SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) ofthe Securities Exchange Act of 1934 (Amendment No. )
Payment of Filing Fee (Check the appropriate box):
2437 East Main StreetPlainfield, Indiana
[GRAPHIC MISSING]
GALYANS
SPORTS & OUTDOOR
ONE GALYANS PARKWAY
PLAINFIELD, INDIANA 46168
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of Galyan’sGalyan's Trading Company, Inc., which will be held at The Westin Hotel, 50 S. Capitol Avenue, Indianapolis,the Company's
headquarters at One Galyans Parkway, Plainfield, Indiana 4620446168 on Thursday,Friday, May
15, 200321, 2004 at 9:00 a.m., local time.
At the Annual Meeting, holders of common stock will vote upon the
election of twelve directors.directors, the approval of grants of equity awards to our
Chief Executive Officer, and an amendment to our stock option plan. The attached
proxy statement contains information about thisthese and other matters pertaining to
the Annual Meeting.
Whether or not you plan to attend, you can ensure that your shares are
represented at the meeting by promptly voting and submitting your proxy by
Internet, by telephone, or by completing, executing and returning the enclosed proxy card.
I hope you will be able to attend the Annual Meeting and look forward
to seeing you on May 15, 2003.
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21, 2004.
/S/ EDWIN J. HOLMAN
Edwin J. Holman
CHIEF EXECUTIVE OFFICER
April 25, 2003
GALYAN’S
GALYAN'S TRADING COMPANY, INC.2437 East Main StreetPlainfield, Indiana
ONE GALYANS PARKWAY
PLAINFIELD, INDIANA 46168
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 2003
Galyan’s21, 2004
Galyan's Trading Company, Inc. will hold its Annual Meeting of
Shareholders on Thursday,Friday, May 15, 200321, 2004 at The Westin Hotel, 50 S. Capitol Avenue, Indianapolis,One Galyans Parkway, Plainfield, Indiana
4620446168 at 9:00 a.m., local time, for the following purposes:
1. To elect twelve directors; 2. To consider approval of a stock option grant to our Chief Executive Officer; 3. To consider approval of a restricted stock grant to our Chief Executive Officer; 4. To consider approval of amendments to our stock option plan; and 5. To transact such other business as may properly come before the meeting. |
Only shareholders who owned stock at the close of business on March 24, 200329,
2004 can vote at this meeting or any adjournments that may take place. Even
though you may plan to attend the meeting, we ask that you vote your shares by
signing and dating the enclosed proxy card, and returning it without delay in
the enclosed postage-paid envelope. Alternatively, you may vote your shares by Internet or telephone. If you attend the meeting, you may withdraw
your proxy and vote in person.
Please vote your shares promptly so that your shares may be present at the meeting.
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By Order of the Board of Directors,
/S/ C. DAVID ZOBA
C. David Zoba
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
April 25, 2003
GALYAN’S
GALYAN'S TRADING COMPANY, INC.2437 East Main StreetPlainfield, Indiana
ONE GALYANS PARKWAY
PLAINFIELD, INDIANA 46168
PROXY STATEMENT
General
GENERAL
We are sending you this proxy statement as part of a solicitation by
the Board of Directors (the "Board") of Galyan’sGalyan's Trading Company, Inc.
("Galyan's") for use at our 20032004 Annual Meeting of Shareholders. We will hold
the meeting on Thursday,Friday, May 15, 200321, 2004 at The Westin Hotel, 50 S. Capitol Avenue, Indianapolis,One Galyans Parkway, Plainfield, Indiana
46204,46168, starting at 9:00 a.m., local time.
We will mail this proxy statement and accompanying proxy card on or
about April 25, 200330, 2004 to all of our shareholders entitled to vote at the meeting.
Unless the context otherwise requires, the terms “us,” “we,” “our”"us," "we," "our" and “Company”"Company"
refer to Galyan’sGalyan's and its subsidiary.
subsidiaries.
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS
AND THE MEETING
| |
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3
Q: HOW CAN I VOTE? A: In the election of directors, you may vote FOR all of the nominees, or your vote may be WITHHELD with respect to one or more of the nominees. For the other matters, you may vote FOR or AGAINST the matter, or you may indicate that you wish to ABSTAIN from voting on the matter. Q: HOW WILL THE VOTES BE COUNTED? A: Your shares of common stock will be voted according to your directions on the proxy card, or broker voting instruction card. If you sign your proxy card or broker voting instruction card with no further instructions, your shares will be voted in accordance with the recommendations of our Board (FOR all director nominees named in the proxy statement, FOR the approval of the option grant to our Chief Executive Officer, FOR the approval of the restricted stock grant to our Chief Executive Officer, and FOR the amendments to our stock option plan). If you ABSTAIN on a particular matter, your shares will not be counted in the vote with respect to that matter. Q: WHO WILL COUNT THE VOTES? A: We have appointed three individuals to serve as inspectors of election for the meeting. The election inspectors will determine the presence of a quorum, tabulate votes, certify the results of the election and take such other actions as may be necessary or appropriate to conduct the election. Q: HOW WILL VOTING ON ANY OTHER BUSINESS BE CONDUCTED? A: We do not currently expect any matters to be presented for a vote at the meeting, other than the three matters described in the proxy statement. If you grant a proxy, the officers named as proxy holders, C. David Zoba and Edward S. Wozniak, or their nominees or substitutes, will have the discretion to vote your shares on any additional matters that are properly presented for a vote at the meeting. If, for any unforeseen reason, any of our nominees is not available as a candidate for director, the person named as the proxy holder will vote your proxy for another candidate or other candidates nominated by our Board. Q: MAY I PROPOSE ACTIONS FOR CONSIDERATION AT NEXT YEAR'S ANNUAL MEETING? A: Yes. For your proposal to be considered for inclusion in our proxy statement for next year's meeting, we must receive your written proposal no later than December 31, 2004. If we change the date of next year's meeting by more than 30 days from the date of this year's meeting, then the deadline is a reasonable time before we begin to print and mail our proxy materials. You should also be aware that your proposal must comply with Securities and Exchange Commission regulations regarding inclusion of shareholder proposals in company-sponsored proxy materials. Similarly, in order for you to raise a proposal (including a director nomination) from the floor during next year's meeting, we must receive a written notice of the proposal no later than February 20, 2005 and it must contain the additional information required by our bylaws. If we change the date of next year's meeting by more than 30 days before, or more than 70 days after, the date contemplated at this year's meeting, then we must receive your written proposal at least 90 days before the date of next year's meeting in order for the proposal to be timely. You may obtain a complete copy of our bylaws by submitting a written request to our Corporate Secretary at our principal executive office, One Galyans Parkway, Plainfield, Indiana 46168. 4
Q: HOW CAN I COMMUNICATE WITH THE BOARD OF DIRECTORS?
A: Shareholders or other interested parties can contact any non-management
director of the Board by writing to them c/o Corporate Secretary,
Galyan's Trading Company, Inc., One Galyans Parkway, Plainfield,
Indiana 46168. The mailing envelope must contain a clear notation
indicating that the enclosed letter is a "Stockholder-Board
Communication" or "Stockholder-Director Communication." All such
letters must identify the author as a stockholder and clearly state
whether the intended recipients are all members of the Board of
Directors or certain specified individual directors. The Secretary will
make copies of all such letters and circulate them to the appropriate
director or directors.
Q: WHO IS PAYING FOR THIS PROXY SOLICITATION?
A: We will pay the cost of soliciting the proxies. In addition, officers,
directors and regular employees, who will not be paid any additional
compensation for such activities, may make the solicitation of proxies
or votes in person, by telephone or by electronic communication. We
will send copies of the solicitation material to brokers, fiduciaries
and custodians who will forward the material to the beneficial owners
of our shares. On request, we will reimburse brokers and other persons
representing beneficial owners of shares for their reasonable expenses
in forwarding solicitation material to such beneficial owners.
5
The following contains information regarding the beneficial ownership
of our common stock as of March 15, 20032004 (unless otherwise noted) for:
Beneficial ownership is determined in accordance with the rules of the
SEC and generally includes voting or investment power with respect to
securities. In computing the number of shares beneficially owned by a person and
the percentage of ownership held by that person, shares of common stock subject
to options and warrants held by that person that are currently exercisable or
will become exercisable within 60 days after March 15, 20032004 (i.e., May 14, 2003)2004)
are deemed outstanding, while these shares are not deemed outstanding for
computing the percentage ownership of any other person. Except as otherwise
indicated in the footnotes below, and except as may be provided under applicable
marital property laws, we believe, based on information furnished to us, the
persons and entities named in the table below have sole voting and investment
power with respect to all shares beneficially owned.
The percentages of common stock beneficially owned are based on
17,084,71617,362,368 shares of common stock outstanding as of March 15, 2003.
Name and Address of Beneficial Owner | Shares of Common Stock Beneficially Owned | Percentage of Common Stock Beneficially Owned | ||||
5% Shareholders: | ||||||
FS Equity Partners IV, L.P | 5,694,500 | (1)(2) | 33.3 | % | ||
Limited Brands, Inc | 5,500,500 | (2)(3) | 29.8 | |||
Directors and executive officers: | ||||||
Robert B. Mang | 215,000 | (4) | 1.3 | % | ||
C. David Zoba | 74,740 | (5) | * | |||
Edward S. Wozniak | 40,501 | (6) | * | |||
Charles F. Nelson | 70,117 | (7) | * | |||
Edward J. Whitehead | 11,667 | (8) | * | |||
Norman S. Matthews | 180,000 | (9) | 1.0 | |||
Byron E. Allumbaugh | 13,334 | (10) | * | |||
Frank J. Belatti | 3,334 | (11) | * | |||
Stuart B. Burgdoerfer | — | — | ||||
Timothy J. Faber | — | — | ||||
Todd W. Halloran | 5,694,500 | (2)(12) | 33.3 | |||
George R. Mrkonic, Jr | 13,334 | (13) | * | |||
John M. Roth | 5,694,500 | (2)(12) | 33.3 | |||
Stephanie M. Shern | 13,334 | (14) | * | |||
Ronald P. Spogli | 5,694,500 | (2)(12) | 33.3 | |||
Peter Starrett | 170,000 | (15) | 1.0 | |||
Directors and executive officers as a group (21 persons) | 6,732,382 | (16) | 35.3 | |||
Former director and executive officer: | ||||||
Joel L. Silverman | 250,000 | (17) | 1.4 | % |
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.......................................... 5,694,500 (1)(2) | |
(9) | |
................................................... 291,000 (10) | |
..................................................... 5,694,500 (2)(16) | |
(1) Based on the information in a Schedule 13D filed October 9, 2001, as
amended through August 18, 2003. This shareholder indicates that shares
are held of record by FS Equity Partners IV, L.P., a Delaware limited
partnership ("FS Equity IV"). FS Capital Partners LLC, a Delaware
limited liability company, is the general partner of FS Equity IV and
has the power to vote and dispose of the shares held of record by FS
Equity IV. The address for this shareholder is 11100 Santa Monica
Boulevard, Suite 1900, Los Angeles, California 90025.
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Meetings
MEETINGS AND COMMITTEES
The Board of Directors has determined that Galyan's is a "controlled
company," as defined in Rule 4350(c)(5) of the listing standards of the National
Association of Securities Dealers, Inc. ("NASD"), based on the beneficial
ownership of FS Equity Partners IV, L.P. (hereafter, "Freeman Spogli") and
Committees
Limited Brands, Inc. (and its subsidiary, G Trademark Inc.) of approximately
55.3% of the common stock outstanding as of March 15, 2004, and the shareholders
agreement among Freeman Spogli, Limited Brands, G Trademark and the Company
(described below under the heading "Information Regarding Certain Directorships
and Voting Arrangements") requiring the parties to vote their shares in the
election of specified nominees to our Board of Directors. Accordingly, Galyan's
is exempt from certain requirements of the NASD listing standards, including the
requirement to maintain a majority of independent directors of Galyan's Board of
Directors and the requirements regarding the determination of compensation of
executive directors, the nomination of directors by independent directors and
the composition of our Compensation Committee or our Nominating and Governance
Committee.
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2002.2003, which
period began on February 2, 2003 and ended on January 31, 2004. In addition to
meetings of the full Board, directors also attended meetings of Board
committees. During fiscal 2002,2003, the Board had standing audit, compensation,
nominating and governance, executive and real estate committees. In addition, in February 2003, the Board designated a nominating and corporate governance committee, which will meet for the first time in fiscal 2003. During fiscal
2002,2003, all of the directors attended at least 75% of the meetings of the Board
and those Committeescommittees on which he or she served during his or her tenure on the
Board.Board, except for Frank J. Belatti, who attended 75% of Board meetings but only
67% of all meetings of the Board and the committees on which he served. The
Board acted by unanimous written consent on two (2)five (5) occasions during fiscal
2002.
6
Board2003. Galyan's does not have a formal policy with respect to attendance of
directors at annual shareholder meetings, but the Nominating and Governance
Committee Membership
........ M | C | ||||||||
- ------------------------------------------------------------------------------------------------------------------------------ Frank J. Belatti | ........... M | ||||||||
- ------------------------------------------------------------------------------------------------------------------------------ Stuart B. Burgdoerfer | ...... M | ||||||||
- ------------------------------------------------------------------------------------------------------------------------------ Timothy J. Faber | ........... M | ||||||||
- ------------------------------------------------------------------------------------------------------------------------------ Michael Goldstein .......... C - ------------------------------------------------------------------------------------------------------------------------------ Edwin J. Holman ............ M | M | ||||||||
- ------------------------------------------------------------------------------------------------------------------------------ Norman S. Matthews | ......... C | ||||||||
C C
- ------------------------------------------------------------------------------------------------------------------------------
George R. Mrkonic, | Jr. ..... M | ||||||||
- ------------------------------------------------------------------------------------------------------------------------------ John M. Roth | ............... M | M | |||||||
- ------------------------------------------------------------------------------------------------------------------------------ Ronald P. Spogli | ........... M | ||||||||
- ------------------------------------------------------------------------------------------------------------------------------ Peter Starrett | |||||||||
............. M | |||||||||
Audit Committee
M - Member
C - Chair (for committees that have a designated chairperson)
AUDIT COMMITTEE
Our Audit Committee currently consists of three independent directors.
