive an annual cash
retainer of $4,000. Directors will also receive an annual long-term incentive award with a value
of approximately $20,000. The options awarded on July 2, 2007 and discussed in footnote 2 to the
table above constituted the directors long-term incentive award for fiscal 2008. The Company will
continue to reimburse directors for their reasonable travel and related expenses associated with
attending Board and Board committee meetings.
Fiscal 2009 Standard Director Compensation Arrangements
In May 2008, the Compensation Committee approved additional changes to the Companys
30
director compensation program for fiscal 2009. Effective July 1, 2008, each director of the Company who is
not an employee of the Company or any of its subsidiaries (other than Mr. William M. Lockhart who
joined the Board on April 25, 2008 and who is not expected to accept compensation in connection
with his service on the Board) will receive an annual cash retainer of $40,000, and meeting fees
will be eliminated. The Chairman of the Audit Committee will continue to receive an annual cash
retainer of $8,000 and the Chairman of the Compensation and Nominating Committees will each
continue to receive an annual cash retainer of $4,000. Directors will also continue to receive an
annual long-term incentive award with a value of approximately $20,000. Assuming approval of the
Amended and Restated Plan, the long-term incentive award will be delivered in the form of
restricted stock. The Company will also continue to reimburse directors for their reasonable
travel and related expenses incurred in connection with attending Board and committee meetings.
Security Ownership of Certain Beneficial Owners and Management
The following table presents, as of May 20, 2008, information relating to the beneficial
ownership of the Companys Common Stock by (i) each person known to the Company to own beneficially
more than five percent of the outstanding shares of the Companys Common Stock, (ii) each current
director of the Company, (iii) each Named Executive Officer, and (iv) all current directors and
executive officers of the Company as a group.
Unless otherwise indicated, beneficial owners listed here may be contacted at the Companys
corporate headquarters at 1901 Diplomat Drive, Farmers Branch, Texas 75234. Under the rules of the
SEC, a person is deemed to be a beneficial owner of a security if that person has or shares voting
power, which includes the power to vote or to direct the voting of such security, or investment
power, which includes the power to dispose of or to direct the disposition of such security. A
person is also deemed to be the beneficial owner of any securities of which that person has the
right to acquire beneficial ownership within 60 days. Under these rules, more than one person may
be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a
beneficial owner of securities as to which that person has no economic interest. For each listed
person, the number of shares of Common Stock and percent of class listed includes shares of Common
Stock that may be acquired by such person upon the exercise of stock options that are or will be
exercisable, or upon the conversion of the Companys 5.75% Convertible Senior Subordinated Notes
due 2009 that are or will be convertible, within 60 days of May 20, 2008.
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options/Notes
|
|
|
|
|
|
Total as a
|
|
|
|
|
|
|
Exercisable/
|
|
|
|
|
|
Percentage of
|
|
|
Number of
|
|
Convertible
|
|
Total
|
|
Shares
|
|
|
Shares
|
|
Within 60
|
|
Beneficial
|
|
Outstanding
|
Beneficial Owner
|
|
Owned
|
|
Days
|
|
Ownership
|
|
(if 1% or more)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carlson Capital, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asgard Investment Corp.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clint D. Carlson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2100 McKinney Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite 1600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dallas, TX 75201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Double Black Diamond Offshore LDC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UBS House, 227 Elgin Avenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
P.O. Box 852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Cayman, Cayman Islands
|
|
|
2,709,600
|
|
|
|
|
|
|
|
2,709,600
|
(2)
|
|
|
21.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBT Holdings LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10877 Wilshire Boulevard
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suite 2200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Los Angeles, CA 90024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles Bronfman Trust
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
c/o Wilmington Trust Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1100 North Market Street
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wilmington, DE 19890
|
|
|
2,044,072
|
|
|
|
341,297
|
|
|
|
2,385,369
|
(3)
|
|
|
18.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Skystone Advisors LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kerry Nelson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Two International Place
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Suite 1800
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Boston, MA 02110
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HSO Limited Partnership
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The Cayman Corporate Centre, 4
th
Floor
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27 Hospital Road
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Georgetown, Grand Cayman
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Cayman Islands, British West Indies
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|
|
1,175,504
|
|
|
|
273,038
|
|
|
|
1,448,542
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(4)
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|
|
11.5
|
%
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The KIP Presidium Fund, L.P.
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Knowledge Investment Partners
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Education Fund, L.P.
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KIP Presidium Management LLC
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Knowledge Investment Partners
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Education Company LLC
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Robert C. Daugherty
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3201 Enterprise Parkway, Suite 460
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Beachwood, OH 44122
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|
619,044
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|
|
|
|
|
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|
619,044
|
(5)
|
|
|
5.0
|
%
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|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
Wellington Management Company, LLP
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75 State Street
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Boston, MA 02109
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1,378,507
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1,378,507
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(6)
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11.2
|
%
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WS Capital, L.L.C.
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WS Capital Management, L.P.
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WSV Management, L.L.C.
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WS Ventures Management, L.P.
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Reid S. Walker
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G. Stacy Smith
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Patrick P. Walker
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300 Crescent Court, Suite 1111
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Dallas, TX 75201
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618,342
|
|
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|
|
|
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|
618,342
|
(7)
|
|
|
5.0
|
%
|
32
|
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|
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Options/Notes
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Total as a
|
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Exercisable/
|
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Percentage of
|
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Number of
|
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Convertible
|
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Total
|
|
Shares
|
|
|
Shares
|
|
Within 60
|
|
Beneficial
|
|
Outstanding
|
Beneficial Owner
|
|
Owned
|
|
Days
|
|
Ownership
|
|
(if 1% or more)(1)
|
Terrence M. Babilla
|
|
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1,000
|
|
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43,333
|
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|
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44,333
|
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|
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*
|
|
Adam Blumenfeld
|
|
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245,100
|
|
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165,000
|
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410,100
|
|
|
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3.3
|
%
|
Michael J. Blumenfeld
|
|
|
|
|
|
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10,000
|
|
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10,000
|
|
|
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*
|
|
Jeff Davidowitz
|
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140,302
|
|
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20,167
|
|
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160,469
|
(8)
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|
|
1.3
|
%
|
Richard Ellman
|
|
|
|
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|
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|
William R. Estill
|
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2,458
|
|
|
|
50,000
|
|
|
|
52,458
|
|
|
|
*
|
|
Kurt Hagen
|
|
|
|
|
|
|
16,667
|
|
|
|
16,667
|
|
|
|
*
|
|
William M. Lockhart(9)
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
Tevis Martin
|
|
|
2,000
|
|
|
|
133,333
|
|
|
|
135,333
|
|
|
|
1.1
|
%
|
William H. Watkins, Jr.
|
|
|
43,503
|
|
|
|
20,167
|
|
|
|
63,670
|
(10)
|
|
|
*
|
|
Current directors and executive
officers as a group (9 persons)
|
|
|
431,905
|
|
|
|
408,667
|
|
|
|
840,572
|
|
|
|
6.6
|
%
|
|
|
|
*
|
|
The percentage of shares beneficially owned does not exceed 1%.
|
|
(1)
|
|
Based on the number of shares outstanding (12,362,060) at the close of business on May 20,
2008.
|
|
(2)
|
|
Based on information filed on a Schedule 13D/A with the SEC on May 1, 2008. According to the
Schedule 13D/A, (a) each of Carlson Capital, L.P., Asgard Investment Corp. and Clint D.