Under its currentThe Board of Directors has adopted a revised Audit Committee charter that
complies with Rule 4350(d)(1) of the NASD listing standards, and a copy of the
revised charter is attached as APPENDIX A. Our Audit Committee has the
responsibility and authority set forth in Rule 4350(d)(3) of the NASD listing
standards under the revised charter. Among other things, our Audit Committee
appoints the independent auditors, reviews the results and scope of the audit
and other services provided by our independent auditors, approves professional
services to be provided by the independent public accountants, reviews and
evaluates our audit and control functions, reviews the independence of the
independent public accountants, considers the range of audit and non-audit fees
and reviews the adequacy of our internal accounting controls. Our Board of
Directors has determined that it has at least one "audit committee financial
expert" serving on the Audit Committee, Michael Goldstein, and that Mr.
Goldstein is an "independent director" as defined in the NASD listing standards.
Our Audit Committee met on ten (10)seventeen (17) occasions during fiscal 2002.
Compensation Committee
2003.
COMPENSATION COMMITTEE
Our Compensation Committee makes all recommendations to the Board
regarding our equity compensation plans and salaries and incentive compensation
for our executive officers. Our Compensation Committee met on three (3)two (2) occasions
during fiscal 2002.
Executive Committee
2003.
8
did not meet inmet on one (1) occasion during fiscal 2002.
Real Estate Committee
2003. Effective March 1, 2004,
Mr. Holman became a member of this committee and Mr. Mang resigned from the
committee.
REAL ESTATE COMMITTEE
Our Real Estate Committee reviews the proposals and analysis prepared
by our management team, including Mr. MangHolman and Mr. Zoba, and makes
recommendations to the Board or our Executive Committee, as appropriate under
the circumstances, for the selection of new store sites and other store related
real estate matters. Our Real Estate Committee met on eleven (11)nine (9) occasions during
fiscal 2002.
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Nominating2003. Effective March 1, 2004, Mr. Holman became a member of this
committee and Corporate Governance Committee
Mr. Mang resigned from the committee.
NOMINATING AND GOVERNANCE COMMITTEE
Our Nominating and Corporate Governance Committee identifies individuals
qualified to become Board members, and recommends that the Board nominate such
individuals for election to the Board at the next annual meeting of
shareholders. This committee also develops and reviews Galyan’sGalyan's corporate
governance guidelines and makes recommendations to the Board relating to the
guidelines. ThisThe committee was formed in February 2003 and did not make recommendations with respect to the nomineesbelieves that candidates for director coveredshould meet
certain minimum qualifications, including (1) being of the highest ethical
character and sharing the values of Galyan's as reflected in our Ethics Policy,
(2) having reputations, both personal and professional, consistent with the
image and reputation of Galyan's, (3) being highly accomplished in their
respective field, with superior credentials and recognition and (4) having
relevant expertise and experience. The committee retains the right to modify
these minimum qualifications from time to time. Shareholders may provide the
committee information on director candidates for consideration by this proxy statement. This committee
will consider nominees for directors that are recommended by shareholders. Any shareholder wishing to proposewriting a nominee should submit a recommendation in writingletter to our Corporate Secretary at our principal executive
office, 2437 East Main Street,One Galyans Parkway, Plainfield, Indiana 46168; indicating46168 containing the nominee’sfollowing
information: the prospective candidate's name, qualifications, age, relevant
experience, and other relevant biographical information and providing documentation of such nominee’sdirector candidate's consent to serve as a director.
Director Compensation Arrangements
The
mailing envelope must contain a clear notation indicating that the enclosed
letter is a "Stockholder-Board Communication" or "Stockholder-Director
Communication." All such letters must identify the author as a stockholder and
clearly state that the intended recipients are all members of the Nominating and
Governance Committee. All such communications received by the Corporate
Secretary will be delivered to the members of the Nominating and Governance
Committee. A current copy of the Galyan's Nominating and Governance Committee
Charter is available on our website at WWW.GALYANS.COM in the Investors section,
and is also attached as APPENDIX B.
CODE OF ETHICS
Galyan's has a code of ethics, the Ethics Policy, which applies to all
employees, officers (including executive officers) and directors. The Ethics
Policy is posted on our website at WWW.GALYANS.COM in the Investors section, and
is attached as APPENDIX C.
DIRECTOR COMPENSATION ARRANGEMENTS
Each of our directors is eligible for reimbursement for reasonable
travel expenses incurred in attending meetings.
Michael Goldstein joined the Board in May 2003 and is the Chair of our
Audit Committee. Mr. Goldstein receives an annual cash retainer of $25,000 and
Byron E. Allumbaugh, Frank J. Belatti, and George R. Mrkonic, Jr. and Stephanie M. Shern also receiveeach receives
an annual cash retainer of $10,000,$20,000. Each of these directors also receives a fee
for each Board meeting attended of $2,500
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each of these four directors,Messrs. Allumbaugh, Belatti and Mrkonic, Jr., upon joining
the Board in September 2000,2001, each received a grant of 10,000 options. Mr.
Goldstein, upon joining the Board in May 2003, also received a grant of 10,000
options. Each of these directors will receive an annual grant of 5,000 options,
whichwith the same vesting conditions. Norman S. Matthews joined the Board in 1999
and is Chairman of the Board, and the Chairman of the Compensation, Executive
and Real Estate Committees. Mr. Matthews receives an annual cash retainer of
$100,000 and no separate fees for meeting attendance. Mr. Matthews receives an
annual grant of 15,000 options, and Galyan's made the first such grant in May
2002. All options granted to members of our Board of Directors have a maximum
term of seven years and vest in equal installments over a three-year period so
long as the directorhe continues to serve. Each of these directors will receiveserve as a grant of 5,000 options, with the same vesting conditions, on each anniversary of his or her appointment or election to service on the Board. We anticipate that Michael Goldstein, a director nominee, will receive a substantially comparable compensation arrangement, if elected.
director.
In addition, we havehad consulting arrangements with Mr. Matthews and Mr.
Starrett during the last fiscal year. The consulting arrangement with Mr.
Starrett.Matthews terminated in May 2003. See “Compensation"Compensation Committee Interlocks and
Insider Participation”Participation" below for descriptionsa description of these arrangements.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
Board of Directors
BOARD OF DIRECTORS
At the Annual Meeting, we will elect twelve (12) directors. The
nominees proposed for election by the Board of Directors are Robert B. Mang,Edwin J. Holman,
Norman S. Matthews, Byron E. Allumbaugh, Frank J. Belatti, Stuart B.
Burgdoerfer, Timothy J. Faber, Michael Goldstein, Todd W. Halloran, George R.
Mrkonic, Jr., John M. Roth, Ronald P. Spogli and Peter Starrett. Robert Mang,
who currently is a member of the Board, has agreed to resign from the Board on
or before May 14, 2004, and will not stand for re-election. Each director will
serve until the annual meeting of shareholders in 20042005 or until his or her
successor is elected and qualified. Stephanie M. Shern, who currently is a member of the Board, has chosen not to stand for re-election. Ms. Shern will hold office as a member of the Board until the election of her successor at the Annual Meeting.
Each nominee has indicated his or her willingness to serve if elected, but if any nominee should become unable to serve, we will vote the proxies solicited hereby for the election of such other person as our directors shall select.
Information about our Nominees and Continuing Directors
Robert B. Mang,
INFORMATION ABOUT OUR NOMINEES AND CONTINUING DIRECTORS
EDWIN J. HOLMAN, 57, has served as our Chief Executive Officer and Chairman of the Companysince
March 2004 and as a director since October 2000.September 2003, when he joined the Company as
President and Chief Operating Officer. Mr. Holman served as President and Chief
Operating Officer of Bloomingdale's, Inc., a subsidiary of Federated, Inc., from
July 2000 until August 2003. From August 1997 to January 1999 until July 2000, Mr. MangHolman
served as President and Chief Operating Officer of the Rich's, Lazarus and
Goldsmiths division of Federated, Inc. From January 1996 until January 1999, he
was Chairman and Chief Executive Officer of Monet Group,Petrie Retail, Inc., a designer and marketer of branded fashion jewelry sold through department stores. From January 1996 to December 1996, Mr. Mang served as Vice Chairman of Duty Free Shoppers. Monet Group, Inc. filed for bankruptcy protection in May 2000.
Norman
NORMAN S. Matthews, 70,MATTHEWS, 71, has served as a director and has been
designated as the (non-executive) Chairman of our Board of Directors since
August 1999. Mr. Matthews has been an independent retail consultant for more
than fifteen years. From 1982 to 1988, Mr. Matthews served as Vice Chairman and
then President of Federated Department Stores, Inc. Mr. Matthews also serves as
a member of the board of directors of Henry Schein, Inc., Finlay Enterprises,
Inc., Progressive Corporation, Sunoco, Inc. and Toys “R”"R" Us, Inc.
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Byron
BYRON E. Allumbaugh, 71,ALLUMBAUGH, 72, has served as a director since September 2001.
Mr. Allumbaugh served as Chairman and Chief Executive Officer of Ralphs
Supermarkets, a California based chain, from 1976 to 1995, and as Chairman from
1995 until February 1997. Since February 1997, he has been a self-employed
business consultant. Mr. Allumbaugh also serves as a member of the board of
directors of CKE Restaurants, Inc., El Paso Corporation, Penn Traffic Company and The Pantry, Inc.
Frank
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Belatti, 55,BELATTI, 56, has served as a director since September 2001.
Mr. Belatti has served as Chairman and Chief Executive Officer of AFC
Enterprises, Inc. in Atlanta, Georgia since 1992. Mr. Belatti also serves as a
member of the board of directors of Radio Shack Corporation and AFC Enterprises,
Inc.
Stuart
STUART B. Burgdoerfer, 40,BURGDOERFER, 41, has served as a director since May 2001. Mr.
Burgdoerfer joined Limited Brands in September 1998 and served as Vice President
and Corporate Controller from November 2000 until August 2002 and as a Senior
Vice President and Corporate Controller since August 2002. From September 1999
to November 2000, he was Vice President and Chief Financial Officer of White
Barn Candle Company, a division of Limited Brands. From September 1998 to
September 1999, he served as Vice President-Financial Planning of Limited
Brands.
From September 1996 to September 1998, Mr. Burgdoerfer served in strategic planning and financial management capacities at Pizza Hut, Inc.
TimothyTIMOTHY J. Faber, 41,FABER, 42, has served as a director since November 2000. Mr.
Faber joined Limited Brands in January 2000 and serves as its Vice President
Treasury/Mergers and Acquisitions. From September 1996 to January 2000, Mr.
Faber was employed by the General Electric Company as Managing Director of the
Capital Markets Services division of GE Capital.
Michael Goldstein, 61, is
MICHAEL GOLDSTEIN, 62, has served as a nominee for director.director since May 2003. Mr.
Goldstein has been the Chairman of the Toys “R”"R" Us Children’sChildren's Fund, Inc. since
2001. Mr. Goldstein was the Chairman of the Board of Toys “R”"R" Us, Inc. from 1998
to 2001, and Chief Executive Officer from 1994 to 1997. Mr. Goldstein also
serves as a member of the board of directors of Toys “R” Us, Inc., Finlay Enterprises, Inc., United
Retail Group, Inc., 4 Kids Entertainment, Inc. and Columbia House Company.
ToddMedco Health Solutions, Inc.
TODD W. Halloran, 41,HALLORAN, 42, has served as a director since August 1999. Mr.
Halloran joined Freeman Spogli & Co. in 1995 and became a Principal in 1998. Mr.
Halloran also serves as a member of the board of directors of The Pantry, Inc.
George
GEORGE R. Mrkonic, Jr.MRKONIC, JR.,50, 51, has served as a director since September
2001. Mr. Mrkonic served as Vice Chairman of Borders Group, Inc. from December
1994 to January 2002. From November 1994 until January 1997, he served as Vice
Chairman and President of Borders Group, Inc. He also serves as a member of the
board of directors of Borders Group, Inc., Champion Enterprises, Inc., Guitar Center, Inc., Nashua
Corporation, and Syntel, Inc.
John, and Brinker International, Inc.
JOHN M. Roth, 44,ROTH, 45, has served as a director since August 1999. Mr. Roth
joined Freeman Spogli & Co. in March 1988 and became a Principal in 1993. Mr.
Roth also serves as a member of the board of directors of Advance Auto Parts,
Inc., Asbury Automotive Group, Inc. and AFC Enterprises, Inc.
Ronald
RONALD P. Spogli, 55,SPOGLI, 56, has served as a director since August 1999. Mr.
Spogli is a Principal of Freeman Spogli & Co., which he co-founded in 1983. Mr.
Spogli also serves as a member of the board of directors of Hudson Respiratory
Care, Inc., Century Maintenance Supply, Inc., and AFC Enterprises, Inc.
and Advance Auto Parts, Inc.
Peter Starrett, 55,PETER STARRETT, 56, has served as a director since August 1999. In
August 1998, Mr. Starrett founded Peter Starrett Associates, a retail advisory
firm. From 1990 to 1998, Mr. Starrett served as the President of Warner Bros.
Studio Stores Worldwide. Mr. Starrett also serves as a member of the board of
directors of Guitar Center, Inc., Pacific Sunwear, Inc., The Pantry, Inc. and
AFC Enterprises, Inc.
The Board of Directors recommends a vote FOR the election of the directors listed above. We will vote proxies received by us in favor of the above nominees unless a contrary choice is indicated.