Carlson have sole voting and sole dispositive power with respect to, and are deemed to
beneficially own, 2,709,600 shares of the Companys Common Stock, and (b) Double Black Diamond
Offshore LDC has sole voting and sole dispositive, and is deemed to beneficially own,
2,489,781 shares of the Companys Common Stock.
|
|
(3)
|
|
Based on information filed on a Schedule 13D/A with the SEC on March 14, 2008. According to
the Schedule 13D, each of CBT Holdings LLC and Charles Bronfman Trust have shared voting and
shared dispositive power with respect to, and are deemed to beneficially own, 2,385,369 shares
of the Companys Common Stock.
|
|
(4)
|
|
Based on information filed on a Schedule 13G/A with the SEC on February 13, 2008. According
to the Schedule 13G/A, (a) each of Skystone Advisors LLC and Kerry Nelson have shared voting
and shared dispositive power with respect to, and are deemed to beneficially own, 1,175,504
shares of the Companys Common Stock and 273,038 shares of the Companys Common Stock issuable
upon conversion of the Companys 5.75% Convertible Senior Subordinated Notes due 2009 and (b)
HSO Limited Partnership has shared voting and shared dispositive power with respect to, and is
deemed to beneficially own, 1,032,600 shares of the Companys Common Stock and 273,038 shares
of the Companys Common Stock issuable upon conversion of the Companys 5.75% Convertible
Senior Subordinated Notes due 2009.
|
|
(5)
|
|
Based on information filed on a Schedule 13D with the SEC on January 18, 2008. According to
the Schedule 13D, (a) each of The KIP Presidium Fund, L.P. and KIP Presidium Management LLC
has shared voting and shared dispositive power with respect to, and are deemed to beneficially
own, 609,044 shares of the Companys Common Stock, (b) Knowledge Investment Partners Education
Fund, L.P. has shared voting and shared dispositive power with respect to, and is deemed to
beneficially own, 9,000 shares of the Companys Common Stock, (c) Knowledge Investment
Partners Education Company LLC has shared voting and shared dispositive power with respect to,
and is deemed to beneficially own, 618,044 shares of the Companys Common Stock, and (d)
Robert C. Daugherty has sole voting and sole dispositive power with respect to 1,000 shares of
the Companys Common Stock, shared voting and shared dispositive power with respect to 618,044
shares of the Companys Common Stock, and is deemed to beneficially own 619,044 shares of the
Companys Common Stock.
|
|
(6)
|
|
Based on information filed on a Schedule 13G/A with the SEC on February 14, 2008. According
to the Schedule 13G/A, Wellington Management Company, LLP has shared voting power with respect
to 848,307 shares of the Companys Common Stock, shared dispositive power with respect to
1,378,507 shares of the Companys Common Stock and is deemed to beneficially own 1,378,507
shares of the Companys Common Stock.
|
|
(7)
|
|
Based on information filed on a Schedule 13G with the SEC on January 2, 2008. According to
the Schedule 13G, (a)
|
33
|
|
|
|
|
each of WS Capital, L.L.C. and WS Capital Management, L.P. has shared voting and shared
dispositive power with respect to, and are deemed to beneficially own, 58,100 shares of the
Companys Common Stock, (b) each of WSV Management, L.L.C., WS Ventures Management, L.P.
and Patrick P. Walker has shared voting and shared dispositive power with respect to, and
are deemed to beneficially own 560,242 shares of the Companys Common Stock, and (c) each of
Reid S. Walker and G. Stacy Smith has shared voting and shared dispositive power with
respect to, and are deemed to beneficially own 618,342 shares of the Companys Common Stock.
|
|
(8)
|
|
Includes (a) 34,751 shares of the Companys Common Stock held by Penn Footwear Retirement
Trust of which Mr. Davidowitz is a trustee, (b) 67,551 shares of the Companys Common Stock
held by JIBS Equities LP of which Mr. Davidowitz is a general partner, (c) 9,000 shares of the
Companys Common Stock held by Penn Footwear, Inc. of which Mr. Davidowitz is President and a
stockholder, (d) 4,000 shares of the Companys Common Stock held by Oldfield Company of which
Mr. Davidowitz is President and a stockholder, (e) 10,000 shares of the Companys Common Stock
held by DVD Partners LP of which Mr. Davidowitz is a general partner, and (f) 10,000 shares of
the Companys Common Stock held by 3D Partners LP of which Mr. Davidowitz is general partner.
|
|
(9)
|
|
Mr. Lockhart currently serves as a principal and portfolio manager of Carlson Capital, L.P.
|
|
(10)
|
|
Includes 30,303 shares of the Companys Common Stock held in trust for the benefit of Mr.
Watkins.
|
Additional Information
Proposals of Stockholders
The Company currently intends to hold its next annual meeting in November 2008. Stockholders
who intend to have a proposal considered for inclusion in the Companys proxy materials for
presentation at the fiscal 2009 annual meeting of stockholders must submit the proposal to the
Company at its principal executive offices no later than June 18, 2008, unless the fiscal 2009
annual meeting date is changed by more than 30 days from the fiscal 2008 annual meeting, in which
case the deadline will be a reasonable time before the Company begins to print and mail the proxy
materials. The proposal must be made in accordance with the provisions of Rule 14a-8 of the
Exchange Act. As the rules of the SEC make clear, simply submitting a proposal does not guarantee
that it will be included.
Stockholders who intend to present a proposal at the fiscal 2009 annual meeting of
stockholders without inclusion of such proposal in the Companys proxy materials must, pursuant to
the Companys Bylaws, deliver a notice of such proposal by certified mail to the Secretary of the
Company at its principal executive offices at 1901 Diplomat Drive, Farmers Branch, Texas 75234 not
less than 120 nor more than 150 days before the first anniversary of October 16, 2007, which was
the date of the proxy statement for the Companys fiscal 2008 annual meeting of stockholders. The
Company reserves the right to reject, rule out of order or take other appropriate action with
respect to any proposal that does not comply with these and other applicable requirements.
YOUR VOTE IS IMPORTANT. THE BOARD ENCOURAGES YOU TO VOTE YOUR SHARES ELECTRONICALLY ON THE
INTERNET OR ON THE TELEPHONE BY FOLLOWING THE INSTRUCTIONS ON THE ACCOMPANYING PROXY CARD, OR
COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED.
34
|
|
|
|
|
|
|
|
|
By:
|
Order of the Board of Directors,
|
|
|
|
|
|
Terrence M. Babilla
President, Chief Operating Officer, General
Counsel and Secretary
|
|
|
Farmers Branch, Texas
May 27, 2008
35
EXHIBIT A
SPORT SUPPLY GROUP, INC.
AMENDED AND RESTATED
2007 LONG-TERM INCENTIVE PLAN
I. PURPOSE OF THE PLAN
The Sport Supply Group, Inc. Amended and Restated 2007 Long-Term Incentive Plan (the
Plan
)
is designed to: (a) promote the long-term financial interests and growth of Sport Supply Group,
Inc. (the
Company
), and its Affiliates by attracting and retaining Directors, Employees and
Consultants with the training, experience and ability to enable them to make a substantial
contribution to the success of the Company and its Affiliates; (b) motivate Directors, Employees
and Consultants by means of growth-oriented incentives to enhance the profitable growth of the
Company and its Affiliates; and (c) further the alignment of interests of Participants with those
of the stockholders of the Company through opportunities for increased ownership in the Company.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan unless specifically modified
elsewhere in the Plan:
A.
Affiliate
means any corporation, partnership, limited liability company or partnership,
association, trust or other organization which, directly or indirectly, controls, is controlled by,
or is under common control with, the Company. For purposes of the preceding sentence, control
(including, with correlative meanings, the terms controlled by and under common control with), as
used with respect to any entity or organization, shall mean the possession, directly or indirectly,
of the power (1) to vote more than 50% of the securities having ordinary voting power for the
election of directors of the controlled entity or organization or (2) to direct or cause the
direction of the management and policies of the controlled entity or organization, whether through
the ownership of voting securities or by contract or otherwise.
B.
Annual Incentive Award
means a conditional right granted to a Participant under Section
IX(C) hereof to receive a cash payment, Common Stock or other Award after the end of a specified
fiscal year.
C.
Award
means any Option, Restricted Stock Award, Performance Award, or Annual Incentive
Award, together with any other right or interest granted to a Participant under the Plan.
D.
Board
means the Board of Directors of the Company.
E.
Cash Merger
shall have the meaning assigned to such term in Section X(D) of the Plan.
F.
Change of Control
shall mean the occurrence of any of the following events:
1. The acquisition by any person of beneficial ownership, directly or indirectly, through a
purchase, merger or other acquisition transaction or series of transactions, of shares of capital
stock of the Company entitling such person to exercise 40% or more of the total voting power of all
shares of capital stock of the Company entitled to vote generally in the elections of directors,
other than any such acquisition by either (i) the Company or (ii) any subsidiary or any employee
benefit plan of the Company, and during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board (together with any new directors whose election to
the Board, or whose nomination for election by the stockholders of the Company, was approved by a
vote of a majority of the directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously approved) cease for any
reason to constitute a majority of the Board then in office; or
2. The acquisition by any person of beneficial ownership, directly or indirectly, through a
purchase, merger or other acquisition transaction or series of transactions, of shares of capital
stock of the Company entitling such person to exercise 50% or more of the total voting power of all
shares of capital stock of the Company entitled to vote generally in the elections of directors,
other than any such acquisition by either (i) the Company or (ii) any subsidiary or any employee
benefit plan of the Company; or
3. Any consolidation of the Company with, or merger of the Company into, any other person, any
merger of another person into the Company, or any conveyance, sale, transfer or lease or disposal
of all or substantially all of the assets of the Company to another person (other than (i) any such
transaction (A) involving a merger or consolidation that does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of capital stock of the Company (other
than any reclassification, conversion, exchange or cancellation of outstanding shares of capital
stock of the Company solely for shares of publicly traded common stock listed on the NASDAQ Stock
Market or on an established national securities exchange or automated over-the-counter trading
market in the United States) and (B) pursuant to which the holders of 50% or more of the total
voting power of all shares of the Companys capital stock entitled to vote generally in the
election of directors immediately prior to such transaction have the entitlement to exercise,
directly or indirectly, more than 50% of the total voting power of all shares of capital stock
entitled to vote generally in the election of directors of the continuing or surviving corporation
immediately after such transaction or (ii) any transaction which is effected solely to change the
jurisdiction of incorporation of the Company and results in a reclassification, conversion or
exchange of outstanding shares of common stock into solely shares of common stock).
For purposes of this Section II(F), whether a person is a beneficial owner will be determined in
accordance with Rule 13d-3 under the Exchange Act, and person includes any syndicate or group
that would be deemed to be a person under Section 13(d)(3) of the Exchange Act.
G.
Code
means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any
section of the Code shall be deemed to include any amendments or successor provisions to such
section and any regulations under such section.
2
H.
Committee
means the Compensation Committee of the Board, each member of which shall be a
non-employee director within the meaning of Rule16b-3 under the Exchange Act. Each grant of an
Award to a Covered Employee will be made by a Committee which is comprised solely of two or more
outside directors within the meaning of Code section 162(m), unless administration of this Plan
by outside directors is not then required in order to qualify for tax deductibility under section
162(m) of the Code.
I.
Covered Employee
has the meaning specified in Section IX(E) of this Plan.
J.
Common Stock
means the common stock, par value $0.01 per share, of the Company, or any
security into which such common stock may be changed by reason of any transaction or event of the
type described in Section X below.
K.
Company
means Sport Supply Group, Inc., a Delaware corporation, and any successor thereto
that adopts the Plan.
L.
Consultant
means any person who is not an Employee or a Director and who is providing
advisory or consulting services to the Company or any Affiliate.
M.
Director
means an individual who is a member of the Board.
N.
Employee
means any person in an employment relationship with the Company or any
Affiliate.
O.
Exchange Act
means the Securities Exchange Act of 1934, as amended.
P.