9
Information Regarding Certain Directorships and Voting Arrangements
INFORMATION REGARDING CERTAIN DIRECTORSHIPS AND VOTING ARRANGEMENTS
We are party to a stockholders agreement with FS Equity Partners IV, L.P.,Freeman Spogli, Limited
Brands, Inc. (formerly known as The Limited, Inc.), and G Trademark Inc. (a wholly-owned subsidiary of Limited
Brands) and Benchmark Capital Partners IV, L.P., under which Freeman Spogli, Limited Brands, and G Trademark and Benchmark Capital have agreed
to vote all of their shares in the election of directors in favor of the
following persons: (a) four Board nominees designated by Freeman Spogli, (b) two
Board nominees designated by Limited Brands, (c) our Chief Executive Officer in
office at the time of any election of directors, which currently is Robert B. Mang,Edwin S.
Holman, (d) Norman S. Matthews, who is our current Chairman of the Board, and
(e) one or more additional nominees upon whom Freeman Spogli and Limited Brands
shall agree. If, at the time of any election of directors (or appointment of
directors in the event of a vacancy or an increase in the size of the Board),
Freeman Spogli and Limited Brands are unable to agree on any such additional
nominees, our stockholders agreement provides that our Board in existence at
that time will select the additional nominees. The number of Board nominees that
Freeman Spogli and Limited Brands are entitled to nominate under the agreement
decreases if the number of shares held by such party falls below certain
thresholds set forth in the stockholders agreement. Under the stockholders
agreement, the parties have agreed that we will have a Board consisting of no
more than 13 members. In addition, until one year after the date on which
persons other than Freeman Spogli and Limited Brands and their respective
affiliates own 20% or more of our shares, Limited Brands and Benchmark Capital havehas agreed to vote
against any combination of our company unless Freeman Spogli consents to the
combination.
Under the terms of the stockholders agreement, the four designees of
FS Equity Partners IV, L.P.Freeman Spogli are Todd W. Halloran, John M. Roth, Ronald P. Spogli and Peter
Starrett and the two designees of Limited Brands are Stuart B. Burgdoerfer and
Timothy J. Faber.
Benchmark Capital, previously party to this stockholders agreement, distributed its shares in the Company to its limited partners in 2003 and, as a result, is no longer bound by the stockholders agreement. There are no family relationships among any of our directors or executive officers.
PROPOSAL NO. 2:
APPROVAL OF STOCK OPTION AGREEMENT
On August 29, 2003, Galyan's entered into an amended employment
agreement with Edwin J. Holman, which is currently in effect, in connection with
his agreement to become Galyan's President and Chief Operating Officer. On March
1, 2004, in connection with his agreement to become our Chief Executive Officer,
Galyan's granted to Mr. Holman a nonqualified stock option to purchase 100,000
shares of Galyan's common stock, which was evidenced by a stock option agreement
(the "Option Agreement"). This stock option was not granted under the 1999 Stock
Plan and, instead, was granted subject to shareholder approval at the Annual
Meeting. This stock option will not be effective if the shareholders do not
approve it.
The full text of the Option Agreement is attached as APPENDIX D. The
material terms of the Option Agreement are described below, but such description
is qualified in its entirety by reference to the text of the Option Agreement,
attached as APPENDIX D.
The Board of Directors recommends a vote FOR the approval of the Option
Agreement.
12
1 Mr. Mang resigned from these positions on March 1, 2004.
2 Mr. Nelson retired from Galyan's effective January 31, 2004.
EQUITY COMPENSATION PLAN INFORMATION
As of the end of fiscal 2003, we maintained the following compensation
plans under which our equity securities are authorized for issuance: (1) 1999
Stock Option Plan, (2) 1999 Stock Subscription Plan, (3) 2002 Employee Stock
Purchase Plan, (4) a stock option agreement entered into in 2003 with Edwin J.
Holman and (5) a restricted stock agreement entered into in 2003 with Edwin J.
Holman.
22
1 All of these shares were subject to stock options outstanding under our
1999 Stock Option Plan.
2 Of these shares, 694,389 were available for additional stock option grants
under our 1999 Stock Option Plan, 381,640 shares were available for
issuance at fair market value under our 1999 Stock Subscription Plan, and
1,425,308 were available for purchase under our 2002 Employee Stock
Purchase Plan.
3 Under the 1999 Stock Option Plan as currently in effect, on May 29, 2004 an
additional number of shares of our common stock, equal to three percent
(3%) of the total number of issued and outstanding shares of our common
stock as of the close of business on that date will become available for
stock option grant purposes under our 1999 Stock Option Plan. However,
under the proposed amendments to the 1999 Stock Option Plan, the increase
will be effective on May 29, 2004, but will be calculated as of March 29,
2004, which will result in an increase of 520,871 shares available under
the plan based on the number of shares of our common stock issued and
outstanding on that date.
23
The following is a list of our current executive officers, followed by
their biographical information (other than Mr. Mang,Holman, whose biographical
information appears on page 810 of this proxy statement):
Chief Executive Officer and | |||
C. David Zoba | 52 Executive Vice President, General Counsel and | ||
Secretary | |||
Edward S. Wozniak | 58 Senior Vice President, Chief Financial Officer | ||
Brett 49 Senior Vice President, Human Resources Jeffrey R. Brown 49 Senior Vice President, General Merchandise | |||
Manager, | |||
Apparel and
Footwear
Galen R. Erickson 52 Senior Vice President, | |||
Logistics
David M. Pritchett 39 Senior Vice President, | |||
Lindsay J. Rice | 49 Senior Vice President, General Merchandise | ||
Manager, | |||
Hardgoods Paul C. Wagner | 38 Senior Vice President, Chief Information Officer | ||
Edward J. Whitehead | 48 Senior Vice President, Marketing |
C. David ZobaDAVID ZOBA has served as Executive Vice President, General Counsel
and Secretary since May 2001 and has primary responsibility for real estate and
store planning, and is Galyan’sthe Company's chief legal officer. He served as a
director of Galyan’sthe Company from August 1999 until May 2001. Mr. Zoba served as the
Senior Vice President and Counsel-Real Estate for Limited Brands from 1999 until
May 2001, and as Vice President and Senior Counsel —- Real Estate from 1994 to
1999.
Edward
EDWARD S. WozniakWOZNIAK has served as Senior Vice President and Chief
Financial Officer since February 2001. From April 1998 to October 2000, Mr.
Wozniak served as Senior Vice President and Chief Financial Officer for
10
David’s David's
Bridal Inc.
From November 1996 to April 1998, Mr. WozniakEDWARD J. BRETT, has served as Senior Vice President, Chief Administrative Officer for Things Remembered,Human Resources
since January 2004. From December 2001 to May 2003, Mr. Brett served as
Corporate Vice President of Store Innovation and Development at Circuit City
Stores, Inc., a subsidiary From May 2000 to December 2001, he served as Vice President,
Northeast Division President and from 1995 to 2000, Mr. Brett served as Vice
President of Cole National Corporation.
Dennis J. FeldmannSuperstores Human Resources & Training and Human Resources Director
of Central Division at Circuit City.
JEFFREY R. BROWN has served as Senior Vice President, General
Merchandise Manager, Outdoors,Apparel and Footwear, since May 2001.2003. From April 1998 to1974 until May
2001, he was2003, Mr. Brown held various merchandising and management positions with
Kaufmann's Department Stores, serving as Senior Vice President, General
Merchandise Manager Outdoors. From August 1996 to April 1998, Mr. Feldmann served as Divisional Merchandise Manager, Outdoors. From April 1985 to August 1996, Mr. Feldmann served as Vice President of Merchandising at All About Sports, a division of Van Leunen’s, Inc., where he was responsible for merchandising, marketing, store design and merchandising planning and allocation. Van Leunen’s, Inc. filed for bankruptcy protection infrom March 1989 until May 1997.
Joan M. Hurley2003.
GALEN R. ERICKSON has served as Senior Vice President, Communications and Community CommitmentLogistics, since
February 2002. SheMay 2003. From 1996 until May 2003, Mr. Erickson served as Senior Vice
President, DirectorDistribution of Marketing from May 2001 to February 2002, and as Director of Marketing from May 1997 to May 2001. From June 1995 to March 1997, Ms. Hurley served as General Manager of Market Development for Best Lock Corporation.
Charles F. NelsonBlockbuster Entertainment.
DAVID M. PRITCHETT has served as Senior Vice President, Minister of Culture since May 2001. From November 1995 to May 2001, he served as Minister of Culture.
David M. Pritchetthas served as Senior Vice President, Director of Store
Operations, since May 2001. From March 1996 to May 2001, he was Director of
Store Operations.
Lindsay
LINDSAY J. RiceRICE has served as Senior Vice President, General
Merchandise Manager, Athletics,Hardgoods, since May 2001.October 2003. He served as Senior Vice
President, General Merchandise Manager, Athletics from May 2001 until October
2003, and as General Merchandise Manager, Athletics from April 1998 until May
2001.
From January 1990 to November 1997, Mr. Rice served as Executive Vice President of Merchandising at Oshman’s Sporting Goods, Inc. where he was responsible for merchandising, marketing, store design and merchandise planning and allocation. He also held various other positions at Oshman’s Sporting Goods, Inc., where he was employed for 21 years.
PaulPAUL C. WagnerWAGNER has served as Senior Vice President, Chief Information
Officer since September 2001. He served as
24
Edward
EDWARD J. WhiteheadWHITEHEAD has served as Senior Vice President, Marketing
since February 2002. From March 2001 until February 2002, Mr. Whitehead served
as President of Eyestorm, Inc., a wholly-owned subsidiary of Eyestorm.com Ltd.,
a company that markets and distributes art media products. From January 2000
until March 2001, Mr. Whitehead served as Director of Marketing and Strategic
Planning for Harrods Ltd. in London. From May 1998 until January 2000, Mr.
Whitehead was Founder and CEO of the Workshop, Inc., an agency specializing in
marketing, advertising and strategic branding.
Prior to this, Mr. Whitehead was Executive Vice President of Merchandising for Mossimo, Inc. from December 1995 until April 1998.
11
EXECUTIVE COMPENSATION
The following table sets forth compensation earned during the fiscal
periods indicated by the person who served as our Chief Executive Officer at the
end of the most recent fiscal year and the other four most highly compensated
executive officers during the most recent fiscal periods indicated.year. We refer to these
individuals as our named executive officers.
Summary
SUMMARY COMPENSATION TABLE
1 Mr. Mang resigned as Chief Executive Officer and Chairman of the Company on
March 1, 2004.
2 Represents $7,500 in financial planning services and $3,087 in matching
contributions under our 401(k) plan.
3 Represents $7,500 in financial planning services and $4,298 in matching
contributions under our 401(k) plan.
4 Represents $7,408 in relocation expenses and $3,453 in financial planning
services.
5 Mr. Holman joined Galyan's as President and Chief Operating Officer in
September 2003, and was named our Chief Executive Officer on March 1, 2004.
6 Represents a payment of $225,000 due under his employment agreement at the
end of fiscal 2003 and $480,000, which is the value of 40,000 shares of
restricted stock that were granted on September 3, 2003 and immediately
vested, based on the closing price of Galyan's common stock on that date of
$12.00.
25
Table
Long-term Compensation Awards | ||||||||||||||||
Annual Compensation | ||||||||||||||||
Fiscal Year | Securities Underlying Options (1) | All Other Compensation | ||||||||||||||
Name and Principal Position | Salary | Bonus | ||||||||||||||
Robert B. Mang | 2002 | $ | 550,000 | $ | 120,313 | 48,000 | $ | 11,798 | (2) | |||||||
Chief Executive Officer and | 2001 | 500,000 | 185,504 | 15,000 | 10,861 | (3) | ||||||||||
Chairman of the Company | 2000 | 155,769 | (4) | 680,000 | (5) | 165,000 | 1,186,664 | (6) | ||||||||
C. David Zoba (7) | 2002 | $ | 325,000 | $ | 140,625 | (8) | 21,000 | $ | 170,282 | (8) | ||||||
Executive Vice President, | 2001 | 257,692 | 174,202 | (9) | 110,000 | 124,863 | (9) | |||||||||
General Counsel and Secretary | ||||||||||||||||
Charles F. Nelson | 2002 | $ | 250,000 | $ | 23,438 | — | $ | 3,144 | (10) | |||||||
Senior Vice President | 2001 | 248,461 | 46,376 | 5,000 | 5,267 | (10) | ||||||||||
Minister of Culture | 2000 | 243,750 | 283,586 | 4,500 | 4,816 | (10) | ||||||||||
Edward J. Whitehead (11) | 2002 | $ | 250,000 | $ | 23,438 | 44,000 | $ | 25,306 | (12) | |||||||
Senior Vice President | ||||||||||||||||
Marketing | ||||||||||||||||
Edward S. Wozniak (13) | 2002 | $ | 243,808 | $ | 26,797 | 27,000 | $ | 128,511 | (14) | |||||||
Senior Vice President | 2001 | 205,769 | 41,738 | 40,000 | 61,598 | (15) | ||||||||||
Chief Financial Officer |
12
Option Grantsrepresents $83,605 in Last Fiscal Year
relocation expenses and $3,125
in financial planning services.
9 Mr. Zoba joined Galyan's in May 2001.
10 Bonus includes a $100,000 payment due under his employment agreement at the
end of fiscal 2003. All Other Compensation represents $5,000 in financial
planning services and $3,043 in matching contributions under our 401(k)
plan.
11 Bonus includes a $100,000 payment due under his employment agreement at the
end of fiscal 2002. All Other Compensation represents $160,926 in
relocation expenses, $5,750 in financial planning services and $3,606 in
matching contributions under our 401(k) plan.
12 Bonus includes a $100,000 payment due under his employment agreement at the
end of fiscal 2001. All Other Compensation represents $120,370 in
relocation expenses, $2,762 in financial planning services and $1,731 in
matching contributions under our 401(k) plan.
13 Mr. Nelson retired as Senior Vice President, Minister of Culture, effective
as of January 31, 2004.
14 Represents our matching contribution under our 401(k) plan.
15 Mr. Wozniak joined Galyan's in February 2001.
16 Represents $3,750 in financial planning services and $3,058 in matching
contributions under our 401(k) plan.
17 Represents $121,452 in relocation expenses, $4,500 in financial planning
services and $2,559 in matching contributions under our 401(k) plan.
18 Represents $59,547 in relocation expenses and $2,051 in financial planning
services.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth options granted during fiscal 20022003 to
each of our named executive officers. Each grant was made under the 1999 stock option plan, and each vests in three equal
installments beginning one year after the date of grant.grant and, except for a grant
of 200,000 options to Mr. Holman approved by the Board in connection with his
hiring and described below under "Equity Compensation Plan Information," each
grant during fiscal 2003 was made under the 1999 stock option plan. The
potential realizable value is calculated assuming that the fair value on the
date of grant of our common stock appreciates at the indicated annual rate
compounded annually for the entire term of the option, and that the option is
exercised and sold on the last day of its term for the appreciated stock price.
The assumed rates of appreciation are mandated by the rules of the SEC and do
not represent our estimate of the future prices or market value of our common
stock.
Option Grants in Last Fiscal Year
Name | Number of securities underlying options granted | Percent of total options granted to employees in fiscal year | Exercise price per share | Fair value on date of grant | Expiration date | Potential realizable value at assumed annual rates of price appreciation for option term | |||||||||||||
5% | 10% | ||||||||||||||||||
Robert B. Mang | 48,000 | 8.0 | % | $ | 20.64 | $ | 20.64 | 05/29/09 | $ | 403,323 | $ | 939,913 | |||||||
C. David Zoba | 21,000 | 3.5 | % | 20.64 | 20.64 | 05/29/09 | 176,454 | 411,212 | |||||||||||
Charles F. Nelson | 0 | ||||||||||||||||||
Edward J. Whitehead | 9,000 | 1.5 | % | 20.64 | 20.64 | 05/29/09 | 75,623 | 176,234 | |||||||||||
35,000 | 5.8 | % | 12.81 | 12.81 | 02/26/09 | 182,523 | 425,357 | ||||||||||||
Edward S. Wozniak | 27,000 | 4.5 | % | 20.64 | 20.64 | 05/29/09 | 226,869 | 528,701 |
Aggregated Option Exercises in Fiscal 2002 and Fiscal Year-End Option Values
OPTION GRANTS IN LAST FISCAL YEAR
Aggregate Year-End Option Table
Number of securities underlying unexercised options at February 1, 2003 | Value of unexercised in-the-money options at February 1, 2003 (1) | ||||||||
Name | Exercisable | Unexercisable | Exercisable | Unexercisable | |||||
Robert B. Mang | 115,000 | 113,000 | $ | 8,400 | $ | 4,200 | |||
C. David Zoba | 36,667 | 94,333 | — | — | |||||
Charles F. Nelson | 33,834 | 4,833 | 2,053 | 210 | |||||
Edward J. Whitehead | — | 44,000 | — | — | |||||
Edward S. Wozniak | 13,335 | 53,665 | — | — |
13
Equity Compensation Plan Information
We currently maintain the following compensation plans under which our equity securities are authorized for issuance:
Eachclosing stock price on January 31, 2004 of these plans has been approved by our shareholders. The following table sets forth, for each$8.81 per share,
none of these plans, the number of shares of our common stock subject to outstanding options, warrants, and rights, the weighted-average exercise price of outstanding options, warrants, and rights, and the number of shares remaining available for future award grants as of February 1, 2003.
Equity Compensation Plan Table
Plan category | Number of shares to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of shares remaining available for future issuance under equity compensation plans (excluding shares reflected in the first column) | ||||||
Equity compensation plans approved by | |||||||||
stockholders | 1,855,834 | (1) | $ | 15.84 | 2,458,315 | (2)(3) | |||
Equity compensation plans not approved by | |||||||||
stockholders | N/A | N/A | N/A | ||||||
Total | 1,855,834 | $ | 15.84 | 2,458,315 |
14
named executive officers had in-the-money options. EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
Employment Contracts
Robert B. Mang
EMPLOYMENT CONTRACTS
THE COMPANY HAS EMPLOYMENT CONTRACTS WITH THREE OF ITS NAMED EXECUTIVE
OFFICERS, WHICH ARE DESCRIBED BELOW.
EDWIN J. HOLMAN
In September 2000,August 2003, we entered into an employment agreement with Mr. Mang,Holman
to be our President and Chief Operating Officer. In March 2004, Mr. Holman
became our Chief Executive Officer. In connection with his agreement to become
our Chief Executive Officer, we granted him 100,000 options to acquire our
common stock under our 1999 stock option plan, and Chairmanwe agreed to grant him,
subject to shareholder approval, 50,000 restricted shares of our common stock
and an additional 100,000 options to acquire our common stock. Otherwise, except
as identified below, the terms of his August 2003 employment agreement to be our
President and Chief Operating Officer continues to apply to his employment as
our Chief Executive Officer.
The term of the Company, for an initial term ofAugust 2003 agreement is three years, with an automatic
day-by-day renewal beginning after the second anniversary, so that there is
always a one year renewals thereafter unlessterm remaining under the agreement until either party notifieswe or Mr.
Holman elect to terminate the other toagreement or until another event triggering
termination occurs. Under the contrary at least 90 days prior to the end of the initial term or a renewal period, as applicable.agreement, Mr. Mang’sHolman's annual base salary was
$550,000 for fiscal 2002, and at least $600,000 for fiscal 2003. Under2003, and will be at least $650,000 for fiscal 2004 and
$700,000 for fiscal 2005. In addition, under the agreement, if we achieve
certain financial objectives, Mr. MangHolman is eligible to receive a target bonus
equal to 60%75% of his base salary. We agreed to increase to his target bonus to
90% of his base salary if we achieve certain financial objectives, and he hasupon naming him our Chief Executive Officer. In addition,
the ability to earn up to 200% of his target bonus can be increased by an uncapped, additional amount if we exceed
our targeted financial objectives by an amount determined by our Board of
Directors. With respect toMr. Holman was paid a guaranteed bonus of $225,000 for fiscal 2002, the Compensation Committee made Mr. Mang eligible for a2003,
and received no separate target bonus of 70%, rather than the 60% he was eligible to receive under the agreement. In March 2003, Mr. Mang received a bonus of $120,313 for fiscal 2002.
2003. Under the agreement, Mr.
Mang exercisedHolman is eligible to receive an annual grant of stock options, subject to a
rightminimum of 50,000 shares per year, pursuant to purchase 70,000 shares of our common1999 stock at $10.00 per share with $300,000 of financing provided by us, all of which he repaid in fiscal 2000. The fair value of our common stock at the time Mr. Mang purchased these shares, and when we granted him these options, was $15.00 per share. We have paid Mr. Mang $295,000 to pay the taxes owed by him as a result of our issuance to him of shares below their fair value. Upon beginning employment with us, Mr. Mang also received 90,000 options to purchase our common stock at a $10.00 exercise price and 75,000 options to purchase our common stock at a $20.00 exercise price. In addition, under the employment agreement, in fiscal 2000 we granted Mr. Mang stock appreciation rights for 41,000 units with respect to the common stock of MVP.com, Inc., a former affiliated party. Since MVP.com ceased operations in January 2001, these SARs have no value.
option plan.
27
Mang’sHolman's employment is terminated by us without cause or by Mr.
MangHolman for good reason, he will be entitled to receive all earned but unpaid
salary and benefits as of the date of termination, anda lump sum payment equal to
his target bonus for the fiscal year in which his employment is terminated.of termination, and, if the termination
occurs after October 31 of the fiscal year of termination, the annual bonus, if
any, for that fiscal year based upon the Company's actual performance and paid
consistent with the administration of the Company's regular annual bonus
program. In addition, he will receive severance pay constituting the continuationcomprised of a lump sum
payment equal to his then current base salary, andcontinued health coverage and a
payment equal to what he would have received under our retirement plans, for the
longer of one year from the date of termination or three years from the date of
his employment agreement.
In the event of such a termination, any unvested
restricted stock will immediately become vested.
In the event of a change in control of the Company, unvested options
and restricted stock previously granted to Mr. MangHolman shall immediately become
vested on the date of such change of control. In addition, and in lieu of the
termination benefits described in the paragraph above, if a change in control
occurs and the Company or its successor terminates Mr. Holman's employment
without cause or Mr. Holman then terminates his employment for good reason
within one year following such change in control, Mr. Holman will receive a lump
sum payment equal to the sum of his annual base salary in effect on the date of
termination and his target bonus for the fiscal year in which the termination
occurs, multiplied by 2.5, plus an amount equal to the excise tax payable by Mr.
Holman under the Internal Revenue Code as a result of excess parachute payments
made to Mr. Holman resulting from the change in control.
Mr. Holman has also agreed to be bound by noncompetitionnon-competition and nonhirenon-hire
provisions that apply until the secondfirst anniversary of termination of his
employment.
In connection with the August 2003 agreement, Galyan's issued Mr.
Holman the following securities on September 3, 2003: (1) a restricted stock
grant of 100,000 shares of the Company's stock, (2) 100,000 options pursuant to
the Company's 1999 stock option plan and (3) 200,000 additional options pursuant
to a separate stock option agreement approved by the Board of Directors. The
grant of restricted stock vests as follows: 40% on September 3, 2003, and 20% on
each of the first, second and third anniversaries of Mr. Holman's commencement
date of employment. In the event Mr. Holman terminates his employment without
cause prior to the first anniversary of his employment, he must forfeit to the
Company an amount equal to the value of the restricted stock based upon the date
of grant. The options to acquire 200,000 shares of our common stock vest in
equal installments over three years, expire seven years after the date of grant
and otherwise have substantially the same as the terms of options issued under
the 1999 stock option plan. On September 3, 2003, the closing price of a share
of Galyan's common stock was $12.00, and the exercise price of the 100,000
shares of common stock issued under the 1999 stock option plan and the 200,000
shares of common stock issued under a separate agreement outside of the plan is
$11.43, which was the closing price of Galyan's common stock on September 2,
2003, Mr. Holman's first day of employment.
C. David Zoba
DAVID ZOBA
In May 2001,October 2003, we entered into ana new employment agreement with Mr.
Zoba, our executive vice president, general counsel and secretary, extending his
agreement for an initial term of threetwo years, with an automatic day-by-day renewal beginning after
the first anniversary, so that there is always a one year renewals thereafter unlessterm remaining under
the agreement until either party notifieswe or Mr. Zoba elect to terminate the other to the contrary at least 90 days prior to the end of the initial termagreement or
a renewal period, as applicable.until another event triggering termination occurs. Mr. Zoba’sZoba's annual base salary
was $325,000$350,000 for fiscal 20022003, and will be $350,000at least $375,000 for fiscal 2003.2004 and
$400,000 for fiscal 2005. Mr. Zoba will receive a bonus of $100,000 per year if
he remains employed by us on the last day of each fiscal year. In addition, underyear (or a pro rata
amount at the end of the term of the agreement, if less than a full year).
28
entitledeligible to receive a target bonus
equal to 40%50% of his base salary if we achieve our targetedcertain financial objectives, and
has the ability to earn up to 200% of his target bonus can be increased by an uncapped, additional amount if we exceed
our targeted financial objectives by an amount determined by our Board of
Directors. In MarchBecause we did not achieve our financial objectives for 2003, Mr.
Zoba received ano target bonus of $140,625 for fiscal 2002, which includes the2003, but did receive $100,000 he received for
remaining employed at the end of the fiscal year.
Under the agreement, Mr. Zoba
exercised his rightis eligible to purchase 30,000 sharesreceive an annual grant of common stock at $19.00 per share for an aggregate purchase price of $570,000. In connection with his exercise, we loaned him $285,000options pursuant to finance the purchase of a portion of those shares and Mr. Zoba paid the remaining $285,000 in cash. Mr. Zoba issued to us a full recourse promissory note for the amount borrowed, which note bears simple interest at 7.5% per year and is secured by his shares of common stock. Mr. Zoba has repaid the note in full. Mr. Zoba also received 110,000 options to purchase our common1999
stock at an exercise price of $19.00 per share.
15
option plan.
If Mr. Zoba’sZoba's employment is terminated by us without cause or by Mr.
Zoba for good reason, he will be entitled to receive all earned but unpaid
salary and benefits as of the date of termination and a lump sum payment equal
to his target bonus for the fiscal year in which his employment is terminated.of termination. In addition, he will
receive severance pay constituting the continuationcomprised of a lump sum payment equal to his then current
base salary, andcontinued health coverage and a payment equal to what he would have
received under our retirement plans, for the longer of one year from the date of
termination or two years from the date of his employment or May 29, 2004.
agreement. In the event
of a change in control of the Company, unvested options previously granted to
Mr. Zoba shall immediately become vested on the date of such change of control.
Mr. Zoba has also agreed in the contract to be bound by noncompetitionnon-competition and nonhirenon-hire
provisions that apply until the later of the second anniversary of termination
of his employment.
Agreement with Joel L. Silverman, our Former President and Chief Operating Officer
employment or three years from the date of the agreement.