Fair Market Value
means the opening sale price or closing sale price, as determined by
the Committee in its discretion, (or average of the quoted closing bid or asked prices if there is
no sale price reported) of the Common Stock on the date specified as reported by NASDAQ or by the
principal national stock exchange on which the Common Stock is then listed. If no prices are
reported on that date, the fair market value shall be the opening sale price or closing sale price,
as determined by the Committee in its discretion, on the last preceding date on which such prices
of the Common Stock are so reported. If the Common Stock is traded over the counter at the time a
determination of its fair market value is required to be made hereunder, its fair market value
shall be deemed to be equal to the average between the reported high and low or closing bid and
asked prices, as determined by the Committee in its discretion, of Common Stock on the most recent
date on which the Common Stock was publicly traded. In the event Common Stock is not publicly
traded at the time a determination of its value is required to be made hereunder, the determination
of its fair market value shall be made by the Committee in such manner as it deems appropriate.
Q.
Incentive Stock Option
means an incentive stock option within the meaning of section 422
of the Code.
R.
Nonqualified Stock Option
means an Option that does not satisfy all of the applicable
requirements of section 422 of the Code or by its terms is not intended to be treated as an
Incentive Stock Option.
3
S.
Option
means an Award granted under Section VII of the Plan and includes both Incentive
Stock Options to purchase Common Stock and Nonqualified Stock Options to purchase Common Stock.
T.
Participant
means an Employee, Consultant, or Director who has been granted an Award.
U.
Performance Award
means a right, granted to a Participant under Section IX hereof, to
receive Awards based upon performance criteria specified by the Committee.
V.
Plan
means the Sport Supply Group, Inc. Amended and Restated 2007 Long-Term Incentive
Plan, as amended from time to time. The Plan was formerly the Sport Supply Group, Inc. 2007 Stock
Option Plan.
W.
Qualified Member
means a member of the Committee who is a nonemployee director within
the meaning of Rule 16b-3(b)(3) under the Exchange Act and an outside director within the meaning
of Treasury Regulation § 1.162-27 under section 162(m) of the Code.
X.
Restricted Stock Award
means Common Stock granted to a Participant under Section VIII
hereof, that is subject to certain restrictions and to a risk of forfeiture.
Y.
Stock Merger
shall have the meaning assigned to such term in Section X(D) of the Plan.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall become effective upon the date of its adoption by the Board; provided, however,
the Plan is approved by the stockholders of the Company within 12 months thereafter.
Notwithstanding any provision in the Plan or in any agreement evidencing an Award hereunder, no
Option shall be exercisable prior to such stockholder approval. No further Incentive Stock Options
may be granted under the Plan after 10 years from the date the Plan is adopted by the Board. The
Plan shall remain in effect until the date on which all Options granted under the Plan have been
exercised or expired, and all restrictions on Restricted Stock Awards granted under the Plan have
lapsed or such Awards have been forfeited.
IV. ADMINISTRATION
A.
Composition of Committee
. The Plan shall be administered by the Committee appointed
by the Board. In the absence of the Boards appointment of the Committee to administer the Plan,
the Board shall serve as the Committee.
B.
Powers
. Subject to the express provisions of the Plan, the Committee shall have
authority, in its discretion, to determine which Employees, Directors and Consultants shall receive
an Award, the time or times when such Award shall be made, whether an Incentive Stock Option,
Nonqualified Stock Option, Restricted Stock Award or other type of Award shall be granted, and the
number of shares to be subject to each Award. In making such determinations, the Committee shall
take into account the nature of the services rendered by the respective
4
Employees, Directors and Consultants, their present and potential contribution to the
Companys success and such other factors as the Committee in its discretion shall deem relevant.
C.
Additional Powers
. The Committee shall have such additional powers as are delegated
to it by the other provisions of the Plan. Subject to the express provisions of the Plan, this
shall include the power to construe the Plan and the respective agreements executed hereunder, to
prescribe rules and regulations relating to the Plan, and to determine the terms, restrictions and
provisions of the agreement relating to each Award, including such terms, restrictions and
provisions as shall be requisite in the judgment of the Committee to cause designated Options to
qualify as Incentive Stock Options, and to make all other determinations necessary or advisable for
administering the Plan. Subject to Rule 16b-3 under the Exchange Act and Code section 162(m), the
Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan
or in any agreement relating to an Award in the manner and to the extent it shall deem expedient to
carry it into effect. The determinations of the Committee on the matters referred to in this
Section IV shall be conclusive.
D.
Manner of Exercise of Committee Authority
. At any time that a member of the
Committee is not a Qualified Member, any action of the Committee relating to an Award granted or to
be granted to a Participant who is then subject to section 16 of the Exchange Act in respect of the
Company, or relating to an Award intended by the Committee to qualify as performance-based
compensation within the meaning of section 162(m) of the Code and regulations thereunder, may be
taken either (i) by a subcommittee, designated by the Committee, composed solely of two or more
Qualified Members, or (ii) by the Committee but with each such member who is not a Qualified Member
abstaining or recusing himself or herself from such action; provided, however, that, upon such
abstention or recusal, the Committee remains composed solely of two or more Qualified Members.
Such action, authorized by such a subcommittee or by the Committee upon the abstention or recusal
of such non-Qualified Member(s), shall be the action of the Committee for purposes of this Plan.
Any action of the Committee shall be final, conclusive and binding on all persons, including the
Company, its subsidiaries, stockholders, Participants, beneficiaries, and transferees under Section
XII(E) hereof or other persons claiming rights from or through a Participant. The express grant of
any specific power to the Committee, and the taking of any action by the Committee, shall not be
construed as limiting any power or authority of the Committee. The Committee may delegate to
officers or managers of the Company or any subsidiary, or committees thereof, the authority,
subject to such terms as the Committee shall determine, to perform such functions, including
administrative functions, as the Committee may determine, to the extent that such delegation will
not result in the loss of an exemption under Rule 16b-3(d)(1) under the Exchange Act for Awards
granted to Participants subject to section 16 of the Exchange Act in respect of the Company and
will not cause Awards intended to qualify as performance-based compensation under section 162(m)
of the Code to fail to so qualify.
V. SHARES SUBJECT TO THE PLAN; GRANT OF AWARDS
A.
Shares Subject to the Plan
. Subject to adjustment in the same manner as provided in
Section X with respect to shares of Common Stock subject to Awards then outstanding, the aggregate
number of shares of Common Stock that may be issued under the Plan, since inception of the Sport
Supply Group, Inc. 2007 Stock Option Plan, shall not exceed 2,000,000 shares.
5
Shares shall be deemed to have been issued under the Plan only to the extent actually issued
and delivered pursuant to an Award. If an Award under this Plan expires or is canceled, forfeited,
settled in cash or otherwise terminated without an issuance of shares to the Participant, shares of
Common Stock subject to such Award, including (1) the number of shares withheld in payment of any
exercise or purchase price of an Award or taxes related to an Award, and (2) the number of shares
surrendered in payment of any exercise or purchase price of an Award or taxes related to an Award,
shall again be available for the grant of an Award under the Plan, except to the extent otherwise
limited by applicable law or regulation.