AGREEMENT WITH ROBERT B. MANG, OUR FORMER CHIEF EXECUTIVE OFFICER AND CHAIRMAN
We entered into an agreement with Joel L. Silverman,Robert B. Mang, our former PresidentChief
Executive Officer and Chief Operating Officer,Chairman of the Company, formalizing his separation
arrangements with us. Under the agreement, Mr. SilvermanMang resigned from his position
as an officer of Galyan's effective March 1, 2004, and agreed to resign as a
director of Galyan’s effective March 4, 2002.Galyan's no later than May 14, 2004. Under the terms of our
separation agreement with him, Mr. SilvermanMang will remain an employee of Galyan's,
assisting Mr. Holman, our new Chief Executive Officer, with merchandising,
marketing and other transition issues, for a period ending no later than May 31,
2004. During his transitional period of employment, Mr. Mang will receive his
normal base salary at the rate of $550,000$650,000 per year (payable under our normal
payroll arrangements) through October 1, 2003,. In addition, within ten business days after the end of
his transitional period of employment, Mr. Mang will receive a bonus with respectpayment in
the gross amount of $585,000 (subject to reductions for taxes), representing his
target bonus for fiscal 20022004, a severance payment in the gross amount of
$330,000, payable at the time we pay annual bonuses$866,667 (subject to reductions for that year,taxes), and a payment representinglump sum equal to the value of all vested and unvested retirement benefits
whichthat Mr. Mang would have been vested as of Octoberaccrued under Galyan's retirement plans through July 1,
2003, which was approximately $370,000.2005 were he to remain employed through such date. In addition, all unvested
options granted to Mr. Silverman vested immediately upon execution of the agreement,Mang vest on May 31, 2004, and those and all other
outstanding options were made exercisable for a two-year period.until March 31, 2006. We have also
agreed to allow Mr. Silverman,Mang, partially at his expense, to continue his group health
insurance coverage through October 1, 2003.September 30, 2005. Under the agreement, Mr. SilvermanMang
waived all other consideration to which he may have been entitled and released
us from any and all claims related to his employment. He also agreed not to
compete with us or directly or indirectly or to solicit any of our employees for a
two-yearone-year period.
Consulting Agreements
CONSULTING AGREEMENT WITH CHARLES F. NELSON, OUR FORMER SENIOR VICE PRESIDENT,
MINISTER OF CULTURE
In January 2004, we entered into a consulting arrangement with Charles
Nelson, formerly our Senior Vice President, Minister of Culture, under which we
agreed that he would retire effective January 31, 2004, and that Galyan's would
pay him $10,000 per month for twelve months for employee and executive search
services. We have also agreed to pay him a success fee of 25% of the salary and
bonus earned in the first year by any person hired by the Company as a result of
the efforts of Mr. Nelson. Any success fees will be credited against the monthly
retainer. If both Mr. Nelson and Galyan's agree,
29
“Compensation"Compensation Committee Interlocks and Insider Participation”Participation" below
for a description of certainan oral consulting agreementsagreement that we have with Mr. MatthewsStarrett
and the oral consulting agreement that we had with Mr. Starrett.
16
Matthews, which was
terminated in May 2003.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
This section of the proxy statement will not be deemed to be incorporated by reference by any general statement incorporating this proxy statement into any of our filings under the Securities Act of
THIS SECTION OF THE PROXY STATEMENT WILL NOT BE DEEMED TO BE
INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING THIS PROXY
STATEMENT INTO ANY OF OUR FILINGS UNDER THE SECURITIES ACT OF 1933 or the Securities Exchange Act ofOR THE
SECURITIES EXCHANGE ACT OF 1934, except to the extent we specifically incorporate this information by reference, and will not otherwise be deemed “filed” under either such Acts.
EXCEPT TO THE EXTENT WE SPECIFICALLY
INCORPORATE THIS INFORMATION BY REFERENCE, AND WILL NOT OTHERWISE BE DEEMED
"FILED" UNDER EITHER SUCH ACTS.
The Galyan’sGalyan's Compensation Committee of the Board of Directors (the
“Committee”"Committee") is responsible for developing and administering the policies and
practices associated with the total compensation for executives, subject to the
approval of the Board as deemed necessary or appropriate, and making
recommendations to the Board on all elements of compensation of our executive
officers. The Committee also has the authority to administer and make award
grants under the 1999 Stock Option Plan.
Executive Compensation Philosophy
The Committee also has authority to
administer option award grants made to Mr. Holman in September 2003 and March
2004.
EXECUTIVE COMPENSATION PHILOSOPHY
It is the philosophy of the Committee that a significant portion of
each executive’sexecutive's possible compensation be directly linked to Galyan’sGalyan's
performance and appreciation in shareholder value. Thus, a significant portion
of each executive’sexecutive's compensation is “at"at risk.”" The guiding principles behind
total compensation for executive officers are as follows:
Base Salary
30
Committee.Committee, except that the base salaries for Messrs. Holman
and Zoba are set forth in employment agreements we have entered into with each
of them. The Committee strives to set and maintain base salaries at levels
competitive with those paid by other retailers. In setting base salary levels,
the Committee considers, among other factors it may deem relevant in the
circumstances, salaries for comparable positions at comparable retail companies,
using independent survey data of other representative retailers, adjusted for
company size. The Committee also sets base salary levels based on its subjective
assessment of individual performance and future contributions, satisfaction of
Galyan’sGalyan's performance objectives, competitive issues, length of service and
internal equity in light of the executives’executives' relative positions and
responsibilities.
Short-Term Incentive Compensation
SHORT-TERM INCENTIVE COMPENSATION
Each year, the Committee establishes an annual incentive compensation
program that provides for cash awards based upon the achievement of specific
performance objectives established by the Committee based on operating income,
earnings per share or a similar financial performance metric. If Galyan’sGalyan's
achieves the Committee’sCommittee's financial performance objective, each executive officer
will earn a “target”"target" bonus established by the Committee with respect to the
officer. Although the Committee has discretion to determine “target”"target" bonus
levels, each executive’s “target”executive's "target" bonus level generally ranges from 30% to 70%90%
of his or her base salary. The Committee sets a minimum financial performance
standard below which no executive officer will be entitled to any of his or her
“target”"target" bonus, and also establishes whether and the extent to which partial
bonuses will be paid for performance that exceeds the minimum standard but falls
short of the original goal, as well as the extent to which bonuses greater than
the applicable “target”"target" will be paid for performance that exceeds goals. There
are no caps on the maximum level of bonuses. For fiscal 2002, Galyan’s2003, Galyan's financial
performance objectives were based on various specific and confidential operating
income goals. The fiscal 20022003 goals were not entirely achieved, but performance did exceed the established minimum standards.achieved. Accordingly, no fiscal
20022003 bonuses were paid to executives, albeit at less than 100% of the original “target” levels.
17
Long-Term Incentive Compensation
executives.
LONG-TERM INCENTIVE COMPENSATION
The Committee intends to make annual grants of stock options under the
1999 Stock Option Plan to provide long-term equity participation that help to
further align management’smanagement's interests with the interests of Galyan’sGalyan's
shareholders. The Committee believes that option grants promote the continuity
of management and focus performance on long-term strategic and financial goals
and objectives, including improvement in shareholder value. In determining the
number of options to grant to an executive officer, the Committee takes into
consideration the position of the individual, the Committee’sCommittee's subjective
assessment of his or her performance, the individual’sindividual's previous and anticipated
contribution to Galyan’sGalyan's success and grant history, total compensation paid to
the executive, possible dilutive effects of the award, possible future stock
values, and industry practices and trends in general, with no one factor being
accorded any special weight. Each grant typically allows the individual to
acquire shares of our common stock at a price that is not less than the fair
market value of the shares at the close of business on the grant date. The
options typically vest in equal annual installments over a three-year period and
have a maximum term of seven years.
Compensation for the Chief Executive Officer
Base Salary
COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER FOR FISCAL 2003
Robert B. Mang was appointed Chairman of the Company and Chief
Executive Officer effective October 1, 2000.2000, and served in that capacity until
his resignation as an officer on March 1, 2004. Pursuant to the terms of his
employment
31
$550,000 in fiscal 2002 and will receive a base salary of not less than $600,000 in fiscal 2003.
Short-Term Incentive Compensation
In
addition, pursuant to the terms of his separation arrangement, Mr. Mang will
receive various payments described above under the heading "Employment
Agreements and Other Arrangements - Agreement with Robert B. Mang, our Former
Chief Executive Officer and Chairman."
SHORT-TERM INCENTIVE COMPENSATION
For fiscal 2002,2003, Mr. Mang receiveddid not receive an incentive cash award of $120,313 under
the annual incentive compensation program established by the Committee. The award was based upon achievement of the confidential financial performance goals established by the Committee for fiscal 2002 and was paid in the current fiscal year. Mr.
Mang’s “target”Mang's "target" bonus for purposes of the annual incentive compensation plan for
fiscal 20022003 was 70%90% of his base salary, and his bonus for fiscal 2002 reflects partial payment of the “target” bonus.
Long-Term Incentive Compensation
salary.
LONG-TERM INCENTIVE COMPENSATION
For fiscal 2002,2003, Mr. Mang received a stock option grantgrants covering 48,00072,000
shares of Galyan’sGalyan's common stock as part of Galyan’sGalyan's program of annual option
grants. The stock option hasoptions have a three-year vesting period, a maximum term of
seven years, and the exercise price was set at the fair market value of the
underlying stock on the date of grant. Pursuant to the terms of his separation
arrangements with Galyan's, these options and all other unvested options held by
Mr. Mang shall vest on May 31, 2004 and be exercisable until March 31, 2006. The
number of shares subject to such option grant to Mr. Mang was determined after
taking into consideration his position, the Committee’sCommittee's subjective assessment of
his performance and his previous and anticipated contribution to Galyan’sGalyan's
success, his total compensation, possible dilutive effects of the award,
possible future stock values, and industry practices and trends in general with
no one factor being accorded any special weight.
Tax Treatment
TAX TREATMENT
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public corporations for compensation in excess of $1,000,000 paid
for any fiscal year to the corporation’scorporation's chief executive officer or to any of
the four other most highly compensated executive officers as of the end of the
fiscal year. However, the statute exempts qualifying performance-based
compensation from the deduction limit if certain requirements are met. The
Committee currently intends to structure stock option grants as qualifying
performance-based compensation for this purpose. Current base salary and
anticipated bonus levels are not expected to exceed or materially exceed the
Section 162(m) limit.
18
The Board of Directors and Committee endeavor to maximize the
deductibility of compensation under Section 162(m) of the Internal Revenue Code
to the extent practicable while maintaining competitive compensation. Further,
because of ambiguities and uncertainties as to the application and
interpretation of Section 162(m) and the regulations issued thereunder, no
assurance can be given, notwithstanding the Committee’sCommittee's efforts, that
compensation intended by the Committee to satisfy the requirements for
deductibility under Section 162(m) does in fact do so.
|
19
PERFORMANCE MEASUREMENT COMPARISON
COMPARSION
The following graph compares the cumulative total shareholder return on
a $100 investment in our common stock with the cumulative total return of a $100
investment in (a) the Russell 2000 Index and (b) S&P 500 Specialty Retail Index
(a published industry index). The graph is intended to provide a relevant
comparison of total returns for the period from June 27, 2001 (the day our
common stock commenced trading) through March 24, 2003.29, 2004. Because our stock began
trading on June 27, 2001, the information in the graph is provided at fiscal
quarter-end intervals and at March 24, 2003,29, 2004, the record date for our annual
meeting. The total return on the common stock is measured by dividing the
difference between the common stock price at the end and the beginning of the
measurement period by the common stock price at the beginning of the measurement
period. The graph for our Company and each of the indices also assumes the
reinvestment of dividends. Note: We caution that past stock price performance
shown for our common stock is not necessarily indicative of future price
performance.
This performance graph will not be deemed to be incorporated by reference by any general statement incorporating this proxy statement into any of our filings under the Securities Act of
THIS PERFORMANCE GRAPH WILL NOT BE DEEMED TO BE INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING THIS PROXY STATEMENT INTO ANY
OF OUR FILINGS UNDER THE SECURITIES ACT OF 1933 or the Securities Exchange Act ofOR THE SECURITIES EXCHANGE ACT
OF 1934, except to the extent we specifically incorporate this information by reference, and shall not be deemed “soliciting material” or otherwise deemed “filed” under either such Acts.
GALYAN’SEXCEPT TO THE EXTENT WE SPECIFICALLY INCORPORATE THIS INFORMATION BY
REFERENCE, AND SHALL NOT BE DEEMED "SOLICITING MATERIAL" OR OTHERWISE DEEMED
"FILED" UNDER EITHER SUCH ACTS.
GALYAN'S TRADING COMPANY, INC.
Comparison of Cumulative Total ReturnJune
COMPARISON OF CUMULATIVE TOTAL RETURN
JUNE 27, 2001 to March 24, 2003
Total Return to Shareholders(Dividends reinvested monthly)
Base Period 6/27/01 | Periods Ending | ||||||||||||||||
Company / Index | 8/4/01 | 11/3/01 | 2/2/02 | 5/4/02 | 8/3/02 | 11/2/02 | 2/1/03 | 3/24/03 | |||||||||
![]() | 100 | 59.60 | 53.74 | 65.46 | 93.36 | 60.58 | 56.08 | 49.54 | 53.74 | ||||||||
![]() | 100 | 98.41 | 87.80 | 97.64 | 104.55 | 77.07 | 78.81 | 76.77 | 75.90 | ||||||||
![]() | 100 | 104.17 | 87.77 | 107.31 | 106.10 | 72.77 | 78.16 | 66.50 | 72.96 |
20
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Our Compensation Committee consists of Norman S. Matthews, as Chairman,
Frank J. Belatti, Timothy J. Faber, Norman S. Matthews, John M. Roth and Peter Starrett. None of the
members is an employee or was formerly one of our officers or an officer of one
of our subsidiaries. However, Mr. Faber is Vice President Treasury/Mergers and
Acquisitions of Limited Brands, Inc., Messrs. Matthews andMr. Starrett provideprovides consulting services
to Galyan’s,Galyan's, Mr. Matthews provided consulting services until May 2003, when the
arrangement for such services was terminated, and Mr. Roth is Vice President and
Managing Member of FS Capital Partners LLC, which is the general partner of FS
Equity Partners IV, L.P. Certain transactions and relationships between us and
Limited Brands, Messrs. Matthews and Starrett and Freeman Spogli or their
respective affiliates are described below.
Transactions with Freeman Spogli and Limited Brands
TRANSACTIONS WITH FREEMAN SPOGLI AND LIMITED BRANDS
In connection with our 1999 recapitalization, we declared a dividend in
the form of a warrant to Limited Brands to purchase 1,350,000 shares of our
stock with an initial exercise price on September 1, 1999 of $10.00 per share.
Under the terms of the warrant, on the first day of each month from and
including October 1999 to and including September 2000, the exercise price
increased by an amount equal to 31/3%3% of the initial exercise price. On the
first day of each month thereafter, the exercise price increases by an amount
equal to 31/3%3% of the exercise price in effect on the preceding September 1.
This results in an increase of the exercise price at a rate of 40.0% per year.
The warrant became exercisable upon the completion of our initial public
offering in July 2001 and will expire in August 2009.
We are also party to a stockholders agreement with FS Equity Partners IV,
L.P., Limited Brands, Inc., and G Trademark, Inc. and Benchmark Capital Partners IV, L.P. See “Information"Information Regarding
Certain Directorships and Voting Arrangements”Arrangements" above for a description of the
stockholders agreement.
In addition, we are party to a 1999 registration rights agreement granting FS Equity Partners IV, L.P., Limited Brands, Inc. and G Trademark, Inc. rights to require us to register their shares for public resale, pursuant either to a demand made by these shareholders or pursuant to a request to participate in offerings to be made by the Company. Limited Brands is a guarantor of our obligations under our real property leases for eight of our stores: (1) Woodbury, Minnesota store, (2) Minnetonka, Minnesota store, (3) Dublin, Ohio store, (4) Schaumburg, Illinois store, (5) Buford, Georgia store, (6) Atlanta, Georgia store, (7) Castleton, Indiana store, and (8) Gaithersburg, Maryland store. We have agreed to reimburse Limited Brands for any amounts that they may be required to pay under these guarantees. To date, they have made no payments.
We paid
In December 2003, we acquired from an affiliate of Limited Brands
$150,000approximately 37 acres of land that is adjacent to our distribution center in
Plainfield, Indiana for recruitinga purchase price of approximately $2.2 million. The
price was based upon an independent appraisal, with a reduction from the
appraised price to reflect costs savings to Limited Brands associated with its search for a replacement for C. David Zoba, whom we hired from Limited Brands as our executive vice president, general counsel and secretary.
Certain Agreements and Arrangements with Directors
not
having to pay brokerage fees.
CERTAIN AGREEMENTS AND ARRANGEMENTS WITH DIRECTORS
Mr. Starrett, who is a consultant to Freeman Spogli & Co., and Mr. Matthews havehas a verbal
consulting agreementsagreement with us, under which we pay themhim $50,000 and $100,000 per year, respectively, for theirhis
consulting services. Either party can terminate these agreementsthis agreement at any time.
34
soldloaned Mr. Matthews $75,000 in
connection with his purchase from us of 10,000 shares of our common stock, to Mr. Matthews for an aggregate purchase price of $100,000, $75,000 of which we loaned to him to finance the purchase. The fair value of our common stock at the time of this sale as determined by our Board of Directors was $15.00 per share. In fiscal 2002, we paid Mr. Matthews $48,170 to reimburse the taxes owed by him as a result of our issuance to him of shares below their fair value. With respect to the loan of $75,000,and
Mr. Matthews issued to us a full recourse promissory note for the amount
borrowed. The note bearsborrowed, bearing simple interest at 7.5% per annum and is secured by the
additional shares of common stock. Accrued interest is payable in arrears on March 31 of each year commencing March 31, 2001 andMr. Matthews repaid the principal balance of, andborrowed amount
(together with all accrued and unpaid interest on, the note is due and payable on August 15, 2005. As ofinterest) in full in March 31, 2003, the outstanding principal balance plus accrued interest due from2004. Mr. Matthews was $76,386.99.
is a
consultant to Freeman Spogli & Co.
In addition, on May 29, 2002,30, 2003, we granted Mr. Matthews 15,000 options to
purchase our common stock at an exercise price of $20.64$13.66 per share.
None of our executive officers serves on the Compensation Committeecompensation committee or
Boardboard of Directorsdirectors of any other company on which any of the members of our
Compensation Committee or any of our directors is an executive officer.
21
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
This section of the proxy statement will not be deemed to be incorporated by reference by any general statement incorporating this proxy statement into any of our filings under the Securities Act of
THIS SECTION OF THE PROXY STATEMENT WILL NOT BE DEEMED TO BE
INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING THIS PROXY
STATEMENT INTO ANY OF OUR FILINGS UNDER THE SECURITIES ACT OF 1933 or the Securities Exchange Act ofOR THE
SECURITIES EXCHANGE ACT OF 1934, except to the extent we specifically incorporate this information by reference, and will not otherwise be deemed “filed” under either such Acts.
EXCEPT TO THE EXTENT WE SPECIFICALLY
INCORPORATE THIS INFORMATION BY REFERENCE, AND WILL NOT OTHERWISE BE DEEMED
"FILED" UNDER EITHER SUCH ACTS.
Our Audit Committee is comprised of Byron E. Allumbaugh, George R.
Mrkonic, Jr. and Stephanie M. Shern (Chair), although effective as of the Annual Meeting of Shareholders, Ms. Shern is retiring as a director and will no longer serve on the Audit Committee.Michael Goldstein (Chairman). Each of the members of the Audit
Committee is independent as defined under the listing standards of the Nasdaq
National Market,Market. The Board of Directors of the Company has determined that
Michael Goldstein, Chair of the Audit Committee, is an audit committee financial
expert as defined by Item 401(h) of Regulation S-K of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and is independent within the
committeemeaning of Item 7(d)(3)(iv) of Schedule 14A of the Exchange Act. The Committee
operates under a revised written charter adopted by our Board by unanimous written consent on April 15, 2003March 9, 2004
and attached to this proxy statement as AppendixAPPENDIX A. The Audit Committee appoints
our independent accountants.
Galyan’s
Galyan's management is responsible for preparing our financial
statements, internal controls and financial reporting process. Galyan’sGalyan's
independent accountants, Deloitte & Touche LLP, are responsible for performing
an independent audit of our consolidated financial statements in accordance with
generally accepted auditing standards and for issuing a report thereon. The
Audit Committee’sCommittee's responsibility is to monitor and oversee these processes. The
members of the Audit Committee are not professionally engaged in the practice of
auditing or accounting and are not experts in the fields of accounting or
auditing, including in respect of auditor independence. It is not the Audit
Committee’sCommittee's duty or responsibility to conduct auditing or accounting reviews or
procedures. Therefore, the Audit Committee has relied, without independent
verification, on management’smanagement's representation that the financial statements have
been prepared with the integrity and objectivity and in conformity with
generally accepted accounting principles and on the representations of the
independent accountants included in their report on Galyan’sGalyan's consolidated
financial statements. Furthermore, the Audit Committee’sCommittee's considerations and
discussions with management and the independent accountants do not assure that
Galyan’sGalyan's consolidated financial statements are presented in accordance with
generally accepted accounting principles, that the audit of Galyan’sGalyan's
consolidated financial statements has been carried out in accordance with
generally accepted auditing standards, or that the independent accountants are
in fact “independent.”
"independent."
35
firm’sfirm's independence.
Based on the reviews and discussions mentioned above and the report of
the independent accountants to the Audit Committee, and subject to the
limitations on the role and responsibilities of the Audit Committee referred to
above, the Audit Committee, exercising its business judgment, recommended to our
Board that the audited consolidated financial statements be included in our
Annual Report on Form 10-K for the year ended February 1, 2003,January 31, 2004, filed with the
Securities and Exchange Commission.
|
22
Submitted by the Audit Committee Michael Goldstein, Chairman Byron E. Allumbaugh George R. Mrkonic, Jr. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Freeman Spogli, Limited Brands and Certain Directors
TRANSACTIONS WITH FREEMAN SPOGLI, LIMITED BRANDS AND CERTAIN DIRECTORS
See “Compensation"Compensation Committee Interlocks and Insider Participation”Participation" and
“Information"Information Regarding Certain Directorships and Voting Arrangements”Arrangements" above for
descriptions of certain transactions and relationships between us and Freeman
Spogli and Limited Brands or one or more of their respective affiliates, and
certain members of our Board of Directors.
Stock Sales to Executive Officers and Directors Prior to Our Initial Public Offering
STOCK SALES TO EXECUTIVE OFFICERS AND DIRECTORS PRIOR TO OUR INITIAL PUBLIC
OFFERING
In October 1999, several executive officers purchased shares of our common stock. Specifically, Dennis J. Feldmann, Joan M. Hurley, Charles F. Nelson, David M. Pritchett and Lindsay J. Rice purchased 10,000, 15,000, 25,000,
11,000 and 10,000 shares of common stock, respectively, for a purchase price of
$100,000, $150,000, $250,000, $110,000 and $100,000 respectively, and we lent them $40,000, $50,000, $50,000, $50,000 and $50,000,
respectively, to finance the purchase of a portion of these shares. Each person
issued to us a full recourse promissory note for the amount borrowed. Each note
bears simple interest at 7.5% per annum and accrued interest is payable in
arrears on March 31 of each year commencing on March 31, 2000. The principal
balance of, and all accrued and unpaid interest on, each note is due and payable
on October 15, 2004. The notes are secured by shares of common stock owned by
these individuals. In June 2002, Mr. Feldmann repaid the borrowed amount (together with all accrued interest) in full. As of March 31, 2003,2004, after reflecting payments for accrued
interest for the period ending December 31, 2002,2003, the outstanding principal
balance plus accrued interest due from Hurley, Nelson,each of Messrs. Pritchett and Rice was
approximately $50,925, $50,925, $50,925 and $50,925, respectively.
$50,938.
36
borrowed. The note bearsborrowed, bearing simple interest at 7.5% per
year and is secured by his shares of common stock. In February 2003, Mr. Zoba
repaid the borrowed amount (together with all accrued interest) in full.
AGREEMENTS WITH EXECUTIVE OFFICERS
See "Employment Agreements and Other Arrangements" above for a
description of certain agreements we have entered into with certain of named
executive officers.
In addition to those agreements, we entered into an employment
agreement with each of Jeffrey R. Brown, Lindsay J. Rice and Edward J. Brett on
December 12, 2003, December 12, 2003 and January 20, 2004, respectively. Each of
those agreements provides for a term of two years, with an automatic day-by-day
renewal beginning after the first anniversary, so that there is always a one
year term remaining under the agreement. The initial base salary for the
executive under each of the agreements is $265,000, and is to be adjusted under
the Company's normal salary review procedures. Each executive is also eligible
to receive a target bonus equal to 35% of his base salary if we achieve certain
financial objectives. The target bonus can be increased by an uncapped,
additional amount if we exceed our targeted financial objectives by an amount
determined by our Board of Directors. Because we did not achieve our financial
objectives for 2003, none of the executives received a target bonus for fiscal
2003. Each executive is also eligible under his agreement to receive an annual
grant of stock options pursuant to our 1999 Stock Option Plan. If the executive
is terminated by us without cause or by the executive for good reason, he will
be entitled to receive all earned but unpaid salary and benefits as of the date
of termination and the annual bonus, if any, for that fiscal year based upon the
Company's actual performance and paid consistent with the administration of the
Company's regular annual bonus program. In addition, he will receive severance
pay constituting the continuation of his then current base salary and health
coverage and a payment equal to what he would have received under our retirement
plans for the longer of one year from the date of termination of his employment
or two years from the date of the agreement. In the event of a change in control
of the Company, unvested options previously granted to the executive will
immediately become vested on the date of such change of control. Each executive
also agreed to be bound by non-competition and non-hire provisions that apply
until the first anniversary of termination of his employment.
In June 2003, we entered into a separation agreement with Joan M.
Hurley, formerly our Senior Vice President, Communications and Community
Relations, under which we agreed to pay Ms. Hurley her annual base salary of
$160,000 per year during a one-year period, with potential reduction for income
earned by her from third parties, and some excess benefits costs, in exchange
for a release from Ms. Hurley of any potential claims and an agreement by her
not to compete with us or solicit for hire any of our employees during the one
year period.
SECTION 16(a)16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act and SEC regulations require our
directors, certain officers and persons who own more than 10% of a registered
class of our equity securities to file reports of ownership and changes in
ownership with the SEC and NASDAQ. These persons are required by SEC regulation
to furnish us with copies of all Section 16(a) forms they file. Based solely on
our review of the copies of such reports that we received, and on written
representations from certain reporting persons, we believe that, all Section 16(a)other than a
late Form 4 filing requirements applicable toby each of Messrs. Allumbaugh, Belatti, Mang and Mrkonic, our
directors, officers and greater than 10% beneficial owners were complied with all
applicable Section 16(a) filing requirements during 2002 except as follows. In September 2002, we granted stock options to each of our non-employee directors. Messrs. Allumbaugh, Belatti, and Mrkonic and Ms. Shern each filed a single late Form 4 to report their receipt of these options. In addition, each of Messrs. Feldmann and Wagner filed a single late Form 4 to report one discretionary transaction under our 401(k) plan.
fiscal 2003.
37
Our Audit Committee of the Board of Directors has appointed Deloitte &
Touche LLP as our independent public accountants for fiscal year 2003.2004. Deloitte
& Touche LLP has served as our independent public accountants since 1999.
Services provided to us by Deloitte & Touche LLP in fiscal 20022003 included the
audit of our consolidated financial statements for the year ended February 1, 2003,January 31,
2004, limited reviews of quarterly reports, services related to filings with the
Securities and Exchange Commission, including relating to our initial public offering, and consultations on various tax matters.
We expect representatives of Deloitte & Touche LLP to be at the Annual Meeting and to be available to respond to appropriate questions from shareholders. We will give the Deloitte & Touche LLP representatives an opportunity to make a statement if they desire.