B.
Grant of Awards
. The Committee may from time to time grant an Award to one or more
Employees, Directors or Consultants determined by it to be eligible for participation in the Plan
in accordance with the terms of the Plan.
C.
Stock Offered
. Subject to the limitations set forth in Section V(A), the stock to
be offered pursuant to the grant of an Award may be authorized but unissued Common Stock or Common
Stock previously issued and outstanding and reacquired by the Company. Any of such shares which
remain unissued and which are not subject to outstanding Awards at the termination of the Plan
shall cease to be subject to the Plan but, until termination of the Plan, the Company shall at all
times make available a sufficient number of shares to meet the requirements of the Plan.
VI. ELIGIBILITY
Awards may be granted only to persons who, at the time of grant, are Employees, Directors or
Consultants. An Award may be granted on more than one occasion to the same person, and, subject to
the limitations set forth in the Plan, such Award may include an Incentive Stock Option, a
Nonqualified Stock Option, a Restricted Stock Award, a Performance Award, an Annual Incentive
Award, or any combination thereof. In each calendar year, during any part of which this Plan is in
effect, a Covered Employee may not be granted (a) Awards (other than Awards designated to be paid
only in cash or the settlement of which is not based on a number of shares of Common Stock)
relating to more than 200,000 shares of Common Stock, subject to adjustment in a manner consistent
with any adjustment made pursuant to Section X, and (b) Awards designated to be paid only in cash,
or the settlement of which is not based on a number of shares of Common Stock, having a value
determined on the date of grant in excess of $1,000,000.
VII. STOCK OPTIONS
A.
Option Period
. The term of each Option shall be as specified by the Committee at
the date of grant; provided, however, that each such Option by its terms shall not be exercisable
after the expiration of ten years from the date of grant.
B.
Limitations on Exercise of Option
. An Option shall be exercisable in whole or in
such installments and at such times as determined by the Committee; provided, that except in the
case of an Award issued in connection with the start of employment or service with the Company or
its subsidiaries, or under such other circumstances as are deemed appropriate by the Committee, an
Option shall not be exercisable prior to the first anniversary of the date of the
6
Award. If the Committee provides, in its sole discretion, that any Option is exercisable only
in installments, the Committee may waive such installment exercise provisions at any time at or
after grant in whole or in part, based on such factors as the Committee shall determine, in its
sole discretion.
C.
Special Limitations on Incentive Stock Options
. An Incentive Stock Option may be
granted only to an individual who is employed by the Company or any parent or subsidiary
corporation (as defined in section 424 of the Code) of the Company at the time the Option is
granted. To the extent that the aggregate fair market value (determined at the time the respective
Incentive Stock Option is granted) of stock with respect to which Incentive Stock Options are
exercisable for the first time by an individual during any calendar year under all incentive stock
option plans of the Company and its parent and subsidiary corporations exceeds $100,000, such
Incentive Stock Options shall be treated as Nonqualified Stock Options. The Committee shall
determine, in accordance with applicable provisions of the Code, Treasury Regulations and other
administrative pronouncements, which of a Participants Incentive Stock Options will constitute
Nonqualified Stock Options because of such limitation and shall notify the Participant of such
determination as soon as practicable after such determination. No Incentive Stock Option shall be
granted to an individual if, at the time the Option is granted, such individual owns stock
possessing more than 10% of the total combined voting power of all classes of stock of the Company
or of its parent or subsidiary corporation, within the meaning of section 422(b)(6) of the Code,
unless (i) at the time such Option is granted the option price is at least 110% of the Fair Market
Value of the Common Stock subject to the Option and (ii) such Option by its terms is not
exercisable until after the expiration of five years from the date of grant. An Incentive Stock
Option shall not be transferable otherwise than by will or the laws of descent and distribution,
and shall be exercisable during the Participants lifetime only by such Participant or the
Participants guardian or legal representative.
D.
Option Agreement
. Each Award of an Option shall be evidenced by an Option agreement
in such form and containing such provisions not inconsistent with the provisions of the Plan as the
Committee from time to time shall approve. Each Option agreement shall specify the effect of
termination of (1) employment, (2) membership on the Board, or (3) the consulting or advisory
relationship, as applicable, on the exercisability of the Option. An Option agreement may provide
for the payment of the Option price, in whole or in part, by either check, the withholding of
Common Stock otherwise deliverable upon exercise of the Option or the delivery of a number of
shares of Common Stock (plus cash if necessary) having a Fair Market Value equal to such Option
price. The terms and conditions of the respective Option agreements need not be identical. Subject
to the consent of the Participant, the Committee may, in its sole discretion, amend an outstanding
Option agreement from time to time in any manner that is not inconsistent with the provisions of
the Plan (including, without limitation, an amendment that accelerates the time at which the
Option, or a portion thereof, may be exercisable); provided, however, that the Committee shall not
have any discretion to accelerate, waive or modify any term or condition of an Option that is
intended to qualify as performance-based compensation for purposes of section 162(m) of the Code
if such discretion would cause the Award not to so qualify.
E.
Option Price and Payment
. The price at which a share of Common Stock may be
purchased upon exercise of an Option shall be determined by the Committee but, subject to
7
adjustment as provided in Section X, such purchase price shall not be less than the Fair
Market Value of a share of Common Stock on the date of the Award. The Option or portion thereof may
be exercised by delivery of an irrevocable notice of exercise to the Company, as specified by the
Committee. The purchase price of the Option or portion thereof shall be paid in full in the manner
prescribed in Section VII(D) above or in any other manner approved by the Committee.
F.
Stockholder Rights and Privileges
. The Participant shall be entitled to all the
privileges and rights of a stockholder only with respect to such shares of Common Stock as have
been purchased under the Option and which have been evidenced in a manner deemed appropriate by the
Committee, in its discretion, including but not limited to in the form of a certificate of stock
registered in the Participants name or by book entry, electronic or otherwise.
G.
No Repricing
. Other than in connection with a change in the Companys
capitalization (as defined in Section X), the exercise price of an Option may not be reduced
without approval of the Companys stockholders (including canceling previously awarded Options and
regranting them with a lower exercise price).
VIII. RESTRICTED STOCK AWARDS
A.
Grant and Restrictions
. The Committee is authorized to grant Restricted Stock
Awards to Participants. Restricted Stock Awards shall be subject to such restrictions on
transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose,
which restrictions may lapse separately or in combination at such times, under such circumstances
(including based on achievement of performance goals and/or future service requirements), in such
installments or otherwise, as the Committee may determine at the date of grant or thereafter;
provided, however, that the Committee shall not have any discretion after the applicable date of
grant to accelerate, waive, or modify any term or condition of a Restricted Stock Award that is
intended to qualify as performance-based compensation for purposes of section 162(m) of the Code
if such discretion would cause the Award not to so qualify. During the restricted period
applicable to the Restricted Stock Award, the shares subject to the Restricted Stock Award may not
be sold, transferred, pledged, hypothecated, margined or otherwise encumbered by the Participant.
B.
Certificates for Stock
. Restricted Stock Awards granted under this Plan may be
evidenced in such manner as the Committee shall determine. If certificates representing shares
subject to the Restricted Stock Award are registered in the name of the Participant, the Committee
may require that such certificates bear an appropriate legend referring to the terms, conditions
and restrictions applicable to such Restricted Stock Award, that the Company retain physical
possession of the certificates, and that the Participant deliver a stock power to the Company,
endorsed in blank, relating to the Restricted Stock Award.
C.
Dividends and Splits
. As a condition to the grant of a Restricted Stock Award, the
Committee may require or permit a Participant to elect that any cash dividends paid on a share
subject to the Restricted Stock Award be automatically reinvested in additional Restricted Stock
Awards or applied to the purchase of additional Awards under this Plan. Unless otherwise
determined by the Committee, Common Stock distributed in connection with a stock split or stock
dividend, and other property (other than cash) distributed as a dividend, shall be subject to
8
restrictions and a risk of forfeiture to the same extent as the Restricted Stock Award with
respect to which such Common Stock or other property (other than cash) has been distributed.
IX. PERFORMANCE AND ANNUAL INCENTIVE AWARDS
A.
Performance Conditions
. The right of a Participant to exercise or receive a grant
or settlement of any Award, and the timing thereof, may be subject to such performance conditions
as may be specified by the Committee. The Committee may use such business criteria and other
measures of performance as it may deem appropriate in establishing any such performance conditions.
B.
Performance Awards Granted to Designated Covered Employees
. If the Committee
determines that a Performance Award to be granted to an individual who is designated by the
Committee as likely to be a Covered Employee should qualify as performance-based compensation for
purposes of section 162(m) of the Code, the grant, exercise and/or settlement of such Performance
Award may be contingent upon achievement of preestablished performance goals and other terms set
forth in this Section IX(B).
1.
Performance Goals Generally
. The performance goals for such Performance Awards
shall consist of one or more business criteria or individual performance criteria and a targeted
level or levels of performance with respect to each of such criteria, as specified by the Committee
consistent with this Section IX(B). Performance goals shall be objective and shall otherwise meet
the requirements of section 162(m) of the Code and regulations thereunder (including Treasury
Regulation § 1.162-27 and successor regulations thereto), including the requirement that the level
or levels of performance targeted by the Committee result in the achievement of performance goals
being substantially uncertain. The Committee may determine that such Performance Awards shall be
granted, exercised, and/or settled upon achievement of any one performance goal or that two or more
of the performance goals must be achieved as a condition to grant, exercise and/or settlement of
such Performance Awards. Performance goals may differ for Performance Awards granted to any one
Participant or to different Participants.
2.
Business and Individual Performance Criteria
(a)
Business Criteria
. One or more of the following business criteria for the
Company, on a consolidated basis, and/or for specified subsidiaries or business or
geographical units of the Company (except with respect to the total stockholder return
criteria), shall be used by the Committee in establishing performance goals for such
Performance Awards: (1) earnings per share; (2) increase in earnings; (3) revenues; (4)
increase in revenues; (5) increase in cash flow; (6) increase in cash flow return; (7)
return on net assets; (8) return on assets; (9) return on investment; (10) return on
capital; (11) return on equity; (12) economic value added; (13) operating margin; (14)
contribution margin; (15) net income before taxes; (16) net income after taxes; (17) pretax
earnings; (18) pretax earnings before interest, depreciation and amortization; (19) pretax
operating earnings after interest expense and before incentives, service fees, and
extraordinary or special items; (20) total stockholder return; (21) debt reduction; (22)
market share; (23) change in the Fair Market Value of the Common Stock;
9
(24) selling, general, and
administrative expenses (SG&A) as a percentage of net income or revenues; and (25) any
of the above goals determined on an absolute or relative basis or as compared to the
performance of a published or special index deemed applicable by the Committee including,
but not limited to, the Standard & Poors 500 Stock Index or a group of comparable
companies. One or more of the foregoing business criteria shall also be exclusively used in
establishing performance goals for Annual Incentive Awards granted to a Covered Employee
under Section IX(C) hereof.
(b)
Individual Performance Criteria
. The grant, exercise and/or settlement of
Performance Awards may also be contingent upon individual performance goals established by
the Committee. If required for compliance with section 162(m) of the Code, such criteria
shall be approved by the stockholders of the Company.
3.
Performance Period; Timing for Establishing Performance Goals
. Achievement of
performance goals in respect of such Performance Awards shall be measured over a performance period
of up to ten years, as specified by the Committee. Performance goals shall be established not
later than 90 days after the beginning of any performance period applicable to such Performance
Awards, or at such other date as may be required or permitted for performance-based compensation
under section 162(m) of the Code.
4.
Performance Award Pool
. The Committee may establish a Performance Award pool,
which shall be an unfunded pool, for purposes of measuring performance of the Company in connection
with Performance Awards. The amount of such Performance Award pool shall be based upon the
achievement of a performance goal or goals based on one or more of the criteria set forth in
Section IX(B)(2) hereof during the given performance period, as specified by the Committee in
accordance with Section IX(B)(3) hereof. The Committee may specify the amount of the Performance
Award pool as a percentage of any of such criteria, a percentage thereof in excess of a threshold
amount, or as another amount which need not bear a strictly mathematical relationship to such
criteria.
5.
Settlement of Performance Awards; Other Terms
. After the end of each performance
period, the Committee shall determine the amount, if any, of (a) the Performance Award pool, and
the maximum amount of the potential Performance Award payable to each Participant in the
Performance Award pool, or (b) the amount of the potential Performance Award otherwise payable to
each Participant. Settlement of such Performance Awards shall be in cash, Common Stock, other
Awards or other property, in the discretion of the Committee. The Committee shall specify the
circumstances in which such Performance Awards shall be paid or forfeited in the event of
termination of employment by the Participant prior to the end of a performance period or settlement
of Performance Awards.
C.
Annual Incentive Awards Granted to Designated Covered Employees
. If the Committee
determines that an Annual Incentive Award to be granted to an individual who is designated by the
Committee as likely to be a Covered Employee should qualify as performance-based compensation for
purposes of section 162(m) of the Code, the grant, exercise and/or settlement of such Annual
Incentive Award shall be contingent upon achievement of preestablished performance goals and other
terms set forth in this Section XI(C).
10
1.
Potential Annual Incentive Awards
. Not later than the end of the 90th day of each
applicable fiscal year, or at such other date as may be required or permitted in the case of Awards
intended to be performance-based compensation under section 162(m) of the Code, the Committee
shall determine the individuals who will potentially receive Annual Incentive Awards, and the
amounts potentially payable thereunder, for that fiscal year, either out of an Annual Incentive
Award pool established by such date under Section IX(C)(2) hereof or as individual Annual Incentive
Awards. The amount potentially payable, with respect to Annual Incentive Awards, shall be based
upon the achievement of a performance goal or goals based on one or more of the business criteria
set forth in Section IX(B)(2) hereof in the given performance year, as specified by the Committee.
2.
Annual Incentive Award Pool
. The Committee may establish an Annual Incentive Award
pool, which shall be an unfunded pool, for purposes of measuring performance of the Company in
connection with Annual Incentive Awards. The amount of such Annual Incentive Award pool shall be
based upon the achievement of a performance goal or goals based on one or more of the business
criteria set forth in Section IX(B)(2) hereof during the given performance period, as specified by
the Committee in accordance with Section IX(C)(3) hereof. The Committee may specify the amount of
the Annual Incentive Award pool as a percentage of any of such business criteria, a percentage
thereof in excess of a threshold amount, or as another amount which need not bear a strictly
mathematical relationship to such business criteria.
3.
Payout of Annual Incentive Awards
. After the end of each applicable fiscal year,
the Committee shall determine the amount, if any, of (a) the Annual Incentive Award pool, and the
maximum amount of the potential Annual Incentive Award payable to each Participant in the Annual
Incentive Award pool, or (b) the amount of the potential Annual Incentive Award otherwise payable
to each Participant. The Committee shall specify the circumstances in which an Annual Incentive
Award shall be paid or forfeited in the event of termination of employment by the Participant prior
to the end of the applicable year or settlement of such Annual Incentive Award.
D.
Written Determinations
. All determinations by the Committee as to the
establishment of performance goals, the amount of any Performance Award pool or potential
individual Performance Awards, the achievement of performance goals relating to Performance Awards
under Section IX(B), the amount of any Annual Incentive Award pool or potential individual Annual
Incentive Awards, the achievement of performance goals relating to Annual Incentive Awards under
Section IX(C) shall be made in writing in the case of any Award intended to qualify under section
162(m) of the Code. The Committee may not delegate any responsibility relating to such Performance
Awards or Annual Incentive Awards.
E.
Status of Performance and Annual Incentive Awards under Section 162(m) of the Code
.
It is the intent of the Company that Performance Awards and Annual Incentive Awards under Sections
IX(B) and IX(C) hereof granted to persons who are designated by the Committee as likely to be
Covered Employees within the meaning of section 162(m) of the Code and regulations thereunder
(including Treasury Regulation § 1.162-27 and successor regulations thereto) shall, if so
designated by the Committee, constitute performance-based compensation within the meaning of
section 162(m) of the Code and regulations thereunder. Accordingly, the terms used in this Section
IX, including the definitions of Covered Employee and other terms
11
used therein, shall be interpreted in a manner consistent with section 162(m) of the Code and
regulations thereunder. The foregoing notwithstanding, because the Committee cannot determine with
certainty whether a given Participant will be a Covered Employee with respect to a fiscal year that
has not yet been completed, the term Covered Employee as used herein shall mean only a person
designated by the Committee, at the time of grant of a Performance Award or an Annual Incentive
Award, who is likely to be a Covered Employee with respect to that fiscal year. If any provisions
of this Plan as in effect on the date of adoption or any agreements relating to Performance Awards
or Annual Incentive Awards that are designated as intended to comply with section 162(m) of the
Code do not comply or are inconsistent with the requirements of section 162(m) of the Code or
regulations thereunder, such provision or agreement shall be construed or deemed amended to the
extent necessary to conform to such requirements.
X. RECAPITALIZATION OR REORGANIZATION
A.
No Effect on Right or Power
. The existence of the Plan and the Awards granted
hereunder shall not affect in any way the right or power of the Board or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or other change in
the Companys or any Affiliates capital structure or its business, any merger or consolidation of
the Company or any Affiliate, any issuance of debt or equity securities ahead of or affecting
Common Stock or the rights thereof, the dissolution or liquidation of the Company or any Affiliate
or any sale, lease, exchange or other disposition of all or any part of its assets or business or
any other corporate act or proceeding.
B.
Subdivision or Consolidation of Shares; Stock Dividends
. The shares with respect to
which Awards may be granted are shares of Common Stock as presently constituted, but if, and
whenever, prior to the settlement or expiration of an Award theretofore granted, the Company shall
effect a subdivision or consolidation of shares of Common Stock or the payment of a stock dividend
on Common Stock without receipt of consideration by the Company, the number of shares of Common
Stock with respect to which such Award may thereafter relate (1) in the event of an increase in the
number of outstanding shares shall be proportionately increased, and the purchase price per share,
if applicable, shall be proportionately reduced, and (2) in the event of a reduction in the number
of outstanding shares shall be proportionately reduced, and the purchase price per share, if
applicable, shall be proportionately increased. Any fractional share resulting from such adjustment
shall be rounded up to the next whole share.
C.
Recapitalizations
. If the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure (a
recapitalization
), the number and class of shares of
Common Stock subject to an Award theretofore granted shall be adjusted so that such Award shall
thereafter cover the number and class of shares of stock and securities to which the Participant
would have been entitled pursuant to the terms of the recapitalization if, immediately prior to the
recapitalization, the Participant had been the holder of record of the number of shares of Common
Stock then covered by such Award.
D.
Change of Control
.
12
1. In the event of a Change of Control each outstanding Award shall become fully vested and,
if applicable, exercisable as to all Awards, including Awards that would not otherwise be vested
and/or exercisable.
2. In the event a Change of Control is triggered by a merger or consolidation of the Company
with or into another corporation pursuant to which shares of Common Stock are converted into the
right to receive cash (a
Cash Merger
), then in such event each Option not otherwise exercised
prior to the effective time of the Cash Merger shall be exchangeable after the effective time of
the Cash Merger only for the excess, if any, of the per share consideration paid in the Cash Merger
over the per share exercise price of each Option specified in the applicable Option agreement
(subject to all applicable withholding), and for all other purposes each Option agreement shall be
cancelled and shall no longer be exercisable for shares of any entity upon the effective time of
the Cash Merger. In the event a Change of Control is triggered by a merger or consolidation of the
Company with or into another corporation pursuant to which shares of Common Stock are converted
into the right to receive any securities and/or property (a
Stock Merger
), then in such event
each Option not otherwise exercised prior to the effective time of the Stock Merger shall be
exercisable after the effective time of the Stock Merger only for such securities and/or property
into which shares of Common Stock would have been converted if such Option had been exercised
immediately prior to the effective time of the Stock Merger.
E.
Other Changes in the Common Stock
. In the event of changes in the outstanding
Common Stock by reason of a recapitalization, reorganization, merger, consolidation, combination,
split-up, split-off, spin-off, liquidation, exchange or other relevant change in capitalization or
distributions to the holders of Common Stock occurring after the date of the grant of any Award and
not otherwise provided for by this Section X, such Award and any agreement evidencing such Award
shall be subject to adjustment by the Committee at its discretion as to the number and price of
shares of Common Stock or other consideration subject to such Award. In the event of any such
change in the outstanding Common Stock or distribution to the holders of Common Stock, or upon the
occurrence of any other event described in this Section X, the aggregate number of shares available
under the Plan shall be appropriately adjusted to the extent, if any, determined by the Committee,
whose determination shall be conclusive.
F.
No Adjustments unless Otherwise Provided
. Except as hereinbefore expressly
provided, the issuance by the Company of shares of stock of any class or securities convertible
into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon
the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other securities, and in any case
whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number of shares of Common Stock subject to Awards theretofore granted or the
purchase price per share, if applicable.
XI. AMENDMENT AND TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with respect to any shares of
Common Stock for which Awards have not theretofore been granted. The Board shall have the right to
alter or amend the Plan or any part thereof from time to time; provided that no change in
13
the Plan may be made that would impair the rights of a Participant with respect to an Award
theretofore granted without the consent of the Participant, and provided, further, that the Board
may not, without approval of the stockholders of the Company, amend the Plan to (A) increase the
maximum aggregate number of shares that may be issued under the Plan, (B) change the class of
individuals eligible to receive Awards under the Plan, (C) extend the term of the Plan, or (D)
reduce the price at which Options may be granted below the Fair Market Value.
XII. MISCELLANEOUS
A.
No Right to An Award
. Neither the adoption of the Plan nor any action of the Board
or of the Committee shall be deemed to give an Employee, Director or Consultant any right to be
granted an Award or any other rights hereunder except as may be evidenced by an Award agreement
duly executed on behalf of the Company, and then only to the extent and on the terms and conditions
expressly set forth therein. The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of funds or assets to
assure the performance of its obligations under any Award.
B.
No Employment/Membership Rights Conferred
. Nothing contained in the Plan shall (1)
confer upon any Employee or Consultant any right with respect to continuation of employment or of a
consulting or advisory relationship with the Company or any Affiliate or (2) interfere in any way
with the right of the Company or any Affiliate to terminate an Employees or a Consultants
employment, consulting or advisory relationship, as applicable, at any time. Nothing contained in
the Plan shall confer upon any Director any right with respect to continuation of membership on the
Board.
C.
Other Laws; Withholding
. The Company shall not be obligated to issue any Common
Stock pursuant to any Award granted under the Plan at any time when the shares covered by such
Award have not been registered under the Securities Act of 1933, as amended, and such other state
and federal laws, rules and regulations as the Company or the Committee deems applicable and, in
the opinion of legal counsel for the Company, there is no exemption from the registration
requirements of such laws, rules and regulations available for the issuance and sale of such
shares. No fractional shares of Common Stock shall be delivered, nor shall any cash in lieu of
fractional shares be paid. The Company shall have the right to deduct in connection with all Awards
any taxes required by law to be withheld and to require any payments required to enable it to
satisfy its withholding obligations.
D.
No Restriction on Corporate Action
. Nothing contained in the Plan shall be
construed to prevent the Company or any Affiliate from taking any action which is deemed by the
Company or such Affiliate to be appropriate or in its best interest, whether or not such action
would have an adverse effect on the Plan or any Award made under the Plan. No Participant,
beneficiary or other person shall have any claim against the Company or any Affiliate as a result
of any such action.
E.
Restrictions on Transfer
. An Award (other than an Incentive Stock Option, which
shall be subject to the transfer restrictions set forth in Section VII(C)) shall not be
transferable otherwise than (1) by will or the laws of descent and distribution, (2) pursuant to a
qualified domestic relations order as defined by the Code or Title I of the Employee Retirement
Income
14
Security Act of 1974, as amended, or the rules thereunder, or (3) with the consent of the
Committee.
F.
Governing Law
. The Plan shall be governed by, and construed in accordance with, the
laws of the State of Delaware, without regard to conflicts of law principles thereof.
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VOTE BY INTERNET -
www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern
Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions
to obtain your records and to create an electronic voting instruction form.
VOTE BY PHONE -
1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting
date. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Sport Supply
Group, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS
FOLLOWS:
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SPRTS1
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KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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SPORT SUPPLY GROUP, INC.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
FOLLOWING PROPOSAL.
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Vote on Proposal
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For
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Against
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Abstain
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1.
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Approval of the Sport Supply Group, Inc. Amended and Restated 2007 Long-Term
Incentive Plan
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o
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Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator, trustee, or guardian, please give full title as
such. If a corporation, please sign in
full corporate name by the president or other authorized officer. If a partnership, please sign in partnership name by
authorized person.
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Signature [PLEASE SIGN WITHIN BOX]
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Signature (Joint Owners)
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Date
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Proxy
SPORT SUPPLY GROUP, INC.
SOLICITED ON BEHALF OF THE
COMPANY AND APPROVED BY THE BOARD OF DIRECTORS
The undersigned hereby
constitutes and appoints Adam Blumenfeld and Terrence M. Babilla, and each of them, as attorneys and proxies of the
undersigned, with full power of substitution, for and in the name, place, and stead of the undersigned, to appear at the
special meeting of stockholders of Sport Supply Group, Inc. to be held on the 10th day of July 2008 (pursuant to the Notice
of Special Meeting dated May 27, 2008 and accompanying proxy statement), and at any postponement or adjournment thereof, and
to vote all of the shares of Sport Supply Group, Inc. that the undersigned is entitled to vote with all the powers and
authority the undersigned would possess if personally present in accordance with the following instructions.
When
properly executed, this Proxy will be voted in the manner directed herein by the undersigned Stockholder.
If no
direction is made, this Proxy will be voted for proposal 1.