23
FEES PAID TO INDEPENDENT AUDITORS
AUDIT FEES. The following table sets forth theaggregate fees billed to usfor audit services rendered by
Deloitte & Touche LLP in 2003 and 2002 totaled approximately $270,000
and $232,000, respectively. Services rendered in this category
consisted of:
o audits of the consolidated financial statements;
o reviews of the consolidated financial statements included in the
Company's Quarterly Reports on Form 10-Q;
o professional services rendered in connection with a consent included
in Form S-8 filing for hiring of President and Chief Operating
Officer;
o professional services rendered in connection with a consent included
in Form S-8 filing for establishment of an employee stock purchase
plan; and
o services associated with periodic reports and other documents filed
with the Securities and Exchange Commission.
AUDIT-RELATED FEES. The aggregate fees billed in 2003 and 2002 for
assurance and related services by Deloitte & Touche LLP that are
reasonably related to the performance of the audit or review of the
Company's financial statements totaled approximately $147,000 and
$14,000, respectively. Services rendered in this category consisted
primarily of:
o internal control reviews;
o Section 404 readiness consultation; and
o financial statement audits of employee benefit plans.
TAX FEES. The aggregate fees billed in 2003 and 2002 for professional
services rendered by Deloitte & Touche LLP for the fiscal year ended February 1, 2003:
Audit Fees | $ | 200,000 |
Financial Information Systems Design and Implementation Fees | $ | 0 |
All Other Fees | $ | 183,000 |
The amounts shown above include out-of-pocket expenses incurred by Deloittetax compliance, tax
advice and Touche LLPtax planning totaled approximately $113,000 and $138,000,
respectively. Services rendered in connection with the provision of such services. The amount shown for “Audit Fees” includes fees relating to thethis category consisted primarily
of:
38
of our financial statements for the year ended February 1, 2003 and also includes fees relating to quarterly reviews of financial statements, including the Forms 10-Q for the three month periods ended May 4, 2002, August 3, 2002 and November 2, 2002. The amount shown for “All Other Fees” also includes fees relating to
purposes of Internal Revenue Service regulations related to
uniform capitalization costs of inventory.
The Audit Committee approves all audit-related and non-audit related
services, and does not delegate these responsibilities except that pre-approval
of non-audit services may be delegated to a single member of the Audit
Committee. In fiscal 2003, the Audit Committee pre-approved Deloitte and Touche
LLP's provision of all non-audit services, and determined that Deloitte and
Touche LLP’sLLP's provision of the non-audit services generating “All Other Fees” is compatible with maintaining
Deloitte and Touche LLP’sLLP's independence.
OTHER MATTERS
The Board of Directors is not aware of any other matters to be presented at the Annual Meeting. If other matters properly come before the Annual Meeting, the proxies will be voted in accordance with the judgment of the persons voting.
|
BY ORDER OF THE BOARD OF DIRECTORS
/S/ C. DAVID ZOBA
C. David Zoba
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
Plainfield, Indiana
Dated: April 25, 2003
24
APPENDIX A—GALYAN’SA
GALYAN'S TRADING COMPANY, INC.
AUDIT COMMITTEE CHARTER
A. Name
NAME There shall be a committee of the Board which shall be called the Audit Committee.
B. Purpose
PURPOSE
The Audit Committee shall be directly responsible for the appointment,
compensation and oversight over the work of the Company’sCompany's public accountants.
The Audit Committee shall monitor (1) the integrity of the financial
statements of the Company and of the Company’sCompany's systems of internal accounting
and financial controls, (2) the Company’sCompany's compliance with legal and regulatory
requirements, (3) the public accountants’accountants' qualifications and independence, (4)
the performance of the Company’sCompany's public accountants and (5) the establishment
and performance of the Company’sCompany's internal audit functions.
The Audit Committee shall prepare the report required by the rules of
the Securities and Exchange Commission to be included in the Company’sCompany's annual
proxy statement. The Audit Committee Charter shall be included as an appendix to
the Company’sCompany's proxy statement at least once every three years.
C. Committee Membership
COMMITTEE MEMBERSHIP
The Audit Committee shall consist of no fewer than three members. Each
member of the Audit Committee shall satisfy the independence, experience and
financial expertise requirements of the NASDAQ and Section 10A of the Securities
Exchange Act of 1934, as amended by the Sarbanes-Oxley Act of 2002, and the
rules promulgated thereunder. Director’sDirector's fees are the only compensation that an
Audit Committee member may receive from the Company.
The Board shall appoint the members of the Audit Committee annually, considering the recommendation of the Nominating and Corporate Governance Committee, and further considering the views of the Chairman of the Board and the Chief Executive Officer, as appropriate. The members of the Audit Committee shall serve until their successors are appointed and qualify, and shall designate the Chairperson of the Audit Committee. The Board shall have the power at any time to change the membership of the Audit Committee and to fill vacancies in it, subject to such new member(s) satisfying the independence, experience and financial expertise requirements referred to above. Except as expressly provided in this Charter or the by-laws of the Company or the Corporate Governance Guidelines of the Company, or as otherwise provided by law or the rules of the NASDAQ, the Audit Committee shall fix its own rules of procedure.
A-1
Committee Authority and Responsibilities
COMMITTEE AUTHORITY AND RESPONSIBILITIES The Audit Committee shall have the sole authority to appoint or replace the public accountants and shall approve all audit engagement fees and terms and all non-audit engagements with the public accountants. The Audit Committee shall consult with management but shall not delegate these responsibilities, except that pre-approvals of non-audit services may be delegated to a single member of the Audit Committee. In its capacity as a committee of the Board, the Audit Committee shall be directly responsible for the oversight of the work of the public accounting firm (including resolution of disagreements between management and the public accounting firm regarding financial reporting) for the purpose of preparing or issuing an audit report or related work, and the public accounting firm shall report directly to the Audit Committee.
The Audit Committee shall have the authority, to the extent it deems
necessary or appropriate, to retain special legal, accounting or other
consultants to advise the committee and carry out its duties, and to conduct or
authorize investigations into any matters within its scope of responsibilities.
The Audit Committee shall meet periodically with management, the internal
auditors and the public accountants in separate executive sessions in
furtherance of its purposes. The Audit Committee may request any officer or
employee of the Company or the Company’s
A-1
Company's outside counsel or public accountants to attend a meeting of the Audit Committee or to meet with any members of, or consultants to, the Audit Committee.
The Audit Committee shall make regular reports to the Board. The Audit
Committee shall review and reassess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval. The Audit Committee
shall annually review the Audit Committee’sCommittee's own performance.
In performing its functions, the Audit Committee shall undertake those tasks and responsibilities that, in its judgment, would most effectively contribute and implement the purposes of the Audit Committee. The following functions are some of the common recurring activities of the Audit Committee in carrying out its oversight responsibility:
A-2
Limitations of Audit Committee’s Roles
E. LIMITATIONS OF AUDIT COMMITTEE'S ROLES
While the Audit Committee has the responsibilities and powers set forth
in its Charter, it is not the duty of the Audit Committee to prepare financial
statements, plan or conduct audits or to determine that the Company’sCompany's financial
statements and disclosures are complete and accurate and are in accordance with
generally accepted accounting principles and applicable rules and regulations.
These are the responsibilities of management and the registered public
accountants.
A-3
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Galyan’s Trading Company or the Corporate Governance Guidelines
of the Company, the Nominating & Governance Committee shall fix its own rules of
procedure.
D. COMMITTEE AUTHORITY AND RESPONSIBILITIES
o The Nominating & Governance Committee shall develop qualification
criteria for Board members, and actively seek, interview and screen
individuals qualified to become Board members for recommendation to
the Board in accordance with the Corporate Governance Guidelines.
The Nominating & Governance Committee shall take into account the
obligations of the Company under the Stockholders Agreement dated as
of August 31, 1999, as amended, (the "Stockholders Agreement"),
among FS Equity Partners IV, L.P., G Trademark, Inc.2437 East Main StreetPlainfield, Indiana 46168
Dear Shareholder:
, The Limited,
Inc. and the Company.
o The Nominating & Governance Committee shall have the sole authority
to retain and terminate any search firm to be used to identify
director candidates and shall have sole authority to approve the
search firm's fees and other retention terms. The Nominating &
Governance Committee shall also have authority to obtain advice and
assistance from internal or external legal, accounting or other
advisors.
B-1
cordially invitedexpected to attenduse your work time for the Annual Meetingbenefit of Shareholdersthe Company.
Our premises, equipment, documents, data, software, supplies, and support
services are furnished to you to further the Company's business and interests.
Inventions, designs, and innovations that you conceive or devise are assets of
Galyan’sthe Company when they (1) arise out of or are suggested by the Company's
confidential information or trade secrets or any work you performed for the
Company, or (2) result from your use of the Company's time, facilities, or
assets. You are expected to take due care in safeguarding the Company's tangible
and intangible assets against loss or unauthorized use. Misuse of your Associate
discount privileges is also a violation of this policy.
C-1
which willan Indiana corporation
("Company"), and Edwin J. Holman ("Optionee").
R E C I T A L S
A. Optionee is employed by the Company pursuant to an Amended
Employment Agreement dated August 29, 2003 ("Employment Agreement").
B. Company has determined to grant Optionee the right to purchase
shares of common stock of the Company pursuant to the terms of this Agreement.
C. The Options (as hereinafter defined) granted pursuant to this
Agreement are not granted pursuant to any plan and shall be heldsubject to approval
by Company's shareholders at The Westin Hotel, 50 South Capitol Avenue, Indianapolis, Indiana 46204, on Thursday,Company's next annual meeting scheduled for May 15, 2003,21,
2004 (the "Annual Meeting"). Nevertheless, except as provided herein, such
Options shall be subject to the same terms and conditions as if they had been
granted pursuant to the Galyan's Trading Company, Inc. 1999 Stock Option Plan,
as amended ("Plan").
A G R E E M E N T
NOW, THEREFORE, in consideration of the covenants hereinafter set
forth, the parties agree as follows:
1. OPTIONS; NUMBER OF SHARES.
(a) Subject only to approval by Company's shareholders at 9:00 a.m. local time.
At the Annual
Meeting, holdersCompany hereby grants to Optionee the right to purchase (each an
"Option" and collectively, the "Options") up to 100,000 shares of common stock,
will vote uponno par value, of the election of twelve directors. The attached proxy statement contains information about this and other matters pertainingCompany ("Common Stock" or "Shares") at a per share price
("Purchase Price") equal to the Annual Meeting.
Whetherclosing price of Common Stock on the date hereof
($8.74).
(b) Although the Options are not issued pursuant to the Plan, the
Options and the right to purchase all or any portion of the Shares are subject
to the terms and conditions stated in this Agreement and in the Plan, as if such
Options had been granted pursuant to the Plan. Upon exercise of an Option and
payment of the Purchase Price, Optionee shall become a shareholder of the
Company, with all rights and privileges of a shareholder of the Company in
respect of any Shares issuable upon such exercise. It is intended that the
Options will not you planqualify for treatment as an incentive stock option under
Section 422 of the Internal Revenue Code of 1986, as amended ("Code").
2. EXERCISE CRITERIA.
(a) Unless vesting of the Options is accelerated pursuant to attend, you can ensureSubsection
(b), one-third of the Options shall become vested on each of the first three
anniversaries of the date hereof, provided Optionee is employed by Company on
such anniversary date.
(b) Upon a Change in Control (as defined in Section 7 of the Employment
Agreement), all outstanding Options shall become 100% vested.
D-1
your shares are representednumber of Shares which could
have been exercised under the Options had such Options been exercised by
Optionee on the date of such termination (for a termination other than Cause)
and only for the limited period of time set forth in Section 4.
6. DEATH OF OPTIONEE: NO ASSIGNMENT. The rights of Optionee under this Agreement
may not be assigned or transferred except by will, by the laws of descent or
distribution, and may be exercised during the lifetime of Optionee only by such
Optionee; provided, however, that in the event of disability (within the meaning
of Section 22(e)(3) of the Code) of Optionee, Optionee's designee or legal
representative may exercise the Options on behalf of Optionee (provided the
Options would have been exercisable by Optionee) until the right to exercise the
Options otherwise expires. Any attempt to sell, pledge, assign, hypothecate,
transfer, or otherwise dispose of the Options in contravention of this Agreement
or the Plan shall be void. If Optionee should die while Optionee is engaged in
an employment relationship with the Company or within 90 days after termination
of such relationship, and provided Optionee's rights hereunder shall have
vested, in whole or in part, pursuant to Section 2 hereof, Optionee's designee,
legal representative, or legatee, the successor trustee of Optionee's inter
vivos trust or the person who acquired the right to exercise the Options by
reason of the death of Optionee (individually, a "Successor") shall succeed to
Optionee's rights under this Agreement. After the death of Optionee, only a
Successor may exercise the Options.
D-2
meeting by promptly votingtime.
8. CONTINUANCE OF EMPLOYMENT REQUIRED; NO EMPLOYMENT COMMITMENT. The vesting
schedule requires continued employment through each applicable vesting date as a
condition to the vesting of the applicable installment of the Options and submitting your proxy by Internet, by telephone,the
rights and benefits under this Agreement. Partial employment, even if
substantial, during any vesting period will not entitle Optionee to any
proportionate vesting or by completing, executingavoid or mitigate a termination of rights and returningbenefits
upon or following a termination of employment as provided in Section 3 above or
under the enclosed proxy card.
I hope you will be ablePlan.
9. NO RIGHTS AS A STOCKHOLDER. Neither Optionee nor any other person entitled to
attendexercise any Option shall have any of the Annual Meeting and look forwardrights or privileges of a stockholder
of the Company as to seeing you on May 15, 2003.
|
April 25, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GALYAN’S TRADING COMPANY, INC.
ANNUAL MEETING OF SHAREHOLDERSThursday, May 15, 2003
The undersigned hereby appoints C. David Zoba and Edward S. Wozniak, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of theany shares of Common Stock until the issuance and delivery
to him or her of Galyan’sa certificate evidencing the shares registered in his or her
name. No adjustment will be made for dividends or other rights as to a
stockholder for which a record date is prior to such date of delivery.
10. THE PLAN. The Options and all rights of Optionee thereunder and/or hereunder
are subject to, and Optionee agrees to be bound by, all of the terms and
conditions of the Plan, which are incorporated herein by this reference, and
apply to the same extent as if the Options had been issued pursuant to the Plan;
provided, however, the limitation in Section 5(b) of the Plan on the number of
options that may be granted in any calendar year to an individual shall not
apply. Unless otherwise expressly provided in these terms and conditions,
provisions of the Plan that confer discretionary authority on the Board or the
Committee do not (and shall not be deemed to) create any additional rights in
Optionee not expressly set forth in this Agreement or in a written amendment
hereto signed by the Company. If there is
D-3
(“Galyan’s”) thatOne Galyans Parkway
Plainfield, IN 46168
Attn: General Counsel
Telecopy: (317) 532-0269
With a copy to:
Norman S. Matthews
650 Madison Ave., 23rd Floor
New York, NY 10022
(c) AMENDMENTS. This Agreement may be amended only by a written
agreement executed by both of the undersignedparties hereto. The Company may, however,
unilaterally waive any provision hereof in writing to the extent such waiver
does not adversely affect the interests of Optionee hereunder, but no such
waiver shall operate as or be construed to be a subsequent waiver of the same
provision or a waiver of any other provision hereof.
(d) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana without regard to conflict of
law principles thereunder.
D-4
entitledentered into between Galyan's
Trading Company, Inc., an Indiana corporation ("Company"), and Edwin J. Holman
("Employee"), effective as of March 1, 2004.
BACKGROUND
A. Company and Employee are parties to votean Amended Employment Agreement,
dated August 29, 2003 ("Employment Agreement").
B. Company desires to grant Employee 50,000 shares of unregistered
common stock of Company, effective as of the date hereof, subject to the
conditions set forth in this 2004 Restricted Stock Agreement and subject to
approval by Company's shareholders at Company's next annual meeting scheduled
for May 21, 2004 (the "Annual Meeting").
In consideration of the premises, Company and Employee agree as
follows:
AGREEMENT
1. Subject only to approval by Company's shareholders at the Annual
Meeting, Company grants Employee 50,000 shares of Shareholdersunregistered common stock of
Company, effective as of March 1, 2004, which shares ("2004 Restricted Shares")
shall be subject to the restrictions specified in this 2004 Restricted Stock
Agreement. Company agrees to endeavor to register the 2004 Restricted Shares
within a reasonable time after the grant date specified in the preceding
sentence.
2. Until such time as the 2004 Restricted Shares become vested,
Employee shall not have any right to sell, transfer, pledge, hypothecate, or
otherwise dispose of the 2004 Restricted Shares. Employee represents and
warrants to Company that he shall not sell, transfer, pledge, hypothecate, or
otherwise dispose of the 2004 Restricted Shares in violation of applicable
securities laws or the provisions of this 2004 Restricted Stock Agreement.
Except as expressly provided in this 2004 Restricted Stock Agreement, all
non-vested 2004 Restricted Shares shall be forfeited upon Employee's termination
of employment.
3. The 2004 Restricted Share shall vest as follows:
(a) Unless vesting of the 2004 Restricted Shares is accelerated
pursuant to Subsections (b) or (c) below, one-third of the 2004
Restricted Shares shall become vested on each of the first three
anniversaries of the date hereof, provided Employee is employed on such
anniversary date.
(b) If Employee's employment terminates under the circumstances
covered by Section 5(b) or (c) of the Employment Agreement, all 2004
Restricted Shares granted to Employee shall become fully vested (to the
extent not already vested) upon Employee's termination of employment.
(c) If Employee's employment terminates pursuant to Section 4(c) or
4(d) of the Employment Agreement, all 2004 Restricted Shares granted to
Employee shall become fully vested (to the extent not already vested)
upon Employee's termination of employment.
E-1
heldpaid to
the Company upon the exercise of an Award.
(i) "Fair Market Value" means, with respect to a Share on any date,
(i) if the Shares are listed or admitted to trade on a national
securities exchange, the closing price of a Share on the Composite
Tape, as published in the Western Edition of The Wall Street Journal,
of the principal national securities exchange on which the Shares are
listed or admitted to trade on such date, or, if there is no trading of
the Shares on such date (or if the market has not closed at 9:00 a.m. localthe
applicable time), then the closing price of a Share as quoted on such
Composite Tape on the next preceding date on which there was trading in
Shares; (ii) if the Shares are not listed or admitted to trade on a
national securities exchange, the last price for a Share on such date,
as furnished by the National Association of Securities Dealers, Inc.
("NASD") through the NASDAQ National Market Reporting System or a
similar organization, if the NASD is no longer reporting such
information; (iii) if the Shares are not listed or admitted to trade on
a national securities exchange and are not reported on the National
Market Reporting System, the mean between the bid and asked price for a
Share on such date, as furnished by the NASD or a similar organization;
or (iv) if the Shares are not listed or admitted to trade on a national
securities exchange, are not reported on the National Market Reporting
System, and if bid and asked prices for the Shares are not furnished by
the NASD or a similar organization, the value as established by the
Committee at such time on Thursday, May 15, 2003,for purposes of the Plan.
(j) "Incentive Stock Option" means a stock option that satisfies the
requirements of Code Section 422.
(k) "Non-Qualified Stock Option" means a stock option that does not
satisfy the requirements of Code Section 422.
(l) "Option" means an Incentive Stock Option or a Non-Qualified
Stock Option granted pursuant to the Plan.
(m) "Participant" means any person to whom an Award has been granted
under the Plan, provided, however, a Participant shall cease to be such
at such time as all Awards granted to him under the Plan have been
exercised and/or forfeited.
(n) "Plan" means the Galyan's Trading Company, Inc. 1999 Stock
Option Plan, as set out in this document, as amended from time to time.
(o) "Restricted Stock" means an Award of Shares that, at the time of
grant, are nontransferable and are subject to a substantial risk of
forfeiture.
(p) "Rule 16b-3" means Rule 16b-3 under the Securities Exchange Act
of 1934, as amended.
(q) "Share" means a share of the Company's no-par value common
stock.
F-2
Westin Hotel, 50 South Capitol Avenue, Indianapolis, Indiana 46204,following rules shall apply in
construing the Plan and any adjournments or postponements thereof.
If shares of Galyan’s Common Stock are held forAward Agreement:
(a) This Plan, the account of the undersigned under the Galyan’s SavingsAwards, all documents evidencing Awards and Retirement Plan, then the undersigned hereby directs the trustee to vote all
shares of Galyan’s Common Stock in the undersigned’s accountother related documents shall be governed by, and construed in
accordance with, the instructions givenlaws of the State of Indiana without regard to
conflicts of law principles.
(b) If a court of competent jurisdiction holds any provision invalid
and unenforceable, the remaining pro visions of the Plan shall continue
in effect, provided that the essential economic terms of the Plan and
any Award can still be enforced.
(c) Captions and headings are used solely as a convenience to
facilitate reference and shall not be deemed in any way material or
relevant to the construction of the Plan or any provision thereof.
(d) Reference to any provision of the Code or other law shall be
deemed to include a reference to the successor of such provision.
(e) The Plan and the Awards are intended to comply with and shall be
construed to effect compliance with, the exemptions under Rule 16b-3,
in the case of Participants who are subject to Section 16 of the
Securities Exchange Act of 1934; provided, however, the Company shall
have no liability to any Participant for Section 16 consequences of an
Award.
(f) It is intended that Awards granted with an Exercise Price not
less than Fair Market Value on the date of grant shall qualify as
performance-based compensation or otherwise be exempt from
deductibility limitations under Code Section 162(m), and the Plan and
the Awards shall be construed accordingly.
ARTICLE III
ADMINISTRATION
SECTION 3.1. COMMITTEE. Except as otherwise provided herein, the Plan
shall be administered by the Board or, at the Annual MeetingBoard's option, by a compensation
committee thereof to which the Board has duly delegated the administration of
the Plan. The Committee shall consist solely of two or more non-employee
directors (within the meaning of Rule 16b-3) who are "outside directors" for
purposes of Code Section 162(m) and the regulations thereunder. Any action of
the Committee with respect to administration of the Plan shall be taken by a
majority vote or written consent of its members.
SECTION 3.2. POWERS OF COMMITTEE. Subject to the express provisions of
the Plan and any express limitations on its delegated authority, the Committee
is authorized and empowered to administer the Plan and to (i) designate those
person who are Participants; (ii) grant Awards; (iii) determine effective date
of each Award, the number of Shares subject to the Award, and the other terms
and conditions of the Award, which terms and conditions need not be same for
each Award; (iv) interpret the Plan; (v) determine the Fair Market Value of the
Shares; (vi) accelerate the time during which an Award may be exercised, either
in accordance with Section 6.8 or otherwise, in each case notwithstanding the
provisions of the Award Agreement stating the time during which the Award may be
exercised; (vii) prescribe, amend, and rescind rules relating to the Plan;
F-3
adjournmentsother requirements set forth herein (including, without
limitation, the tax withholding requirements of Article VII) or postponementsin the
applicable Award Agreements. Any Shares delivered by the Participant in
connection with the exercise of an Award must have been owned by the
Participant for at least six months as of the date of delivery. Shares
used to satisfy the Exercise Price of an Award shall be valued at their
Fair Market Value on the date of exercise.
F-6
matters properly comingapplicable provisions of this Plan or with any Award Agreement or if
the Participant, whether or not he or she is currently employed by the
Company, engages in any of the following activities without the prior
written consent of the Company:
(1) Directly or indirectly renders services to or for an
organization, or engages in a business, that is, in the
judgment of the Committee, in competition with the
Company.
(2) Discloses to anyone outside of the Company, or uses for
any purpose other than the Company's business, any
confidential or proprietary information or material
relating to the Company, whether acquired by the
Participant during or after employment with the Company.
F-8
Annual Meeting,effective date of the Extraordinary Event
("Effective Date"), to exercise on or before the Effective Date, in
whole or in part, any unexpired Award issued to the Participant, to the
extent that the Award is vested and exercisable as of the Effective
Date.
SECTION 6.6. RIGHTS AS A SHAREHOLDER. Unless otherwise provided by the
Board of Directors or the Committee, a Participant shall have rights as a
shareholder with respect to Shares covered by an Award, including voting rights
or rights to dividends, only upon the date of issuance of a certificate to him
and, if payment is required, only after payment if full has been made for such
Shares.
SECTION 6.7. LIMITS ON EXERCISE AND TRANSFER.
(a) Except as expressly provided in (or pursuant to) Subsection (b)
by applicable law or by the Award Agreement, as the same may be
amended:
(1) all Awards are non-transferable and shall not be subject
in any manner to sale, transfer, anticipation,
alienation, assignment, pledge, encumbrance, or charge;
(2) Awards must be exercised only by the Participant; and
(3) amounts payable or shares issuable pursuant to an Award
must be delivered only to (or for the account of) the
Participant.
In addition, the Shares shall be subject to the restrictions imposed in
the applicable Award Agreement.
(b) The exercise and transfer restrictions in Subsection (a) shall not
apply to:
(1) transfers to the Company;
(2) the designation of a beneficiary to receive benefits if
the Participant dies or, if the Participant has died,
transfers to or exercises by the Participant's
beneficiary, or, in the absence of a validly designated
beneficiary, transfers by will or the laws of descent
and distribution; or
F-9
mattersopinion of counsel for the Company, be necessary or advisable in
connection therewith. In addition, any securities delivered under the Plan may
be subject to any special restrictions that the Committee may require to
preserve a pooling of interests under generally accepted accounting principles.
A person acquiring any securities under the Plan shall, if requested by the
Company, provide such assurances and representations to the Company as the
Committee may deem necessary or desirable to assure compliance with all
applicable legal and accounting requirements.
SECTION 8.2. COMPLIANCE WITH SECURITIES LAWS. No Participant shall
sell, pledge, or otherwise transfer Shares acquired pursuant to an Award or any
interest in such Shares except in accordance with the express terms of the Plan
and the applicable Award Agreement. Any attempted transfer in violation of this
Section shall be void and of no effect. Without in any way limiting the
provisions set forth onabove, no Participant shall make any disposition of all or
any portion of Shares acquired or to be acquired pursuant to an Award, except in
compliance with all applicable federal and state securities laws.
Notwithstanding anything else herein to the reverse side.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” EACHcontrary, the Company has no
obligation to register the Shares or file any registration statement under
either federal or state securities laws.
ARTICLE IX
EFFECTIVENESS AND TERMINATION OF THE NOMINEES FOR DIRECTOR. THIS PROXY ALSO GRANTS TO THE PROXYHOLDERS THE DISCRETION TO VOTE THE PROXIESPLAN
The Plan was originally effective on October 15, 1999, and this
restatement of the Plan is effective May 21, 2004. The Plan shall terminate at
the close of business on October 14, 2009, the tenth anniversary of its
effective date; provided, however, the Board may, in its sole discretion,
terminate the Plan at any prior time. Subject to Section 6.5 and 6.8, no such
termination shall in any way affect any Award then outstanding or the
Committee's authority hereunder with respect to such Award.
ARTICLE X
AMENDMENT OF PLAN
Subject to Article VI, the Committee may make such amendments to the
Plan and/or an Award Agreement as it shall deem advisable; provided, however,
except as permitted by Article VI, no amendment shall materially adversely
affect any Award then outstanding without the written consent of the affected
Participant. Adjustments contemplated by Section 5.5 shall not be deemed to be
amendments for purposes of the foregoing. Shareholder approval for any amendment
shall be required only to the extent required under applicable law, including
Code Section 162(m) and Code Section 422 and other provisions of the Code
applicable to incentive stock options, or to the extent deemed necessary or
advisable by the Board.
F-11
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE