fl_def14a.htm
SCHEDULE 14A
INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment
No. _______)
Filed by the
Registrant x
Filed by a Party
other than the Registrant o
Check the
appropriate box:
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Preliminary
Proxy Statement
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¨
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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¨
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Definitive
Additional Materials
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¨
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Soliciting
Material Pursuant to § 240.14a-12
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The Finish Line,
Inc.
(Name of
Registrant as Specified in Its Charter)
(Name of
Person(s) Filing Proxy Statement if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
x
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No
fee required.
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¨
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1)
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Title
of each class of securities to which transaction
applies:
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2)
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Aggregate
number of securities to which transaction applies:
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3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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4)
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Proposed
maximum aggregate value of transaction:
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5)
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Total
fee paid:
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¨
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Fee
paid previously with preliminary materials.
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¨
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement No.:
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3)
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Filing
Party:
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4)
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Date
Filed:
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June 23,
2009
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Dear
Shareholder:
You are
cordially invited to attend the 2009 Annual Meeting of Shareholders of The
Finish Line, Inc., on Thursday, July 23, 2009, at 9:00 a.m. EDT, to be held at
The Finish Line, Inc. Corporate Office, 3308 N. Mitthoeffer Road, Indianapolis,
Indiana 46235. Members of your Board of Directors and management again look
forward to greeting those shareholders who are able to attend.
The
accompanying Notice and Proxy Statement describe the matters to be acted upon at
the meeting.
It is
important that your shares be represented and voted at the meeting. Whether or
not you plan to attend, please sign, date and mail the enclosed proxy card at
your earliest convenience. If you attend the meeting, you may withdraw your
proxy and vote in person.
Your
interest and participation in the affairs of the Company are greatly
appreciated.
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Respectfully,
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Glenn
Lyon,
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Chief
Executive Officer
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The
Finish Line, Inc.
3308
N. Mitthoeffer Road
Indianapolis,
Indiana 46235
Notice
of Annual Meeting of Shareholders
to
be held July 23, 2009
TO THE
SHAREHOLDERS OF THE FINISH LINE, INC.:
Notice is
hereby given that the 2009 Annual Meeting of Shareholders of The Finish Line,
Inc. (the “Company”) to be held at the Company’s Corporate Office at 3308 N.
Mitthoeffer Road, Indianapolis, Indiana 46235 on Thursday, July 23, 2009, at
9:00 a.m. EDT, will be conducted for the following purposes:
(1)
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To
elect two Class II directors to serve on the Company’s Board of Directors
until the 2012 Annual Meeting of
Shareholders;
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(2)
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To
adopt an amendment to the Company’s Articles of Incorporation that will
convert all outstanding high voting Class B Common Shares into Class A
Common Shares as of the day after the Company’s shareholder meeting to be
held in 2012 (in lieu of the current provision which converts those shares
only once they constitute less than 5% of the total Class A Common Shares
and Class B Common Shares outstanding as of a record date for an annual
meeting), and will also limit the aggregate voting power of the Class B
Common Shares to 41% should the total voting power of the Class B Common
Shares ever exceed that amount in the
future;
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(3)
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To
adopt an amendment to the Company’s Articles of Incorporation that will
automatically convert all Class B Common Shares that may be issued to
Company employees or directors in the future into Class A Common Shares
upon their death or termination of employment or
service;
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(4)
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To
approve and ratify an amendment to the Company’s 2002 Stock Incentive Plan
(the “2002 Plan”) to add the Company’s Class B Common Shares as a class of
shares that may be awarded under the 2002 Plan in order to permit, if
authorized by the Company’s Board of Directors in the future, the exchange
of Class B Common Shares for Class A Common Shares that remain unvested
under the 2002 Plan, and, to the extent the 2009 Incentive Plan is not
approved (Item 5), to grant awards of Class B Common
Shares;
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(5)
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To
approve and adopt the Company’s 2009 Incentive
Plan;
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(6)
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To
ratify the selection of Ernst & Young LLP as the Company’s independent
registered public accounting firm for the Company’s fiscal year ending
February 27, 2010; and
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(7)
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To
transact such other business as may properly come before the meeting or
any adjournments or postponements
thereof.
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Only
shareholders of record at the close of business on May 22, 2009, will be
entitled to notice of and to vote at the Annual Meeting and any adjournments or
postponements thereof.
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By
Order of the Board of Directors,
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Gary
D. Cohen,
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Chief
Administrative Officer & Secretary
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Indianapolis,
Indiana
June 23,
2009
Your
vote is important. Accordingly, you are asked to complete, sign, date and return
the accompanying Proxy Card in the envelope provided, which requires no postage
if mailed in the United States.
The
Finish Line, Inc.
3308
N. Mitthoeffer Road
Indianapolis,
Indiana 46235
________________________
PROXY
STATEMENT
FOR
ANNUAL
MEETING OF SHAREHOLDERS
JULY
23, 2009
________________________
GENERAL
INFORMATION
This
Proxy Statement and the accompanying Notice of Annual Meeting and Proxy Card are
being mailed on or about June 23, 2009, in connection with the solicitation of
proxies by the Board of Directors (the “Board”) of The Finish Line, Inc.
(“Finish Line” or the “Company”) for use at the 2009 Annual Meeting of
Shareholders of the Company (the “Annual Meeting”) to be held at the Company’s
Corporate Office at 3308 N. Mitthoeffer Road, Indianapolis, Indiana 46235, on
Thursday, July 23, 2009, at 9:00 a.m. local time, and any adjournment or
postponement thereof.
At the
Annual Meeting, the Company’s shareholders will be asked to:
(1) elect
two Class II directors to serve on the Board until the 2012 Annual Meeting of
Shareholders;
(2) to
adopt an amendment to the Company’s Articles of Incorporation that will convert
all outstanding high voting Class B Common Shares into Class A Common Shares as
of the day after the Company’s shareholder meeting to be held in 2012 (in lieu
of the current provision which converts those shares only once they constitute
less than 5% of the total Class A Common Shares and Class B Common Shares
outstanding as of a record date for an annual meeting), and will also limit the
aggregate voting power of the Class B Common Shares to 41% should the total
voting power of the Class B Common Shares ever exceed that amount in the
future;
(3) to
adopt an amendment to the Company’s Articles of Incorporation that will
automatically convert all Class B Common Shares that may be issued to Company
employees or directors in the future into Class A Common Shares upon their death
or termination of employment or service;
(4) to
approve and ratify an amendment to the Company’s 2002 Stock Incentive Plan (the
“2002 Plan”) to add the Company’s Class B Common Shares as a class of shares
that may be awarded under the 2002 Plan in order to permit, if authorized by the
Company’s Board of Directors in the future, the exchange of Class B Common
Shares for Class A Common Shares that remain unvested under the 2002 Plan, and,
to the extent the 2009 Incentive Plan is not approved (Item 5), to grant awards
of Class B Common Shares;
(5) to
approve and adopt the Company’s 2009 Incentive Plan;
(6) to
ratify the selection of Ernst & Young LLP as the Company’s independent
registered public accounting firm for the Company’s fiscal year ending February
27, 2010; and
(7) vote
on such other matters as may properly come before the Annual Meeting or any
adjournments or postponements thereof.
This
Proxy Statement and related proxy materials are being first mailed to
shareholders on or about June 23, 2009. With this proxy statement, we are
sending you our 2009 Annual Report, which includes our financial statements for
the fiscal year ended February 28, 2009. If you did not receive our Annual
Report, we will send it to you without charge. The Annual Report includes a list
of important documents that we have filed as exhibits with the Securities and
Exchange Commission (“SEC”), but does not include copies of the exhibits. If you
wish to
receive
copies of the exhibits, we will send them to you. Please send your written
request by facsimile to our Corporate Secretary at (317) 613-6523 or by mail to:
The
Finish Line, Inc.
3308 N.
Mitthoeffer Road
Indianapolis,
Indiana 46235
Attn:
Corporate Secretary
In
addition, you may obtain copies of our public filings, including this proxy
statement, our 2009 Annual Report on Form 10-K, and the form of proxy relating
to the annual meeting, without charge from our web site at http://www.finishline.com,
click on the “Our Company” link and then on the “Investor Relations” link, or
from the SEC’s web site at http://www.sec.gov,
the Company’s ticker symbol is FINL. You also may request a copy of these
materials by sending an email to IR@finishline.com. For meeting directions
please call (317) 899-1022, extension 4.
Throughout
this Proxy Statement, fiscal 2007, fiscal 2008, and fiscal 2009 represent the
fiscal years ended March 3, 2007, and March 1, 2008, and February 28, 2009
respectively.
Persons
Making the Solicitation
The Company is making this
solicitation and will bear the expenses of preparing, printing and mailing proxy
materials to the Company’s shareholders. In addition to the mailing of this
proxy statement, proxies may be solicited personally or by telephone or
fax by officers or employees of the Company, none of whom will receive
additional compensation there from. The Company will also reimburse brokerage
houses and other nominees for their reasonable expenses in forwarding proxy
materials to beneficial owners of the Class A Common Shares.
Voting
at the Meeting
Shareholders
of record of the Company’s Class A Common Shares and Class B Common Shares at
the close of business on May 22, 2009 (the “Record Date”), are entitled to
notice of and to vote at the Annual Meeting and any adjournment or postponement
thereof. On that date, 51,373,497 Class A Common Shares and 3,545,702 Class B
Common Shares were outstanding and entitled to vote. Each outstanding Class A
Common Share entitles the holder thereof to one vote and each outstanding Class
B Common Share entitles the holder thereof to ten votes. The holders of a
majority of all the votes entitled to be cast at the Annual Meeting must be
represented at the meeting, either in person or by proxy, to constitute a
quorum. There must be a quorum of all the Company’s common shares for
the Annual Meeting to be held. Additionally, with respect to the
action to be taken on Proposals II and III (the approval of which also requires
the approval of the holders of the Class B Common Shares voting as a separate
class), the holders of a majority of the Class B Common Shares must be
represented at the meeting, either in person or by proxy, to constitute a quorum
of the holders of the Class B Common Shares.
In the
election of directors, the two nominees receiving the highest number of
affirmative votes of the shares present or represented and entitled to be voted
for such nominee shall be elected. Votes withheld from any director are counted
for purposes of determining the presence or absence of a quorum for the
transaction of business. Shareholders do not have the right to cumulate their
votes in the election of directors.
For the
proposals regarding the amendments to the Company’s Articles of Incorporation to
be approved, more votes must be cast by all holders of common shares, voting
together as a single class, in favor of the proposals than are cast against
them, and more votes must be cast by the holders of the Class B Common Shares,
voting as a separate class, in favor of the proposals than are cast against
them. For the selection of Ernst & Young LLP as the Company’s
independent registered public accounting firm for the Company’s fiscal year
ending February 27, 2010 to be ratified, more votes must be cast by all holders
of common shares, voting together as a single class, in favor of the proposal
than are cast against it. Abstentions and broker non-votes will have no effect
on the vote for these proposals.
The
affirmative vote of the holders of a majority of voting power of the Company’s
Class A Common Shares and Class B Common Shares entitled to vote at the Annual
Meeting is required to approve the amendment to the
2002 Plan
and the adoption of the Company’s 2009 Incentive Plan. With respect to these
proposals, abstentions will be treated as “No” votes, but broker non-votes will
have no effect on the vote.
Abstentions
will be counted for purposes of determining whether a quorum is present at the
Annual Meeting for the transaction of business. The Company intends to count
broker non-votes as present or represented for purposes of determining the
presence or absence of a quorum for the transaction of business.
Revocability
of Proxy
A proxy
may be revoked by a shareholder prior to voting at the Annual Meeting by written
notice to the Secretary of the Company, by submission of another proxy bearing a
later date or by voting in person at the Annual Meeting. Such notice or later
proxy will not affect a vote on any matter taken prior to the receipt thereof by
the Company. The mere presence at the Annual Meeting of a shareholder who has
appointed a proxy will not revoke the prior appointment.
If not
revoked, the proxy will be voted at the Annual Meeting in accordance with the
instructions indicated on the Proxy Card by the shareholder or, if no
instructions are indicated, will be voted “FOR” the election of the two Class II
director nominees indicated herein to serve on the Board until the 2012 Annual
Meeting of Shareholders, “FOR” the approval of the proposed amendments to the
Company’s articles of incorporation, “FOR” the approval and ratification of the
amendment to the Company’s 2002 Plan, “FOR” the adoption and approval of the
Company’s 2009 Incentive Plan, “FOR” the ratification of the selection of Ernst
& Young LLP as the Company’s independent registered public accounting firm,
and, as to any other matter that may be properly brought before the Annual
Meeting, in accordance with the judgment of the proxy.
ELECTION
OF CLASS II DIRECTORS
(Item
1 on your Proxy)
The
Company’s Bylaws provide for dividing the Board into three classes, as nearly
equal in number as possible, with the term of office of one class expiring each
year, and with each director to hold office until his or her successor is duly
elected and qualified, except in the event of his or her death, resignation or
removal. The term of the Class I Directors, consisting of Alan H. Cohen and
Delores A. Kunda, will expire at the 2011 Annual Meeting of Shareholders. The
term of the Class II directors, consisting of Larry J. Sablosky, Bill Kirkendall
and William P. Carmichael, will expire at the 2009 Annual Meeting of
Shareholders, and the term of the Class III directors, consisting of David I.
Klapper, Stephen Goldsmith and Catherine A. Langham, will expire at the 2010
Annual Meeting of Shareholders.
The
persons named in the accompanying Proxy Card as proxies for this meeting will
vote in favor of the two nominees as Class II directors of the Company unless
otherwise indicated by the shareholder on the Proxy Card. Mr. Larry J.
Sablosky, a Class II director, has determined to not stand for reelection at the
upcoming Annual Meeting of Shareholders. The remaining Class II directors
elected at the 2009 Annual Meeting will serve for a three-year term expiring at
the 2012 Annual Meeting of Shareholders, and until their successors are duly
elected and qualified, except in the event of their respective death,
resignation, or removal. Management has no reason to believe that the nominees
will be unable or unwilling to serve if elected. If any nominee should become
unavailable prior to the election, the accompanying Proxy Card will be voted for
the election in his or her stead of such other person as the Board of Directors
may recommend.
Nominees
The
nominees for election as Class II directors of the Company are Bill Kirkendall
and William P. Carmichael. Each of such persons currently serves as a director
of the Company. The nominees for election as Class II directors of the Company
were selected by the Board upon the recommendation of the independent directors
of the Board, meeting in executive session. See “Management - Executive Officers
and Directors” for additional information concerning the nominees, and “Board of
Directors, Committees and Meetings - Nomination Process” for additional
information regarding the Board’s criteria for selecting director
nominees.
Recommendation
of the Board of Directors
The Board
unanimously recommends that shareholders vote “FOR” the Class II director
nominees set forth above. Proxies solicited by the Board will be so voted unless
shareholders specify otherwise on their Proxy Cards (Item 1 on your
Proxy).
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth, as of May 22, 2009, information relating to the
beneficial ownership of the Company’s common shares by each person known to the
Company to be the beneficial owner of more than five percent of the outstanding
Class A Common Shares or Class B Common Shares, by each director or nominee for
director, by each of the executive officers named below, and by all directors
and executive officers as a group.
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Stock
Options exercisable within 60 days (3)
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Alan
H. Cohen
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— |
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245,000 |
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(5)
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1,517,782 |
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42.8 |
% |
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1,762,782 |
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David
I. Klapper
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— |
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— |
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—
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1,237,857 |
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34.9 |
% |
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1,237,857 |
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Larry
J. Sablosky
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— |
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— |
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—
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790,063 |
(6) |
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22.3 |
% |
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790,063 |
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Glenn
S. Lyon
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73,000 |
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250,000 |
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(5)
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— |
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— |
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323,000 |
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Steven
J. Schneider
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130,920 |
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149,000 |
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(5)
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— |
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— |
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279,920 |
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Gary
D. Cohen
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133,230 |
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136,500 |
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(5)
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— |
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— |
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269,730 |
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George
S. Sanders
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92,106 |
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152,500 |
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(5)
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— |
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— |
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244,606 |
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Donald
E. Courtney
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107,615 |
(7) |
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132,000 |
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(5)
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— |
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— |
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239,615 |
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Michael
L. Marchetti
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85,055 |
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140,000 |
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(5)
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— |
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— |
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225,055 |
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Samuel
M. Sato
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30,000 |
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9,500 |
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(5)
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— |
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— |
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39,500 |
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Stephen
Goldsmith
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3,786 |
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40,000 |
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(5)
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— |
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— |
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43,786 |
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Bill
Kirkendall
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3,786 |
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35,000 |
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(5)
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— |
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— |
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38,786 |
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William
P. Carmichael
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7,786 |
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46,000 |
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(5)
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— |
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— |
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53,786 |
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Dolores
A. Kunda
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4,138 |
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— |
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(5)
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— |
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— |
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4,138 |
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Catherine
A. Langham
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4,586 |
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22,000 |
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(5)
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— |
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— |
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26,586 |
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Edward
W. Wilhelm
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— |
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— |
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—
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— |
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— |
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— |
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All
directors and executive officers as a group (16 persons)
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676,008 |
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1,357,500 |
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4.0%
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3,545,702 |
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100 |
% |
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5,579,210 |
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Barclays
Global Investors, NA
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3,381,292 |
(8) |
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— |
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6.6%
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— |
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— |
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3,381,292 |
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Schultze
Master Fund, Ltd.
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1,197,322 |
(8) |
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— |
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2.3%
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— |
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— |
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1,197,322 |
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Maverick
Capital, Ltd.
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3,457,588 |
(8) |
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— |
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6.7%
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— |
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— |
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3,457,588 |
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Dimensional
Fund Advisors LP
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3,407,496 |
(8) |
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— |
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6.6%
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— |
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— |
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3,407,496 |
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(1)
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Each
executive officer and director has sole voting and investment power with
respect to the shares listed, unless otherwise indicated, and the address
for the executive officers and directors is: 3308 N. Mitthoeffer Road,
Indianapolis, Indiana 46235.
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(2)
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The
amounts in this column exclude any Class B Common Shares convertible into
a corresponding number of Class A Common
Shares.
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(3)
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The
directors and executive officers listed have the right to acquire the
number of shares of common stock reflected in this column
within 60 days of May 22, 2009.
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(4)
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The
shares owned by each person, or by the group, and the shares included in
the total number of shares outstanding have been adjusted, and the
percentage owned (where such percentage exceeds 1%) has been computed, in
accordance with Rule 13d-3(d)(1) under the Securities Exchange Act of
1934, as amended (the “Exchange
Act”).
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(5)
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Less
than 1% of the Class A Common Shares
outstanding.
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(6)
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Includes
60,000 Class B Common Shares held by a family partnership of which
Mr. Sablosky serves as general partner, and 14,420 Class B Common
Shares held by Mr. Sablosky’s
spouse.
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(7)
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Includes
9,200 Class A Common Shares held by Mr. Courtney’s
spouse.
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(8)
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This
information is based solely on the following Schedules 13G and 13G/A filed
with the Securities and Exchange
Commission:
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Barclays
Global Investors, NA
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as
of December 31, 2008
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Schultze
Master Fund, Ltd.
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as
of June 13, 2008
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Maverick
Capital, Ltd.
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as
of December 31, 2008
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Dimensional
Fund Advisors LP
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as
of December 31, 2008
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MANAGEMENT
Executive
Officers and Directors
The
executive officers, directors and nominees for director of the Company (other
than Larry J. Sablosky, who has determined not to stand for reelection at the
Annual Meeting) are as follows:
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Alan
H. Cohen
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62
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Chairman
of the Board, Class I Director
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1976
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Glenn
S. Lyon
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59
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Chief
Executive Officer, Class I Director
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2001
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David
I. Klapper
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60
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Class
III Director
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1976
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Steven
J. Schneider
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53
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President
and Chief Operating Officer
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1989
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Gary
D. Cohen
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57
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Chief
Administrative Officer, Secretary
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1997
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Edward
W. Wilhelm
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50
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Executive
Vice President, Chief Financial Officer
|
2009
|
George
S. Sanders
|
51
|
Executive
Vice President, Real Estate and Store Development
|
1994
|
Donald
E. Courtney
|
54
|
Executive
Vice President, IS, Distribution, CIO, Assistant Secretary
|
1989
|
Michael
L. Marchetti
|
58
|
Executive
Vice President, Store Operations
|
1995
|
Samuel
M. Sato
|
45
|
Executive
Vice President, Chief Merchandising Officer
|
2007
|
Dolores
A. Kunda
|
53
|
Class
I Director
|
2008
|
Stephen
Goldsmith
|
62
|
Class
III Director
|
1999
|
Bill
Kirkendall
|
55
|
Class
II Director
|
2001
|
William
P. Carmichael
|
65
|
Class
II Director
|
2003
|
Catherine
A. Langham
|
51
|
Class
III Director
|
2006
|
Mr. Alan H.
Cohen, a co-founder of the Company, is currently the Chairman of the
Board. Mr. Cohen retired from his position as the Chief Executive Officer
on November 30, 2008. From May 1982 until October 2003 Mr. Cohen served as
both President and Chief Executive Officer of the Company. Since 1976,
Mr. Cohen has been involved in the athletic retail business as principal
co-founder of Athletic Enterprises, Inc. (one of the predecessor companies of
the Company). Mr. Cohen is an attorney, and practiced law from 1973 through
1981. Mr. Cohen is the brother of Gary D. Cohen.
Mr. Glenn S.
Lyon assumed the position of Chief Executive Officer of the Company on
December 1, 2008. Mr. Lyon was elected to the Board of Directors in January
2009, he has served as President of the Company since October 2003, and was also
the Company’s Chief Merchandising Officer from 2001 until 2007. He served as
Executive Vice President and Chief Merchandising Officer from September 2001 to
October 2003. Prior to joining the Company, he served as President/CEO of Paul
Harris Stores, Inc., from March 2000 to February 2001. From October 1995 to
February 2000, he held positions as President and General Merchandising Manager
of Modern Woman Stores, a Division of the American Retail Group. Mr. Lyon
also spent eight years with TJX Company as Senior Vice President and Executive
Vice President of Merchandising and Marketing. Mr. Lyon started his career
in February 1973 at Macy’s N.Y., where he spent ten years in various
merchandising positions.
Mr. David I.
Klapper, a co-founder of the Company, has served as a director of the
Company since May 1982. Mr. Klapper served as Senior Executive Vice President of
the Company from April 2000 and retired from that position on December 26, 2008.
Prior to that Mr. Klapper served as Executive Vice President from May 1982 to
April 2000. From 1976 to 2000, Mr. Klapper was involved in the athletic retail
business as principal co-founder of Athletic Enterprises, Inc. (one of the
predecessor companies of the Company).
Mr. Steven
J. Schneider is currently the President and Chief Operating Officer of
the Company. He has served as the Company’s Chief Operating Officer since
October 2003, and as Executive Vice President, Chief Operating Officer, Chief
Financial Officer and Assistant Secretary from April 2001 to October 2003.
Mr. Schneider also served as Executive Vice President, Finance, Chief
Financial Officer and Assistant Secretary of the Company from April 2000 to
April 2001, as Senior Vice President, Finance, Chief Financial Officer and
Assistant Secretary of the Company from March 1997 to April 2000, and as Vice
President, Finance and Chief Financial Officer of the Company from April 1989 to
March 1997. From August 1984 to March 1989, Mr. Schneider was employed as
Assistant Controller for Paul Harris Stores, Inc., a women’s apparel retailer.
Mr. Schneider was employed by a national accounting firm for two years and
has been engaged in various financial positions in the retail industry for over
30 years.
Mr. Gary D. Cohen was
promoted to the position of Chief Administrative Officer in June 2009. From
April 2000 to June 2009 he served as Executive Vice President, General Counsel
and Secretary of the Company. Mr. Cohen also served as Senior Vice President,
General Counsel and Secretary of the Company from July 1997 to April 2000. From
April 1990 to July 1997, Mr. Cohen was a Senior Partner in the law firm of Cohen
and Morelock. During the 15 years prior to his joining the Company, Mr. Cohen
represented the Company regarding real estate matters. From 1978 to 1990, Mr.
Cohen held partnership positions with various law firms. At the present time,
Mr. Cohen retains an “Of Counsel” position with the firm of Brand Davis Elsea
& Morelock. Mr. Cohen is the brother of Alan H. Cohen.
Mr. Edward
W. Wilhelm was hired as Executive Vice President, Chief Financial Officer
of the Company in March 2009. Previously Mr. Wilhelm served, since 2000, as
Executive Vice President and Chief Financial Officer of Borders Group,
Inc. From 1997 to 2000, Mr. Wilhelm was Vice President of
Planning, Reporting and Treasury for Borders Group, and served as Vice President
of Finance there from 1994 through 1997. Mr. Wilhelm holds a Bachelor of
Science degree in accounting from the University of Detroit and is a certified
public accountant.
Mr. George
S. Sanders has served as Executive Vice President, Real Estate and Store
Development of the Company since April 2000. Mr. Sanders also served as
Senior Vice President, Real Estate and Store Development of the Company from
March 1997 to April 2000, and as Vice President, Real Estate and Store
Construction from April 1994 to March 1997. From February 1993 to April 1994,
Mr. Sanders served as Director of Real Estate of the Company. From 1983 to
February 1993, Mr. Sanders was employed by Melvin Simon and Associates, a
real estate developer and manager. At the time Mr. Sanders left Melvin
Simon and Associates he held the position of Senior Leasing
Representative.
Mr. Donald
E. Courtney has served as Executive Vice President, IS, Distribution,
Chief Information Officer and Assistant Secretary of the Company since October
2003, and as Executive Vice President, Chief Information Officer-Distribution
from April 2000 to October 2003. Mr. Courtney also served as Senior Vice
President, MIS and Distribution of the Company from March 1997 to April 2000 and
as Vice President, MIS and Distribution of the Company from August 1989 to March
1997. From August 1988 to August 1989, Mr. Courtney served as Director of
MIS and Distribution for the Company. From August 1976 to August 1988,
Mr. Courtney was employed by Guarantee Auto Stores, Inc., an automotive
retailer. At the time Mr. Courtney left Guarantee Auto Stores he held the
position of Vice President, – MIS and Distribution. Mr. Courtney has been
involved in the retail industry for over 30 years.
Mr. Michael
L. Marchetti has served as Executive Vice President, Store Operations of
the Company since April 2000. Mr. Marchetti also served as Senior Vice
President, Store Operations of the Company from March 1997 to April 2000 and as
Vice President, Store Operations from September 1995 to March 1997. From May
1990 to September 1995, Mr. Marchetti was employed as Regional Vice
President of Champs Sports, a division of Footlocker, Inc. Mr. Marchetti
has been involved in the retail industry for over 30 years.
Mr. Samuel
M. Sato has
served as Executive Vice President, Chief Merchandising Officer of the Company
since March 2007. Mr. Sato began his career at Nordstrom Inc. in 1985. He
was a Regional Merchandise Manager, Menswear and Footwear, in the Northeast and
Mid-Atlantic regions of Nordstrom, and then served as Divisional Merchandise
Manager, Shoes. Mr. Sato was promoted to Vice President and Corporate
Merchandise Manager for the Men’s Shoes Division of Nordstrom in 1999.
Mr. Sato has been involved in the retail industry for over 24
years.
Ms. Dolores
A. Kunda was elected as a director of the Company in October 2008 for a
term expiring at the 2011 Annual Meeting. Ms. Kunda also serves on the
Compensation and Stock Option Committee of the Board of
Directors. Ms. Kunda is the founder, President and CEO of Lápiz,
one of the largest Hispanic advertising agencies in the US since
1999. Lápiz is a division of Leo Burnett USA and all entities are
part of a French communications holding company, Publicis Groupe. In
2007, Ms. Kunda assumed the position as President of Leo Burnett Puerto
Rico concurrent with her position at Lápiz. From 2006 to 2009,
Ms. Kunda served as Director for Lenox Group Inc., and was a member of
Lenox’s Audit Committee. Ms. Kunda has an undergraduate degree
from Smith College and an MBA from Northwestern University’s Kellogg Graduate
School of Management. Ms. Kunda has been in the advertising
field for nearly 25 years, and has focused on Hispanic marketing for the last 17
years. Ms. Kunda is the founder of Lápiz, one of the largest
Hispanic advertising agencies in the US and has over twenty years of experience
in marketing and advertising to the general market, Mexico, the US Hispanic
market and Puerto Rico.
Mr. Stephen
Goldsmith has served as a
director of the Company since July 1999. Mr. Goldsmith is the Daniel Paul
Professor of Government, and Director of the Innovations in American Government
Program at Harvard University's Kennedy School of Government. He serves as a
Strategic Advisor to the law firm of McKenna Long and Aldridge, as well as to
Capital Source, a Maryland based financial institution. From 2001 to
2005, he served as Senior Vice President of ACS State and Local Solutions.
Mr. Goldsmith was a director of Net2Phone, Inc., an internet communications
company, from 2003 to 2005, and The Steak n Shake Company, a national restaurant
chain, from 1999 to 2005. Mr. Goldsmith served as Mayor of the
City of Indianapolis from January 1992 to December 1999.
Mr. Bill
Kirkendall has served as a
director of the Company since July 2001. Mr. Kirkendall is a Partner in
D.A. Weibring/Golf Resources Group, a golf course design, management and
consulting firm worldwide since 2006. He is also the Chief Executive
Officer of Pure Motion, Inc., a company that develops and markets
technology-based training aids for recreational sports since March
2007. From 1976 to 1982 Mr. Kirkendall was Vice President of
Golden Brothers Inc., a long haul trucking company. From October 1999 to
November 2002, Mr. Kirkendall was President and Chief Executive Officer of
Orlimar Golf Company, a manufacturer and distributor of golf equipment.
Mr. Kirkendall was President and CEO of Tretorn of N.A., Inc., a
distributor and licensee of athletic footwear, from 1998 to 1999.
Mr. Kirkendall was a driving force with Etonic Inc. (Etonic, Tretorn, Puma
USA), a distributor, manufacturer, and licensee of athletic footwear and apparel
from 1982 to 1998, holding the following positions: Sales Representative from
1982 to 1985, National Sales Manager from 1985 to 1986, Vice President from 1986
to 1988, Senior Vice President from 1988 to 1989, Executive Vice President from
1989 to 1991, and President from 1991 to 1998.
Mr. William
P. Carmichael has served as a director of the Company since July 2003.
Mr. Carmichael currently serves as Chairman of the Board of Trustees of the
Columbia Funds Series Trust, Columbia Funds Series Trust II, Columbia Funds
Master Investment Trust, and Columbia Funds Variable Insurance Trust I. From
1998 to 2001 Mr. Carmichael was Senior Managing Director of The Succession
Fund, which he co-founded in 1998. Prior to The Succession Fund,
Mr. Carmichael served for 26 years in various financial positions with
global consumer product companies, including Senior Vice President of Sara Lee
Corporation from 1991 to 1993, Senior Vice President of Beatrice Foods from 1984
to 1990, Chief Financial Officer of Beatrice Foods from 1987 to 1990, and from
1973 to 1984 as Vice President of Esmark, Inc. Mr. Carmichael has been a
director of Spectrum Brands (formerly Rayovac Corporation) since August 2002,
Cobra Electronics Corporation since 1994, and Simmons Company since May 2004. He
was previously a director of Opta Food Ingredients, Inc., Nations Government
Income Term Trust 2004, Nations Government Income Term Trust 2003, Nations
Balanced Target Maturity Fund and Hatteras Income Securities Fund.
Ms. Catherine
A. Langham has served as a director of the Company since April
2006. Ms. Langham is the co-founder, President and Chief Executive
Officer of Langham Logistics, Inc., a global freight management company
specializing in expedited transportation, warehousing and distribution.
Since July 2007, Ms. Langham has served as a director for Celadon Trucking
Services, an international truckload carrier, and is a member of Celadon
Trucking Services’ audit committee. Ms. Langham was a member of
the Board of Directors of Marsh Supermarkets, Inc. from 1998 through September
2006, where she also served on the audit and executive committees.
Ms. Langham has over 20 years of experience in the logistics
industry.
Officers
are appointed by and serve at the discretion of the Board. Unless otherwise
stated, there are no family relationships among any directors or executive
officers of the Company.
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a)
of the Exchange Act requires the Company’s officers and directors and persons
who beneficially own more than 10 percent of the Company’s Class A Common Shares
to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with
the SEC. Officers, directors and 10 percent shareholders are required by the SEC
to furnish the Company with copies of all Forms 3, 4 and 5 that they
file.
Based
solely on the Company’s review of the copies of the forms it has received and
representations from certain reporting persons that they were not required to
file a Form 5 for certain fiscal years, the Company believes that all
of its officers, directors and greater than 10 percent shareholders have
complied with all of the filing requirements applicable to them with respect to
transactions during the fiscal year ended February 28, 2009.
Code
of Ethics
The
Company’s Code of Ethics, applicable to its directors and officers, is available
on the Company’s website at www.finishline.com. The Company intends to disclose
waivers under this Code of Ethics, or amendments thereto, on the Company’s
website at www.finishline.com or in a report on Form 8-K as
required.
BOARD
OF DIRECTORS, COMMITTEES AND MEETINGS
Independence
of Directors
The Board
has determined that the majority of its members are “independent directors”
under the criteria for independence set forth in the listing standards of the
Nasdaq Stock Market (“Nasdaq”). The independent directors of the Board include
Dolores A. Kunda, Stephen Goldsmith, Bill Kirkendall, William P. Carmichael and
Catherine A. Langham. In addition, all members of the Audit Committee
and the Compensation and Stock Option Committee of the Board are independent
directors and all members of the Audit Committee satisfy the independence
requirements set forth in Securities and Exchange Commission ("SEC")
rules.
Meetings
and Committees of the Board of Directors
The Board
held 9 meetings in fiscal 2009 and all directors attended at least 75% of
the meetings of the Board and the committees of the Board of which they were
members. Members of the Board are expected to attend the 2009 Annual Meeting.
Except for Dolores Kunda, who joined the Board in October 2008, all Board
members attended the 2008 Annual Meeting of Shareholders.
The Board
of Directors has 3 committees. The Audit Committee is comprised of
Ms. Langham and Messrs. Goldsmith, Kirkendall and Carmichael, Chair. The
Compensation and Stock Option Committee is comprised of Ms. Langham,
Mr. Kirkendall and Ms. Kunda. The Finance Committee is comprised of
Messrs. Klapper and Carmichael. The Company does not have a nominating committee
nor any committee performing such functions. The Board has determined that,
because a majority of its members are independent directors, it is appropriate
for the independent directors to fulfill the role of nominating potential
directors to the Board. Nominees are recommended to the Board by at least a
majority of independent directors, meeting in executive session.
The Audit
Committee. The Audit Committee is
appointed by the Board and is composed solely of independent directors (as
defined in the Nasdaq listing standards and SEC rules). The Audit Committee
appoints the Company’s independent registered public accounting firm each year
and approves the associated compensation and terms of the engagement. It also
approves services that may be proposed by the independent registered public
accounting firm, as well as any services provided by other professional
financial services providers. The Audit Committee monitors and oversees the
quality and integrity of the Company’s accounting process and systems of
internal controls. Each member of the Audit Committee meets the
Nasdaq financial knowledge requirements, and the Board has determined that
Mr. Carmichael qualifies as an “audit committee financial expert” as
defined by SEC rules and that he meets Nasdaq’s professional experience
requirements. The Audit Committee is charged with reviewing and monitoring
all
contemplated
related party transactions. The duties of the Audit Committee are set forth in
its Charter which is available on the Company’s website at www.finishline.com,
specifically at the ‘Our Company’ tab, then through the ‘Investor Relations’
tab. The Audit Committee met 7 times during fiscal 2009.
The
Compensation and Stock Option Committee (the
“Compensation Committee”). The Compensation Committee is
appointed by the Board and is currently composed of three non-employee
independent directors (as defined in the Nasdaq listing standards). The
Compensation Committee is responsible for discharging the responsibilities of
the Board with respect to the compensation structure of the Company’s executive
officers including the chief executive officer. In consultation with the chief
executive officer the Compensation Committee reviews and approves performance
goals and objectives for the executive officers of the Company,
other than the chief executive officer. The Committee also evaluates the
performance of the chief executive officer and sets his annual compensation
structure. The Compensation Committee is responsible for administering the
Company’s 1992 Employee Stock Incentive Plan, as amended, and the Company’s 2002
Stock Incentive Plan, as amended. It periodically reviews and makes
recommendations to the Board with respect to director compensation. The duties
of the Compensation Committee are set forth in its Charter which is available on
the Company’s website at www.finishline.com, specifically at the ‘Our Company’
tab then through the ‘Investor Relations’ tab. Decisions with respect to
executive officer and director compensation are reviewed and approved by the
Compensation Committee. Decisions
concerning the compensation structure of the chief executive officer are
recommended to all outside directors of the Board for ratification. The
Compensation Committee met 7 times during fiscal
2009.
The
Finance Committee. The Finance Committee reviews the Company’s financial
policies and performs duties as may be requested by the Board. The Finance
Committee met
one time during fiscal 2009.
Meetings
of the Independent Directors. The
Company’s independent directors meet regularly in executive sessions outside the
presence of Company management. An executive session is generally held in
conjunction with each regularly scheduled meeting of the Board. The Company has
not formally appointed a single director to preside at executive sessions of the
independent directors. Rather, the responsibility to preside at each such
meeting of independent directors is rotated among the independent directors,
depending on the subject matter to be discussed at such
meeting.
Nomination
Process
In determining whether to
nominate a candidate for election to the Company’s Board of Directors, the Board
considers various criteria, such as the recommendations of the independent
directors, the candidate’s relevant business skills and experience,
commitment to enhancing shareholder value, and professional ethics and
values, bearing in mind the requirements of the Board at that point in time. The
Board believes it is appropriate that a majority of its members be independent
directors and that at least one member, who also serves on the Audit Committee,
be an “audit committee financial expert” as defined by SEC rules. Candidates are
identified through a variety of sources, including other members of the Board,
senior Company executives, individuals personally known by the members of the
Board, and research. The Company will consider shareholder recommendations of
candidates when the recommendations are properly submitted. To be considered,
any such shareholder recommendation must be submitted as set forth under the
section of this Proxy Statement entitled “Proposals of Shareholders,” and must
comply with the notice, information and consent provisions set forth in the
Company’s Bylaws. Shareholder nominees will be evaluated under the criteria set
forth above. To recommend a prospective nominee for the Board’s consideration, a
shareholder may submit a candidate’s name and qualifications to The Finish Line,
Inc., Board of Directors (or the applicable Board member) at the Company’s
principal offices (3308 N. Mitthoeffer Road, Indianapolis, Indiana 46235) in
care of the Secretary. The Board of Directors of the Company has adopted a
resolution addressing the nomination process described above.
Communications
with the Board of Directors
Shareholders
may communicate with the Board of Directors, its committees, the independent
directors as a group, or one or more members of the Board or its committees, by
sending a letter to The Finish Line, Inc., Board of Directors (or the applicable
member of the Board of Directors), at the Company’s principal offices (3308 N.
Mitthoeffer Road, Indianapolis, Indiana 46235) in care of the Secretary. If the
Secretary deems appropriate, the Secretary will forward such correspondence to
the Chairman of the Board or to the applicable Board member.
The
process
by which the Secretary reviews and forwards correspondence deemed appropriate
has been approved by a majority of the Board’s independent
directors.
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
The
following is an overview and analysis of the Company’s executive compensation
structure and pertains to those named executive officers listed in the Summary
Compensation Table on page 23.
Compensation
Committee Objectives
The
Compensation and Stock Option Committee (the “Committee” or “Compensation
Committee”) remains focused on establishing a balanced compensation structure
for the Company’s executive officers; a structure that motivates the Company’s
executive leadership to attain specified annual performance goals with a
particular emphasis on longer-term strategy that will ensure sustainable
improvement of shareholder value. The Committee strives to ensure that
compensation levels remain competitive to attract and retain key individuals and
maintains a commitment to ensure that executive officer compensation is
perceived as fundamentally fair to the Company’s shareholders.
Executive
Officer Compensation Overview
The basic
components that comprise an executive officer’s compensation structure remain a
fixed base salary and a sufficiently balanced at-risk component that consists of
annual performance based incentive compensation, and long-term equity and
non-equity incentive compensation. The Committee met several times at the
beginning of the fiscal year to permit adequate time for evaluation and
confirmation of executive officer compensation. At these meetings the Committee
first evaluated the achievement of performance goals for each executive officer
for fiscal year 2008. Based on these evaluations the Committee then considered
and set the performance criteria and metrics that comprised the compensation
structure of each executive officer for fiscal year 2009 (also “fiscal 2009” or
“FY09”).
In
setting FY09 executive compensation the Committee also considered special
circumstances that developed during the previous fiscal year, such as the
protracted litigation that resulted from the failed merger between the Company and Genesco
Inc., and the resolution of the litigation via a settlement between the parties
in early March 2008. The Committee recognized the exceptional services of
several key executives during this challenging period, including those of
Mr. Gary Cohen, Mr. Steven Schneider and Mr. Kevin Wampler. Each
of these named executive officers was therefore granted an additional award
that, depending on the individual executive and his role, consisted of both
equity and monetary value. These additional awards are set forth in the Summary
Compensation Table on page 23, and further described in footnotes 7, 9, 10,
11, 13, 14 and 15 thereto.
When
setting executive officer compensation for fiscal 2009 the Committee considered
recommendations from Mr. Alan Cohen, the Company’s current Chairman of the
Board and the Chief Executive Officer for most of fiscal 2009. The Committee
also considered recommendations from other members of Company management. The
executive officers for whom compensation recommendations are discussed are not
present during those discussions. When setting the compensation structure for
the Chief Executive Officer no member of Company management is present. The
Compensation Committee retains the discretion to accept, adjust or reject any
recommendations concerning executive officer compensation.
Compensation
Consultant and Benchmarking
The
Committee continues to evaluate the elements that make up an executive officer’s
compensation in the context of Company performance and the competitive retail
market within which the Company operates. To assist the Committee in setting
executive officer base salary amounts, bonus incentive amounts, and equity based
awards for fiscal 2009 the Committee retained the consulting services of Mercer
Human Resource Consulting (“Mercer”).
As part
of its analysis in setting executive officer compensation for fiscal 2009, the
Committee considered the compensation structures of executives in comparable
positions at competitive companies. In setting this peer group of companies the
Committee, in consultation with Mercer, considered criteria that included market
capitalization, revenue, industry (specialty-retail), competitive market data
provided by Mercer, and merchandise type. For fiscal 2009 this peer group
consisted of:
|
·
|
Ann
Taylor Stores Corp.
|
|
·
|
Children’s
Place Retail
|
|
·
|
New
York & Company Inc.
|
|
·
|
Pacific
Sunwear Calif Inc.
|
The
Committee strives to set the basic components of executive officer compensation
near the median of the peer group (“FY09 Peer Group”). However, the compensation
structure for each named executive officer will often vary from this average
because of varied performance factors and/or performance metrics the Committee
incorporates into each individual executive officer’s compensation
structure.
Base
Compensation
A
fundamental component of overall executive compensation remains an executive
officer’s base salary. Target performance bonus amounts and actual performance
bonus payout amounts remain directly based on a percentage of an executive
officer’s base salary. When setting an executive officer’s base salary for
fiscal 2009 the Committee considered competitive base salary amounts for similar
executives in the FY09 Peer Group, the executive officer’s position, tenure, the
responsibilities of the position, and the respective level of accountability.
The Committee continues to consider internal pay equity a significant criterion
when setting final base salary amounts.
Mr. Alan
Cohen retired from his position as Chief Executive Officer effective December 1,
2008, and retained his position as the Chairman of Board. On that date
Mr. Glenn Lyon, the Company’s then President, assumed the position of Chief
Executive Officer, and Mr. Steven Schneider, the Company’s then Chief
Operating Officer assumed the position of President and Chief Operating Officer.
As a result of their new positions the base salary amounts for both
Mr. Lyon and Mr. Schneider were adjusted at that time to reflect their
new responsibilities. These adjustments were based on the same criteria as
specified above. The base salary amounts for each named executive officer
for fiscal 2009, including the adjusted base salaries for Mr. Lyon and
Mr. Schneider, are reflected in the Summary Compensation Table on page 23,
and in footnotes 2 and 3 thereto.
Performance
Based Incentive Compensation
For
fiscal 2009 the Committee designated nine of the Company’s executive officers
with a title of ‘executive vice president’ or higher, including each of the
named executive officers, to participate in the fiscal 2009
executive
officer
bonus program (“EOBP” or “EOBP09”). The Committee concluded that
these individuals with their respective responsibilities were in the most
opportune positions to drive overall company financial performance for fiscal
2009. Each such executive officer was established with a specified target bonus
amount expressed as a percentage of such executive officer’s base salary. The
Committee set the target bonus amounts by considering each executive officer’s
responsibilities against how those responsibilities are expected to affect
overall financial performance.
The
EOBP09 is established and administered under the authority of the Company’s
shareholder approved 2002 Stock Incentive Plan (as amended and restated). For
fiscal 2009 the EOBP consisted of two primary categories;
|
1.
|
a
qualifying Company Financial Performance Category,
and
|
|
2.
|
an
Executive Team Performance
Category.
|
Both
categories remain based on financial performance. The first category is
comprised of performance criteria as individually specified in the Company’s
2002 Stock Incentive Plan (“Company Financial Performance Category”), and the
second executive team performance category (“Executive Team Performance
Category”) is based on performance criteria that concerns the collective
performance of the executive management team for which the Committee retained
final discretion on achievement. Because both categories were comprised of
quantifiable performance criteria it was the intent of the Committee that both
categories qualify as deductible performance based compensation for purposes of
Section 162(m) of the Internal Revenue Code (the “Code”).
For the
Chief Executive Officer the Company Financial
Performance Category of the EOBP09 bonus amount was set at 85% of base salary,
and the Executive Team Performance Category was set at 20% of base salary
equating to a total maximum bonus potential under the EOBP09 of 105% of base
salary.
For the
President the Company Financial Performance Category of the EOBP09 bonus amount
was set at 75% of base salary as a target, and the Executive Team Performance
Category was set at 15% of base salary equating to a total maximum bonus
potential under the EOBP09 of 90% of base salary.
For the
Chief Operating Officer the Company Financial
Performance Category of the EOBP09 bonus amount was set at 65% of base salary,
and the Executive Team Performance Category was set at 15% of base salary
equating to a total maximum bonus potential under the EOBP09 of 80% of base
salary.
For the
General Counsel and Chief Financial Officer the Company Financial
Performance Category of the EOBP09 bonus amount was set at 60% of base salary,
and the Executive Team Performance Category was set at 10% of base salary
equating to a total maximum bonus potential under the EOBP09 of 70% of base
salary.
Code
Section 162(m) generally disallows a federal tax deduction to any publicly
traded corporation for compensation paid in excess of $1,000,000, in a taxable
year. The Committee endeavors to structure EOBP amounts that may be paid to
qualify as performance based compensation provided that preserving the tax
deduction does not inhibit the Committee’s ability to achieve executive officer
compensation objectives.
Qualifying
Company Financial Performance Criteria
|
The
Company Financial Performance Category of the EOBP09 consisted of the
following criteria:
|
|
·
|
Improving
pre-tax operating income;
|
|
·
|
Improving
comparable store sales revenue;
|
|
·
|
Improving
consolidated gross margin;
|
|
·
|
Individual
business unit performance
objectives;
|
|
·
|
Reducing
consolidated aged inventory;
|
|
·
|
Share
price performance; and
|
|
·
|
Reducing
the Company’s selling, general and administrative
expense.
|
Qualifying
Company Financial Performance Criteria Measurement
Each
Company financial performance criteria was measured within a percentage range
against fiscal 2008 financial performance. The performance criterion of
improving pre-tax operating income was generally determined by comparing the
increase in the Company’s consolidated operating earnings for fiscal 2009 to
fiscal 2008, and is subject to the following adjustments: asset impairments,
material gains and/or losses from insurance costs, stock compensation expenses,
all bonus payment amounts to senior management, and material legal costs
incurred by the Company during the fiscal year.
For
fiscal 2009 the percentage metric for improving pre-tax operating income ranged
from 11% to 25% over fiscal 2008, for improving comparable
store sales revenue the percentage metric ranged from 0.18% up to 1.80% over
fiscal 2008, for improving the Company’s consolidated gross margin the
performance metric was based on a basis point improvement over fiscal 2008 and
ranged from 13 basis points to a 40 basis point improvement, and for reducing
consolidated aged inventory the percentage metric ranged from 1.0% to 2.0% of
total year-end inventory balance. For purposes of calculating the performance
metric for aged inventory the Committee considered aged inventory as existing
Company inventory that is 365 days or older. For the performance criteria of
share price performance the Committee established that the share base price
against which the fiscal 2009 share performance would be measured would be the
average closing price of the Company’s shares for the last 20 days of fiscal
2008, which was $2.64 (“Comparator Price”). Improvement in share price
performance for fiscal 2009 would be measured by comparing the average of the
closing price of the Company’s shares for the last 20 business days of fiscal
2009 to the Comparator Price. The percentage metric for share price performance
ranged from 89.0% to 146.0%.
The
performance criterion of reducing the selling, general and administrative
expense of the Company was measured by comparing an upward monetary deviation
(measured as a percentage) from a predetermined budget of the Company’s selling,
general and administrative expense (“SG&A”) for fiscal 2009. For purposes of
bonus criteria measurement the SG&A budget included occupancy costs, but
excluded asset impairments, material gains and/or losses from insurance costs,
stock compensation expenses, all bonus payment amounts to senior management, and
material legal costs incurred by the Company during the fiscal year. The
percentage metric for reducing the selling, general and administrative expense
of the Company ranged from .04% to .40%.
Qualifying
Financial Performance Criteria Achievement and Allocation for Each Named
Executive Officer
Performance
criteria allocation to an EOBP09 participant remains based on such participant’s
accountability, influence on Company operations, tenure with the Company, and
the competitive challenges of a participant’s position within the Company and
within the specialty-retail industry at large. The Committee strives to allocate
the criteria in such a way that the challenge of achieving the performance goals
is relatively consistent from year to year. As indicated above, the program’s
target award opportunities are set as a percentage of a participant’s base
salary. The percentage allocations for each named executive officer are
indicated below.
For
fiscal 2009 the performance criteria of improving pre-tax operating income,
improving consolidated gross margin, reducing aged inventory, and reducing the
Company’s SG&A were each achieved at metric thresholds resulting in the full
achievement of each such criterion. The performance criteria of improving
comparable store sales revenue and share price performance were not achieved at
their respective target metrics, and therefore were not included in the
calculation of final earned bonus amounts under the EOBP09.
Individual
Business Unit Performance Criteria
Individual
business unit performance objectives for the named executive officers, other
than the Chief Executive Officer, varied depending on functional role,
responsibility, and alignment with strategic Company objectives. Each named
executive officer’s individual business unit performance objectives were
established by the executive officer then reviewed and approved by the Committee
at the beginning of the fiscal year. An individual business unit performance
category was excluded from the Chief Executive Officer’s EOBP09 criteria because
of this position’s overall responsibility for the financial performance of the
Company.
As
President through November 30, 2008, Mr. Glenn Lyon’s individual business
unit performance objectives for FY09 were comprised of: measured reduction in
year-end differential between general ledger inventory and individual business
unit inventory as compared to fiscal year 2008, and measured improvement in
gross-margin-
return-on-investment
for athletic shoes as compared to fiscal 2008. Individual business unit
performance objectives comprised 10% of Mr. Lyon’s qualifying financial
performance criteria allocation; he achieved 5.8% of this criterion in his
capacity as President. Once Mr. Lyon assumed the role of Chief Executive
Officer on December 1, 2008, he no longer had an individual business unit
performance component as part of his EOBP09 criteria.
Mr. Steven
Schneider’s individual business unit performance objectives for FY09 were
comprised of: achieving minimum store labor benchmarks, achieving minimum
consolidated store occupancy costs as compared to fiscal 2008, measured
improvement in lease audit savings as compared to fiscal 2008, achieving minimum
departmental savings in the Company’s purchasing and
transportation-and-distribution departments, and improving leadership
development of Company management. Individual business unit performance
objectives comprised 10% of Mr. Schneider’s qualifying financial
performance category; he retained this percentage allocation under the EOBP09
when he assumed the role of both President and Chief Operating Officer on
December 1, 2008. Mr. Schneider achieved 100% of this
criterion.
Mr. Gary
Cohen’s individual business unit performance objectives for FY09 were comprised
of: the development and effective management of a cost effective reorganization
of the Company’s human resource department, implementation of several cost
effective human resource management software programs, implementation of an
electronic Board communication process, measurable control of contract-review
efficiency, revision and update of the Company’s insider trading policy,
measured control of legal and human resource departmental budgets, and the
timely resolution of lease obligations and general liability claims. Individual
business unit performance objectives comprised 25% of Mr. Gary Cohen’s
qualifying financial performance category; he achieved 100% of this
criterion.
Mr. Kevin
Wampler’s individual business unit performance objectives were comprised of:
implementation of an efficient communication process with executive management
on periodic financial results, achievement of purchasing department cost
savings, measured control of departmental budgets; and measured control of
direct Company expenses. Individual business unit performance objectives
comprised 25% of Mr. Wampler’s qualifying financial performance category;
Mr. Wampler voluntarily left the Company on November 25, 2008 thereby
forfeiting all components and payments under the EOBP09.
Qualifying
financial performance criteria allocation and the resulting amounts earned by
each named executive officer under this category for fiscal 2009 are as
follows:
Alan
H. Cohen, as Chief Executive Officer thru 11-30-08
|
Qualifying
Company financial performance criteria under the EOBP09 for Mr. Cohen
were allocated in the following percentages:
|
·
Improving pre-tax operating income
|
30%
- achieved
|
·
Improving comparable store sales revenue
|
15%
- not achieved
|
·
Improving consolidated gross margin
|
20%
- achieved
|
·
Reducing consolidated aged inventory
|
5%
- achieved
|
·
Share price performance
|
10%
- not achieved
|
·
Reducing the Company’s SG&A
|
20%
-
achieved
|
Mr. Alan
Cohen achieved 75% of the qualifying company financial performance portion under
the EOBP09.
Mr. Cohen’s
base salary for fiscal 09 was set at $614,000. He retired on November 30, 2008
earning $460,495 of his annual base salary. Upon his retirement from the
position of Chief Executive Officer on November 30, 2008, Mr. Cohen
received a retirement severance in the amount of $100,000. This retirement
severance amount was added to Mr. Cohen’s then earned base salary amount
totaling $560,495. For purposes of calculating the percentage of qualifying
company financial performance criteria allocation to Mr. Cohen, the amount
of $560,495 was used as his base salary. The total bonus amount
Mr. Cohen is eligible for under the qualifying financial performance
category of the EOBP09 is $357,319.
Glenn
S. Lyon
|
Qualifying
Company financial performance criteria under the EOBP09 for Mr. Glenn
Lyon were allocated in the following percentages:
|
|
as
President through
11-30-08
|
|
as
Chief Executive Officer from 12-1-08
|
|
Base salary as President:
$485,000
|
|
Base salary as CEO:
$620,000
|
·
Improving pre-tax operating income
|
30%
|
|
30%
- achieved
|
·
Improving comparable store sales revenue
|
10%
|
|
15%
- not achieved
|
·
Improving consolidated gross margin
|
20%
|
|
20%
- achieved
|
·
Individual business unit performance objective
|
10%
(achieved at 5.8%)
|
|
0%
- not applicable
|
·
Reducing consolidated aged inventory
|
5%
|
|
5%
- achieved
|
·
Share price performance
|
10%
|
|
10%
- not achieved
|
·
Reducing the Company’s SG&A
|
15%
|
|
20%
-
achieved
|
Mr.
Lyon’s base salary as President was set at $485,000, and as Chief Executive
Officer at $620,000. As President thru 11-30-08 Mr. Lyon earned $363,750 in base
salary, and as Chief Executive Officer he earned $155,000 in base salary. Mr.
Lyon’s earned base salary amounts were used for the calculation of bonus amounts
earned under the EOBP09. As President Mr. Lyon achieved 76% of the qualifying
company financial performance portion under the EOBP09 equating to an earned
bonus amount of $206,792. As Chief Executive Officer Mr. Lyon achieved 75% under
this criteria allocation equating to an earned bonus amount of $98,813.
The total
bonus amount Mr. Lyon is eligible for under the qualifying financial
performance category of the EOBP09 is $305,605.
Steven
J. Schneider
|
Qualifying
Company financial performance criteria under the EOBP09 for
Mr. Steven Schneider were allocated in the following percentages
:
|
|
as
COO through 11-30-08
|
|
as President
& COO from 12-1-08
|
|
Base salary as COO:
$420,000
|
|
Base salary as President & COO:
$500,000
|
· Improving pre-tax operating
income
|
30%
|
|
30%
- achieved
|
· Improving comparable store sales
revenue
|
10%
|
|
10%
-not achieved
|
· Improving consolidated gross
margin
|
15%
|
|
20% -
achieved
|
· Individual business unit
performance objectives
|
10%
|
|
10%
- achieved
|
· Reducing consolidated aged
inventory
|
5%
|
|
5%
- achieved
|
· Share price
performance
|
10%
|
|
10%
- not achieved
|
· Reducing the Company’s
SG&A
|
20%
|
|
15%
-
achieved
|
Mr.
Schneider’s base salary as Chief Operating Officer was set at $420,000, and as
President and Chief Operating Officer at $500,000. As COO thru 11-30-08 Mr.
Schneider earned $315,000 in base salary, and as President & COO he earned
$125,000. Mr. Schneider’s earned base salary amounts were used for the
calculation of bonus amounts earned under the EOBP09. Mr. Schneider achieved a
total of 80% of the qualified company financial performance portion under the
EOBP09 under both his positions as Chief Operating Officer, and as President and
Chief Operating Officer. As Chief Operating Officer Mr. Schneider earned a bonus
amount of $163,800 under this criteria allocation, and as President and Chief
Operating Officer Mr. Schneider earned a bonus amount of $75,000.
The total
bonus amount Mr. Schneider is eligible for under the qualifying financial
performance category of the EOBP09 is $238,800.
Gary D. Cohen, Executive Vice
President, General Counsel & Secretary:
|
Qualifying
Company financial performance criteria under the EOBP09 for Mr. Gary
Cohen were allocated in the following percentages:
|
·
Improving pre-tax operating income
|
30%
- achieved
|
·
Improving comparable store sales revenue
|
10%
- not achieved
|
·
Improving consolidated gross margin
|
10%
- achieved
|
·
Individual business unit performance objectives
|
25%
- achieved
|
·
Reducing consolidated aged inventory
|
5%
- achieved
|
·
Share price performance
|
5%
- not achieved
|
·
Reducing the Company’s SG&A
|
15%
-
achieved
|
Mr. Gary
Cohen achieved 85% of the qualified company financial performance portion under
the EOBP09. Mr. Cohen’s base salary for fiscal 2009 was $318,000. The total
bonus amount Mr. Gary Cohen is eligible for under the qualifying financial
performance category of the EOBP09 is $162,180.
Kevin
S. Wampler, Chief Financial Officer through November 25,
2008:
|
Qualified
Company financial performance criteria under the EOBP09 for Mr. Wampler
were allocated in the following percentages:
|
·
Improving pre-tax operating income
|
30%
|
·
Improving comparable store sales revenue
|
10%
|
·
Improving consolidated gross margin
|
10%
|
·
Individual business unit performance objectives
|
25%
|
·
Reducing consolidated aged inventory
|
5%
|
·
Share price performance
|
5%
|
·
Reducing the Company’s SG&A
|
15%
|
Mr. Wampler
voluntarily left the Company on November 25, 2008 thereby forfeiting all
components and payments under the EOBP09.
Executive
Team Performance Category
For
fiscal 2009 the Committee added an Executive Team Performance Category to the
EOBP09. This category consisted of the following five measurable performance
criteria:
(1)
|
Improve
sales per average square foot over those of fiscal
2008;
|
(2)
|
Improve
the percentage of consolidated inventory that is 180 days or less over
that of fiscal 2008;
|
(3)
|
Improve
inventory turn-over rate over that of fiscal
2008;
|
(4)
|
Reduce
the Company’s total occupancy costs over those of fiscal 2008;
and
|
(5)
|
Reduce
return-to-vendor footwear units over those of fiscal
2008.
|
Each of
the named executive officers was eligible for a performance bonus under this
Executive Team Performance Category, quantified as a percentage of each
officer’s base salary, if the Company achieved at least three of the five listed
criteria. For the Chief Executive Officer the Executive Team Performance
Category was set at 20% of base salary. For the President it was set at 15% of
base salary, for the Chief Operating Officer it was set at 15% of base salary
and for the General Counsel and Chief Financial Officer it was set at 10% of
each individual’s respective base salary.
The
Company did not improve its sales per average square foot over that of fiscal
2008, therefore it was concluded that the first criterion of this category was
not achieved. The Company was able to improve the percentage of consolidated
inventory that is 180 days or less in fiscal 2009 by approximately 3.4% over
that of fiscal
2008,
resulting in the achievement of the second criterion. The Company was able to
improve its inventory turnover rate for fiscal 2009 over that of fiscal 2008
by approximately 10%, resulting in the achievement of this category. The
Company was also successful in its effort to reduce its total occupancy costs in
fiscal 2009 by approximately 1.4% over that of fiscal 2008, achieving the
fourth criterion. The Company successfully reduced the return-to-vendor footwear
units over those of fiscal 2008 by approximately 50%, achieving the fifth
criterion of this category to the satisfaction of the Committee.
With four
of the five criteria that comprised the Executive Team Performance Category
achieved to the satisfaction of the Committee, the Committee concluded that each
executive that was a participant in this Executive Team Performance Category of
the EOBP09, including each of the named executive officers, was eligible for the
maximum performance bonus amount under this category. Amounts earned by each
named executive officer under this category are as follows:
Alan
H. Cohen, as Chief Executive Office thru 11-30-08
The
Executive Team Performance Category of the EOBP09 was calculated to equal 20% of
Mr. Alan Cohen’s base salary. For purposes of EOBP09 calculations the
amount of $560,495 was used as his base salary. As described above, the Company
achieved at least three of the five performance criteria meeting the threshold
to qualify Mr. Cohen for the maximum performance bonus amount under this
category: $112,100.
Glenn
S. Lyon -
The
Executive Team Performance Category of the EOBP09 was calculated to equal 15% of
Mr. Lyon’s base salary. As described above the Company achieved at least
three of the five performance criteria meeting the threshold to qualify
Mr. Lyon for the maximum performance bonus amount under this category. As
President through November 30, 2008 Mr. Lyon earned $54,563 under this
category, and as Chief Executive Officer from December 1, 2008, Mr. Lyon
earned $31,000 under this category for a total of $85,563.
Steven
J. Schneider -
The
Executive Team Performance Category of the EOBP09 was calculated to equal 15% of
Mr. Schneider’s base salary. As described above, the Company achieved at
least three of the five performance criteria meeting the threshold to qualify
Mr. Schneider for the maximum performance bonus amount under this category.
As Chief Operating Officer through November 30, 2008, Mr. Schneider earned
$47,250 under this category, and as President and Chief Operating Officer from
December 1, 2008, Mr. Schneider earned $18,750 under this category for a
total of $66,000.
Gary
D. Cohen -
The
Executive Team Performance Category of the EOBP09 was calculated to equal 10% of
Mr. Gary Cohen’s base salary. As described above, the Company achieved at
least three of the five performance criteria meeting the threshold to qualify
Mr. Gary Cohen for the maximum performance bonus amount under this
category: $31,800.
Kevin
S. Wampler -
The
Executive Team Performance Category of the EOBP09 was calculated to equal 10% of
Mr. Wampler’s base salary. Mr. Wampler voluntarily left the Company on
November 25, 2008 thereby forfeiting all components and payments under the
EOBP09.
All
EOBP09 compensation is paid after the end of the fiscal year once the Committee
has evaluated the Company’s performance relative to the performance goals
established at the beginning of the fiscal year. EOBP09 award amounts are
reflected in the “Non-Equity Incentive Plan Compensation” column of the Summary
Compensation Table on page 23.
Retention
Bonus Plan
In light
of the litigation that developed from the Company’s contemplated merger with
Genesco Inc. during fiscal 2008, the Committee implemented a Retention Plan
applicable to certain key members of executive
management.
The purpose of implementing the Retention Plan was to enhance the ability of the
Company to retain key employees who were considered critical to the successful
resolution of the Genesco related litigation as well as to the continuing
business operations of the Company. Other than Mr. Alan Cohen who served as the
chief executive officer through November 30, 2008, each of the named executive
officers was named as a participant in the Retention Plan. The Retention Plan
consisted of three payments to each Retention Plan participant with each payment
structured to be made at three-month intervals. The dollar amount of the first
payment to each Retention Plan participant was set to be equal to the dollar
amount of the second payment, and the third and final payment was set to be
equal to the sum of the first two payment amounts. To receive the second and
third payments, Retention Plan participant employees needed to remain employed
by the Company at the time of payment of those amounts. The first payment under
the Retention Plan was paid to each plan participant on February 29, 2008. The
remaining payments under the plan were made on May 30, 2008, and August 29,
2008, to those named executive officers and in the amounts as set forth in the
Summary Compensation Table on page 23 and in footnote (5)
thereto.
Long
Term Executive Officer Bonus Program
The
Committee determined to continue its establishment of a new long term incentive
bonus plan for fiscal 2009 based on a three year performance cycle that includes
fiscal 2009, fiscal 2010, and fiscal 2011 (“LTIB09”). Operating
earning threshold amounts under the LTIB09 are subject to the following
adjustments: asset impairments, material gains and/or losses from insurance
costs, stock compensation expenses, bonus payment amounts to senior management,
and material legal costs incurred by the Company during the applicable fiscal
year. Under the LTIB09 each of the named executive officers set forth below is
eligible to earn up to the target amount specified below if, over the three-year
performance cycle, the Company improves adjusted operating earnings by 30% (or
what equates to an average of 10% per year) over adjusted operating earnings for
fiscal 2008 of $41,609,000.
The
purpose of the LTIB09 is to continue to encourage the Company’s executive
management, including each of the named executive officers, to focus on
longer-term Company performance. The Committee believes that the fixed cash
based incentive component of this plan continues to serve as an adequate long
term incentive as compared to a share-based plan where the value of the reward
component remains uncertain and subject to a variety of factors outside of the
control of plan participants.
For Mr.
Alan Cohen the LTIB09 target amount was set at $225,000, for Mr. Glenn Lyon
$150,000, for Mr. Steven Schneider $125,000, for Mr. Gary Cohen $75,000 and for
Mr. Kevin Wampler $75,000 (which was forfeited by Mr. Wampler when he
voluntarily left the Company on November 25, 2008). These threshold payment
amounts have remained consistent for at least the prior three fiscal year long
term incentive bonus plans and the Committee determined that the amounts should
continue to remain consistent for the LTIB09.
To the
extent that operating earnings for the three-year performance cycle are less
than the stated goal but are within 90% of such goal, then the bonus award
amount will be one half of the proposed bonus award. To remain eligible for an
award under this program the executive officer must remain employed throughout
the three-year performance cycle at such officer’s present or superior position.
The LTIB09 is not required to be funded by the Company, and if amounts are
earned under the plan the amounts will be paid out of the general assets of the
Company. The Committee retains sole discretion to administer the LTIB09,
including the ability to reduce award amounts and whether to grant any award
amount under the program. The Committee also retains discretion to confirm
eligibility under the program in the event of an eligible executive’s
termination of employment. In such an event the Committee will consider the
circumstances of the termination including voluntarily separation, separation
due to death or disability, and retirement. Because of his retirement on
November 30, 2008, Mr. Alan Cohen is considered to no longer be eligible
for any bonus payments under any long-term incentive bonus program. The
Committee concluded that Mr. Lyon and Mr. Schneider will remain
eligible under the LTIB09 at the payment amounts set at the inception of the
program provided they remain in their current or superior positions at the time
of payout under the program, and provided the threshold criteria are met.
Potential bonus amounts under the LTIB09 for each named executive officer are
also reflected in the Fiscal Year 2009 Grants of Plan-Based Awards Table on page
25.
Restricted
Share and Stock Option Incentive Compensation
In
keeping with the Committee’s objective of providing a sufficiently balanced
executive compensation structure the Committee incorporated an
equity component into each of the named executive officer’s annual compensation
for fiscal 2009. Before confirming the amount of equity based
compensation that would be allocated to each named executive the Committee
considered an equity compensation report prepared by Mercer. The Mercer report
included an assessment of equity distribution among those companies that
comprise the FY09 Peer Group. The Committee then considered recommendations from
the Chief Executive Officer as to which key employees should receive equity
grants and the recommended amounts. Included in the Chief Executive Officer’s
recommendations were the grants of additional special equity awards to
Mr. Steven Schneider, Mr. Gary Cohen and to Mr. Kevin Wampler,
for their extraordinary individual contributions to the resolution of the failed
merger between the Company and Genesco and the resulting litigation that
followed. The Committee concluded that the recommendations of the Chief
Executive Officer were within industry trends and did not exceed comparable
position limits. The Committee also concluded to approve the special equity
awards to the above named executive officers.
Special
equity awards made to Mr. Steven Schneider, Mr. Gary Cohen and to
Mr. Kevin Wampler were comprised of both stock options and restricted
shares. Restricted shares granted as part of a special equity award to these
three named executive officers carried the same three year cliff vesting
schedule as those shares that comprised their annual incentive based
compensation, and the options granted as part of the special equity award had a
shortened vesting schedule from those granted as part of annual incentive based
compensation. Special equity awards, as well as all other equity
awards granted to the named executive officers during fiscal 2009, are reflected
in the Summary Compensation Table on page 23 and the Fiscal Year 2009
Grants of Plan-Based Awards Table on Page 25.
When
determining to grant equity based compensation to the Company’s executives the
Committee considers the recipient’s prior performance, the importance of
retaining the recipient’s services, and the potential for the recipient’s
performance in helping the Company achieve long-term performance objectives.
Company equity awards that are part of annual executive compensation are
determined at the beginning of the fiscal year, although equity awards may be
granted at other times in the event of a new hire or promotion, or other special
circumstances. Equity grants to newly-hired or newly-promoted
employees with titles of vice president or below that fall within guidelines
previously approved by the Committee may be approved by written action of the
Chief Executive Officer acting under a delegation from the Committee. All other
equity grants are approved by resolution of the Committee.
Scheduling
of the Committee’s meetings continues to be made without regard to anticipated
earnings or other potential material announcements by the
Company. Unless otherwise specified by the Committee, the grant date
for annual equity grants to executive officers is the same date of the Committee
meeting at which they are approved. The exercise price of each stock option to
be awarded is calculated to equal the average of the high and low sales price of
the Company’s Class A common stock on Nasdaq on the grant date. Once equity
grant awards are approved by the Committee, grant award letters are prepared and
distributed as soon as administratively possible reflecting the number of stock
options and/or restricted shares granted.
Vesting
Schedule for Option Awards Granted To Named Executive Officers
The grant
date for annual executive compensation options granted to the named executive
officers in fiscal 2009 was March 11, 2008. Other than the special equity awards
referenced above, the tiered vesting schedule for fiscal 2009 executive
compensation options granted to the named executive officers is the same for
each such named executive:
|
Vesting Dates for Options Granted in fiscal
2009
|
|
Percent of Options Vested
|
|
|
3/11/09
|
|
10%
|
|
|
3/11/10
|
|
20%
|
|
|
3/11/11
|
|
30%
|
|
|
3/11/12
|
|
40%
|
|
The
vesting schedule for options granted as part of the special equity awards
awarded to Mr. Steven Schneider, Mr. Gary Cohen and to Mr. Kevin
Wampler are as follows:
|
Vesting Dates for Options Granted as part of a
Special Equity Award
|
|
Percent of Options Vested
|
|
|
3/11/09
|
|
50%
|
|
|
3/11/10
|
|
50%
|
|
Options
granted to independent directors of the Company as part of their service on the
Board vest one year from their grant date. Prior to the exercise of an option
grant, the recipient has no rights as a shareholder with respect to shares
subject to such option grant, including voting rights and the right to receive
dividends. There were no stock options granted to independent directors in
fiscal 2009
Vesting
Schedule for Stock Awards Granted
Stock
awards granted by the Committee as part of annual executive compensation, as
well as those granted as part of special equity awards to Mr. Gary Cohen, Mr.
Wampler and Mr. Schneider for fiscal 2009 vest under a three year cliff-vesting
schedule where 100% of the restrictions on all such stock grants lapse and the
shares granted vest on March 11, 2011. The grant date for all stock awards
granted to named executive officers in fiscal 2009 was March 11, 2008.
Dividends, if any, are paid on all restricted shares at the same rate as those
received by all other shareholders of the Company. Option and stock
awards made to named executive officers for fiscal 2009 are reflected in the
Fiscal Year 2009 Grants of Plan-Based Awards Table on page 25. Restricted
shares granted to independent directors vest in one year and are reflected in
the Fiscal Year 2009 Director Compensation Table on page 35.
Employment
Agreements and Change in Control
On
December 31, 2008, the Company entered into amended and restated employment
agreements with Mr. Glenn Lyon, Mr. Steven Schneider, and
Mr. Gary Cohen. Mr. Alan Cohen retired from his position as the
Company’s Chief Executive Officer on November 30, 2008. He remains as
the Chairman of the Board and is not a party to any employment agreement with
the Company. Mr. Kevin Wampler voluntarily left the Company on November 25,
2008, and is therefore no longer subject to any employment agreement with the
Company. Each of the remaining named executive officer’s employment agreements
obligates the Company to make certain payments to the executives in the event of
termination or a change in control. The Company maintains these
agreements as a means of remaining competitive, focusing each such executive
officer on shareholder interests when considering strategic alternatives, and
providing income protection in the event of involuntary loss of employment.
Information regarding applicable payments to each named executive officer under
such agreements is provided in the section entitled Potential Payments in the
Event of Termination or a Change in Control beginning on page
30.
Pension
Benefits
The
Company does not currently provide pension benefits to its executives or
employees.
Non-Qualified
Deferred Compensation
The
Finish Line, Inc. Non-Qualified Deferred Compensation Plan (“NQDC Plan”), is a
non-qualified deferred compensation plan offered to certain officers and key
employees, including each of the named executive officers, of the Company who
may elect to defer a specified percentage of their future compensation, and
performance based compensation (up to a maximum of 80%) on a pre-tax basis. The
NQDC Plan is designed to coordinate with The Finish Line Inc. Profit Sharing and
401(k) Plan (the “401(k) Plan”) so that compensation deferrals are made to the
NQDC Plan only to the extent such deferrals cannot be made to the 401(k) Plan
due to limits applicable to qualified plans. Deferred compensation under the
NQDC Plan is credited with earnings, gains and losses, in accordance with
investment options that may be selected by the participant from time to time,
based on investment options available under the 401(k) Plan. In general the
plan’s investment options consist of various mutual and index funds comprised of
stocks, bonds and money market accounts. Amounts deferred under the NQDC Plan by
a participant are credited to a bookkeeping account and are adjusted
periodically for hypothetical investment options based on participant directed
allocation of the account funds from a menu of fund options chosen by the NQDC
Plan administrator. The NQDC Plan directs the Company to make matching
contributions to the NQDC Plan equal to 3% of the amounts
deferred
under both the NQDC Plan and the 401(k) Plan less any matching contributions
made on behalf of the participant under the 401(k) Plan. Upon retirement or
other separation from service or, if previously elected, upon a change in
control of the Company a participant is entitled to payment of their vested
account balance in a manner as previously elected by such participant. The NQDC
Plan is intended to comply with the provisions of Section 409A of the Code
applicable to deferred compensation arrangements. Compensation amounts deferred
under the NQDC Plan by named executive officers are listed in the Fiscal Year
2009 Non-Qualified Deferred Compensation Table on page 30, and are included in
the Salary column of the Summary Compensation Table on page 23.
Qualified
Deferred Compensation
The
Finish Line Inc. Profit Sharing and 401(k) Plan is a defined contribution
plan qualified under Sections 401(a) and 401(k) of the Code and is
applicable to all eligible employees of the Company including each of the named
executive officers. In fiscal 2009 eligible employees could elect to contribute
a portion of their salary to the plan up to a maximum amount of $15,500, and the
Company provided matching contributions at 100% for up to 3% of each employee’s
eligible earnings. Matching contributions made by the Company to
named executive officers are reflected in the Summary Compensation Table on page
23.
Perquisites
It
remains the practice of the Company to not provide perquisites to its named
executive officers other than to the Chief Executive Officer. Through the date
of Mr. Alan Cohen’s retirement as Chief Executive Officer the Company paid
Mr. Cohen’s annual country club membership dues and also provided
Mr. Cohen with use of a Company vehicle. For that portion of
Mr. Cohen’s use of the Company vehicle that did not meet the Internal
Revenue Service’s standard for business use, the cost was imputed as income and
a gross up payment for taxes was provided.
When
Mr. Glenn Lyon assumed the role of Chief Executive Officer on December 1,
2008, the Company began providing Mr. Lyon with an allowance for his
country club membership dues and for an automobile. The Committee considers
these payments to be reasonable and consistent with its compensation structure
objectives.
Tax
and Accounting Considerations
To the
extent readily determinable, the Compensation Committee takes into consideration
the accounting and tax treatment of the various aspects of the Company’s
executive compensation structure. The Company’s executive compensation plans are
designed to be in part deductible under Section 162(m) of the Code. However,
since some types of compensation payments and their deductibility depend upon
factors outside of the Committee’s or the Company’s control and because
interpretations and changes in the tax laws and other factors beyond the
Committee’s control may affect the deductibility of compensation, the Committee
will not necessarily limit executive compensation to that which is deductible
under applicable provisions of the Code. The Committee will consider various
alternatives to preserving the deductibility of compensation payments and
benefits to the extent reasonably practicable and to the extent consistent with
its other compensation objectives.
The
Company does not currently have a policy requiring a specific course of action
with respect to compensation adjustments following later restatements of
financial results. Under those circumstances, the Committee would evaluate
whether adjustments, including implementation of recoupment procedures, are
appropriate based upon the facts and circumstances surrounding the restatement
and existing laws.
Additionally,
Section 409A of the Code governs the timing of deferrals and form of payment
under the Company’s recently implemented non-qualified deferred compensation
program. The Committee believes that the Company has been operating the
non-qualified plan in good faith compliance with Section 409A.
Related
Party Transactions
In
accordance with the Company’s Audit Committee charter, the Audit Committee
maintains responsibility for reviewing and approving any related party
transactions. The Company did not enter into any financial
transactions
with any
related party or immediate family member of a director or executive officer of
the Company during fiscal 2009. If any such material financial transaction were
contemplated, the terms of any such transaction would be reviewed and approved
by the Audit Committee prior to the Company entering into any such
transaction.
Compensation
Committee Report
The
Company’s Compensation and Stock Option Committee has reviewed and discussed the
foregoing Compensation Discussion and Analysis with management and based on such
review recommended to the Board that the Compensation Discussion and Analysis be
included in this Proxy Statement and incorporated by reference into the
Company’s Form 10-K for fiscal 2009.
This
report is respectfully submitted by the members of the Compensation and Stock
Option Committee set forth below:
Bill
Kirkendall
Dolores
Kunda
Catherine
Langham
Compensation
Committee Interlocks and Insider Participation
Members of the Compensation and Stock
Option Committee have no interlocks or insider participation, and no member is
or has been a former employee or officer of the Company.
Name
and
Principal
Position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
(16)
|
|
|
All
Other
Compensation
($)
|
|
|
|
|
Alan
H. Cohen
|
|
2009
|
|
$ |
460,495 |
(1) |
|
$ |
100,000 |
(6) |
|
$ |
492,482 |
|
|
$ |
660,984 |
|
|
$ |
469,419 |
|
|
$ |
18,050 |
(20) |
|
$ |
2,201,430 |
|
Chairman
of the Board
|
|
2008
|
|
$ |
593,000 |
|
|
$ |
0 |
|
|
$ |
296,775 |
|
|
$ |
244,708 |
|
|
$ |
0 |
|
|
$ |
23,323 |
|
|
$ |
1,157,806 |
|
and
Chief Executive Officer (through 11-30-08)
|
|
2007
|
|
$ |
570,000 |
|
|
$ |
0 |
|
|
$ |
193,945 |
|
|
$ |
160,193 |
|
|
$ |
28,500 |
|
|
$ |
24,967 |
|
|
$ |
977,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glenn
S. Lyon
|
|
2009
|
|
$ |
518,750 |
(2) |
|
$ |
60,000 |
|
|
$ |
253,919 |
|
|
$ |
278,050 |
|
|
$ |
391,167 |
(17) |
|
$ |
14,650 |
(21) |
|
$ |
1,516,536 |
|
Chief
Executive Officer
|
|
2008
|
|
$ |
468,000 |
|
|
$ |
20,000 |
|
|
$ |
252,160 |
|
|
$ |
407,810 |
|
|
$ |
157,950 |
|
|
$ |
10,300 |
|
|
$ |
1,316,220 |
|
(effective
12-1-08)
|
|
2007
|
|
$ |
450,000 |
|
|
$ |
0 |
|
|
$ |
151,672 |
|
|
$ |
391,935 |
|
|
$ |
18,000 |
|
|
$ |
12,055 |
|
|
$ |
1,023,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
J. Schneider
|
|
2009
|
|
$ |
440,000 |
(3) |
|
$ |
75,000 |
|
|
$ |
262,005 |
(9) |
|
$ |
183,849 |
(13) |
|
$ |
304,800 |
(18) |
|
$ |
24,817 |
(22) |
|
$ |
1,290,471 |
|
President
and Chief
|
|
2008
|
|
$ |
406,000 |
|
|
$ |
25,000 |
|
|
$ |
207,544 |
|
|
$ |
233,360 |
|
|
$ |
134,792 |
|
|
$ |
10,300 |
|
|
$ |
1,016,996 |
|
Operating
Officer (effective 12-1-08)
|
|
2007
|
|
$ |
390,000 |
|
|
$ |
0 |
|
|
$ |
109,399 |
|
|
$ |
234,792 |
|
|
$ |
13,650 |
|
|
$ |
13,650 |
|
|
$ |
759,896 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
D. Cohen
|
|
2009
|
|
$ |
318,000 |
|
|
$ |
125,000 |
(7) |
|
$ |
225,297 |
(10) |
|
$ |
130,094 |
(14) |
|
$ |
193,980 |
|
|
$ |
9,193 |
(23) |
|
$ |
1,001,564 |
|
Chief
Administrative
|
|
2008
|
|
$ |
307,000 |
|
|
$ |
25,000 |
|
|
$ |
158,203 |
|
|
$ |
167,019 |
|
|
$ |
104,380 |
|
|
$ |
10,300 |
|
|
$ |
771,902 |
|
Officer &
Secretary
|
|
2007
|
|
$ |
295,000 |
|
|
$ |
0 |
|
|
$ |
63,828 |
|
|
$ |
188,101 |
|
|
$ |
53,100 |
|
|
$ |
12,055 |
|
|
$ |
612,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin
S. Wampler
|
|
2009
|
|
$ |
280,385 |
(4) |
|
$ |
75,000 |
|
|
$ |
(162,282 |
)
(11) |
|
$ |
(37,593 |
)
(15) |
|
$ |
0 |
(19) |
|
$ |
14,565 |
(24) |
|
$ |
369,950 |
(25) |
Executive
Vice
|
|
2008
|
|
$ |
280,000 |
|
|
$ |
25,000 |
|
|
$ |
158,203 |
|
|
$ |
167,019 |
|
|
$ |
94,150 |
|
|
$ |
10,300 |
|
|
$ |
734,672 |
|
President,
Chief Financial Officer and Assistant Secretary
|
|
2007
|
|
$ |
245,000 |
|
|
$ |
0 |
|
|
$ |
63,828 |
|
|
$ |
179,241 |
|
|
$ |
44,100 |
|
|
$ |
12,055 |
|
|
$ |
544,224 |
|
(1)
|
Mr.
Cohen retired from his position as Chief Executive Officer on November 30,
2008. Amount shown represents the portion of his annual base
salary of $614,000 that he earned through the date of his retirement. Mr.
Cohen has retained his position as Chairman of the Board.
|
(2)
|
Mr.
Lyon was promoted from President to Chief Executive Officer effective
December 1, 2008. Amount shown represents total salary paid to
Mr. Lyon during fiscal 2009. Mr. Lyon’s annual base salary as
President was $485,000 and his annual base salary as Chief Executive
Officer was $620,000 during fiscal 2009.
|
(3)
|
Mr.
Schneider was promoted from Chief Operating Officer to President and Chief
Operating Officer effective December 1, 2008. Amount shown
represents total salary paid to Mr. Schneider during fiscal
2009. Mr. Schneider’s annual base salary as Chief Operating
Officer was $420,000 and his base salary as President/Chief Operating
Officer was $500,000 during fiscal 2009.
|
(4)
|
Mr.
Wampler voluntarily left the Company on November 25, 2008. Amount shown
represents total salary paid to Mr. Wampler through his date of
departure.
|
(5)
|
Except
as otherwise indicated, amounts reflected in this column for fiscal 2009
represent the second and third (out of a total of three) payments payable
to the named executive officer in fiscal 2009 under a Retention Bonus Plan
the Company implemented in fiscal 2008. The second payment was payable on
May 30, 2008, and the third payment was payable on August 29, 2008,
provided the executive remained employed by the Company on those dates.
The amount of the second payment under this plan was equal to the first
payment, and the third and final payment was equal to the sum of the first
two payments.
|
(6)
|
Amount
represents a retirement severance payment the Committee granted to Mr.
Cohen upon his retirement from his position as Chief Executive Officer on
November 30, 2008. This amount, together with the $460,495 Mr. Cohen
earned as base salary through the date of his retirement, was the base
amount used to determine Mr. Cohen’s annual incentive based compensation
under the EOBP09.
|
(7)
|
Includes
a special award of $50,000 paid to Mr. Gary Cohen for his exceptional
service in resolving the litigation that resulted from the failed merger
between the Company and Genesco Inc., and $75,000 paid under the Retention
Plan.
|
(8)
|
The
amounts in this column for fiscal 2009 reflect the amount of compensation
expense recognized by the Company for the restricted shares granted in
fiscal 2009, as well as in prior years, to each named executive officer
and exclude the estimate of forfeitures related to time based vesting. The
grant date fair market value of the restricted shares has been computed in
accordance with FAS123(R). For further information regarding the valuation
of restricted shares please see Note 9 to the Company’s financial
statements filed with the SEC on Form 10-K on May 5, 2009. The amounts
shown reflect the Company’s accounting expense for these stock awards and
do not necessarily reflect the actual value that may be recognized by a
named executive officer.
|
(9)
|
In
addition to shares granted as part of annual compensation, Mr. Schneider
was granted 25,000 restricted shares as part of a special equity award for
his exceptional service in resolving the failed merger between the Company
and Genesco Inc.
|
(10)
|
In
addition to shares granted as part of annual compensation Mr. Gary Cohen
was granted 35,000 restricted shares as part of a special equity award for
his exceptional service in resolving the litigation that resulted from the
failed merger between the Company and Genesco Inc.
|
(11)
|
In
addition to shares granted as part of annual compensation Mr. Wampler was
granted 25,000 restricted shares as part a special equity award for his
exceptional service in resolving the failed merger between the Company and
Genesco Inc. Mr. Wampler voluntarily left the Company on November 25,
2008, thereby forfeiting all payments under the EOBP09, including
entitlement to any unvested shares.
|
(12)
|
The
amounts in this column for fiscal 2009 reflect the amount of compensation
expense recognized by the Company for the stock options granted in fiscal
2009, as well as in prior years, to each named executive officer and
excludes the estimate of forfeitures related to time based vesting. The
grant date fair market value of the stock options granted has been
computed in accordance with FAS123(R). For further information regarding
the valuation of stock options granted please see Note 9 to the Company’s
financial statements filed with the SEC on Form 10-K on May 5, 2009. The
amounts shown reflect the Company’s accounting expense for these option
awards and do not reflect the actual value that may be recognized by a
named executive officer.
|
(13)
|
In
addition to options granted as part of annual compensation Mr. Schneider
was granted 25,000 options as part of a special equity award for his
exceptional service in resolving the failed merger between the Company and
Genesco Inc.
|
(14)
|
In
addition to options granted as part of annual compensation, Mr. Gary Cohen
was granted 35,000 options as part of a special equity award for his
exceptional service in resolving the litigation that resulted from the
failed merger between the Company and Genesco Inc.
|
(15)
|
In
addition to shares granted as part of annual compensation, Mr. Wampler was
granted 25,000 options as part of a special equity award for his
exceptional service in resolving the failed merger between the Company and
Genesco Inc. Mr. Wampler voluntarily left the Company on November 25,
2008, thereby forfeiting all payments under the EOBP09, including
entitlement to any unvested options.
|
(16)
|
Non-equity
incentive plan compensation is listed for the fiscal year in which such
compensation was earned. Payments of such compensation were made to the
named executive officer in the next succeeding fiscal year.
|
(17)
|
Includes
non-equity incentive plan compensation of $261,354 awarded prior to
December 1, 2008 while Mr. Lyon served as President and $129,813 awarded
after that date when he was promoted to Chief Executive
Officer.
|
(18)
|
Includes
non-equity incentive plan compensation of $211,050 awarded prior to
December 1, 2008 while Mr. Schneider served as Chief Operating Officer and
$93,750 awarded after that date when he was promoted to President/Chief
Operating Officer.
|
(19)
|
Mr.
Wampler voluntarily left the Company on November 25, 2008 thereby
forfeiting all payments under the EOBP09.
|
(20)
|
This
amount reflects the Company’s contribution to Mr. Alan Cohen’s profit
sharing and 401(k) plan account for fiscal 2009 in the amount of $6,900,
and the value of those benefits the Company provided to Mr. Alan Cohen
considered perquisites in the amount of $11,150. The
perquisites included payment of annual country club membership dues and
the tax gross up value for use of a Company vehicle.
|
(21)
|
This
amount reflects the Company’s contribution to Mr. Lyon’s profit sharing
and 401(k) plan account for fiscal 2009 in the amount of $9,193, and the
value of those benefits considered perquisites the Company provided to Mr.
Lyon in his capacity as Chief Executive Officer in the amount of
$5,457. The perquisites included payment of country club
membership dues and the reimbursement for use of a vehicle.
|
(22)
|
This
amount reflects the Company’s total contributions to Mr. Schneider’s
non-qualified deferred compensation plan (NQDCP), profit sharing and
401(k) plan accounts for fiscal 2009. Of this amount, $15,624 was the
Company’s contribution to Mr. Schneider’s NQDCP account, and $9,193 was
the Company’s contribution to his profit sharing and 401(k) plan
accounts.
|
(23)
|
This
amount reflects the Company’s contribution to Mr. Gary Cohen’s profit
sharing and 401(k) plan account for fiscal 2009 in the amount of
$9,193.
|
(24)
|
This
amount reflects the Company’s total contributions to Mr. Wampler’s NQDCP,
profit sharing and 401(k) plan accounts for fiscal 2009. Of this amount,
$7,665 was the Company’s contribution to Mr. Wampler’s NQDCP account, and
$6,900 was the Company’s contribution to his profit sharing and 401(k)
plan accounts.
|
(25) |
This
amount excludes the amount of equity compensation expense reversed by the
Company with respect to the restricted shares and options granted to Mr.
Wampler as part of his annual compensation. The amount of equity
compensation expense reversed by the Company are indicated in the ‘Stock
Awards’ column and ‘Option Awards’ column for Mr.
Wampler. |
|
|
|
|
Date
of
|
|
Estimated
Future Payouts Under Non-Equity Incentive Plan Awards
|
|
|
All
Other Stock Awards: Number of Shares of Stock or
|
|
|
All
Other Option Awards: Number of Securities Underlying
|
|
|
Exercise
or Base Price of Option
|
|
|
Grant
Date Fair Value of Stock and Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan
H. Cohen
|
|
3/11/08
|
|
3/11/08
|
|
|
— |
(1) |
|
|
|
|
|
— |
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/08
|
|
3/11/08
|
|
|
— |
|
|
|
476,425 |
(2) |
|
|
588,525 |
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/08
|
|
3/11/08
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
35,000 |
|
|
|
70,000 |
|
|
$ |
4.51 |
|
|
$ |
291,389 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glenn
S. Lyon
|
|
3/11/08
|
|
3/11/08
|
|
|
75,000 |
(4) |
|
|
— |
|
|
|
150,000 |
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/08
|
|
3/11/08
|
|
|
— |
|
|
|
131,750 |
(6) |
|
|
162,750 |
(7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/08
|
|
3/11/08
|
|
|
— |
|
|
|
272,813 |
(8) |
|
|
327,375 |
(9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/08
|
|
3/11/08
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30,000 |
|
|
|
60,000 |
|
|
$ |
4.51 |
|
|
$ |
249,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
J. Schneider
|
|
3/11/08
|
|
3/11/08
|
|
|
62,500 |
(4) |
|
|
|
|
|
|
125,000 |
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/08
|
|
3/11/08
|
|
|
— |
|
|
|
93,750 |
(10) |
|
|
112,500 |
(11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/08
|
|
3/11/08
|
|
|
— |
|
|
|
204,750 |
(12) |
|
|
252,000 |
(13) |
|
|
55,000 |
(21) |
|
|
75,000 |
(22) |
|
$ |
4.51 |
|
|
$ |
391,128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
D. Cohen
|
|
3/11/08
|
|
3/11/08
|
|
|
37,500 |
(4) |
|
|
|
|
|
|
75,000 |
(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/08
|
|
3/11/08
|
|
|
— |
|
|
|
184,200 |
(14) |
|
|
214,900 |
(15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/08
|
|
3/11/08
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
60,000 |
(23) |
|
|
70,000 |
(24) |
|
$ |
4.51 |
|
|
$ |
404,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin
S. Wampler
|
|
3/11/08
|
|
3/11/08
|
|
$ |
— |
(16) |
|
|
|
|
|
$ |
— |
(16) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/08
|
|
3/11/08
|
|
|
— |
|
|
|
168,000 |
(14) |
|
|
196,000 |
(15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/11/08
|
|
3/11/08
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
50,000 |
(25) |
|
|
35,000 |
(26) |
|
$ |
4.51 |
|
|
$ |
292,270 |
|
(1)
|
Mr. Cohen
retired from his position as Chief Executive Officer during fiscal 2009
and is therefore ineligible for any payments under the
LTIB09.
|
(2)
|
Reflects
the target amount payable to Mr. Alan Cohen under the Company’s
fiscal year 2009 annual executive officer bonus program (EOBP09).
Estimated target EOBP09 payment amounts are based on a percentage of each
named executive officer’s base salary. For Mr. Alan Cohen
the target percentage is 85% of base salary. Because
Mr. Cohen retired from his position as Chief Executive Officer during
fiscal 2009, the base salary amount used to determine his eligibility
amounts under the EOBP09 was the $460,495 in base salary he earned through
his retirement date, plus his retirement severance amount of $100,000,
totaling $560,495. Amounts actually paid under this program to
Mr. Cohen for fiscal 2009 are reflected in the Summary Compensation
Table under the column heading “Non-Equity Incentive Plan
Compensation.”
|
(3)
|
Reflects
the maximum amount that would be payable to Mr. Alan Cohen under the
annual EOBP09. The estimated maximum payment amounts under the EOBP09 for
Mr. Cohen is set at 105% of his base salary. Amounts actually paid
under this program to Mr. Cohen for fiscal 2009 are reflected in the
Summary Compensation Table under the column heading “Non-Equity Incentive
Plan Compensation.”
|
(4)
|
Reflects
the threshold amount that would be payable to the respective named
executive officer under the LTIB09 if the Company were to achieve at least
90% of the goal under the LTIB09: achievement of improved adjusted
operating earnings over three fiscal years by an annual average of 10%
over adjusted operating earnings for fiscal year 2008. If the
stated goal is achieved, the amount reflected in this column would not be
payable until after the close of fiscal year 2011.
|
(5)
|
Reflects
the maximum amount that would be payable to the respective named executive
officer under the LTIB09 if the Company were to fully achieve the stated
goal under the LTIB09: achievement of improved adjusted operating earnings
over three fiscal years by an annual average of 10% over adjusted
operating earnings for fiscal year 2008. If the stated goal is achieved,
amounts reflected in this column would not be payable until after the
close of fiscal year 2011.
|
(6)
|
Reflects
the target amount payable to Mr. Lyon under the Company’s EOBP09 in
his capacity as Chief Executive Officer. Estimated target EOBP09 payment
amounts are based on a percentage of each named executive officer’s base
salary. The target percentage for Mr. Lyon as Chief
Executive Officer was 85% of his $620,000 base salary in such
capacity. Mr. Lyon was Chief Executive Officer for the
final three months of fiscal 2009, so the prorated amount of his base
salary in such capacity used to determine target eligibility amounts under
the EOBP09 was $155,000. Amounts actually paid under this program to
Mr. Lyon in his capacity as Chief Executive Officer for fiscal 2009
are reflected in the Summary Compensation Table under the column heading
“Non-Equity Incentive Plan
Compensation.”
|
(7)
|
Reflects
the maximum amount that would be payable to Mr. Lyon in his capacity
as Chief Executive Officer under the Company’s EOBP09. The estimated
maximum EOBP09 payment amounts are based on a percentage of
Mr. Lyon’s annual base salary. The maximum percentage for
Mr. Lyon as Chief Executive Officer was 105% of his $620,000 base
salary in such capacity. Mr. Lyon was Chief Executive
Officer for the final three months of fiscal 2009, so the prorated amount
of his base salary in such capacity used to determine maximum eligibility
amounts under the EOBP09 was $155,000. Amounts actually paid
under this program to Mr. Lyon in his capacity as Chief Executive
Officer for fiscal 2009 are reflected in the Summary Compensation Table
under the column heading “Non-Equity Incentive Plan
Compensation.”
|
(8)
|
Reflects
the target amount payable to Mr. Lyon under the Company’s EOBP09 in
his capacity as President. The estimated maximum EOBP09 payment amounts
are based on a percentage of Mr. Lyon’s annual base
salary. The target percentage for Mr. Lyon as President
was 75% of his $485,000 base salary in such
capacity. Mr. Lyon was President for the first nine months
of fiscal 2009, so the prorated amount of his base salary in such capacity
used to determine eligibility amounts under the EOBP09 was $363,750.
Amounts actually paid under this program to Mr. Lyon in his capacity
as President for fiscal 2009 are reflected in the Summary Compensation
Table under the column heading “Non-Equity Incentive Plan
Compensation.”
|
(9)
|
Reflects
the maximum amount that would be payable to Mr. Lyon in his capacity
as President under the Company’s EOBP09. The estimated maximum
EOBP09 payment amounts are based on a percentage of Mr. Lyon’s annual
base salary. The maximum percentage for Mr. Lyon as
President was 90% of his $485,000 base salary in such
capacity. Mr. Lyon was President for the first nine months
of fiscal 2009, so the prorated amount of his base salary in such capacity
used to determine eligibility amounts under the EOBP09 was $363,750.
Amounts actually paid under this program to Mr. Lyon in his capacity
as President for fiscal 2009 are reflected in the Summary Compensation
Table under the column heading “Non-Equity Incentive Plan
Compensation.”
|
(10)
|
Reflects
the target amount payable to Mr. Schneider under the Company’s EOBP09
in his capacity as President and Chief Operating Officer. The
target percentage for Mr. Schneider as President and Chief Operating
Officer was 75% of his base salary in such
capacity. Mr. Schneider was President and Chief Operating
Officer for the final three months of fiscal 2009, so the prorated amount
of his base salary in such capacity used to determine his maximum
eligibility amounts under the EOBP09 was $125,000. Amounts actually paid
under this program to Mr. Schneider in his capacity as President and
Chief Operating Officer for fiscal 2009 are reflected in the Summary
Compensation Table under the column heading “Non-Equity Incentive Plan
Compensation.”
|
(11)
|
Reflects
the maximum amount that would be payable to Mr. Schneider in his
capacity as President and Chief Operating Officer under the annual EOBP09.
The maximum percentage for Mr. Schneider as President and Chief
Operating Officer was 90% of his $500,000 base salary in such
capacity. Mr. Schneider was President and Chief Operating
Officer for the final three months of fiscal 2009, so the prorated amount
of his base salary in such capacity used to determine his maximum
eligibility amounts under the EOBP09 was $125,000. Amounts actually paid
under this program to Mr. Schneider in his capacity as President and
Chief Operating Officer for fiscal 2009 are reflected in the Summary
Compensation Table under the column heading “Non-Equity Incentive Plan
Compensation.”
|
(12)
|
Reflects
the target amount payable to Mr. Schneider under the Company’s EOBP09
in his capacity as Chief Operating Officer. The target
percentage for Mr. Schneider as Chief Operating Officer was 65% of
his $420,000 base salary in such capacity. Mr. Schneider
was Chief Operating Officer for the first nine months of fiscal 2009, so
the prorated amount of his base salary in such capacity used to determine
his target eligibility amounts under the EOBP09 was $315,000. Amounts
actually paid under this program to Mr. Schneider in his capacity as
Chief Operating Officer for fiscal 2009 are reflected in the Summary
Compensation Table under the column heading “Non-Equity Incentive Plan
Compensation.”
|
(13)
|
Reflects
the maximum amount that would be payable to Mr. Schneider in his
capacity as Chief Operating Officer under the annual EOBP09. The maximum
percentage for Mr. Schneider as Chief Operating Officer was 80% of
his $420,000 base salary in such capacity. Mr. Schneider
was Chief Operating Officer for the first nine months of fiscal 2009, so
the prorated amount of his base salary in such capacity used to determine
his maximum eligibility amounts under the EOBP09 was $315,000. Amounts
actually paid under this program to Mr. Schneider in his capacity as
Chief Operating Officer for fiscal 2009 are reflected in the Summary
Compensation Table under the column heading “Non-Equity Incentive Plan
Compensation.”
|
(14)
|
Reflects
the target amount payable to the respective named executive officer under
the annual EOBP09. Estimated target EOBP09 payment amounts are based on a
percentage of each named executive officer’s base salary: For
Mr. Gary Cohen and Mr. Kevin Wampler the target percentage was
60% of their respective annual base salaries. Amounts actually paid under
this program to each named executive officer for fiscal 2009 are reflected
in the Summary Compensation Table under the column heading “Non-Equity
Incentive Plan Compensation.”
|
(15)
|
Reflects
the maximum amount that would be payable to the respective named executive
officer under the annual EOBP09. For Mr. Gary Cohen and
Mr. Kevin Wampler the maximum percentage was 70% of their respective
annual base salary. Amounts actually paid under this program to each named
executive officer for fiscal 2009 are reflected in the Summary
Compensation Table under the column heading “Non-Equity Incentive Plan
Compensation.”
|
(16)
|
Mr. Wampler
voluntarily left the Company on November 25, 2008 thereby forfeiting all
potential payments under the LTIB09.
|
(17)
|
Amounts
reflected in this column show the number of restricted shares granted to
each named executive officer in fiscal 2009. The restricted shares granted
vest under a three-year cliff-vesting schedule where all restrictions on
the shares lapse and the shares granted vest on March 11,
2011.
|
(18)
|
Amounts
reflected in this column show the number of stock options granted to each
named executive officer in fiscal 2009. Except as otherwise indicated the
options granted have a tiered vesting schedule whereby 10% vest one year
from the grant date, 20% vest two years from the grant date, 30% vest
three years from the grant date and the remaining 40% vest four years from
the grant date.
|
(19)
|
The
amount reflected in this column shows the exercise price which was
calculated as the average of the high and low sales price of the Company’s
common stock traded on the grant date of March 11, 2008.
|
(20)
|
The
amount reflected in this column shows the grant date fair value of
restricted shares and of stock options computed in accordance with
FAS123(R). For stock option awards the fair market value was calculated by
multiplying the Black-Scholes value by the number of options granted. The
Black-Scholes value for stock options granted in fiscal 2009 to each of
the named executive officers was $1.91. For restricted share awards, the
fair value was calculated by multiplying the average of the high and low
sales price of the Company’s stock on the NASDAQ on the grant
date.
|
(21)
|
In
addition to 30,000 restricted shares granted as part of annual
compensation, Mr. Schneider was granted 25,000 restricted shares as
part of a special equity award for his exceptional service in resolving
the failed merger between the Company and Genesco Inc.
|
(22)
|
In
addition to 50,000 stock options granted as part of annual compensation,
Mr. Schneider was granted 25,000 stock options as part of a special
equity award for his exceptional service in resolving the failed merger
between the Company and Genesco Inc. The 25,000 stock options granted as
part of a special equity award have a two year vesting schedule whereby
12,500 options vest on March 11, 2009 and the remaining 12,500 options
vest on March 11, 2010.
|
(23)
|
In
addition to 25,000 restricted shares granted as part of annual
compensation, Mr. Gary Cohen was granted 35,000 restricted shares as
part of a special equity award for his exceptional service in resolving
the litigation that resulted from the failed merger between the Company
and Genesco Inc.
|
(24)
|
In
addition to 35,000 stock options granted as part of annual compensation,
Mr. Gary Cohen was granted 35,000 stock options as part of a special
equity award for his exceptional service in resolving the litigation that
resulted from the failed merger between the Company and Genesco Inc. The
35,000 stock options granted as part of a special equity award have a two
year vesting schedule whereby 17,500 options vest on March 11, 2009 and
the remaining 17,500 options vest on March 11, 2010.
|
(25)
|
In
addition to 25,000 restricted shares granted as part of annual
compensation, Mr. Wampler was granted 25,000 restricted shares as
part of a special equity award for his exceptional service in resolving
the failed merger between the Company and Genesco Inc. Mr. Wampler
voluntarily left the Company on November 25, 2008 thereby forfeiting all
unvested Company shares granted to him in connection with his employment
with the Company.
|
(26)
|
In
addition to 35,000 stock options granted as part of annual compensation,
Mr. Wampler was granted 25,000 stock options as part a special equity
award for his exceptional service in resolving the failed merger between
the Company and Genesco Inc. The 25,000 stock options granted as part of a
special equity award have a two year vesting schedule whereby 12,500
options vest on March 11, 2009 and the remaining 12,500 options vest on
March 11, 2010. Mr. Wampler voluntarily left the Company on November
25, 2008 thereby forfeiting all unvested Company stock options granted to
him in connection with his employment with the
Company.
|
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END TABLE
|
|
|
|
|
|
|
|
Number
of Securities Underlying Unexercised Options
(#)
|
|
|
Number
of Securities Underlying Unexercised Options
(#)
(2)
|
|
|
Option Exercise Price
($)
|
|
|
|
Number
of Shares or Units of Stock That Have Not Vested
(#)
|
|
|
Market
Value of Shares or Units of Stock That Have Not Vested
($)
(3)
|
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan
H. Cohen (1)
|
|
|
40,000 |
|
|
|
— |
|
|
$ |
14.29 |
|
08/31/2015
|
|
|
|
|
|
|
|
|
|
55,000 |
|
|
|
— |
|
|
$ |
16.07 |
|
03/29/2016
|
|
|
|
|
|
|
|
|
|
80,000 |
|
|
|
— |
|
|
$ |
12.03 |
|
03/19/2017
|
|
|
|
|
|
|
|
|
|
70,000 |
|
|
|
— |
|
|
$ |
4.51 |
|
03/11/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glenn
S. Lyon
|
|
|
35,000 |
|
|
|
— |
|
|
$ |
4.70 |
|
09/10/2011
|
|
|
20,000 |
(4) |
|
$ |
83,000 |
|
|
|
|
15,000 |
|
|
|
— |
|
|
$ |
8.15 |
|
02/07/2012
|
|
|
25,000 |
(5) |
|
$ |
103,750 |
|
|
|
|
35,000 |
|
|
|
— |
|
|
$ |
5.65 |
|
02/04/2013
|
|
|
30,000 |
(6) |
|
$ |
124,500 |
|
|
|
|
40,000 |
|
|
|
— |
|
|
$ |
0.50 |
|
10/23/2013
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
— |
|
|
$ |
17.62 |
|
03/04/2014
|
|
|
|
|
|
|
|
|
|
|
|
18,000 |
|
|
|
12,000 |
|
|
$ |
14.29 |
|
08/31/2015
|
|
|
|
|
|
|
|
|
|
|
|
12,000 |
|
|
|
28,000 |
|
|
$ |
16.07 |
|
03/29/2016
|
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
45,000 |
|
|
$ |
12.03 |
|
03/19/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
$ |
4.51 |
|
03/11/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
J. Schneider
|
|
|
14,000 |
|
|
|
— |
|
|
$ |
4.00 |
|
04/26/2011
|
|
|
15,000 |
(4) |
|
$ |
62,250 |
|
|
|
|
12,000 |
|
|
|
— |
|
|
$ |
8.15 |
|
02/07/2012
|
|
|
25,000 |
(5) |
|
$ |
103,750 |
|
|
|
|
24,500 |
|
|
|
— |
|
|
$ |
5.65 |
|
02/04/2013
|
|
|
55,000 |
(6) |
|
$ |
228,250 |
|
|
|
|
40,000 |
|
|
|
— |
|
|
$ |
17.62 |
|
03/04/2014
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
10,000 |
|
|
$ |
14.29 |
|
08/31/2015
|
|
|
|
|
|
|
|
|
|
|
|
10,500 |
|
|
|
24,500 |
|
|
$ |
16.07 |
|
03/29/2016
|
|
|
|
|
|
|
|
|
|
|
|
3,000 |
|
|
|
27,000 |
|
|
$ |
12.03 |
|
03/19/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
$ |
4.51 |
|
03/11/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000 |
(7) |
|
$ |
4.51 |
|
03/11/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
D. Cohen
|
|
|
21,000 |
|
|
|
— |
|
|
$ |
8.15 |
|
02/07/2012
|
|
|
|
|
|
|
|
|
|
|
|
24,500 |
|
|
|
— |
|
|
$ |
5.65 |
|
02/04/2013
|
|
|
7,000 |
(4) |
|
$ |
29,050 |
|
|
|
|
35,000 |
|
|
|
— |
|
|
$ |
17.62 |
|
03/04/2014
|
|
|
25,000 |
(5) |
|
$ |
103,750 |
|
|
|
|
12,000 |
|
|
|
8,000 |
|
|
$ |
14.29 |
|
08/31/2015
|
|
|
60,000 |
(6) |
|
$ |
249,000 |
|
|
|
|
6,000 |
|
|
|
14,000 |
|
|
$ |
16.07 |
|
03/29/2016
|
|
|
|
|
|
|
|
|
|
|
|
1000 |
|
|
|
9,000 |
|
|
$ |
12.03 |
|
03/19/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000 |
|
|
$ |
4.51 |
|
03/11/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000 |
(8) |
|
$ |
4.51 |
|
03/11/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin
S. Wampler
|
|
|
24,000 |
|
|
|
— |
|
|
$ |
4.00 |
|
04/26/2011
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
— |
|
|
$ |
8.15 |
|
02/07/2012
|
|
|
|
|
|
|
|
|
|
|
|
24,000 |
|
|
|
— |
|
|
$ |
5.65 |
|
02/04/2013
|
|
|
|
|
|
|
|
|
|
|
|
35,000 |
|
|
|
— |
|
|
$ |
17.62 |
|
03/04/2014
|
|
|
|
|
|
|
|
|
|
|
|
12,000 |
|
|
|
— |
|
|
$ |
14.29 |
|
08/31/2015
|
|
|
|
|
|
|
|
|
|
|
|
6,000 |
|
|
|
— |
|
|
$ |
16.07 |
|
03/29/2016
|
|
|
|
|
|
|
|
|
|
|
|
1,000 |
|
|
|
— |
|
|
$ |
12.03 |
|
03/19/2017
|
|
|
|
|
|
|
|
|
(1)
|
Mr. Alan
Cohen retired from his position as Chief Executive Officer on November 30,
2008. Pursuant to the equity award agreements entered into between the
Company and Mr. Cohen under the authority of the 2002 Stock Incentive
Plan, all awards of Company stock options and Company incentive stock
granted to Mr. Cohen vested on the date of Mr. Cohen’s
retirement.
|
(2)
|
Generally,
options outstanding will be exercisable at a price equal to the average of
the high and low price on the date of grant and, unless otherwise
indicated, vest on a tiered schedule over a four year period: 10% after
one year, 20% after two years, 30% after three years and
the remaining 40% after four years. All options expire ten years
from the date of grant.
|
(3)
|
The
values represented in this column have been calculated by multiplying
$4.15 (the closing price of the Company’s common stock on the last trading
day of fiscal 2009, which was February 27, 2009) by the number of shares
of stock.
|
(4)
|
Restricted
shares granted on March 29, 2006, have a three-year cliff-vesting schedule
and vest on March 29, 2009.
|
(5)
|
Restricted
shares granted on March 19, 2007, have a three-year cliff-vesting schedule
and vest on March 19, 2010.
|
(6)
|
Restricted
shares granted on March 11, 2008, have a three-year cliff-vesting schedule
and vest on March 11, 2011.
|
(7)
|
Stock
options granted as part of a special equity award to Mr. Schneider in
the amount of 25,000 have a two year vesting schedule whereby 12,500
options vest on March 11, 2009 and the remaining 12,500 options vest on
March 11, 2010.
|
(8)
|
Stock
options granted as part of a special equity award to Mr. Gary Cohen
in the amount of 35,000 have a two year vesting schedule whereby 15,500
options vest on March 11, 2009 and the remaining 15,500 options vest on
March 11, 2010.
|
FISCAL
YEAR 2009 OPTION EXERCISES AND STOCK VESTED TABLE
|
|
|
|
|
|
|
|
|
Number of Shares
Acquired on Exercise
(#)
|
|
|
Value Realized
on
Exercise
($)
|
|
|
Number of Shares
Acquired on Vesting
(#)
|
|
|
Value Realized
on
Vesting
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan
H. Cohen
|
|
|
— |
|
|
|
— |
|
|
|
80,000 |
|
|
$ |
408,400
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glenn
S. Lyon
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
J. Schneider
|
|
|
—
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
D. Cohen
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin
S. Wampler
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
(1)
|
Amount
for Mr. Alan Cohen reflects the value determined by multiplying the
number of shares vested by the average of the high and low sales price of
the Company’s shares on November 28, 2008 ($5.10), the active
market-trading date immediately preceding the actual vesting date of
November 30, 2008, which was a Sunday. Vesting of Mr. Cohen’s shares
occurred pursuant to the award agreements under which they were granted
which directed vesting of the shares upon the qualifying event of
retirement which occurred on November 30,
2008.
|
EQUITY
COMPENSATION PLAN INFORMATION
The
following table provides information with respect to compensation plans under
which equity securities of the Company are currently authorized for issuance to
employees or non-employees (such as directors, consultants, advisors, vendors,
customers, suppliers, or lenders), as of February 28, 2009:
|
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
(a)
|
|
Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in
column(a))
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by security holders (1)
|
|
|
3,222,930
|
|
|
|
$10.58
|
|
|
|
2,500,488
|
|
Equity
compensation plans not approved by security holders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
3,222,930
|
|
|
|
$10.58
|
|
|
|
2,500,488
|
|
(1)
|
These
shares are subject to awards made or to be made under the Company’s 1992
Employee Stock Incentive Plan, 2002 Stock Incentive Plan, Non-Employee
Director Stock Option Plan, and Employee Stock Purchase
Plan.
|
|
|
Executive
Contributions in Last Fiscal Year
($)
(1)
|
|
|
Registrant
Contributions in Last Fiscal Year
($)
(2)
|
|
|
Aggregate
Earnings in Last Fiscal Year
($)
(3)
|
|
|
Aggregate
Withdrawals /
Distributions
($)
|
|
|
Aggregate
Balance at Last Fiscal Year-End
($)
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan
H. Cohen
|
|
$ |
1,753 |
|
|
|
—
|
|
|
$ |
( 614 |
) |
|
$ |
1,094 |
(5) |
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Glenn
S. Lyon
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
J. Schneider
|
|
$ |
17,134 |
|
|
$ |
15,624 |
|
|
$ |
(7,481 |
) |
|
|
—
|
|
|
$ |
27,583 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary
D. Cohen
|
|
$ |
1,564 |
|
|
|
—
|
|
|
$ |
( 696 |
) |
|
|
—
|
|
|
$ |
862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin
S. Wampler
|
|
$ |
17,385 |
|
|
$ |
7,665 |
|
|
$ |
(5,682 |
) |
|
$ |
21,923 |
(6) |
|
|
—
|
|
(1)
|
The
amounts deferred by each named executive officer have also been reported
as compensation for each respective named executive officer in the Summary
Compensation Table for fiscal year 2009.
|
(2)
|
All
of the amounts reported in this column have also been included in the
Summary Compensation Table for fiscal year 2009 under the column heading
“All Other Compensation” for the respective named executive
officer.
|
(3)
|
Amounts
listed represent the aggregate loss from NQDC Plan participation. Amounts
in this column are not includable in the Summary Compensation Table for
fiscal year 2009.
|
(4)
|
Represents
the balance of the participant’s account under the NQDC Plan as of March
1, 2009. The full amounts of the reported aggregate balances for the
respective named executive officers were reflected in prior years’ Summary
Compensation Tables.
|
(5)
|
Mr.
Alan Cohen’s fund balance was distributed to him in connection with his
retirement on November 30, 2008.
|
(6)
|
Mr.
Wampler’s fund balance was distributed upon his voluntary resignation from
the Company on November 25, 2008.
|
The
Company is a party to amended and restated employment agreements with the
following named executive officers: Glenn S. Lyon, the Company’s Chief Executive
Officer, Gary D. Cohen, the Company’s Chief Administrative Officer &
Secretary, and Steven J. Schneider, the Company’s President and Chief Operating
Officer. Under these agreements each of the executive officers will be entitled
to certain payment provisions if they are terminated under any of the following
circumstances:
|
·
|
Without
Cause by the Company or resignation by executive for Good Reason 30 days
before or two years after a Change in
Control;
|
|
·
|
Without
Cause by the Company at the end of the employment term upon the Company’s
non-renewal of the agreement;
|
|
·
|
Resignation
by executive without Good Reason following a Change in
Control;
|
|
·
|
Without
Cause by the Company or resignation by executive for Good Reason other
than during a Change in Control;
and
|
|
·
|
For
Cause by the Company or resignation by the executive without Good
Reason.
|
Generally,
pursuant to these agreements the terms “Cause”, “Good Reason” and “Change in
Control” are defined as follows:
“Cause” means:
(A)
|
the
willful and continued failure by an executive to perform his material
duties;
|
(B)
|
the
willful or intentional engaging by an executive in conduct within the
scope of his employment that causes material injury to the
Company;
|
(C)
|
the
executive’s conviction for, or a plea of nolo contendre to, the commission
of a felony involving moral turpitude;
or
|
(D)
|
a
material breach of the executive’s covenants of non-competition and
confidentiality that causes a material injury to the
Company.
|
“Good Reason” means if, other
than for cause, any of the following has occurred:
(A)
|
any
reduction in the executive’s base salary or annual bonus opportunity
(except for across the board reductions for all similarly situated
executives of the Company);
|
(B)
|
a
transfer of the executive’s primary workplace by more than thirty-five
(35) miles from its location;
|
(C)
|
a
material breach of the agreement by the Company;
or
|
(D)
|
if
such termination of employment occurs within 30 days prior to or
two years following a Change in Control, then any one of the
following: a substantial reduction in an executive’s authority,
duties or responsibilities, or the assignment of any duties or
responsibilities inconsistent with an executive’s position with the
Company.
|
“Change in Control” means the
consummation of one or more of the following:
(A)
|
the
sale, exchange, lease or other disposition, in one or a series of related
transactions, of all or substantially all of the assets of the Company to
any person or group;
|
(B)
|
any
person or group, other than the three founders of the Company, is or
becomes the beneficial owner, directly or indirectly, of more than 35% of
the total voting power of the voting stock of the
Company;
|
(C)
|
a
merger, consolidation or similar reorganization of the Company with or
into another entity, if the shareholders of the common stock of the
Company immediately prior to such transaction do not own a majority of the
voting power of the voting stock of the surviving company or its parent
immediately after the transaction in substantially the same proportions as
immediately prior to such transaction;
or
|
(D)
|
if
during any 12-month period, a majority of the then current directors cease
for any reason to constitute a majority of the
Board.
|
During
fiscal 2009, Alan H. Cohen retired as Chief Executive Officer of the Company
effective November 30, 2008, and Kevin S. Wampler voluntarily departed as the
Company’s Chief Financial Officer effective November 25, 2008. With the
exception of the discussion under the section captioned “Termination of an
Executive for Cause or by Executive Without Good Reason,” these two executive
officers have been omitted from the following charts because the Company would
not owe any payment to them if the stated triggering event were to
occur.
The
Company also is a party to an employment agreement with Edward W. Wilhelm, who
was appointed the Company’s Executive Vice President and Chief Financial Officer
on March 30, 2009, a date that occurred after the end of the Company’s 2009
fiscal year-end. A discussion of the payment provisions upon a termination or a
change in control under Mr. Wilhelm’s employment agreement is not included
herein because he was not employed by the Company on February 28, 2009, which is
the calculation date for the payments to the other named executive officers
discussed below.
Termination
of an Executive 30 Days Before or Two Years After a Change In
Control
If an
executive is terminated by the Company without Cause (other than by reason of
death or disability) or resigns for Good Reason, in either case during the
period that begins 30 days prior to a Change in Control and ends two years
following a Change in Control, then each such executive will be entitled to
receive benefits equal to: (1) such employee benefits, if any, as to which the
executive may be entitled under the Company’s employee benefit plans according
to their terms, (2) a lump sum payment that is derived by adding the executive’s
base salary with his annual target bonus and the value of any other bonus the
executive could have earned during the year of termination, and multiplying that
figure by 2.5, and (3) health insurance benefits for each executive and his
dependents for two years. Each of the agreements also provides that to the
extent any of the payments under the agreements become subject to an excise tax
imposed by Section 4999 or 280G of the Code, then the executive would receive an
additional gross-up payment to indemnify him for the effect of such a
tax.
The
amounts shown in the tables below do not include payments and benefits that are
provided on a non-discriminatory basis to salaried employees generally upon
termination of employment, including accrued salary, vacation pay, 401(k) plan
distributions, and welfare benefits provided to all employees (other than the
continuation of health insurance benefits, which is set forth in the tables
below). The chart below illustrates the potential payments that each named
executive officer would be entitled to if they were terminated by the Company
without Cause or such executive resigned for Good Reason with respect to a
Change in Control on February 28, 2009:
|
|
Lump
Sum Cash Payment (Base + Target Bonus x 2.5) (1)
|
|
|
Health
Insurance Benefits for two years (2)
|
|
|
|
|
Glenn
S. Lyon
|
|
|
$4,302,500
|
|
|
|
$22,176
|
|
|
|
$451,452
|
|
Steven
J. Schneider
|
|
|
$3,312,500
|
|
|
|
$22,176
|
|
|
|
$121,356
|
|
Gary
D. Cohen
|
|
|
$1,914,000
|
|
|
|
$17,424
|
|
|
|
0
|
|
(1)
|
This
amount is calculated by adding the named executive officer’s annual base
salary, plus the executive’s target annual bonus, plus the value of any
other bonus the named executive officer could have earned during the year
and multiplying it by 2.5. Although no payments have yet been made to any
of the named executive officers under the LTIB07, LTIB08 and LTIB09,
amounts under these long-term bonus plans could still be earned by the
named executive officer if they remain employed, therefore the maximum
amounts that could be payable under each of the three applicable LTIB
plans have been included in the multiplied figure. For Mr. Lyon the
total maximum amount that could be earned under the LTIB for fiscal 07, 08
and 09 is $450,000, for Mr. Schneider the maximum amount that could
be earned under the LTIB plans is $375,000, and for Mr. Gary Cohen
the maximum amount that could be earned under the LTIB plans is
$225,000.
|
(2)
|
The
estimated value of health insurance is based on the health insurance
coverage the Company carried for each named executive officer on February
28, 2009.
|
(3)
|
Each
named executive officer’s employment agreement provides that the Company
will pay a gross up payment in the event that amounts paid under the
agreement become subject to an excise tax imposed by Section 4999 of the
Internal Revenue Code. The amount of an applicable tax gross up payment
would be such that, after deduction of any excise tax on the covered
payment, the net amount retained by the executive officer would be equal
to the covered amount.
|
Termination
of an Executive Without Cause Upon Non-Renewal of Agreement
If an
executive is terminated by the Company without Cause at the end of his
employment term following the Company providing the executive with a notice of
non-renewal of his agreement, then each such executive will be entitled to
receive the following benefits: (1) such employee benefits, if any, as to which
the executive may be entitled under the Company’s employee benefit plans
according to their terms, (2) a lump sum payment equal to the executive’s base
salary, (3) health insurance benefits for each executive and his dependents for
one year, and (4) if the executive was eligible to receive a cash bonus for the
calendar year during which his employment was terminated, an amount equal to a
pro-rated portion (based upon the number of days during such calendar year the
executive was employed) of the annual bonus and any other bonus the executive
would have received during such calendar year had he remained employed through
the entire year.
The
following chart illustrates the potential payments that each executive would be
entitled to if the Company did not renew the executive’s agreement and the
executive was terminated by the Company without cause on February 28,
2009:
|
|
Lump
Sum Cash Payment Equal to Base Salary
(1)
|
|
|
Health
Insurance Benefits for one year
(2)
|
|
|
|
|
Glenn
S. Lyon
|
|
|
$620,000 |
|
|
|
$11,088 |
|
|
|
$901,167 |
|
Steven
J. Schneider
|
|
|
$500,000 |
|
|
|
$11,088 |
|
|
|
$754,800 |
|
Gary
D. Cohen
|
|
|
$318,000 |
|
|
|
$
8,712 |
|
|
|
$543,980 |
|
(1)
|
Amount
represents the named executive officer’s annual base salary as of February
28, 2009.
|
(2)
|
The
estimated value of health insurance is based on the health insurance
coverage the Company carried for each named executive officer on February
28, 2009.
|
(3)
|
Amount
represents the value of earned bonus payments for fiscal year 2009, plus
the maximum amount that could still be earned during fiscal 2009 by each
named executive under the LTIB for fiscal 2007, 2008, and 2009. For Mr.
Lyon, this amount is $450,000; for Mr. Schneider, the amount is $375,000;
and for Mr. Gary Cohen, the amount is
$225,000.
|
Termination
of an Executive by Resignation Without Good Reason Following a Change In
Control
If an
executive resigns without Good Reason during the 30 day period that begins on
the first anniversary of a Change in Control, such executive shall be entitled
to receive such employee benefits, if any, as to which the executive may be
entitled under the Company’s employee benefit plans according to their terms,
and a lump sum payment equal to the executive’s base salary.
The
following chart illustrates the potential payments that each executive would be
entitled to if they terminated their employment by resignation without Good
Reason on February 28, 2009, and such date was within the 30 day period
following the first anniversary of a Change in Control:
|
|
Lump
Sum Payment Equal to Base Salary
|
|
|
|
Glenn
S. Lyon
|
|
|
$620,000
|
|
0
|
|
Steven
J. Schneider
|
|
|
$500,000
|
|
0
|
|
Gary
D. Cohen
|
|
|
$318,000
|
|
0
|
|
(1)
|
Based
on current estimates no excise tax gross up would be payable to the
executive on the contemplated date.
|
Termination
of an Executive Other Than in Connection With a Change in Control
If an
executive is terminated by the Company without Cause (other than by reason of
death or disability) or if the executive resigns for Good Reason, in either case
other than within the period that begins 30 days prior to a Change in Control
and ends two years following a Change in Control, then each such executive will
be entitled to receive the following benefits: (1) such employee benefits, if
any, as to which the executive may be entitled under the Company’s employee
benefit plans according to their terms; (2) a lump sum payment equal to: (a)
with respect to Mr. Lyon, two times his base salary, (b) with respect to Mr.
Schneider, 1.5 times his base salary, and (c) with respect to Mr. Gary Cohen,
one times his base salary; (3) health insurance benefits for each executive and
his dependents for one year; and (4) if the executive was eligible to receive a
cash bonus for the calendar year during which his employment was terminated, an
amount equal to the greater of (a) a pro-rated portion (based upon the number of
days during such calendar year the executive was employed) of the annual bonus
and any other bonus the executive would have received during such calendar year
had he remained employed through the entire year, or (b) the average annual
bonus actually paid to the executive over the three full fiscal years prior to
the termination date.
The
following chart illustrates the potential payments to which each executive would
be entitled if he were terminated by the Company without Cause or the executive
resigned for Good Reason other than in connection with a Change in Control on
February 28, 2009:
|
|
Lump
Sum Cash Payment (1)
|
|
|
Health
Insurance Benefits for one year (2)
|
|
|
|
|
Glenn
S. Lyon
|
|
$ |
1,240,000 |
(4) |
|
$ |
11,088 |
|
|
$ |
901,167 |
|
Steven
J. Schneider
|
|
$ |
750,000 |
(5) |
|
$ |
11,088 |
|
|
$ |
754,800 |
|
Gary
D. Cohen
|
|
$ |
318,000 |
|
|
$ |
8,712 |
|
|
$ |
543,980 |
|
(1)
|
Unless
indicated otherwise, amount represents the named executive officer’s
annual base salary as of February 28,
2009.
|
(2)
|
The
estimated value of health insurance is based on the health insurance
coverage the Company carried for each named executive officer on February
28, 2009.
|
(3)
|
Amount
represents the value of earned bonus payments for fiscal year 2009, plus
the maximum amount that could still be earned during fiscal 2009 by each
named executive officer under the LTIB for fiscal 2007, 2008, and 2009.
For Mr. Lyon, this amount is $450,000; for Mr. Schneider, the amount is
$375,000; and for Mr. Gary Cohen, the amount is
$225,000.
|
(4)
|
Amount
reflects a cash payment equal to 2 times the base salary for Mr.
Lyon.
|
(5)
|
Amount
reflects a cash payment equal to 1.5 times the base salary for Mr.
Schneider.
|
Termination
of an Executive for Cause or by Executive Without Good Reason
If an
executive is terminated by the Company for Cause, or the executive resigns
without Good Reason, then such executive would be entitled to receive his base
salary through the date of termination, any earned but unpaid portion of the
executive’s annual performance bonus, reimbursement for any unreimbursed
business expenses incurred by the executive in accordance with Company policy
prior to the executive’s termination date, and such
employee
benefits, if any, as to which the executive may be entitled under the Company’s
employee benefit plans according to their terms.
During
fiscal year 2009, Alan H. Cohen retired as the Chief Executive Officer of the
Company effective as of November 30, 2008. In accordance with Mr.
Alan Cohen’s Retirement Agreement (previously disclosed pursuant to the
Company’s Current Report on Form 8-K filed on December 2, 2008), the Company
paid Mr. Alan Cohen a retirement bonus amount of $100,000 in addition to the
amount of base salary he had earned through the date of his
termination. In addition, effective November 25, 2008, Kevin S.
Wampler voluntarily departed as the Company’s Chief Financial
Officer. The Company did not make any payment to Mr. Wampler in
connection with his termination other than the amount of base salary he had
earned through the date of his departure.
The following
chart illustrates the potential payments that each executive would be entitled
to if they were terminated by the Company for Cause or the executive resigned
without Good Reason on February 28, 2009:
|
|
|
|
|
Annual
Performance Bonus (2)
|
|
Glenn
S. Lyon
|
|
0
|
|
|
0
|
|
Steven
J. Schneider
|
|
0
|
|
|
0
|
|
Gary
D. Cohen
|
|
0
|
|
|
0
|
|
(1)
|
The
executive would receive his base salary through the date his employment
terminated.
|
(2)
|
Amount
represents the unpaid portion of the executive’s annual performance bonus
for fiscal 2008, the year preceding the year his employment
terminated.
|
The Company’s
obligation to make any payments described above remains subject to such
executive’s continued compliance with the non-competition, non-solicitation and
confidentiality obligations set forth in their respective agreements, as well as
their execution of a general release in favor of the Company and its affiliates
in a form reasonably acceptable to the Company.
Director
Compensation
The
Compensation Committee reviews and sets director compensation at its first
meeting that follows the Company’s annual meeting. At the Company’s last annual
meeting the shareholders approved an amendment to the 2002 Stock Incentive Plan
that eliminated the automatic grant of stock options to non-employee directors
and provided the Committee with the discretion to award both stock options and
incentive stock to such directors. The Committee then approved a new
compensation structure for the Company’s outside directors: upon the
commencement of service on the Board a new outside director is now eligible to
receive a grant of the Company’s shares valued at $30,000; thereafter each
outside director is eligible to receive an annual grant of Company shares valued
at $40,000 for continued service. For each outside director the fee component
for director services now consists of an annual retainer in the amount of
$20,000. Each outside director also receives $2,500 per Board meeting attended.
For those outside directors that comprise the Audit and Compensation and Stock
Option Committees a fee of $1,500 is payable per each such committee meeting
attended. The Chairman of the Audit Committee now receives an annual Chairman
fee of $7,000 and the Chairman of the Compensation Committee receives a Chairman
fee of $3,500.
The
following table summarizes the compensation paid to the Company’s non-employee
outside directors for the fiscal year ended February 28, 2009.
|
|
Fees
Earned or Paid in Cash
($)
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dolores
A. Kunda
Compensation
and Stock Option Committee
Class
I
|
|
$ |
14,000 |
|
|
$ |
11,096 |
(4) |
|
|
— |
|
|
|
|
|
$ |
25,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
Goldsmith
Audit
Committee
Class
III
|
|
$ |
57,500 |
|
|
$ |
24,986 |
|
|
$ |
8,564 |
|
|
$ |
15,000 |
(5) |
|
$ |
106,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bill
Kirkendall
Compensation
and Stock Option Committee
Audit
Committee
Class
II
|
|
$ |
54,750 |
|
|
$ |
24,986 |
|
|
$ |
8,564 |
|
|
|
|
|
|
$ |
88,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
P. Carmichael
Audit
Committee
Finance
Committee
Class
II
|
|
$ |
48,750 |
|
|
$ |
24,986 |
|
|
$ |
8,564 |
|
|
|
|
|
|
$ |
82,300 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Catherine
A. Langham
Audit
Committee
Compensation
and Stock Option Committee
Class
III
|
|
$ |
49,000 |
|
|
$ |
24,986 |
|
|
$ |
8,564 |
|
|
|
|
|
|
$ |
82,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alan
H. Cohen
Chairman
of the Board
Class
I
|
|
$ |
8,500 |
(6) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
$ |
8,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Larry
J. Sablosky
Class
II
|
|
$ |
8,500 |
(7) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
$ |
8,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
I. Klapper
Class
III
|
|
$ |
6,000 |
(8) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
$ |
6,000 |
|
(1)
|
Amounts
reflected in this column include the value of an outside director’s annual
retainer fee and additional fees for those directors who serve on a
committee of the Board.
|
(2)
|
Except
as indicated, each director was granted Class A Company shares in an
amount equal to $40,000 on the grant date. The grant date was July 22,
2008 and the fair market value of the stock was computed to equal the
average of the high and low price of the Company’s shares on that date
($10.56). Amounts reflected in this column have been computed in
accordance with FAS123(R) and reflect the amount expensed by the Company
in its annual financial statements for grants made in fiscal 2009, as well
as in prior years.
|
(3)
|
Amounts
in this column are calculated in accordance with FAS123(R) and represent
the amounts expensed by the Company during fiscal 2009 for options granted
to the respective directors in the prior year.
|
(4)
|
Ms. Kunda
was elected to the Board on October 16, 2008, and upon her election she
was granted Company shares in an amount equal to $30,000 on the grant
date.
|
(5)
|
The
Committee awarded Mr. Goldsmith $15,000 for his exceptional service
in resolving the failed merger between the Company and Genesco.
Inc.
|
(6)
|
Mr. Cohen
retired from his position as Chief Executive Officer on November 30, 2008
but retained his position as Chairman of the Board. Upon his retirement
Mr. Cohen became a non-employee director and thereby became eligible
to participate in the Company’s compensation program for non-employee
directors.
|
(7)
|
Mr. Sablosky
retired from his position as Senior Executive Vice President on December
26, 2008, but retained his Board position. Upon his retirement
Mr. Sablosky became a non-employee director and thereby became
eligible to participate in the Company’s compensation program for
non-employee directors.
|
(8)
|
Mr. Klapper
retired from his position as Senior Executive Vice President on December
26, 2008, but retained his Board position. Upon his retirement
Mr. Klapper became a non-employee director and thereby became
eligible to participate in the Company’s compensation program for
non-employee directors.
|
PROPOSALS
RELATING TO HIGHER VOTE CLASS B COMMON SHARES
(Items
2-5 on Your Proxy)
Since the
time of the initial public offering of its Class A Common Shares, the Company
has had two classes of common stock: Class A Common Shares and Class B Common
Shares. The main difference between the two classes of common stock relates to
voting rights. The Class A Common Shares, which are the only securities of the
Company that are publicly traded, entitle the holder of record to one vote for
each share held. The Class B Common Shares, which are currently only held by the
Company’s three founders (Alan H. Cohen, Larry J. Sablosky and David I. Klapper)
and certain affiliates (collectively, the “Founders”), entitle the holder
of record to ten votes for each share held. Except as otherwise required by law,
the Class A Common Shares and the Class B Common Shares vote together as a
single class on all matters submitted to a vote of shareholders, including the
election of directors. The common shares do not have cumulative
voting rights with respect to the election of directors.
The
Founders, as a result of their ownership of Class B Common Shares, have
collectively had significant voting power at all times since the initial public
offering of the Company’s Class A Common Shares. As of the record
date for the Annual Meeting, their collective voting control was approximately
41%. The Company’s dual class stock structure has essentially prevented, or made
highly unlikely, any action requiring shareholder approval that one or more of
the Founders did not support, including actions that may have effected a change
in control of the Company. Other provisions of Indiana law and the Company’s
Articles of Incorporation and Bylaws also impose restrictions on the acquisition
of control of the Company. See “Other Restrictions on Acquisition of
the Company” below. The dual class stock structure concentrated voting power in
the hands of the Company's key business leaders, each of whom was actively
involved in day-to-day management of the Company and in developing and
implementing business strategy.
Within
the past year, the Company experienced a significant change as the Founders each
retired from active management, and one of the Founders (Larry J. Sablosky)
declined to stand for reelection to the Board. The Company today has
new leadership and, with that new leadership, new strategic plans and objectives
are being developed and pursued.
The
retirement of the Founders caused the Board of Directors to analyze the
Company’s corporate governance, specifically the effects of its dual class stock
structure, and to discuss that structure with the Founders. Based on those
discussions, the Board concluded (and each Founder confirmed) that the dual
class stock structure as presently constituted creates disincentives to the
Founders selling a substantial portion of their Class B Common Shares (to sell a
Class B Common Share it must first be converted into a Class A Common Share),
which in turn could perpetuate the dual class stock structure for the
foreseeable future and potentially indefinitely. The disincentive is
created by provisions in the Company’s Articles of Incorporation which would
eliminate all Class B Common Shares (automatically converting them into Class A
Common Shares on a one-to-one basis) if the Class B Common Shares outstanding as
of any record date for an annual meeting represent less than 5% of the total
number of all common shares outstanding (the “5%
Trigger”). Although the Class B Common Shares are subject to
significant transfer restrictions requiring generally that they be converted
into Class A Common Shares prior to sale, they may be freely transferred by the
Founders to certain family members, trusts and foundations and thus remain
outstanding beyond the lives of the Founders.
While the
Board of Directors believes that the 5% Trigger will likely dissuade the
Founders, in the near term and possibly beyond, from voluntarily converting a
sufficient number of Class B Common Shares into Class A Common Shares to cause
the remaining Class B Common Shares to automatically convert into Class A Common
Shares, it also recognizes that, since the Founders are no longer actively
involved with the Company’s day-to-day business operations, they may in fact be
more likely now than in the past to voluntarily convert Class B Common Shares
into Class A Common Shares so that they may be sold on the public market,
including the conversion of a sufficient number of shares that could result in
the elimination of the remaining Class B Common Shares due to the 5%
Trigger. Even if such sales did not result in a conversion of our
remaining Class B Common Shares, they could reduce the percentage vote
represented by the holders of Class B Common Shares. In light of this
possibility, the Board of Directors discussed and identified various risks to
the Company if some or all Class B Common Shares were eliminated in the near
term. Specifically, the Board of Directors determined that if the
dual class stock structure were eliminated, or if the voting control represented
by the Class B Common Shares was reduced
significantly,
in the near term the Company could be at a significant risk of unsolicited
takeover activities, which could irreparably damage the Company and its
shareholders.
On
balance, and after deliberating on various alternatives and discussing those
alternatives with the Founders, the Board of Directors determined that the best
interests of the Company and its shareholders would be served if the dual class
stock structure were phased out over a reasonable but fixed period of
time. Since the Board of Directors lacks the power to unilaterally
eliminate the Company’s dual class stock structure (as it requires either the
conversion of sufficient Class B Common Shares by the Founders to implicate the
5% Trigger or amending the Company’s Articles of Incorporation, which in turn
requires the support of the Founders), it developed, unanimously approved and
recommends the series of proposals described in this Proxy Statement which it
believes provide a reasoned and balanced solution and, critically, one which the
Founders have indicated they intend to support.
Two
principal elements form the foundation of the proposals contained in this Proxy
Statement as they relate to the Company’s Class B Common Shares. The
first element is replacing the 5% Trigger with a date certain that the dual
class stock structure will terminate. A period of three years is
proposed. This element is intended to eliminate the current
disincentive to the Founders to convert (for sale or otherwise) a significant
portion of their Class B Common Shares created by the 5% Trigger, to provide
greater certainty to our shareholders as to when the Company’s dual class stock
structure will end and, potentially, to extend for a fixed period of up to three
years the stability afforded by the dual class stock structure should the
Founders, or certain of them, decide to convert a significant percentage of
their Class B Common Shares into Class A Common Shares before that
date.
The
second element is authorizing the Board of Directors to issue in the future a
limited number of new Class B Common Shares under the Company’s 2002 Plan and
the proposed new 2009 Incentive Plan (subject to certain limitations described
below, including a limitation that the voting power of the outstanding Class B
Common Shares could never exceed that in existence as of the record date for
this year’s Annual Meeting). This element is likewise intended to help maintain
the stability afforded by the dual class stock structure for a period of up to
three years, during which time the Company would have the opportunity to
finalize and implement its new strategic plans. The Founders
indicated to the Board of Directors that this second element of the proposals
was important in their indicated support of the elimination of the Class B
Common Shares in 2012.
In
developing the Proposals II-V outlined below, the Board considered a variety of
factors that it deemed relevant, among them:
|
·
|
Whether
the current 5% Trigger creates a disincentive to the Founders to convert
(for sale or otherwise) a substantial portion of their Class B Common
Shares into Class A Common Shares, and the desirability of eliminating
that disincentive;
|
|
·
|
The
fact that the Company’s Founders, who collectively currently have
significant voting control through their ownership of Class B Common
Shares, have retired and thus are no longer involved in active day-to-day
business operations, and the potential impacts of such circumstance on
corporate governance and other
matters;
|
|
·
|
The
potential advantages and disadvantages of a fixed conversion date for the
Class B Common Shares versus the uncertainty associated with the current
structure;
|
|
·
|
The
potential advantages and disadvantages of eliminating the possibility that
the Company’s dual class stock structure could be extended into the
foreseeable future and potentially
indefinitely;
|
|
·
|
Whether
stability may be provided by extending the dual class stock structure for
a period of three years, and whether that stability would enhance the
successful development and implementation of the Company’s strategic
plans, and the advantages reasonably flowing from a successful
implementation of such strategic
plans;
|
|
·
|
Whether
the Company’s stock price reflects an inherent “takeover premium” (in
light of market expectancy or the lack of market expectancy that the dual
class stock structure may go away in the near term), and the potential
impact that an announced sunset of the Class B Common Shares may have on
stock price in the future;
|
|
·
|
The
impact on Company performance, and the performance of its industry, caused
by the ongoing economic crisis and the prospects of future performance of
the Company and its industry;
|
|
·
|
The
current environment as it relates to hostile takeovers and proxy fights
and the Company’s vulnerability to hostile actions if the dual class stock
structure were eliminated in light of various factors, including existing
mechanisms in the Company’s constituent documents and applicable law that
may help to deter or delay such
actions;
|
|
·
|
The
potential negative consequences of hostile takeover activities on the
Company, its shareholders and other constituencies (including employees,
customers, suppliers and the
community);
|
|
·
|
The
possible impact of the proposals on the Company’s ability to attract and
retain key executives;
|
|
·
|
The
terms and limitations of the proposals, and possible alternatives;
and
|
|
·
|
The
reasonableness of the proposals in light of all of the foregoing
considerations and other relevant considerations identified by the Board
of Directors.
|
The Board
of Directors believes that the Proposals II-V described below are prudent and
are in the best interests of the Company and its shareholders. While
the main objective sought to be achieved by the Board is transitioning to a more
customary corporate governance structure as opposed to deterring a possible
takeover, the Board recognizes that certain of the proposals, if adopted, may
for a period of up to three years reduce the Company’s vulnerability to takeover
attempts and certain other transactions which have not been negotiated with and
approved by the Board of Directors. The Board of Directors believes
that this aspect of the proposals is independently in the best interest of the
Company and its shareholders to the extent it may encourage potential acquirors
to negotiate directly with the Board of Directors. Specifically, the
Board of Directors believes that in these challenging and uncertain economic
times, it is in the best position to determine the true value of the Company and
to negotiate more effectively for what is in the best interests of the Company
and its shareholders. The Board of Directors does not believe these
proposals should discourage persons from proposing a merger or other transaction
involving the Company at prices reflecting the true value of the
Company.
In
considering the possible “anti-takeover” effects of certain of these proposals,
the Board of Directors concluded that, if the Company did not currently have its
dual class stock structure, the Company may have heightened vulnerability to
hostile takeover activities. Underlying the Board’s conclusions were
a variety of factors, among them the depressed stock market and related
depressed prices for the Company’s Class A Common Shares, the continuing global
economic crisis and the impact such crisis has had on the Company and its
industry. The Board believes takeover attempts that have not been negotiated
with and approved by the Board of Directors present to shareholders the risk of
a takeover on terms that may be less favorable than might otherwise be
available. By contrast, the Board believes that a transaction that is negotiated
and approved by the Board of Directors can be planned and undertaken at an
opportune time to obtain maximum value for the Company and its shareholders,
with due consideration given to matters such as the management and business of
the acquiring corporation and maximum strategic development of the Company’s
assets.
The Board
of Directors believes that unsolicited takeover attempts can seriously disrupt
the business and management of a corporation and cause it to undertake defensive
measures at a great expense. Although a tender offer or other takeover attempt
may be made at a price substantially above then current market prices, such
offers may not be made at a value that reflects the true value of a corporation,
and are sometimes made for less than all of the outstanding shares of a
corporation. In such cases, shareholders may be presented with the
alternative of partially liquidating their investment at a time that may be
disadvantageous, or retaining their investment in an enterprise which is under
different management and whose objective may not be similar to that of the
remaining shareholders. The concentration of control which could result from a
tender offer or other takeover attempt could also deprive the Company’s
remaining shareholders of the benefits of certain protective provisions of the
Securities Exchange Act of 1934, as amended (“1934 Act”), if the number of
record owners becomes less than 300 and the Company terminates its registration
under the 1934 Act.
Although
the Board of Directors of the Company is not aware of any specific effort that
might be made to obtain control of the Company, the Board of Directors believes
that it is appropriate to approve the proposals outlined
in this Proxy Statement certain of which may have the effect of helping to
deter, in the short-term,
unsolicited
changes in the control of the Company in circumstances which the Board of
Directors concludes would not be in the best interests of the Company or its
shareholders.
Certain
of the proposals being recommended by the Board may, for a period of up to three
years, have the effect of rendering the Company less attractive to potential
acquirors, thereby discouraging a takeover attempt which certain shareholders
might have deemed to be in their best interest or pursuant to which shareholders
might have received a substantial premium for their shares over then current
market prices. These provisions may also render the removal of the incumbent
Board of Directors and management more difficult. The Board of Directors has
concluded that the potential benefits of these proposals outweigh the possible
disadvantages.
Other
Restrictions on Acquisition of the Company
In
addition to the protections afforded by the Company’s dual class stock structure
against the potentially harmful effects of unsolicited takeover proposals and
proxy fights, the Company’s current Articles of Incorporation and Bylaws, and
certain provisions of Indiana law, also impose restrictions on acquisitions of
control of the Company, which are described below.
State Law. Several
provisions of the Indiana Business Corporation Law (“IBCL”) could affect the
acquisition of the Company’s common shares or otherwise affect the control of
the Company. Chapter 43 of the IBCL prohibits certain business combinations,
including mergers, sales of assets, recapitalizations, and reverse stock splits,
between corporations such as the Company and an interested shareholder, defined
as the beneficial owner of 10% or more of the voting power of the outstanding
voting shares, for five years following the date on which the shareholder
obtained 10% ownership unless the acquisition was approved in advance of that
date by the Board of Directors. If prior approval is not obtained, several price
and procedural requirements must be met before the business combination can be
completed. These requirements are similar to restrictions in the Company’s
current Articles of Incorporation. In general, the price requirements contained
in the IBCL may be more stringent than those imposed by the Company’s Articles
of Incorporation. However, the procedural restraints imposed by the Company’s
Articles are somewhat broader than those imposed by the IBCL. These provisions
are discussed below in more detail. Also, the provisions of the IBCL may change
at some future date, but the relevant provisions of the Company’s Articles of
Incorporation may only be amended by an 80% vote of the shareholders of the
Company.
In
addition, the IBCL contains provisions designed to assure that minority
shareholders have some say in their future relationship with Indiana
corporations in the event that a person made a tender offer for, or otherwise
acquired, shares giving that person more than 20%, 33 1/3%, and 50% of the
outstanding voting securities of corporations having 100 or more shareholders
(the “Control Share
Acquisitions Statute”). Under the Control Share Acquisitions Statute, if
an acquiror purchases those shares at a time that the corporation is subject to
the Control Share Acquisitions Statute, then until each class or series of
shares entitled to vote separately on the proposal, by a majority of all votes
entitled to be cast by that group (excluding shares held by officers of the
corporation, by employees of the corporation who are directors thereof and by
the acquiror), approves in a special or annual meeting the rights of the
acquiror to vote the shares which take the acquiror over each level of ownership
as stated in the statute, the acquiror cannot vote these shares. An Indiana
corporation otherwise subject to the Control Share Acquisitions Statute may
elect not to be covered by the statute by so providing in its articles of
incorporation or bylaws. The Company, however, is subject to this
statute.
The IBCL
specifically authorizes Indiana corporations to issue options, warrants or
rights for the purchase of shares or other securities of the corporation or any
successor in interest of the corporation. These options, warrants or rights may,
but need not be, issued to shareholders on a pro rata basis.
The IBCL
specifically authorizes directors, in considering the best interest of a
corporation, to consider the effects of any action on shareholders, employees,
suppliers, and customers of the corporation, and communities in which offices or
other facilities of the corporation are located, and any other factors the
directors consider pertinent. Under the IBCL, directors are not required to
approve a proposed business combination or other corporate action if the
directors determine in good faith that such approval is not in the best interest
of the corporation. In addition, the IBCL states that directors are not required
to redeem any rights under or render inapplicable a shareholder rights plan or
to take or decline to take any other action solely because of the effect such
action might have on a proposed change of control of the corporation or the
amounts to be paid to shareholders upon such a change of control. The
IBCL
explicitly provides that the different or higher degree of scrutiny imposed in
Delaware and certain other jurisdictions upon director actions taken in response
to potential changes in control will not apply. The Delaware Supreme Court has
held that defensive measures in response to a potential takeover must be
“reasonable in relation to the threat posed”. In taking or declining to take any
action or in making any recommendation to a corporation’s shareholders with
respect to any matter, directors are authorized under the IBCL to consider both
the short-term and long-term interests of the corporation as well as interests
of other constituencies and other relevant factors. Any determination made with
respect to the foregoing by a majority of the disinterested directors shall
conclusively be presumed to be valid unless it can be demonstrated that such
determination was not made in good faith.
Also
under the IBCL, effective July 1, 2009 a public company must have a staggered
board of directors, unless the company elects to affirmatively opt-out of such
requirement by July 31, 2009. The Company’s bylaws currently provide
for a staggered board of directors, but its articles of incorporation do not
provide for a staggered board. See “Classified Board of Directors”
below. The Company has not yet made a decision about whether it will
opt out of this provision. If the Company does not opt out, the Indiana statute
will mandate a staggered board for the Company and the Company will not be able
to eliminate its staggered board by amending its bylaws.
Because
of the foregoing provisions of the IBCL, the Board will have flexibility in
responding to unsolicited proposals to acquire the Company, and accordingly it
may be more difficult for an acquiror to gain control of the Company in a
transaction not approved by the Board.
Provisions in the Company’s Articles
of Incorporation. The Company’s Articles as currently in
effect (the “Current Articles”), include certain provisions, in addition to the
Company’s dual class stock structure and the provisions of Indiana state law
discussed above, that may be viewed as having an “anti-takeover” effect in that
they could reduce the Company’s vulnerability to hostile takeover attempts and
certain other transactions that have not been negotiated with, and approved by,
the Company’s Board of Directors.
Authorized
Preferred Shares
In
addition to common shares, the Company's Current Articles authorize the issuance
of up to 1,000,000 preferred shares, none of which has been issued. The Board of
Directors has the sole authority to establish the relative rights, preferences,
restrictions and limitations of the preferred shares if and when they are
issued, including, but not limited to, price, voting rights, dividend rights,
liquidation rights and redemption rights. The current authorization of the
preferred shares provides the Company with increased financial flexibility by
providing for additional ways to raise capital. The preferred shares, like any
currently unissued common shares, are available for issuance by the Board of
Directors for any proper corporate purpose. Preferred shares, subject to certain
limits imposed by NASDAQ, could be issued without shareholder approval and
without first offering them to existing shareholders.
The Board
of Directors is not aware of any effort by a third party to accumulate common
shares or otherwise obtain control of the Company. The Company is not presently
negotiating with anyone concerning the issuance or use of any of the preferred
shares and has no present arrangements, understandings or plans concerning the
issuance or use of any of the preferred shares. Preferred shares could be
issued, however, in a manner that might have the effect of discouraging or
making it more difficult for a third party to acquire control of the Company (by
means of a merger, tender offer, proxy contest or otherwise) that is not favored
by the Board of Directors, and as a result, protects the continuity of present
management. For example, without further shareholder approval, the Board of
Directors could strategically sell preferred shares in a private transaction to
purchasers who would oppose a takeover or favor the current Board of Directors.
Issuances of preferred shares also could be used to dilute the stock ownership
of persons seeking to obtain control of the Company. Many of these results,
however, could also be achieved by using the Company’s currently available
common shares or through other currently available means without using the
preferred shares or obtaining shareholder approval.
Cumulative
Voting
The
Current Articles provide that there shall be no cumulative voting by
shareholders of any class or series in the election of directors of the
Company.
Removal
of Directors
The
Current Articles provide that, subject to the rights of any outstanding
preferred shares, a director may be removed only for cause and upon the
affirmative vote of a majority of the members of the Board of Directors whose
removal is not sought and the affirmative vote of the holders of a majority of
the voting power of all the Company’s shares entitled to vote generally in the
election of directors, voting together as a single class.
Advance
Notice Provisions
The
Current Articles require advance notice for shareholder nominations for the
election of directors in accordance with the provisions of the Bylaws. The
Bylaws’ advance notice provisions are discussed below.
Supermajority
Vote for Certain Business Combinations
In
addition to the business combination provisions in Chapter 43 of the IBCL
discussed above, the Current Articles impose, in certain circumstances,
requirements in addition to the Chapter 43 affirmative vote requirements. These
requirements, which are discussed in the following paragraph, apply unless a
majority of the continuing directors approves a transaction or a purchase of
shares before the shareholder becomes an interested shareholder, and the
transaction is approved by a majority of the continuing directors before it is
consummated.
An
“interested shareholder” is defined as a person who (i) beneficially owns 10% or
more of the voting power of the outstanding voting shares, (ii) is an affiliate
or associate of the Company (as defined in the SEC rules) and within the
previous two years has beneficially owned more than 10% of the voting power of
the outstanding shares or (iii) is an assignee or other successor to any voting
shares beneficially owned by an interested shareholder within the previous two
years if the assignment or succession did not involve a public offering of the
shares.
A
“continuing director” is a director who is unaffiliated with the interested
shareholder and was a member of the Board of Directors prior to the time that
the shareholder became an interested shareholder.
The
requirements also do not apply to certain business combinations that do not
involve any cash or other consideration being received by the Company’s
shareholders solely in their capacity as shareholders of the
Company.
The
Current Articles require the affirmative vote of at least 80% of the voting
power of the outstanding voting shares, voting as a single class, in the
following situations:
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any
merger or consolidation of the Company or any of its subsidiaries with an
interested shareholder or with a corporation, limited liability company or
other entity that, after such merger or consolidation, would be an
affiliate of the interested
shareholder;
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any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of
assets of the Company or any of its subsidiaries having an aggregate fair
market value equaling or exceeding 25% of the combined assets of the
Company and its subsidiaries;
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any
issuance or transfer by the Company or any of its subsidiaries to any
interested shareholder, or any affiliate of an interested shareholder, in
exchange for cash, securities or other property having an aggregate fair
market value equally or exceeding 25% of the combined assets of the
Company and its subsidiaries, except pursuant to an employee benefit plan
of the Company or any of its subsidiaries;
or
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any
reclassification of securities or recapitalization of the Company, or any
merger or consolidation of the Company with any of its subsidiaries, that
has the effect of increasing the proportionate share of the outstanding
shares of any class or series of equity or convertible securities of the
Company or any subsidiary that is beneficially owned by any interested
shareholder or any affiliate of any interested
shareholder.
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Additional
Requirements for Certain Change in Control Transactions
The
Current Articles also require that, in addition to the vote otherwise provided
in the Current Articles, that a majority of the continuing directors must
approve the following transactions that, when consummated, would result in a
change of control of the Company:
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any
proposal by the Board of Directors to remove a
director;
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any
amendment to the Company’s Bylaws to provide that Chapter 42 of the IBCL
(Control Share Acquisitions) shall not apply to the
Company;
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any
other amendment to the Company’s Bylaws;
and
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any
proposal by the Board of Directors to amend the Articles of Incorporation
(this condition can be satisfied only if there are at least three
continuing directors).
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Supermajority
Vote for Amendments to the Articles of Incorporation
Under the
Current Articles, the affirmative vote of at least 80% of the voting power of
all outstanding voting shares, voting together as a single class, is required to
alter, amend or repeal the business combination provisions discussed above. In
addition, the Current Articles require the affirmative vote of at least
two-thirds of the voting power of outstanding voting shares, voting together as
a single class, to alter, amend or repeal any other provision of the Articles of
Incorporation, unless such amendment was previously approved by at least
two-thirds of the members of the Board of Directors. In such an event, the
proposed amendment shall only require the affirmative shareholder vote as is
required by the IBCL (typically a plurality or a majority vote) or as otherwise
specified in the Articles.
Provisions
of the Company’s Bylaws. The Company’s Bylaws also include certain
provisions that may be considered to have an anti-takeover effect. Those
provisions are described below.
Classified
Board of Directors
The
Bylaws provide for the Board of Directors to be divided into three classes, as
nearly equal in number as the then total number of Directors constituting the
whole Board permits, with the term of office of one class expiring each
year.
Advance
Notice Requirements
The
Bylaws currently include advance notice procedures for shareholder nominations
of candidates for election as directors and shareholder proposals of business to
be presented at annual meetings of shareholders. These procedures provide that
notice of such shareholder nominations or proposals must be given timely and in
proper written form to the Secretary of the Company prior to the meeting at
which the shareholder nominee or such business is to be considered. Generally,
to be timely, notice must be given not less than 90 days nor more than 120 days
prior to the first anniversary of the previous year’s meeting. To be in proper
written form, the notice must contain the information required by the Bylaws,
including information regarding the proposal and the proponent.
The
advance notice provisions in the Bylaws also: (i) require shareholders
submitting proposals to be shareholders of record at both the time of giving the
notice and at the time of the annual meeting and be entitled to vote at the
annual meeting; (ii) require that the notice include the text of the proposal or
business, including the text of any
resolutions or Bylaw amendments proposed for consideration, and the name and
business and residence addresses of the shareholder proposing the business and
any Shareholder Associated Person on whose behalf the nomination or proposal is
made (the term “Shareholder Associated Person” is defined to include any person
who controls the shareholder or is acting in concert with the shareholder, any
person who is the beneficial owner of the shares held of record or beneficially
by the shareholder, and any person controlling, controlled by or under common
control with the Shareholder Associated Person); (iii) require that the notice
include information on any derivative positions held by the shareholder, any
Shareholder Associated Person or any person to be nominated, and information on
hedging or other transactions with respect to the Company’s shares; and (iv)
clarify that shareholders must comply with applicable requirements of the
Securities Exchange Act of 1934.
The
Bylaws also include provisions relating to the nomination of directors in
certain circumstances when the size of the Board has been
increased.
The
advance notice requirements and director nomination provisions may have the
effect of discouraging a potential acquiror from conducting a proxy contest to
elect directors or otherwise attempting to influence or gain control of the
Company.
Special
Meetings of Shareholders
The
Bylaws do not grant shareholders the right to call a special meeting of
shareholders. Under the Bylaws, a special meeting may be called only by a
majority of the members of the Board of Directors.
Amendment
of Bylaws
The
Bylaws provide that the Board of Directors has the exclusive power to make,
alter, amend and repeal the Bylaws. Therefore, shareholders do not have such
authority.
AMENDMENTS
TO ARTICLES OF INCORPORATION
The
Company’s Board of Directors has unanimously adopted resolutions proposing and
recommending that the present Articles of Incorporation of the Company (the
“Current Articles”) be
amended and restated by the adoption of Restated Articles of Incorporation of
the Company (the “Restated Articles”). A
copy of the proposed Restated Articles is attached to this Proxy Statement as
Appendix
A.
The
shareholders of the Company are being asked to vote on the Restated Articles by
voting on two separate Proposals which describe the major substantive changes
proposed to be effected in the Restated Articles. If both Proposals are approved
by the shareholders, the Restated Articles will be deemed approved by those
shareholders and will become effective as soon as the Restated Articles are
filed with, and approved by, the Indiana Secretary of State (which is expected
to occur as soon as practicable after the Annual Meeting). If one of the
Proposals is rejected by the shareholders, Restated Articles of Incorporation
containing only the amendment approved by the shareholders will be prepared and
filed with the Indiana Secretary of State. If neither of the Proposals is
approved by the shareholders, the Company’s Articles of Incorporation will not
be amended.
The
following information, along with the information contained in “Background and
Reasons for Proposals Relating to Higher Vote Class B Common Shares” beginning
on page 37 should be read carefully since some amendments set forth in the
Proposals may be characterized as anti-takeover measures which, if adopted, may,
for a period of up to three years, tend to insulate management and make
accomplishment of certain transactions involving a potential change of control
of the Company more difficult.
THE
FOLLOWING GENERAL DISCUSSION CONTAINS A SUMMARY OF THE MATERIAL AMENDMENTS
CONTAINED IN THE RESTATED ARTICLES AND IS NOT NECESSARILY
COMPLETE. SHAREHOLDERS ARE ENCOURAGED TO READ THE RESTATED ARTICLES
IN THEIR ENTIRETY, WHICH ARE ATTACHED HERETO AS APPENDIX A.
PROPOSAL
II
AMENDMENT
TO ARTICLES OF INCORPORATION TO ELIMINATE THE 5% CLASS B COMMON SHARE CONVERSION
TRIGGER, ESTABLISH THE AUTOMATIC CONVERSION OF ALL CLASS B COMMON SHARES INTO
CLASS A COMMON SHARES IN 2012, AND LIMIT THE AGGREGATE VOTING POWER OF THE CLASS
B COMMON SHARES TO 41% SHOULD THE TOTAL VOTING POWER OF THE CLASS B COMMON
SHARES EVER EXCEED THAT AMOUNT IN THE FUTURE.
(Item
2 on your Proxy)
As
described in greater detail above (see “Background and Reasons for Proposals
Relating to Higher Vote Class B Common Shares” beginning on page 37), the Class
B Common Shares (which entitle the holders thereof to 10 votes per share
and currently represent significant voting power)
have no
express expiration date and will continue in perpetuity unless and until the
total outstanding number of Class B Common Shares constitutes less than 5% of
the total outstanding voting shares of the Company as of a record date for an
annual meeting of shareholders (i.e.,
the 5% Trigger). If and when that occurs, all remaining Class B Common Shares
are automatically converted to Class A Common Shares immediately following such
record date. Currently, only the Founders own Class B Common
Shares.
There are two ways in
which the number of outstanding Class B Common Shares may be decreased.
First, if the Founders desire to sell any Class B Common Shares, they must first
convert them into Class A Common Shares which they may voluntarily do at any
time on a one-for-one basis. Second, if the Founders attempted to transfer Class
B Common Shares to third parties except as specifically permitted by the
Company’s Articles of Incorporation (the Articles permit transfer to certain
family members, trusts, foundations and other enumerated transferees), the
shares purported to be impermissibly transferred automatically convert into
Class A Common Shares on a one-for-one basis. Because Class B Common Shares can
be transferred to permitted transferees as described above, it is possible they
could remain in existence beyond the lifetime of the Founders.
The
Company’s Class A Common Shares are the only class of shares that are publicly
traded. They are traded on the NASDAQ Stock Market. Given the transfer
restrictions in the Company’s Articles of Incorporation, the Class B Common
Shares are not (and will never be) listed or registered on any national
securities exchange or quoted on the over-the-counter bulletin board or pink
sheets.
Since the
Founders are no longer actively involved in the Company’s day-to-day management,
it is possible that they may, in the aggregate, choose to voluntarily convert
(for sale or otherwise) a sufficient number of Class B Common Shares into Class
A Common Shares that would cause the automatic conversion of the remaining Class
B Common Shares into Class A Common Shares under the 5% Trigger. The Board of
Directors believes, for reasons described above, that if that happened in the
near term it could place the Company at substantial risk of harmful unsolicited
takeover activities which could irreparably damage the Company and its
shareholders.
The Board
of Directors believes that the best interests of the Company and its
shareholders would be served if the dual class stock structure were phased out
over a reasonable, but fixed, period of time. To accomplish this objective, the
Board of Directors recommends that shareholders vote “FOR” this Proposal II,
which, if approved, will effect the automatic conversion of all outstanding
Class B Common Shares into Class A Common Shares on the day after the Company’s
annual meeting in 2012. The Board believes that this Proposal will effect an
orderly transition of the Company’s corporate governance over the relatively
short period of three years, and, during such period, help protect the Company
against potentially harmful unsolicited hostile takeover attempts should the
Founders decide to convert a significant portion of their Class B Common Shares
into Class A Common Shares before that date.
Proposals
IV and V below, if adopted, could result in the issuance of new Class B Common
Shares prior to the annual meeting in 2012. If both Proposals are approved, up
to 2.5 million Class B Common Shares could be issued under the 2009 Incentive
Plan, but the only Class B Common Shares that could be issued under the 2002
Plan would be to replace any shares represented by currently outstanding awards
that are forfeited in the future, if any, and those Class B Common Shares that
could be issued to replace the Class A Common Shares which are currently subject
to unvested incentive stock awards. Assuming the 2009 Incentive Plan is
approved, the Board of Directors has no present intent to issue any Class B
Common Shares under the 2002 Plan. If the 2009 Incentive Plan is not approved
but the proposed amendment to the 2002 Plan is approved, the Board could issue
awards for up to 1,542,724 shares (Class A or Class B) under the 2002 Plan
(of which only 10,868 could be incentive stock awards), which represents the
remaining shares currently available for future issuance under that
plan.
The Board
of Directors does not believe, however, that either of such proposals, if
adopted, should be used to increase the voting power currently
associated with the Class B Common Shares. Thus, this proposed Article amendment
also includes a limitation that the aggregate voting power associated with the
Class B Common Shares may not exceed 41%, which was the aggregate voting power
associated with the Class B Common Shares as of the record date for this Annual
Meeting. If the aggregate number of outstanding Class B Common Shares
were to represent in excess of 41% of the total voting power of all of the
Company’s outstanding voting shares as of the record date for any future meeting
of shareholders, the votes entitled to be cast by each Class B Common Share at
such
meeting on matters where the Class A Common Shares and Class B Common Shares
vote together as a single class, would be proportionately reduced so that the
total voting power associated with all the Class B Common Shares at that meeting
would not exceed 41% on such matters. A vote in favor of the Article amendment
described in this Proposal will include a vote in favor of the limitation
described in this paragraph. The voting limitation will no longer apply if the
Company’s Class A Common Shares cease to be listed for trading on the NASDAQ
Stock Market or other national securities exchange.
Although the elimination
in 2012 of the disproportionate voting power associated with the Class B Common
Shares may make it easier for third parties to remove management and otherwise
effect a change in control of the Company thereafter, the provision which
eliminates the 5% Trigger may be characterized as an anti-takeover measure
which, if adopted, may tend to insulate management and make the accomplishment
of certain transactions involving a change of control of the Company more
difficult prior to the time of automatic conversion in 2012.
Required
Shareholder Approval
For the
amendment to the Articles which eliminates the 5% automatic conversion threshold
for the Class B Common Shares (and establishes in lieu thereof an automatic
conversion date in 2012) and limits the aggregate voting power of the Class B
Common Shares to be approved (i) with respect to all common shares voting
together as a single class, more votes must be cast in favor of this Proposal
than in opposition to it, and (ii) with respect to the holders of Class B Common
Shares voting as a separate class, more votes must be cast in favor of this
Proposal than in opposition to it. The higher shareholder approval requirement
set forth in Clause 8.022 of the Company’s Articles of Incorporation is not
required since at least two-thirds of the members of the Board of Directors
approved this amendment and recommended it to the shareholders.
This
amendment, if approved and adopted, will become effective upon filing of the
Restated Articles in the Office of the Secretary of State of Indiana. If the
shareholders approve the Proposal, the Company intends to accomplish this filing
as soon as practicable following the Annual Meeting.
Recommendation
of the Board of Directors
The
Board of Directors recommends that the shareholders vote “FOR” the amendment to
the Articles of Incorporation eliminating the 5% automatic conversion trigger
for the Class B Common Shares, establishing an automatic conversation date in
2012, and limiting the aggregate voting power of the Class B Common Shares to
41% should the total voting power of the Class B Common Shares ever exceed that
percentage in the future. Proxies solicited by the Board of Directors will be
voted “FOR” this Proposal unless shareholders specify otherwise on their Proxy
Cards (Item 2 on your Proxy Card).
PROPOSAL
III
AMENDMENT
TO ARTICLES OF INCORPORATION TO AUTOMATICALLY CONVERT CLASS B COMMON SHARES
ISSUED IN THE FUTURE TO A COMPANY EMPLOYEE OR DIRECTOR INTO CLASS A COMMON
SHARES UPON THE DEATH OR TERMINATION OF EMPLOYMENT OR SERVICE OF SUCH EMPLOYEE
OR DIRECTOR.
(Item
3 on your Proxy)
As
mentioned in the discussion of Proposal II, Proposals IV and V, if adopted, will
authorize the Board of Directors to issue a limited number of Class B Common
Shares in the future under the Company’s 2002 Plan and the
proposed 2009 Incentive Plan. Moreover, the Company’s Articles of Incorporation
permit the future issuance of Class B Common Shares to any person, although the
Company has no present intention to issue any such shares in such manner. If
Class B Common shares were to be issued to employees or directors under either
plan (or otherwise), the Board of Directors does not believe that such shares
should remain outstanding if the employee or director were to die or otherwise
leave the Company’s employment or service. Accordingly, the Board of Directors
recommends the adoption of this proposed amendment to the Company’s Articles of
Incorporation which will cause any Class B Common Shares issued to any employee
or director of the Company in the future to be automatically
converted
into Class A Common Shares upon the death or termination of employment or
service of such employee or director.
Since
this amendment to the Articles of Incorporation provides for an additional
manner in which the super-majority voting Class B Common Shares can be converted
into single vote Class A Common Shares, the Company does not believe this
proposed amendment to the Articles may be characterized as an anti-takeover
measure.
Required
Shareholder Approval
For the
amendment to the Articles requiring Class B Common Shares issued to employees or
directors in the future to be automatically converted into Class A Common Shares
upon their death or termination of employment or service to be
approved (i) with respect to all common shares voting together as a
single class, more votes must be cast in favor of this Proposal than in
opposition to it, and (ii) with respect to the holders of Class B Common Shares
voting as a separate class, more votes of holders of Class B Common Shares must
be cast in favor of this Proposal than in opposition to it. The higher
shareholder approval requirement set forth in Clause 8.022 of the Company’s
Articles of Incorporation is not required since at least two-thirds of the
members of the Board of Directors approved this amendment and recommended it to
the shareholders.
This
amendment, if approved and adopted, will become effective upon filing of the
Restated Articles in the Office of the Secretary of State of Indiana. If the
shareholders approve the Proposal, the Company intends to accomplish this filing
as soon as practicable.
Recommendation
of the Board of Directors
The
Board of Directors recommends that the shareholders vote “FOR” the amendment to
the Articles of Incorporation requiring any Class B Common Shares issued in the
future to employees or directors of the Company to be automatically converted
into Class A Common Shares upon the death or termination of employment or
service of such employee or director. Proxies solicited by the Board of
Directors will be voted “FOR” this Proposal unless shareholders specify
otherwise on their Proxy Cards (Item 3 on your Proxy Card).
PROPOSAL
IV
APPROVAL
OF AMENDMENTS TO THE 2002 STOCK INCENTIVE PLAN.
(Item
4 on your Proxy)
At the
Annual Meeting, the shareholders of the Company will be asked to approve and
ratify an amendment (the “Amendment”) to the 2002 Stock
Incentive Plan of The Finish Line, Inc. (as amended and restated July 21, 2005)
(the “2002 Plan”), to
add the Company’s Class B Common Shares as a class of stock that may be awarded
under the 2002 Plan. This will permit the Board of Directors to allow the
holders of any remaining unvested Class A Common Shares under the 2002 Plan to
exchange those shares for an equal number of unvested Class B Common
Shares. Even if this Proposal IV is adopted by the Company’s
shareholders, the Board has no present intent to authorize the exchange of any
Class A Common Shares for Class B Common Shares under the 2002
Plan.
In
addition, to the extent the 2009 Incentive Plan is not approved by the Company’s
shareholders (see Proposal V), this Proposal will permit the Board to
grant awards under the 2002 Plan in Class B Common Shares as well as Class
A Common Shares. Currently, there are only 1,542,724 shares available for
issuance or awards under the 2002 Plan.
If both
this Proposal and Proposal V are approved, the only Class B Common Shares
that can be issued under the 2002 Plan will be to replace any shares represented
by currently outstanding awards that are forfeited in the future, if any, and
those Class B Common Shares that could be issued to replace the Class A Common
Shares which are currently subject to unvested incentive stock
awards.
Similar
to our rationale with respect to Proposal II, we believe the ability to issue
Class B Common Shares under the 2002 Plan (whether in exchange for unvested
incentive Class A Common Share awards or otherwise) will help protect the
Company over the next 3 years in the event that the Founders decide to convert a
substantial portion of their Class B Common Shares into Class A Common
Shares. The Board has no present intention of issuing any Class B Common
Shares under the 2002 Plan unless the 2009 Incentive Plan (Proposal V) is not
approved.
As of May
22, 2009, there were stock options for 4,085,114 Class A Common Shares
outstanding under the 2002 Plan, and there were 706,082 shares of unvested
incentive stock outstanding under the 2002 Plan. As of that date, 1,542,724
Class A Common Shares remained available for stock awards under the 2002 Plan,
provided that only 10,868 Class A Common Shares could be awarded in the form of
incentive stock grants.
If the
Amendment is adopted by the shareholders, the total number of shares available
for awards will not change. Rather, if the Amendment is adopted, the Board will
have the authority to authorize the exchange of some or all of
the 706,082 Class A Common Shares subject to unvested awards of
incentive stock for Class B Common Shares, subject to the same terms and
conditions of the original grants. Although the Board has no present intention
of doing this, if they were to authorize such exchange immediately following the
Annual Meeting it would, but for the limitations set forth in Proposal II,
increase the potential voting power of these shares from 0.86% to 8.6% (based
upon the number of outstanding shares as of the record date). However,
due to the cliff vesting applicable to the unvested shares of incentive stock
issued under the 2002 Plan, the number of unvested Class A Common Shares that
are otherwise eligible to be converted into Class B Common Shares is expected to
decrease every year by approximately 21,000 shares during 2010, 265,000
shares during 2011 and 420,000 shares during
2012. Currently, there are 706,082 Class A Common Shares that
would be eligible to be converted under the 2002 Plan, and given the superior
voting rights of the Class B Common Shares, we anticipate that, if the Board of
Directors authorized such conversion in the future, all such shareholders will
elect to convert their Class A Common Shares into Class B Common Shares.
However, the Board of Directors has no present intention to authorize the
conversion of the shares.
As noted
above, and as described in Proposal II, if the Article amendments proposed in
this Proxy Statement are approved by our shareholders, and if the Company issues
Class B Common Shares resulting in the holders of Class B Common Shares holding
greater than 41% of the total voting power of the Company’s shares as of the
record date for any meeting of shareholders, then the number of votes per share
of each holder of Class B Common Shares will automatically be reduced on a
proportionate basis so that the holders of Class B Common Shares (including the
Founders) hold in the aggregate no more than 41% of the Company’s total voting
power.
Furthermore,
if Proposal III is adopted, any Class B Common Shares issued in the future under
the 2002 Plan to employees and directors of the Company will automatically
convert into Class A Common Shares upon the death or termination of employment
of such employees or service of such directors.
Because
our Class A Common Shares are listed on the NASDAQ Global Market, we are subject
to the NASDAQ rules and regulations. NASDAQ Marketplace Rules 5635(b) and
(d) require shareholder approval prior to (i) any issuance or potential issuance
which will result in a change of control of the Company, or (ii) any issuance,
potential issuance or sale of common shares, or securities convertible into or
exercisable for common shares, in any transaction or series of transactions, if
the common shares have, or will have upon issuance, voting power equal to, or in
excess of, 20% of the voting power outstanding before the issuance of such
shares (or of securities convertible into or exercisable for common shares), or
if the number of common shares to be issued is, or will upon issuance be, equal
to or exceed 20% of the number of common shares outstanding before the issuance,
unless the sale or conversion price is greater than the greater of the
pre-transaction trading price of the common shares as reported on NASDAQ or the
book value of such shares. To determine whether an issuance of shares
will result in a change of control
of the Company, the NASDAQ staff has indicated it will consider a number of
factors, including, among others, (a) if the investor or purchaser of the issued
shares will have a control position both before and after the issuance of the
shares; (b) if, after the issuance of the shares, the purchaser either alone or
as part of a group, would hold greater than 20% of the issuer’s then outstanding
common shares or voting power; (c) if the issuer’s largest shareholder
immediately prior to the issuance would retain that position after the issuance
of the shares; and (d) if other arrangements exist for the issuance of shares
between the issuer and the purchasers.
We do not
believe these NASDAQ rules will apply to possible issuances of Class B
Common Shares under the 2002 Plan even if all Class A Common Shares subject to
unvested incentive stock grants under the 2002 Plan are exchanged for Class B
Common Shares. However, to remove any doubt, a vote in favor of this Proposal
will permit the Board of Directors of the Company to authorize the exchange of
the Class A Common Shares subject to unvested incentive stock awards for Class B
Common Shares (if it elects to do so in the future) and the issuance of
additional shares under the 2002 Plan in the future without additional
shareholder approval even if such issuance (or series of issuances) involves a
change of control of the Company or involves 20% or more of the voting power of
the Company and the price of the Company’s Class A Common Shares is less than
its book value per share.
Summary
of the Plan
The
principal features of the 2002 Plan are summarized below. The summary does not
contain all information that may be important to you. The complete text of the
Amendment is set forth as Appendix B to this Proxy
Statement.
2002 Plan
Administration. The 2002 Plan is administered by the
Compensation and Stock Option Committee (for purposes of this Item, the “Committee”) of the Board of
Directors which consists solely of directors who qualify as “outside directors”
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the “Code”),
and as “non-employee directors” within the meaning of Rule 16b-3 of the Exchange
Act. The Committee has the sole authority to, among other things:
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prescribe,
amend and rescind rules and regulations relating to the 2002
Plan;
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determine
which persons are eligible to participate in the 2002
Plan;
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grant
awards under the 2002 Plan;
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establish,
verify the satisfaction of, adjust, reduce or waive any performance goals
or other conditions to the grant of awards under the 2002
Plan;
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prescribe
and amend the terms of documents evidencing awards made under the 2002
Plan;
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interpret
and construe the 2002 Plan; and
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make
all other determinations deemed necessary or advisable for administration
of the 2002 Plan.
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With
respect to any award that is not intended to satisfy Section 162(m)(4)(C) of the
Code or Rule 16b-3 of the Exchange Act, the Committee may appoint one or more
separate committees composed of one or more directors of the Company or, to the
extent permitted by law, one or more officers of the Company, and delegate to
any such subcommittee the authority to grant awards.
Eligibility. Any
person who is an employee or prospective employee of the Company or any of its
affiliates is eligible to be considered for the grant of awards under the 2002
Plan. In addition, non-employee directors are eligible to receive non-qualified
stock option and incentive stock awards under the 2002 Plan. As of May 22, 2009,
eight non-employee directors and 12,345 employees of the Company and its
subsidiaries were eligible to receive awards under the 2002 Plan.
Shares Subject to the
Plan. The aggregate number of Class A Common Shares and, if
the Amendment is approved, Class B Common Shares (collectively, “Shares”), that may be issued
pursuant to all awards granted under the 2002 Plan shall not exceed 6,500,000
plus the number of Shares subject to awards granted under the Company’s
Non-Employee Director Stock Option Plan or the Company’s 1992 Employee Stock
Incentive Plan but which are not issued under such plans as a result of the
cancellation, expiration or forfeiture of such awards, provided that, no more
than 15% of such Shares may be issued pursuant to all incentive bonuses and
incentive stock awards under the Plan. The aggregate number of Shares that may
be issued pursuant to the exercise of options intended to qualify as “Incentive
Stock Options” pursuant to Section 422 of the Code (“ISOs”) shall not exceed
6,500,000. The aggregate number of Shares subject to options granted under the
2002 Plan during any calendar year to any one individual shall not exceed
1,000,000, and the aggregate number of Shares issued or issuable under all
awards other than options granted under the 2002 Plan during one calendar year
to any one individual shall not exceed 1,000,000. At May 22, 2009, the market
value of the 6,500,000 Class A and Class B Common Shares that may be issued
pursuant to the 2002 Plan was $43,615,000. (The Class B Common Shares
are not publicly traded.) If the 2009 Plan is approved by the shareholders
at the Annual Meeting, the 2002 Plan will immediately cease to be available for
use for the grant of new awards other than (i) awards granted solely from shares
returned to the 2002 Plan by forfeiture after July 23, 2009, and (ii) the
exchange of Class A Common Shares for Class B Common Shares if Proposal IV is
approved by the shareholders.
Adjustments. The
maximum number of Shares available for issuance under the 2002 Plan as well as
the exercise or settlement prices of awards under the 2002 Plan will be adjusted
to reflect certain events, such as a stock dividend, stock split, combination of
shares, recapitalization or reorganization. However, such adjustments shall be
made so as to not affect the status of any award intended to qualify as an
“Incentive Stock Option” pursuant to Section 422 of the Code or as
“performance-based compensation” under Section 162(m) of the Code.
Term, Amendment and
Termination. The 2002 Plan, as currently in effect, became
effective on July 21, 2005, and has been amended twice. The Amendment being
considered at this Annual Meeting of shareholders will become effective when
adopted by the Company’s shareholders. No awards shall be granted pursuant to
the 2002 Plan more than 10 years after the effective date of the 2002 Plan. The
Board may amend, alter or discontinue the 2002 Plan or any agreement or other
document evidencing an award made under the 2002 Plan, but for the most part, no
such amendment shall materially increase the maximum number of Shares for which
awards may be granted or change the class of persons eligible under the 2002
Plan without shareholder approval. No amendments or alterations shall be made
which would impair the rights of any award holder without such holder’s consent
unless the Committee determines that such amendment is required or advisable or
to satisfy a law or regulation or to meet the requirements of an accounting
standard. The Committee may prescribe, amend and rescind rules and regulations
relating to the 2002 Plan.
Options. The
Committee may grant an option or provide for the grant of an option, either from
time to time in the discretion of the Committee or automatically upon the
occurrence of specified events, including, without limitation, the
achievement of performance goals, the satisfaction of an event or condition
within the control of the recipient of the award or within the control of
others.
The
purchase price per share of the shares subject to each option granted under the
2002 Plan shall be determined by the Committee. However, if an option is
intended to qualify as an ISO or as qualified performance-based compensation
under Section 162(m) of the Code, the exercise price shall be equal to or exceed
100% of the fair market value of a Share on the date the option is granted and
if an option is intended to qualify as an ISO and the optionee holds (directly
or indirectly) 10% or more of the voting power of the outstanding stock of the
Company, the exercise price shall be equal to or exceed 110% of the fair market
value of a Share on the grant date. In addition, due to the application of Code
Section 409A, the purchase price per share of each non-qualified stock option
should not be less than 100% of the fair market value of a share on the date of
grant. The term of each option granted under the 2002 Plan shall not exceed 10
years from the date of its grant, though the Committee may provide for a lesser
term.
Options
granted under the 2002 Plan shall be exercisable at such time and in such
installments during the period prior to the expiration of the option’s term as
determined by the Committee. At any time after the grant of an option the
Committee may reduce or eliminate restrictions surrounding the participant’s
right to exercise all or part of the option. However, no option other than
non-employee director options shall first become exercisable within one year
from their date of grant, other than on death or disability of the eligible
person or upon certain transactions. Subject to certain exceptions, upon
termination of a grantee employee prior to the full exercise of an option, the
unexercised portion of the option shall be subject to such procedures as the
Committee may establish, except that all options held by non-employee directors
as of the date of cessation of service as a director may be exercised in
accordance with their terms until the earlier of two years after such
termination or the expiration of the applicable option term.
Incentive
Bonuses. An employee may become entitled to receive a bonus
based on satisfaction of certain criteria (an “Incentive Bonus”). Each
Incentive Bonus award will confer upon the employee the opportunity to earn a
future payment tied to the level of achievement with respect to one or more
performance criteria established for a performance period of not less than one
year.
The
Committee shall establish the performance criteria and level of achievement that
shall determine the target and maximum amount payable under an Incentive Bonus
award, which criteria may be based on financial performance and/or personal
performance evaluations. The Committee may specify the percentage of target
Incentive Bonus that is intended to satisfy the requirements for
“performance-based compensation” under Section 162(m) of the Code. The maximum
amount payable pursuant to the portion of an Incentive Bonus granted for any
fiscal year to any individual that is intended to satisfy the requirements for
“performance-based compensation” in the current 2002 Plan cannot exceed
$500,000. The performance criteria for any portion of an Incentive Bonus that is
intended to satisfy the requirements for “performance-based compensation” will
be measured based on one or more “qualifying performance criteria” as described
below under “Summary of the Plan — Qualifying Performance
Criteria.”
The
Committee shall determine the timing of any Incentive Bonus. The Committee may
permit a participant to elect for the payment of any Incentive Bonus to be
deferred to a specified date or event. An Incentive Bonus may be payable in
shares, in cash or in other property. Any Incentive Bonus that is paid in cash
or in other property shall not affect the number of shares otherwise available
for issuance under the 2002 Plan.
Notwithstanding
satisfaction of any performance goals, to the extent the Committee provides, the
amount paid under an Incentive Bonus award on account of either financial
performance or personal performance evaluations may be reduced by the Committee
on the basis of such further considerations as the Committee shall
determine.
The
Committee may provide for or, subject to such terms and conditions as the
Committee may specify, may permit a participant to elect for the payment of any
Incentive Bonus to be deferred to a specified date or event.
Incentive
Stock. “Incentive Stock” is an award
or issuance of Shares, the grant, issuance, retention, vesting and/or
transferability of which is subject, during specified periods of time, to such
conditions (including continued service or performance conditions) and terms as
the Committee deems appropriate.
Subject
to the requirements of applicable law, the Committee shall determine the price,
if any, at which Shares of Incentive Stock shall be sold or awarded to an
eligible person, which may vary from time to time and among eligible persons and
which may be below the fair market value of such shares at the date of grant or
issuance.
The
grant, issuance, retention and/or vesting of shares of Incentive Stock shall be
at such time and in such installments as determined by the Committee or under
criteria established by the Committee. The performance criteria for any
Incentive Stock that is intended to satisfy the requirements for
“performance-based compensation” under Section 162(m) of the Code will be
measured based on one or more “qualifying performance criteria” as described
below under “Summary of the Plan — Qualifying Performance Criteria.” Subject to
certain exceptions, upon a termination of service of an eligible person prior to
the vesting of or the lapsing of restrictions on Incentive Stock, the Incentive
Stock awards granted shall be subject to such procedures as determined by the
Committee.
Qualifying Performance
Criteria. One or more of the following performance criteria
will be the performance criteria for any Incentive Bonus or Incentive Stock
intended to satisfy the requirements for “performance-based compensation” under
Section 162(m) of the Code:
|
·
|
earnings
before interest, taxes and
amortization,
|
|
·
|
total
shareholder return,
|
|
·
|
share
price performance,
|
|
·
|
return
on assets or net assets,
|
|
·
|
operating
income or net operating income,
|
|
·
|
operating
profit or net operating profit,
|
|
·
|
operating
margin or profit margin,
|
|
·
|
return
on operating revenue,
|
|
·
|
overhead
or other expense reduction.
|
These
criteria will apply either individually, alternatively or in any combination, to
either the Company as a whole or to a business unit or a subsidiary, either
individually, alternatively or in any combination. The Company will measure them
either annually or cumulatively over a period of years, on an absolute basis or
relative to a pre-established target, to previous years’ results or to a
designated comparison group, in each case as specified by the Committee in the
award.
The
Committee will appropriately adjust any evaluation of performance under
qualifying performance criteria to exclude any of the following events that
occurs during a performance period:
|
·
|
litigation
or claim judgments or settlements,
|
|
·
|
the
effect of changes in tax law, accounting principles or other such laws or
provisions affecting reported
results,
|
|
·
|
accruals
for reorganization and restructuring programs,
and
|
|
·
|
any
extraordinary, non-recurring items as described in Accounting Principles
Board Opinion No. 30 and/or in management’s discussion and analysis of
financial condition and results of operations appearing in our annual
report to shareholders for the applicable
year.
|
Transferability. Unless
the agreement or other document evidencing an award expressly states that the
award is transferable, no award granted under the 2002 Plan, nor any interest in
such award may be assigned or transferred prior to the vesting or lapse of any
and all applicable restrictions, other than by will or the laws of descent and
distribution. The Committee may grant an award or amend an outstanding award to
provide that the award is transferable or assignable (a) in the case of a
transfer without the payment of any consideration, to any “family member” as
such term is defined in Section 1(a)(5) of the General Instructions to Form S-8
under the Securities Act, as such may be amended from time to time, and (b) in
any transfer described in clause (ii) of Section 1(a)(5) of the General
Instructions to Form S-8 under the Securities Act, provided that following any
such transfer or assignment the award will remain subject to substantially the
same terms applicable to the award while held by the participant, as modified as
the Committee shall determine appropriate, and as a condition to such transfer
the transferee shall execute an agreement agreeing to be bound by such terms. In
addition, if the shareholders approve the Amendment, Class A Common Shares of
unvested incentive stock held by plan participants may, with the prior consent
of those participants, be exchanged for an equal number of unvested Class B
Common Shares. The award, after any such exchange, will remain subject to
substantially the same terms applicable to the initial award except that the
shares subject to the award will be Class B Common Shares in lieu of Class A
Common Shares.
Change in
Control. In the event of a Change in Control (as defined
below) any or all outstanding awards may be assumed, converted or replaced by
the successor corporation (if any), which assumption, conversion or replacement
will be binding on all participants. In the alternative, the successor
corporation may substitute equivalent awards or provide substantially similar
consideration to participants as was provided to shareholders (after taking into
account the existing provisions of the awards). The successor corporation may
also issue, in place of outstanding shares of the Company held by the
participant, substantially similar shares or other property subject to
repurchase restrictions no less favorable to the participant. In the event such
successor corporation (if any) refuses to assume or substitute awards, as
provided above, pursuant to a Change in Control transaction, such awards (in the
case of options, to the extent not exercised prior to the date of such
transaction and in the case of all other awards, to the extent not fully vested
and free from any restriction prior to the date of such transaction) will expire
on such transaction at such time and on such conditions as the Committee
determines. Notwithstanding anything in the 2002 Plan to the contrary, the
Committee may, in its sole discretion, but need not, provide in the terms of the
award for alternative treatment and/or provide that the vesting of any or all
awards granted pursuant to the 2002 Plan will accelerate in connection with a
Change in Control.
For the
purposes of this plan, a “Change in Control” is: (a) a
dissolution or liquidation of the Company, (b) a merger or consolidation in
which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is not
substantial change in the shareholders of the Company or their relative stock
holdings and the awards granted under the Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
participants), (c) a merger in which the Company is the surviving corporation
but after which the shareholders of the Company immediately prior to such merger
(other than any shareholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (d) the sale of substantially
all of the assets of the Company, or (e) the acquisition, sale or transfer of
more than 50% of the outstanding shares of the Company by tender offer or
similar transaction.
The
following is a general description of the federal income tax consequences to the
participant and the Company with regard to awards granted under the 2002 Plan
under present law. This discussion is intended for the information of
shareholders considering how to vote at the Annual Meeting and not as tax
guidance to participants in the 2002 Plan, as the consequences may vary with the
types of awards made, the identity of the recipients and the method of payment
or settlement. The summary does not address the effects of other federal taxes
(including possible
“golden parachute” excise taxes) or taxes imposed under state, local, or foreign
tax laws. This discussion does not purport to discuss all tax consequences
related to awards under the 2002 Plan.
Non-Qualified Stock
Options. There typically
will be no federal income tax consequences to the optionee or to the Company
upon the grant of a non-qualified stock option under the 2002 Plan. When the
optionee exercises a non-qualified option, however, he or she will recognize
ordinary income in an amount equal to the excess of the fair market value of the
common stock received at the time of exercise over the exercise price, and the
Company will be allowed a corresponding deduction, subject to any applicable
limitations under Code Section 162(m). Any gain that the optionee
recognizes when he or she later sells or disposes of the option shares will be
short-term or long-term capital gain, depending on how long the shares were
held.
Incentive Stock Options. There typically
will be no federal income tax consequences to the optionee or to the Company
upon the grant or exercise of an incentive stock option (other than the
alternative minimum tax consequences, discussed in this paragraph, to the
optionee upon exercise). If the optionee holds the option shares for the
required holding period of at least two years after the date the option was
granted and one year after exercise, the difference between the exercise price
and the amount realized upon sale or disposition of the option shares will be
long-term capital gain or loss, and the Company will not be entitled to a
federal income tax deduction. If the optionee disposes of the option shares in a
sale, exchange, or other disqualifying disposition before the required holding
period ends, he or she will recognize taxable ordinary income in an amount equal
to the excess of the fair market value of the option shares at the time of
exercise over the exercise price, and the Company will be allowed a federal
income tax deduction equal to such amount. While the exercise of an incentive
stock option does not result in current taxable income, the excess of the fair
market value of the option shares at the time of exercise over the exercise
price will be an item of adjustment for purposes of determining the optionee’s
alternative minimum taxable income. Thus, an incentive stock option may trigger
alternative minimum tax.
Incentive Bonus. An
eligible person receiving an Incentive Bonus grant will not recognize income,
and the Company will not be allowed a deduction, at the time the grant is made
as long as the Incentive Bonus is subject to a substantial risk of forfeiture.
When the Incentive Bonus is no longer subject to a substantial risk of
forfeiture and the recipient receives payment in cash or Shares (assuming there
was not a proper deferral), the amount of cash and the fair market value of the
Shares received will be ordinary income to the recipient. The Company will be
entitled to a federal income tax deduction equal to that amount.
Incentive
Stock. Unless a participant makes an election to accelerate
recognition of the income to the date of grant (as described below), the
participant will not recognize income, and the Company will not be allowed a tax
deduction, at the time an Incentive Stock award is granted as long as the
Incentive Stock is subject to a substantial risk of forfeiture. When the
restrictions lapse, the participant will recognize ordinary income equal to the
fair market value of the common shares as of that date (less any amount paid for
the shares), and the Company will be allowed a corresponding federal income tax
deduction at that time, subject to any applicable limitations under
Section 162(m) of the Code. If the participant files an election under
Section 83(b) of the Code within 30 days of the date of grant of the
Incentive Stock, he or she will recognize ordinary income as of the date of
grant equal to the fair market value of the shares as of that date (less any
amount paid for the shares), and the Company will be allowed a corresponding
federal income tax deduction at that time, subject to any applicable limitations
under Section 162(m). Any future appreciation in the shares will be taxable
to the participant at capital gains rates. However, if the stock is later
forfeited, the participant will not be able to recover the tax previously paid
pursuant to a Section 83(b) election. If dividends are paid while the
restrictions are in effect, the participant will recognize ordinary income as to
the dividends and the Company will be entitled to a deduction on such
amount.
Code Section
409A. The above discussion does not address the federal income
tax consequences of awards under Section 409A of the Code.
Section 409A was added to the Code by the American Jobs Creation Act of
2004
and
generally affects amounts deferred under a covered non-qualified deferred
compensation plan after December 31, 2004, and such prior deferrals under a plan
that has been materially modified after October 3, 2004. Section 409A
provides that covered amounts deferred under a non-qualified deferred
compensation plan are includable in the participant’s gross income and subject
to 20 percentage points of additional tax plus in certain cases an interest
charge, to the extent not subject to a substantial risk of forfeiture and not
previously included in income, unless certain requirements are met, including
limitations on the timing of deferral elections and events that may trigger the
distribution of deferred amounts. Certain types of awards under the 2002 Plan
(other than incentive
stock
options and non-qualified stock options that meet the rules to be exempt from
Section 409A) may be subject to Section 409A. It is the intent of the Board that
awards of stock or bonus and incentive awards or incentive stock under the 2002
Plan be structured so that they are not subject to Section 409A. If subject to
Section 409A, however, the 2002 Plan and the award agreements are intended to
comply with Section 409A requirements.
Benefits
Under Amended 2002 Plan
The
awards that will be made under the 2002 Plan, as amended by the Amendment, in
the future are not determinable. Assuming the shareholders approve the 2009
Plan, no new awards will be made under the 2002 Plan, except to make use of any
shares that remain available for awards under the 2002 Plan as a result of the
forfeiture of awards previously made under the 2002 Plan and the issuance of
Class B Common Shares in exchange for Class A Common Shares permitted pursuant
to this proposal.
The
following table summarizes all awards of any kind made to the listed individuals
or groups of individuals under the 2002 Plan from the time it became effective
in 2002 through the Record Date.
Name
and Principal Position
|
|
Number
of Shares of Restricted Stock (1)
|
|
Number
of Shares Subject to Options (2)
|
Alan
H. Cohen
Chief
Executive Officer thru 11-30-08
|
|
|
92,000
|
|
|
|
245,000
|
|
Glenn
S. Lyon
Current
Chief Executive Officer
|
|
|
84,000
|
|
|
|
423,474
|
|
Steven
J. Schneider
President
and Chief Operating Officer
|
|
|
101,000
|
|
|
|
335,544
|
|
Gary
D. Cohen
Chief
Administrative Officer & Secretary
|
|
|
97,000
|
|
|
|
250,766
|
|
Kevin
S. Wampler
Executive
Vice President, Chief Financial Officer and Assistant Secretary thru
11-25-08
|
|
|
87,000
|
|
|
|
169,000
|
|
Executive
Group
|
|
|
498,000
|
|
|
|
1,754,503
|
|
Non-Executive
Director Group
|
|
|
111,282
|
|
|
|
363,000
|
|
Non-Executive
Officer Employee Group
|
|
|
562,882
|
|
|
|
2,960,461
|
|
(1)
|
This
column reflects the number of Class A Common Shares issued under the 2002
Plan in the form of restricted stock
awards.
|
(2)
|
This
column sets forth the number of Class A Common Shares of the Company
underlying stock options that have been previously granted under the 2002
Plan to these individuals and groups. All options granted under the 2002
Plan to date were granted as non-qualified options. See “Executive
Compensation” for additional information on options granted to Named
Executive Officers.
|
Tax
Consequences of Exchange of Shares
The
substitution of Class B Common Shares for Class A Common Shares for future
grants under the 2002 Plan will not change the tax treatment of the participants
under the plan or the Company, as described in “Federal Income Tax Consequences”
above. The exchange of unvested Class B Common Shares for unvested Class A
Common Shares previously issued pursuant to the 2002 Plan will be a tax free
exchange under Section 1036(a) of the Code to the participants who made a valid
Section 83(b) election at the time the unvested Class A Common Shares were
issued, and will not accelerate the time at which ordinary income is recognized
for participants who did not make a Section 83(b) election. The Company will
receive no taxable income, gain, loss, or deduction as a result of the
exchange.
Required
Shareholder Approval
The
affirmative vote of the holders of a majority of voting power of the Company’s
Class A Common Shares and Class B Common Shares entitled to vote at the Annual
Meeting, voting together as a single class, is required to approve
the proposed amendments to the 2002 Plan. This amendment, if approved and
adopted by the shareholders, will be effective as of the date the Board of
Directors approved these amendments, which was April 24,
2009.
Recommendation
of the Board of Directors
The
Board of Directors recommends that shareholders vote “FOR” the amendment to the
Company’s 2002 Plan to add the Company’s Class B Common Shares as a class of
shares that may be awarded under the 2002 Plan in order to permit, if authorized
by the Board of Directors in the future, the exchange of Class B Common Shares
for any remaining unvested Class A Common Share restricted stock awards under
the 2002 Plan, and, to the extent the 2009 Incentive Plan is not approved
(Proposal V), to grant awards of Class B Common Shares. Proxies solicited by the
Board of Directors will be voted “FOR” this proposal unless shareholders specify
otherwise on their Proxy Cards (Item 4 on your Proxy Card).
PROPOSAL
V
APPROVAL
OF ADOPTION OF THE 2009 INCENTIVE PLAN
(Item
5 on your Proxy)
Subject
to shareholder approval and upon recommendation of the Committee, the Board of
Directors approved the 2009 Incentive Plan (the “2009 Plan”). The 2009 Plan is
an equity incentive plan that will:
·
|
allow
the Company to make additional grants of restricted stock to participants
since the Company has reached its limit on such grants under the 2002 Plan
(called incentive stock under the 2002
Plan);
|
·
|
provide
the Company with the authority to make various other awards for up to
6,500,000 Class A Common Shares and Class B Common Shares (which will be
limited to 2,500,000 Class A Common Shares and Class B Common Shares for
all awards other than options and stock appreciation
rights);
|
·
|
limit
future grants under the 2002 Plan to awards from shares returned to the
2002 Plan by forfeiture after July 23, 2009 and allow the Company to offer
the holders of unvested incentive stock awards under the 2002 Plan the
right to exchange their Class A Common Shares for Class B Common Shares if
authorized by the Board of Directors in the
future;
|
·
|
allow
the Company to offer the holders of unvested incentive stock awards under
the 2009 Plan the right to exchange their Class A Common Shares for Class
B Common Shares if authorized by the Board of Directors in the future;
and
|
·
|
permit
the Company, at the Committee’s discretion, to grant awards that will
comply with the requirements of Section 162(m) of the Code.
Section 162(m) of the Code limits the Company’s federal income tax
deduction for compensation paid by the Company to certain executive
officers to $1 million per officer per corporate taxable year unless
certain requirements are met, including that compensation is paid based on
attainment of one or more “performance-based”
goals.
|
The
following summary of the material terms of the 2009 Plan, a copy of which is
attached hereto as Appendix
C, does not purport to be complete and is qualified in its entirety by
the terms of the 2009 Plan.
Summary
of the 2009 Incentive Plan
Purposes of the 2009
Plan. The purposes of the 2009 Plan are to foster and promote
the long-term financial success of the Company and materially increase
shareholder value by motivating performance through incentive compensation. The
2009 Plan also is intended to encourage participant ownership in the Company,
attract and retain talent, and enable participants to participate in the
long-term growth and financial success of the Company. In addition, the 2009
Plan provides the ability to make awards linked to the profitability of the
Company and increases in shareholder value.
Reason for Shareholder
Approval. The approval of the 2009 Plan requires the
affirmative vote of the holders of a majority of the voting power of the
Company’s Class A Common Shares and Class B Common Shares, voting as a single
class, entitled to vote at the Annual Meeting. The Compensation Committee, Board
of Directors and the Company’s management believe it is in the best interests of
the Company and its shareholders to approve this 2009 Plan.
Term of the
Plan. The 2009 Plan shall remain in effect until terminated by
the Company or when all shares available for award under the 2009 Plan have been
granted. No incentive stock options may be granted after the tenth anniversary
of the date the 2009 Plan is approved by the Company’s shareholders. The 2009
Plan shall continue in effect until all matters relating to the settlement of
awards and administration of the 2009 Plan have been completed.
Administration of the 2009
Plan. The 2009 Plan shall be administered by the Committee,
but any action that may be taken by the Committee may also be taken by the full
Board of Directors of the Company. The Committee is composed in accordance with,
and governed by, the Committee’s charter, as approved from time to time by the
Board of Directors. The Committee has the authority to grant awards under the
2009 Plan, to determine the terms and conditions thereof, to adjust such terms
and conditions (including accelerating the vesting of any award), to interpret
the provisions of the 2009 Plan and to make all other determinations which may
be necessary or advisable for the administration of the 2009 Plan.
Eligibility and
Participation. Eligibility to participate in the 2009 Plan is
limited to (i) current and prospective employees of the Company; (ii)
consultants or advisors, to the Company or any affiliate; and (iii) current
or prospective non-employee members of the Board of Directors of the Company or
its affiliates. Approximately 12,345 employees of the Company, including all
executive officers, and the five non-management members of the Board of
Directors of the Company and its subsidiaries, are currently eligible to
participate in the 2009 Plan.
Adjustments. The
maximum number of Shares available for issuance under the 2009 Plan as well as
the exercise or settlement prices of awards under the 2009 Plan will be adjusted
to reflect certain events, such as a stock dividend, stock split, combination of
shares, recapitalization or reorganization. However, such adjustments shall be
made so as to not affect the status of any award intended to qualify as an ISO
pursuant to Section 422 of the Code or as “performance-based compensation” under
Section 162(m) of the Code.
Amendment and
Termination. The Board of Directors may amend, alter, or
discontinue the 2009 Plan at any time, but no amendment, alteration or
discontinuation shall be made which would materially impair the rights of a
participant under a granted award without the participant’s consent. Any
amendments to the 2009 Plan shall require shareholder approval to the extent
required by federal or state law or any regulations or rules promulgated
thereunder or the rules of the NASDAQ Stock Market, the national securities
exchange on which the Company’s Class A Common Shares are listed.
Type of Awards under the 2009
Plan. The 2009 Plan provides that the Committee may grant
awards to eligible participants in any of the following forms, subject to such
terms, conditions and provisions as the Committee may deem to be necessary or
desirable: (i) bonus awards; (ii) stock options (both incentive stock options
and non-qualified stock options); (iii) stock appreciation rights; (iv)
restricted stock; (v) deferred stock; and (vi) performance awards (both
performance units and performance shares).
Shares Subject to the 2009
Plan. The total number of Class A Common Shares and Class
B Common Shares reserved and available for distribution pursuant to awards under
the 2009 Plan shall be 6,500,000. Of the 6,500,000 shares reserved, the maximum
number of shares which may be used for awards other than stock options or stock
appreciation rights is 2,500,000 shares. Upon approval of the 2009 Plan by
shareholders, the 2002 Plan will immediately cease to be available for use for
the grant of new awards, other than (i) awards granted solely from shares
returned to the 2002 Plan by forfeiture after July 23, 2009 and (ii) the
exchange of Class A Common Shares subject to unvested incentive stock awards for
Class B Common Shares as described in Proposal IV. The Committee will have full
authority to determine the number of Class A Common Shares or Class B Common
Shares subject to awards. At May 22, 2009, the market value of the 6,500,000
Class A Common Shares that may be issued pursuant to the 2009 Plan was
$43,615,000. (The Class B Common Shares are not publicly
traded.)
As
described in Proposal II above, if the Article amendments proposed in this Proxy
Statement are approved by our shareholders, and if the Company issues Class B
Common Shares under the 2002 Plan, the proposed 2009 Plan, or otherwise
resulting in the holders of Class B Common Shares holding greater than 41% of
the total voting power of the Company’s shares as of the record date for any
annual meeting of shareholders, then the number of votes per share of each
holder of Class B Common Shares will automatically be reduced on a proportionate
basis so that the holders of Class B Common Shares (including the Founders) hold
in the aggregate no more than 41% of the Company’s total voting
power.
Furthermore,
if Proposal III is adopted, any Class B Common Shares issued under the 2009 Plan
to employees or directors of the Company will automatically convert into Class A
Common Shares upon the death or termination of employment or service of such
employees or directors.
Bonus Awards. The
Committee will have the authority to grant awards to participants in the 2009
Plan entitling them to earn incentive compensation based on the achievement of
performance goals established for one or more performance periods. Threshold,
target and maximum awards may be granted. Participants will not be entitled to
payment for a bonus award until the Committee determines that the performance
goals have been obtained for the relevant award level for the relevant
performance period. The Committee is also granted the authority to make
adjustments to a bonus award to reflect individual performance during the
applicable performance period. Unless otherwise determined by the Committee,
payment of bonus awards will be made in cash.
Stock
Options. Stock options granted under the 2009 Plan may be
either incentive stock options or non-qualified stock options. The exercise
price per share shall not be less than the fair market value per share on the
grant date. If a stock option which is intended to qualify as an incentive stock
option is granted to an individual who owns or who is deemed to own shares
possessing more than ten percent (10%) of the combined voting power of all
classes of shares of the Company, a parent corporation or any subsidiary
corporation, then the exercise price per share shall not be less than one
hundred ten percent (110%) of the fair market value per share on the grant date.
The
option
period of each stock option shall be fixed by the Committee, but shall not
exceed ten years from the date the option is granted for incentive stock options
(five years for 10% owners). Stock options shall only be exercisable in whole or
in such installments and at such times as established by the Committee. The
Committee may at any time accelerate the exercisability of all or part of any
stock option. Except as otherwise provided in the award agreement, unexercised
options generally terminate upon the termination of employment or service of the
option holder, except that employees who are not terminated for cause as defined
in the 2009 Plan will have 90 days to exercise their options and options held by
employees terminated as a result of death or disability will expire one year
after the date of such termination. Moreover, non-employee directors will
have two years to exercise their options following their termination of service
as a director.
Stock
Appreciation Rights. Stock appreciation rights may be awarded
at any time by the Committee. The Committee has the discretion to determine the
exercise price and other terms of stock appreciation rights. The exercise price
per share shall not be less than the fair market value per share on the grant
date. Upon exercise of a stock appreciation right, a participant shall receive a
number of Class A Common Shares or Class B Common Shares equal in value to the
excess of the fair market value per Class A Common Share or Class B Common Share
over the exercise price per share of the common stock specified in the related
stock appreciation right agreement; provided the Committee may pay this award in
cash or a combination of cash and shares. If stock appreciation rights are
granted in connection with stock options, upon exercise of the stock
appreciation right, the related options will be forfeited and upon exercise of
the related stock option the stock appreciation right shall terminate. The
effect on stock appreciation rights of termination of employment or service is
the same as for stock options (see above).
Restricted
Stock. Restricted stock may be awarded at any time by the
Committee. Restricted stock is stock which cannot be transferred and remains
subject to a risk of forfeiture until the applicable vesting conditions are
attained. The Committee has the discretion to determine the vesting conditions
and other terms of restricted stock. Except as otherwise provided in the award
agreement, holders of restricted stock shall have all the rights of a
shareholder of the Company holding the class of common stock that is the subject
of the restricted stock, provided that, except as otherwise provided in the
award agreement, for restricted stock that is performance based, a holder’s
right to dividends will not vest unless the restricted stock vests and will be
paid at the time of vesting. Upon termination of employment or service, except
as otherwise provided in the award agreement or determined by the Committee,
unvested restricted stock shall be forfeited.
Deferred
Stock. Deferred stock may be awarded at any time by the
Committee. Deferred stock is a right granted to a participant to receive stock
at the end of a specified deferral period. The Committee has the discretion to
determine the duration of the deferral period, the conditions under which
receipt of the stock will be deferred and other terms of deferred stock. Holders
of deferred stock may elect to further defer receipt of the deferred stock
payable under an award, subject to such terms and conditions determined by the
Committee. Upon the expiration of the deferral period, the Committee shall
deliver common stock to the participant pursuant to the deferred stock award.
Upon termination of employment or service, except as otherwise provided in the
award agreement or determined by the Committee, shares still covered by the
deferred stock award shall be forfeited.
Performance
Awards. Performance awards may be awarded at any time by the
Committee. Performance Awards include performance units and performance shares,
each of which consist of the right to receive shares or cash, as provided in the
particular award agreement, upon achievement of certain performance goals. After
the applicable period for performance has ended, the Committee shall determine
the extent to which the established performance goals were achieved. Upon
termination of employment or service, except as otherwise provided in the award
agreement or determined by the Committee, unvested performance awards shall be
forfeited.
Performance
Criteria. One or more of the following performance criteria
will be the basis of performance measures for awards under the 2009 Plan
intended to satisfy the requirement for performance-based compensation under
Section 162(m) of the Code.
|
·
|
individual
participant financial or non-financial performance
goals;
|
|
·
|
cash
flow from operations;
|
|
·
|
operating
profit or loss;
|
|
·
|
operating
income or loss;
|
|
·
|
net
operating income or loss;
|
|
·
|
four-wall
contribution;
|
|
·
|
return
on total assets;
|
|
·
|
return
on operating income;
|
|
·
|
total
shareholder return;
|
|
·
|
revenue
growth or decline;
|
|
·
|
earnings
before interest, taxes, depreciation and amortization (“EBITDA”);
|
|
·
|
EBITDA
growth or decline;
|
|
·
|
basic
earnings per share (positive or
negative);
|
|
·
|
diluted
earnings per share (positive or
negative);
|
|
·
|
funds
from operations per share;
|
|
·
|
per
share growth (positive or
negative);
|
|
·
|
cash
available for distribution;
|
|
·
|
cash
available for distribution per
share;
|
|
·
|
per
share growth or decline;
|
|
·
|
share
price performance on an absolute basis and relative to an index of
earnings per share;
|
|
·
|
improvements
in the Company’s attainment of expense
levels;
|
|
·
|
expense
reduction or control; or
|
|
·
|
implementing
or completion of critical projects.
|
The
performance criteria can be measured alone or in any combination, and if not
based on individual performance, can be based on either the performance of the
consolidated Company or the performance of a division or business unit of the
Company. Performance can be measured on an absolute basis or relative to a
pre-established target, to previous year results, or to a designated comparison
group. The Committee may include or exclude any or all of the following items
from the calculation: extraordinary, unusual or non-recurring items; effects of
accounting changes; effects of financing activities; expenses for restructuring
or production activities; other non-operating items; spending for acquisitions;
effects of divestitures; and effects of litigation activities and
settlements.
Change in Control
Provisions. Unless otherwise specifically provided in an award
agreement, in the event of a sale of the Company, including, without limitation,
the sale of all or substantially all of the assets of the Company, a merger or
consolidation involving the Company in which it is not the survivor, and the
acquisition of more than 50% of the voting power of the Company’s shares by a
person or group of persons acting in concert, the Committee may provide that the
bonus awards, stock options, stock appreciation rights, restricted stock, and
deferred stock shall vest immediately and any performance goal or other
condition with respect to performance share awards and performance unit awards
shall be deemed satisfied and/or any award shall terminate or be cancelled if
not exercised as of the date of such event. In addition, the Committee may
substitute for the Company shares subject to awards the securities of another
entity and make equitable adjustments with respect to such
substitution.
Transferability. Generally, no awards
granted under the 2009 Plan, or any interests in such awards, may be assigned or
transferred other than by will or the laws of descent and distribution and
awards are exercisable during a participant’s lifetime only by the
participant.
Maximum Amount. To
the extent the Committee structures an award to qualify as performance based
compensation or under Section 162(m) of the Code, the following shall be the
maximum amount of compensation that could be paid to any covered employee. The
maximum number of shares of stock for which stock options and SARs may be
granted to any covered employee in any twelve consecutive month period in the
aggregate, cannot exceed 1,000,000 shares. The total aggregate maximum amount of
compensation that could be paid to any covered employee pursuant to a bonus
award in any twelve consecutive month period cannot exceed $2.5 million. The
total aggregate maximum number of shares of restricted stock that may be granted
to any covered employee during any period of twelve consecutive months cannot
exceed 750,000 shares. The total aggregate maximum value (determined on the date
of grant) of awards of deferred stock and performance awards, in the aggregate,
that may be granted to any covered employee during any period of twelve
consecutive months cannot exceed $5 million.
Federal
Income Tax Consequences
The
following is a general description of the federal income tax consequences to the
participant and the Company with regard to awards granted under the 2009 Plan
under present law. The tax consequences of awards constituting Non-Qualified
Stock Options, Incentive Stock Options, Bonus Awards and Restricted Stock under
the 2009 Plan are the same as awards of Non-Qualified Stock Options, Incentive
Stock Options, Incentive Awards and Incentive Stock, as applicable, under the
2002 Plan, and the tax consequences discussion for those awards under the 2002
Plan are incorporated herein by this reference. The tax consequences discussion
with respect to Code Section 409A under the 2002 Plan Proposal is also the same
for the 2009 Plan and is incorporated herein by this reference. See, “Federal
Income Tax Consequences” under Proposal IV beginning on page 53.
This
discussion is intended for the information of shareholders considering how to
vote at the Annual Meeting and not as tax guidance to participants in the 2009
Plan, as the consequences may vary with the types of awards made, the identity
of the recipients and the method of payment or settlement. The summary does not
address the effects of other federal taxes (including possible “golden
parachute” excise taxes) or taxes imposed under state, local, or foreign tax
laws. This discussion does not purport to discuss all tax consequences related
to awards under the 2009 Plan.
Stock Appreciation Rights
(SARs). There typically
will be no federal income tax consequences to the participant or to the Company
upon the grant of a SAR under the 2009 Plan. When the participant exercises a
SAR, he or she will recognize ordinary income in an amount equal to the excess
of the fair market value of a share of stock received at the time of exercise
over the fair market value of a share of stock on date of grant, and the
Company
will be allowed a corresponding deduction, subject to any applicable limitations
under the Internal Revenue Code Section 162(m).
Deferred
Stock Awards. The
grant of a deferred stock award under the 2009 Plan generally will not be
taxable to the participant, and will not be deductible by the Company at the
time of grant. At the time a deferred stock award is settled in shares of common
stock, the participant will recognize ordinary income and the Company will be
entitled to a corresponding deduction. Generally the measure of the income and
deduction will be the fair market value of the common stock at the time the
deferred stock is
settled.
Performance
Awards. A
participant generally will not recognize income, and the Company will not be
allowed a tax deduction, at the time performance awards are granted, so long as
the awards are subject to a substantial risk of forfeiture. When the participant
receives, or has the right to receive, payment of cash or shares under the
performance award, the cash amount or the fair market value of the shares of
stock will be ordinary income to the participant, and the Company will be
allowed a corresponding federal income tax deduction at that time, subject to
any applicable limitations under Section 162(m).
New
Plan Benefits
The
benefits that will be awarded under the 2009 Plan in the future are not
determinable. However, the Committee has informed certain executive
officer participants under the 2009 Plan of the Company’s intent to make grants
of restricted stock awards to such participants in respect of fiscal year 2010
annual compensation, subject to the approval of the 2009 Plan by the
shareholders and subject to final approval of the Committee. The
Committee also has informed the executive officers of the dollar values of the
anticipated restricted stock awards to be made to each such
participant. The dollar values of the restricted stock awards
intended to be made to each executive officer will be equal to 32% of the
executive officer’s fiscal year 2009 base salary, determined pursuant to the
following formula:
·
|
The
total dollar value of the restricted stock awards plus certain awards of
non-qualified stock options previously made to the executive officers
under the 2002 Plan will be equal to 80% of the executive officer’s fiscal
year 2009 base salary.
|
·
|
Of
this amount, 40% will constitute the dollar value of restricted stock
awards for fiscal year 2010 to be made under the 2009 Plan, and the
remaining 60% will constitute the dollar value of the non-qualified stock
option grants for fiscal year 2010 previously made under the 2002
Plan.
|
Upon the
approval of the 2009 Plan by the Company’s shareholders, the Committee intends
to approve the grant of the number of shares of restricted stock to the
executive officers determined in accordance with the formula described
above.
Required
Shareholder Approval
The
affirmative vote of the holders of a majority of voting power of the Company’s
Class A Common Shares and Class B Common Shares entitled to vote at the Annual
Meeting, voting together as a single class, is required to approve the 2009
Plan. The 2009 Plan, if approved and adopted by the shareholders, will be
effective as of the date it was originally approved by the Board of Directors –
April 24, 2009.
Recommendation
of the Board of Directors
The
Board of Directors recommends that shareholders vote “FOR” the approval and
ratification of the Company’s 2009 Plan. Proxies solicited by the Board of
Directors will be voted “FOR” this Proposal unless shareholders specify
otherwise on their Proxy Cards (Item 5 on your Proxy Card).
AUDIT
COMMITTEE REPORT
The
following report of the Audit Committee does not constitute soliciting material
and should not be deemed filed or incorporated by reference into any other
Company filing under the Securities Act of 1933, as amended (the “Securities
Act”) or the Exchange Act, except to the extent the Company specifically
incorporates this report by reference therein.
The Audit
Committee acts under an annually reviewed charter approved by the Board in
October 2003. The Audit Committee oversees the Company’s financial reporting
process on behalf of the Board. Company management has the primary
responsibility for the financial statements and the reporting process including
the systems of internal controls. In fulfilling its oversight responsibilities,
the Audit Committee reviewed and discussed the audited financial statements in
the Annual Report on Form 10-K for the year ended February 28, 2009, with
management, including a discussion of the quality, not just the acceptability,
of the accounting principles, the reasonableness of significant judgments, and
the clarity of disclosures in the financial statements.
The Audit
Committee is composed solely of independent directors (as defined in the
criteria for independence set forth in the Nasdaq listing standards and SEC
rules). Each member meets Nasdaq financial knowledge requirements, and the Board
of Directors has determined that Mr. Carmichael qualifies as an “audit
committee financial expert” as defined by SEC rules and meets Nasdaq
professional experience requirements as well.
The Audit
Committee discussed with the independent auditors, who are responsible for
expressing an opinion on the conformity of the audited financial statements with
generally accepted accounting principals, the matters to be discussed by
Statement on Auditing Standards No. 61, “Communication with Audit Committees,”
as amended, which includes, among other items, matters relating to the conduct
of an audit of the Company’s financial statements.
The Audit
Committee received the written disclosures and the letter from the independent
auditors required by applicable requirements of the Public Company Accounting
Oversight Board regarding the independent auditor’s communications with the
Audit Committee concerning independence and has discussed with the independent
auditors their independence from the Company.
In
reliance on the reviews and discussions referred to above, the Audit Committee
recommended to the Board (and the Board has approved) the inclusion of the
audited financial statements in the Company’s Annual Report on Form 10-K for the
year ended February 28 , 2009, for filing with the SEC.
William
P. Carmichael, Chair
Bill
Kirkendall
Stephen
Goldsmith
Catherine
A. Langham
Relationship
with Independent Public Accountants
The
accounting firm of Ernst & Young LLP, which has served as the Company’s
principal independent registered public accounting firm continuously since 1988,
was selected by the Audit Committee to continue in that capacity for fiscal
2009. During fiscal 2009, the Company also engaged Ernst & Young LLP to
render certain other professional services, assistance on tax compliance, audit
of the retirement plan and general consultations pursuant to the pre-approval
policies and procedures discussed below.
The
appointment of an independent registered public accounting firm is approved
annually by the Audit Committee. In making its determination, the Audit
Committee reviews both the audit scope and estimated audit fees
for the
coming year. The Audit Committee has selected Ernst & Young LLP for the
current fiscal year. Each professional service performed by Ernst & Young
LLP during fiscal 2009 was reviewed and the possible effect of such service on
the independence of the firm was considered by the Audit Committee.
Additionally, the Audit Committee requires the rotation of its outside auditor’s
audit partners as required by the Sarbanes-Oxley Act of 2002, as amended, and
the related rules of the Securities and Exchange Commission.
Independent
Auditor Fee Information
Fees for
professional services provided by the Company’s independent registered public
accounting firm Ernst & Young LLP, in each of the last two fiscal years, for
each of the following categories are:
|
|
|
2009
|
|
|
2008
|
|
|
Audit
Fees
|
|
$ |
453,197 |
|
|
$ |
553,463 |
|
|
Audit-Related
Fees
|
|
|
19,500 |
|
|
|
17,500 |
|
|
Tax
Fees
|
|
|
69,626 |
|
|
|
155,482 |
|
|
All
Other Fees
|
|
|
— |
|
|
|
— |
|
|
|
|
$ |
542,323 |
|
|
$ |
726,445 |
|
Fees for
audit services include fees associated with the annual financial statement and
internal controls audit, the reviews of the Company’s quarterly reports on Form
10-Q, and assistance with review of documents filed with the SEC. Audit-related
fees principally include accounting consultations and the audit of the Company’s
Profit Sharing and 401(k) plan. Tax fees consist primarily of tax compliance and
consultation on routine tax matters.
Pre-Approval
Policies and Procedures
The Audit
Committee has adopted a policy that requires pre-approval of all audit,
audit-related, tax services and other services performed by the independent
auditor during the fiscal year. The Audit Committee pre-approves specifically
defined services within the categories outlined above, subject to the budget for
each category. Unless a specific service has been previously pre-approved for
that year, the Audit Committee must approve the service before the independent
auditor may perform such service. The Audit Committee has delegated to the Chair
of the Audit Committee the authority to pre-approve permitted services between
Audit Committee meetings, subject to specified budgetary limitations, so long as
the Chair reports any such decisions to the Audit Committee at its next
scheduled meeting.
RATIFICATION
OF THE SELECTION OF INDEPENDENT AUDITORS
(Item
6 on your Proxy)
The Audit
Committee has selected Ernst & Young LLP as the Company’s independent
registered public accounting firm for the fiscal year ending February 27, 2010.
The Board urges you to vote “FOR” ratification of that appointment. A
representative of Ernst & Young LLP plans to be present at the Annual
Meeting and will be given an opportunity to make a statement if he or she
desires to do so and will be available to respond to appropriate questions from
shareholders.
Required
Shareholder Approval
For the
selection of Ernst & Young LLP as the Company’s independent registered
public accounting firm for the Company’s fiscal year ending February 27, 2010 to
be ratified, more votes must be cast by all holders of common shares, voting
together as a single class, in favor of the proposal than are cast against
it.
Recommendation
of the Board of Directors
The
Board of Directors unanimously recommends that shareholders vote “FOR”
ratification of the selection of Ernst & Young LLP as the Company’s
independent registered public accounting firm. Proxies solicited by the Board of
Directors will be so voted unless shareholders specify otherwise on their Proxy
Cards (Item 6 on your Proxy).
PROPOSALS
OF SHAREHOLDERS
If a
shareholder wishes to submit a proposal for consideration at the 2010 Annual
Meeting of Shareholders and wants that proposal to appear in the Company’s proxy
statement for that meeting, the proposal must be submitted to the Company at its
principal offices (3308 N. Mitthoeffer Road, Indianapolis, Indiana 46235) in
care of the Secretary no later than April 23, 2010.
If a
shareholder wishes to submit a proposal for consideration at the 2010 Annual
Meeting of Shareholders, or if a shareholder wishes to recommend a candidate for
election to the Board, the Company’s Bylaws require the shareholder to provide
the Company with written notice of such proposal or recommendation no less than
90 days nor more than 120 days in advance of the first anniversary of the 2009
Annual Meeting (in the event that the date of the 2010 Annual Meeting of
Shareholders is advanced by more than 30 days or delayed by more than 60 days
from such anniversary date, the shareholder must provide the Company with
written notice of such proposal or recommendation no less than 90 days nor more
than 120 days in advance of the meeting or, if later, the seventh day following
the first public announcement of the date of the 2010 Annual Meeting of
Shareholders). Such notice should be sent to the Company in care of the
Secretary at its principal offices.
Notwithstanding
the foregoing, in the event that the number of directors to be elected to the
Board is increased and there is no public announcement by the Company naming all
of the director nominees or specifying the size of the increased Board at least
100 days prior to the first anniversary of the 2009 Annual Meeting (or if the
2010 Annual Meeting is advanced by more than 30 days or delayed by more than 60
days from such anniversary date, at least 100 days prior to the date of the 2010
Annual Meeting), a shareholder’s notice shall also be considered timely, but
only with respect to nominees for any new positions created by such increase, if
it is delivered to the Secretary no later than the close of business on the
seventh day following the day on which such public announcement is made by the
Company.
MISCELLANEOUS
The
Company’s Annual Report to Shareholders for the fiscal year ended February 28,
2009, including the financial statements and related notes thereto, together
with the report of the independent auditors and other information with respect
to the Company, accompanies this Proxy Statement.
The
Company is not aware of any other business to be presented at the 2009 Annual
Meeting. If matters other than those described should properly arise at the
meeting, the proxies will vote on such matters in accordance with their best
judgment.
|
By
Order of the Board of Directors,
|
|
|
|
Gary
D. Cohen
|
|
Chief
Administrative Officer & Secretary
|
|
Indianapolis,
Indiana
|
|
June
23, 2009
|
Appendix
A
Restated
Articles of Incorporation
of
The
Finish Line, Inc.
The
undersigned, desiring to form a corporation (the “Corporation”) pursuant to the
provisions of the Indiana Business Corporation Law (as amended from time to
time, the “Act”),
executes the following Articles of Incorporation.
Article 1 Name.
The name
of the Corporation is The Finish Line, Inc.
Article 2 Purposes and
Powers.
Section
2.01 Purposes.
The purposes for which the Corporation is formed are the transaction of
any or all lawful business for which corporations may be incorporated under the
Act.
Section
2.02 Powers.
The Corporation shall have the same powers as an individual to do all
things necessary or convenient to carry out its business and affairs, including
without limitation, all the powers specifically enumerated in the
Act.
Article 3 Term of
Existence.
The
period during which the Corporation shall continue is perpetual.
Article 4 Registered Agent and Registered
Office.
The name
of the registered agent and address of the registered office of the Corporation
are:
Gary D.
Cohen
3308
Mitthoeffer Road
Indianapolis,
Indiana 46235
Article 5 Authorized
Shares.
Section
5.01 Number
of Shares. The total number of shares which the Corporation shall have
authority to issue is One Hundred Eleven Million (111,000,000)
shares.
Section
5.02 Designation
of Classes, Number and Par Value of Shares. The shares of authorized
capital stock shall be divided into One Million (1,000,000) Preferred Shares, as
hereinafter provided (“Preferred
Shares”), and One Hundred Ten Million (110,000,000) Common Shares, as
hereinafter provided (“Common
Shares”). The Common Shares shall have no par value, except that, solely
for the purpose of any statute or regulation imposing any tax or fee based upon
the capitalization of the Corporation, all of the Common Shares shall be deemed
to have a par value of $.01 per Common
Share.
Section
5.03 Rights,
Privileges, Limitations and Restrictions of Preferred Shares. The Board
of Directors of the Corporation is vested with authority to determine and state
the designations and the relative preferences, limitations, voting rights
(including the
number of
votes, if any, per share, as well as the number of members, if any, of the Board
of Directors or the percentage of members, if any, of the Board of Directors
each class or series of Preferred Shares may be entitled to elect), and other
rights of the Preferred Shares and of each series of Preferred Shares by the
adoption and filing in accordance with the Act, before the issuance of any
Preferred Shares or series of Preferred Shares, of an amendment or amendments to
these Articles of Incorporation as the same may, from time to time, be amended,
determining the terms of such Preferred Shares or series of Preferred Shares
(“Preferred Shares
Designation”). All Preferred Shares of the same series shall be identical
with each other in all respects. The number of authorized Preferred Shares may
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the voting
power of all of the then outstanding shares of the Corporation entitled to vote
generally in the election of Directors (“Voting
Shares”) through amendment to these Articles of Incorporation, voting as
a single class, without a separate vote of the holders of the Preferred Shares
or any series thereof, unless a vote of any such holders is required pursuant to
the Preferred Shares Designation.
Section 5.04 Rights,
Privileges, Limitations and Restrictions of Common
Shares.
Clause
5.041 Classes.
The Common Shares shall consist solely of “Class A Common Shares” and
“Class B Common Shares.” The authorized number of Class A Common
Shares shall be One Hundred Million (100,000,000) and the authorized number of
Class B Common Shares shall be Ten Million (10,000,000); provided that the
authorized number of Class A Common Shares shall be increased by any concurrent
decrease determined by the Board of Directors in the authorized number of Class
B Common Shares. The Board of Directors of the Corporation may authorize the
issuance of Class A Common Shares and Class B Common Shares from time to time
subject to the foregoing and to Clause
5.082(D) of Section 5.08. The Board of Directors shall have no
power to alter the rights with respect to Class A Common Shares or Class B
Common Shares. Except as otherwise provided in these Articles of Incorporation,
all Common Shares shall be identical and shall entitle the holders thereof to
the same rights and privileges.
Clause
5.042 Voting
Rights.
The holders of Class A Common Shares and of Class B Common Shares shall
have the following voting rights:
A. Each
Class A Common Share shall entitle the holder thereof to one (1) vote on all
matters submitted to a vote of the shareholders of the Corporation.
B. Each
Class B Common Share shall entitle the holder thereof to ten (10) votes on all
matters submitted to a vote of the shareholders of the Corporation; provided, however, so long as
the Class A Common Shares are then listed for trading on the NASDAQ Stock Market
or other national securities exchange, in the event that, as of any record date
for determining shareholders entitled to vote on any matter on which the Class A
Common Shares and the Class B Common Shares vote together as a single class, the
aggregate vote associated with the outstanding Class B Common Shares exceeds
forty-one percent (41%) of the total voting power of the Common Shares, the
number of votes for each outstanding Class B Common Share for that matter shall
be proportionately reduced so that the aggregate voting power
of the
outstanding Class B Common Shares with respect to such matter represents
forty-one percent (41%) of the total voting power of the outstanding Common
Shares, but in no event shall the number of votes for a Class B Common Share be
reduced below one (1) vote.
C. Except
as otherwise required by applicable law, the holders of Class A Common Shares
and the holders of Class B Common Shares shall vote together as one class on all
matters submitted to a vote of the shareholders of the Corporation.
Section
5.05 Issuance
of Shares. The Board of Directors has authority to authorize and direct
the issuance by the Corporation of Preferred Shares and Common Shares at such
times, in such amounts, to such persons, for such considerations and upon such
terms and conditions as it may, from time to time, determine upon, subject only
to the restrictions, limitations, conditions and requirements imposed by the
Act, other applicable laws and these Articles of Incorporation, as the same may,
from time to time, be amended.
Section
5.06 Distributions
Upon Shares. Subject to the preferences applicable to Preferred Shares
outstanding at the time, the holders of Class A Common Shares and the holders of
Class B Common Shares shall be entitled to receive such dividends, payable in
cash or otherwise, as may be declared thereon by the Board of Directors from
time to time out of assets or funds of the Corporation legally available
therefor, provided that each Class A Common Share and Class B Common Share shall
be equal in respect of rights to dividends and other distributions in cash,
shares or property of the Corporation, and provided that in the case of
dividends or other distributions payable in Class A Common Shares or Class B
Common Shares, including distributions pursuant to share split-ups or divisions
of Class A Common Shares or Class B Common Shares which occur after the first
date upon which the Corporation has issued both Class A Common Shares and Class
B Common Shares, only Class A Common Shares shall be distributed with respect to
Class A Common Shares and only Class B Common Shares shall be distributed with
respect to Class B Common Shares, unless the Board of Directors of the
Corporation determines in its discretion that it is more desirable to distribute
Class A Common Shares with respect to Class B Common Shares, in which case Class
A Common Shares shall be distributed with respect to Class B Common Shares,
provided that the number of Class A Common Shares that shall be distributed with
respect to Class B Common Shares shall be equal to the number of Class B Common
Shares that otherwise would have been
distributed.
Section
5.07 Liquidation.
In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of the Corporation, the holders of the Common Shares shall be
entitled, after payment or provision for payment of the debts and other
liabilities of the Corporation and of all shares having priority over the Common
Shares, to share ratably in the remaining net assets of the Corporation. If,
upon such dissolution, liquidation or winding up, the assets of the Corporation
distributable as aforesaid among the holders of all shares having priority over
Common Shares shall be insufficient to permit full payment to them of said
preferential amounts, then such assets shall be distributed ratably among the
holders of shares having priority over Common Shares in proportion to the
respective total amounts that they shall be entitled to receive as provided in
this Section 5.07.
Section 5.08 Class
B Common Shares.
Clause 5.081 Transfer
of Class B Shares.
A. Except
as provided in paragraph (B) of this Clause 5.081, no person
holding Class B Common Shares or any beneficial interest therein (a “Class
B Holder”) may voluntarily or involuntarily transfer (including without
limitation the power to vote the Class B Shares by proxy or otherwise), sell,
assign, devise or bequeath any of such Class B Holder’s interest in his or her
Class B Shares, and the Corporation and the transfer agent for the Class B
Common Shares, if any (the “Transfer
Agent”), shall not register the transfer of Class B Common Shares,
whether by sale, grant of proxy, assignment, gift, devise, bequest, appointment
or otherwise, except to a “Permitted
Transferee” of a Class B Holder, which term shall include the Corporation
and shall have the following additional meanings in the following
cases:
(i) In
the case of a Class B Holder who is a natural person holding record and
beneficial ownership of the Class B Common Shares in question, “Permitted
Transferee” means: (a) the spouse of the Class B Holder (the “Spouse”);
(b) a lineal descendant of a great grandparent of the Class B Holder or of the
Spouse (a “Descendant”);
(c) the trustee of a trust (including a voting trust) for the benefit of the
Class B Holder, the Spouse, other Descendants, or an organization contributions
to which are deductible for federal income, estate or gift tax purposes (a
“Charitable
Organization”), and for the benefit of no other person; provided that the
trust may grant a general or special power of appointment to the Spouse or to
the Descendants and may permit trust assets to be used to pay taxes, legacies
and other obligations of the trust or of the estate of the Class B Holder
payable by reason of the death of the Class B Holder or the death of the Spouse
or a Descendant, and that the trust (subject to the grant of a power of
appointment as provided above) must prohibit transfer of Class B Common Shares
or a beneficial interest therein to persons other than Permitted Transferees as
defined in subparagraph (ii) of this Clause 5.081(A) (a “Trust”);
(d) a Charitable Organization established by the Class B Holder or a Descendant;
(e) an Individual Retirement Account, as defined in Section 408(a) of the
Internal Revenue Code, of which the Class B Holder is a participant or
beneficiary, provided that the Class B Holder is vested with the power to direct
the investment of funds deposited into such Individual Retirement Account and to
control the voting of securities held by the Individual Retirement Account (an
“IRA”);
(f) a pension, profit sharing, stock bonus or other type of plan or trust of
which the Class B Holder is a participant or beneficiary and which satisfies the
requirements for qualification under Section 401 of the Internal Revenue Code,
provided that the Class B Holder is vested with the power to direct the
investment of funds deposited into such plan or trust and to control the voting
of securities held by such plan or trust, (a “Plan”);
(g) a corporation all of the outstanding capital stock of which is owned by, or
a partnership or limited liability company all of the partners or members of
which are, the Class B Holder, the Spouse and/or other Descendants, provided
that if any share (or any interest in any share) of capital stock of such a
corporation (or of any survivor of a merger or consolidation of the
corporation), or any partnership or membership interest in the partnership or
limited liability company, is acquired by any person who is not within that
class of persons, all Class
B Common
Shares then held by the corporation or partnership or limited liability company,
as the case may be, shall be deemed without further act on anyone’s
part to be converted into Class A Common Shares and share certificates formerly
representing such Class B Common Shares shall thereupon and thereafter be deemed
to represent the like number of Class A Common Shares in the manner set forth in
Clause 5.082(B) hereof; and
(h) in the event of the death of the Class B Holder, the Class B Holder’s estate
and heirs.
(ii) In
the case of a Class B Holder holding the Class B Common Shares in question as
trustee of an IRA, a Plan or a Trust other than a Trust described in
subparagraph (iii) of this Clause 5.081(A), “Permitted Transferee” means: (a) any participant in or
beneficiary of the IRA, the Plan or the Trust, or the person who transferred the
Class B Common Shares to the IRA, the Plan or the Trust, and (b) a Permitted
Transferee of any person or persons determined pursuant to subparagraph
(i) of this Clause 5.081(A).
(iii) In
the case of a Class B Holder holding the Class B Common Shares in question as
trustee pursuant to a Trust which was irrevocable on the Record Date (as defined
below), “Permitted Transferee” means any person as of the Record Date to whom or
for whose benefit principal may be distributed either during or at the end of
the term of the Trust whether by power of appointment or otherwise. For purposes
of this Section 5.08 of these Articles of Incorporation, there shall be one
“Record Date,” which date shall be the record date for determining the persons
to whom the Class B Common Shares are first distributed by the
Corporation.
(iv) In
the case of a Class B Holder holding record (but not beneficial) ownership of
the Class B Common Shares in question as nominee for the person who was the
beneficial owner thereof on the Record Date, “Permitted Transferee” means the
beneficial owner and a Permitted Transferee of the beneficial owner determined
pursuant to subparagraphs (i), (ii), (iii), (v), or (vi) of
this Clause 5.081(A), as the case
may be.
(v) In
the case of a Class B Holder that is a partnership or limited liability company
holding record and beneficial ownership of the Class B Common Shares in
question, “Permitted Transferee” means any partner of the partnership, provided
that the partner or member was a partner or member in the partnership or limited
liability company at the time it first became a Class B Holder.
(vi) In
the case of a Class B Holder that is a corporation, other than a Charitable
Organization described in Clause 5.081(A)(i)(d), holding record and beneficial
ownership of the Class B Common Shares in question (a “Corporate
Holder”), “Permitted Transferee” means (a) any shareholder of the
Corporate Holder as of the Record Date or any Permitted Transferee of any
shareholder determined pursuant to Clause 5.081(A)(i); and (b) the survivor (the
“Survivor”)
of a merger or
consolidation
of the Corporate Holder, so long as the Survivor is controlled, directly or
indirectly, by those shareholders of the Corporate Holder
who were shareholders of the Corporate Holder as of the Record Date or any
Permitted Transferees of the shareholders determined pursuant to Clause
5.081(A)(i).
(vii) In
the case of a Class B Holder that is the estate of a deceased Class B Holder, or
which is the estate of a bankrupt or insolvent Class B Holder, and provided the
deceased, bankrupt or insolvent Class B Holder, as the case may be, held record
and beneficial ownership of the Class B Common Shares in question, “Permitted
Transferee” means a Permitted Transferee of the deceased, bankrupt or insolvent
Class B Holder as determined pursuant to subparagraphs (i), (v) or (v) of this
Clause 5.081(A), as the case may be.
(viii) In
the case of any Class B Holder who desires to make a bona fide gift, “Permitted
Transferee” means any other Class B Holder or its Permitted
Transferee.
B. Notwithstanding
anything to the contrary set forth herein, any Class B Holder may pledge the
Holder’s Class B Common Shares to a pledgee pursuant to a bona fide pledge of
the shares as collateral security for indebtedness due to the pledgee, provided
that the shares shall not be transferred to, registered in the name of or voted
by the pledgee and shall remain subject to the provisions of this Clause 5.081.
In the event of foreclosure or other similar action by the pledgee, the pledged
Class B Common Shares may only be transferred to a Permitted Transferee of the
pledgor or converted into Class A Common Shares, as the pledgee may
elect.
C. For
purposes of this Clause 5.081:
(i) The
relationship of any person that is derived by or through legal adoption shall be
considered a natural relationship.
(ii) Each
joint owner of shares or owner of a community property interest in Class B
Common Shares shall be considered a “Class B Holder” of such
shares.
(iii) A
minor for whom Class B Common Shares are held pursuant to a Uniform Transfer to
Minors Act or similar law shall be considered a Class B Holder of such
shares.
(iv) Unless
otherwise specified, the term “person” means and includes natural persons,
corporations, partnerships, limited liability companies, unincorporated
associations, firms, joint ventures, trusts and all other entities.
D. Except as otherwise
provided in Clause 5.082(B) any
purported transfer of Class B Common Shares not permitted hereunder shall be
void and of no effect, and the purported transferee shall have no rights as a
shareholder of the Corporation and no other rights against or with respect to
the
Corporation. The
Corporation may, as a condition to the transfer or the registration of transfer
of Class B Common Shares to a purported Permitted Transferee,
require the furnishing of affidavits or other proof as it deems necessary to
establish that the transferee is a Permitted Transferee. The certificate
representing Class B Common Shares shall be endorsed with a legend that states
that Class B Common Shares are not transferable other than to certain
transferees and are subject to certain restrictions as set forth in the Articles
of Incorporation filed by the corporation with the Secretary of State of the
State of Indiana.
Clause 5.082 Conversion
of Class B Common Shares.
A. Each
Class B Common Share, at the option of its holder, may at any time be converted
into one (1) fully paid and nonassessable Class A Common Share, subject to
adjustment as set forth in paragraph F of this Clause 5.082. Such right shall be
exercised by the surrender of the certificate representing the Class B Common
Share to be converted to the Corporation at any time during normal business
hours at the principal executive offices of the Corporation or at the office of
the Transfer Agent, accompanied by a written notice of the election by the
holder thereof to convert and (if so required by the Corporation or the Transfer
Agent) by instruments of transfer, in form satisfactory to the Corporation and
to the Transfer Agent, duly executed by the holder or the holder’s duly
authorized attorney, and transfer tax stamps or funds therefor, if required
pursuant to paragraph H of this Clause 5.082.
B. If the beneficial
ownership (as determined under Rule 13d-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended) of
any Class B Common Share or any interest in any Class B Common Share changes,
voluntarily or involuntarily, such that each new beneficial owner of the Class B
Common Share is not a “Permitted Transferee” (as defined in Clause
5.081A(A) hereof) of the beneficial owner of the Class B Common Share
immediately prior to the change in beneficial ownership, then each Class B
Common Share held by a person who is not a Permitted Transferee shall thereupon
be converted automatically into one (1) fully paid and nonassessable Class A
Common Share (subject to adjustment as set forth in paragraph F of this Clause
5.082). A determination by the Secretary of the Corporation that a change in
beneficial ownership requires conversion under this paragraph shall be
conclusive. Upon making this determination, the Secretary of the Corporation
shall promptly request from the holder of record of each Class B Common Share
that each holder promptly deliver, and each holder shall promptly deliver, the
certificate representing each Class B Common Share to the Corporation for
conversion hereunder, together with instruments of transfer, in form
satisfactory to the Corporation and Transfer Agent, duly executed by the holder
or the holder’s duly authorized attorney, and together with transfer tax stamps
or funds therefor, if required pursuant to paragraph H of this Clause
5.082.
C. If
a holder of Class B Common Shares acquires those shares on or after July 23,
2009, at a time when he was an employee or director of the Corporation or of any
of its majority-owned or wholly-owned subsidiaries (the
“Subsidiaries”), upon the death
of such person or the termination of his or her employment or service with
the Corporation and its Subsidiaries, then each Class B
Common Share held by such person or by his Permitted Transferees shall thereupon
be converted automatically into one (1) fully paid and nonassessable Class A
Common Share (subject to adjustment as set forth in paragraph F of this Clause
5.082). A determination by the Secretary of the Corporation that the death or
termination of employment or service of an employee or director, respectively,
of the Corporation requires conversion under this paragraph shall be conclusive.
Upon making this determination, the Secretary of the Corporation shall promptly
request from the holder of record of each Class B Common Share (or personal
representative in the event of the holder’s death) that each holder (or personal
representative in the event of the holder’s death) promptly deliver, and each
holder (or personal representative in the event of the holder’s death) shall
promptly deliver, the certificate representing each Class B Common Share to the
Corporation for conversion hereunder, together with instruments of transfer, in
form satisfactory to the Corporation and Transfer Agent, duly executed by the
holder or the holder’s duly authorized attorney or personal representative, and
together with transfer tax stamps or funds therefor, if required pursuant to
paragraph H of this Clause 5.082.
D. On
the day after the date of the annual meeting of shareholders of the Corporation
to be held in 2012, each Class B Common Share then issued or outstanding shall
thereupon be converted automatically into one (1) fully paid and nonassessable
Class A Common Share (subject to adjustment as set forth in paragraph F of this
Clause 5.082), and each Class B Common Share then authorized but unissued shall
thereupon automatically be deemed an authorized but unissued Class A Common
Share (subject to adjustment as set forth in paragraph F of this Clause 5.082).
As promptly as practicable on and after such date, the Secretary of the
Corporation shall promptly request from each holder of record of Class B Common
Shares that each holder promptly deliver, and each holder shall promptly
deliver, certificates representing all Class B Common Shares held by the holder
to the Corporation for conversion hereunder, together with instruments of
transfer in form satisfactory to the Corporation and Transfer Agent, duly
executed by the holder or the holder’s duly authorized attorney, and together
with transfer tax stamps or funds therefor, if required pursuant to paragraph H
of this Clause 5.082.
E. As promptly as
practicable following the surrender for conversion of a certificate representing
Class B Common Shares in the manner provided in paragraphs A, B, C or
D, as applicable, of this Clause 5.082 and the payment in cash of any
amount required by the provisions of paragraph H of this Clause 5.082, the
Corporation will deliver or cause to be delivered at the office of the Transfer
Agent to or upon the written order of the holder of the certificate, a
certificate or certificates representing the number of full shares of Class A
Common Shares issuable upon conversion, issued in the name or names as the
holder may direct. In the case of a conversion under paragraph A of this Clause
5.082, the conversion shall be deemed to have been made immediately prior to the
close of business on the date of the surrender of the certificate representing
Class B Common Shares. In the case of a
conversion under
paragraphs B and C of this Clause
5.082, the conversion shall be deemed to have been made on the date that the
beneficial ownership of the share has
changed as set forth in paragraph B or paragraph C, as applicable. In
the case of a conversion under paragraph D of this Clause
5.082, the conversion shall be deemed to have occurred on the day after the date
of the annual meeting of shareholders of the Corporation held in 2012. Upon the
date any conversion under paragraph A of this Clause 5.082 is made, all rights
of the holder of the shares as such holder shall cease, and the person or
persons in whose name or names the certificate or certificates representing the
Class A Common Shares are to be issued shall be treated for all purposes as
having become the record holder or holders of the Class A Common Shares;
provided, however, that any such surrender and payment on any date when the
share transfer books of the Corporation shall be closed shall constitute the
person or persons in whose name or names the certificate or certificates
representing Class A Common Shares are to be issued as the record holder or
holders thereof for all purposes immediately prior to the close of business on
the next succeeding day on which share transfer books are open. Upon the date
any conversion under paragraph B or paragraph C of this
Clause 5.082 is made, all rights of the holder of the shares as such holder
shall cease and the new beneficial owner or owners of the shares shall be
treated for all purposes as having become the record holder or holders of the
Class A Common Shares. Upon the date any conversion under paragraph
D of this Clause 5.082 is made, all rights of the holders of Class B
Common Shares shall cease, and the holders shall be treated for all purposes as
having become the record holders of Class A Common Shares at that time but the
Class B Common Shares shall be entitled to vote the Class B Common Shares at any
adjournments of the annual meeting of shareholders of the Corporation to be held
in 2012.
F. In
the event that the Corporation shall issue Class A Common Shares to the holders
of Class A Common Shares as a share dividend or share split, or in the event
that the Corporation reduces the number of outstanding Class A Common Shares in
a reverse share split or share combination, then the number of Class A Common
Shares issuable upon conversion of a Class B Common Share shall be adjusted such
that the holder of the Class B Common Shares shall receive the number
of Class A Common Shares that such holder would have received if the conversion
had occurred immediately prior to the record date for the share split, share
dividend, reverse share split or share combination of the Class A Common Shares,
as the case may be. In the event that the Corporation shall issue Class B Common
Shares to the holders of Class B Common Shares as a share dividend or share
split, or in the event that the Corporation reduces the number of outstanding
Class B Common Shares in a reverse share split or share combination, then the
number of Class A Common Shares issuable upon conversion of a Class B Common
Share shall be adjusted such that the holder of Class B Common Shares shall
receive the number of Class A Common Shares that the holder would have received
if the conversion had occurred immediately prior to the record date for the
share split, share dividend, reverse share split or share combination of the
Class B Common Shares, as the case may be. In the event of a reclassification or
other similar transaction as a result of which the Class A Common Shares are
converted into another security, then the number of that security issuable upon
conversion of a Class B Common Share shall be determined such that the
holder of
the Class B Common Shares shall receive the number of that security that the
holder would have received if the conversion had occurred immediately
prior to the record date of such reclassification or other similar transaction.
No adjustments in respect of dividends (other than share dividends) shall be
made upon the conversion of any Class B Common Share, provided, however, that if
a share shall be converted subsequent to the record date for the payment of a
dividend (other than a share dividend) or other distribution on Class B Common
Shares but prior to payment, then the registered holder of the share at the
close of business on the record date shall be entitled to receive the dividend
(other than a share dividend) or other distribution payable on the share on that
date notwithstanding the conversion thereof or the Corporation’s default in
payment of the dividend (other than a share dividend) due on such
date.
G. The
Corporation covenants that it will at all times reserve and keep available,
solely for the purpose of issue upon conversion of the outstanding Class B
Common Shares, such number of Class A Common Shares as shall be issuable upon
the conversion of all outstanding Class B Common Shares, provided that nothing
contained herein shall be construed to preclude the Corporation from satisfying
its obligations in respect of the conversion of the outstanding Class B Common
Shares by delivery of purchased Class A Common Shares which are held by the
Corporation. The Corporation covenants that if any Class A Common Shares
required to be reserved for purposes of conversion hereunder require
registration with or approval of any governmental authority under any federal or
state law before the Class A Common Shares may be issued upon conversion, the
Corporation will cause the shares to be duly registered or approved, as the case
may be. The Corporation will endeavor to list the Class A Common Shares required
to be delivered upon conversion prior to such delivery upon each national
securities exchange upon which the outstanding Class A Common Shares are listed
at the time of such delivery. The Corporation covenants that all Class A Common
Shares that shall be issued upon conversion of the fully paid and nonassessable
Class B Common Shares will, upon issue, be fully paid and
nonassessable.
H. The
issuance of certificates for Class A Common Shares upon conversion of Class B
Common Shares shall be made without charge for any stamp or other similar tax in
respect of such issuance. However, if any certificate is to be issued in a name
other than that of the holder of the Class B Common Shares converted, then the
person or persons requesting the issuance thereof shall pay to the Corporation
the amount of any tax that may be payable in respect of any transfer involved in
such issuance or shall establish to the satisfaction of the Corporation that
such tax has been paid.
Section
5.09 Acquisition
of Shares. The Board of Directors has authority to authorize and direct
the acquisition by the Corporation of the issued and outstanding Preferred
Shares and Common Shares at such times, in such amounts, from such persons, for
such considerations, from such sources and upon such terms and conditions as it
may, from time to time, determine upon, subject only to the restrictions,
limitations, conditions and requirements imposed by the Act, other applicable
laws and these Articles of Incorporation, as the same may, from time to time, be
amended.
Section
5.10 No
Pre-emptive Rights. The holders of the Common Shares and the holders of
the Preferred Shares or any series of the Preferred Shares shall have no
pre-emptive rights to subscribe to or purchase any Common Shares, Preferred
Shares or other securities of the
Corporation.
Section
5.11 Record
Ownership of Shares or Rights. The Corporation, to the extent permitted
by law, shall be entitled to treat the person in whose name any share or right
of the Corporation is registered on the books of the Corporation as the owner
thereof for all purposes, and shall not be bound to recognize any equitable or
any other claim to, or interest in, such share or right on the part of any other
person, whether or not the Corporation shall have notice
thereof.
Article
6 Directors.
Section
6.01 Number.
The number of directors of the Corporation shall be as specified in the
Bylaws of the Corporation, as the same may be amended from time to time.
Notwithstanding the foregoing, during any period in which the holders of any one
or more series of Preferred Shares, voting as a class, shall be entitled to
elect a specified number of directors by reason of dividend arrearages or other
contingencies giving them the right to do so, then and during such time as such
right continues, (A) the then otherwise authorized number of directors shall be
increased by such specified number of directors and the holders of the series of
Preferred Shares, voting as a class, shall be entitled to elect such specified
number of directors in accordance with the provisions of the Preferred Shares;
(B) each additional director shall serve until the next annual meeting at which
the term of office of his or her class shall expire and until his or her
successor shall be elected and shall qualify, or until his or her right to hold
such office terminates pursuant to the provisions of the Preferred Shares or
series, whichever occurs earlier. Whenever the holders of a series of Preferred
Shares are divested of the right to elect directors pursuant to the provisions
of the Preferred Shares or series, the terms of office of all directors elected
by the holders of the series of Preferred Shares pursuant to such provisions, or
elected to fill any vacancies resulting from the death, resignation or removal
of directors so elected by the holders of the Preferred Shares or series, shall
forthwith terminate and the authorized number of directors shall be reduced
accordingly.
Section
6.02 No
Cumulative Voting. There shall be no cumulative voting by shareholders of
any class or series in the election of directors of the
Corporation.
Section
6.03 Removal.
Subject to the rights of the holders of any series of Preferred Shares then
outstanding, any director, or the entire Board of Directors, may be removed from
office at any time, but only for cause and only upon the affirmative vote of a
majority of the Board of Directors whose removal is not sought and the
affirmative vote of the holders of a majority of the voting power of all of the
shares of the Corporation entitled to vote generally in the election of
directors, voting together as a single class. For purposes of this Section 6.03,
removal for cause shall be limited to matters relating to a director’s personal
dishonesty, willful misconduct or breach of fiduciary duty involving personal
profit.
Section
6.04 Shareholder
Nomination of Director Candidates and Introduction of Business. Advance
notice of shareholder nominations for the election of directors and of business
to be brought by shareholders before any meeting of the shareholders of the
Corporation shall be given in the manner provided in the Corporation’s
Bylaws.
Section
6.05 Liability
of Directors. To the fullest extent permitted by law, no director of the
Corporation shall be personally liable to the Corporation or its shareholders
for monetary damages for his or her conduct as a director except to the extent
provided in I.C. §23-1-35-1 as of July 1, 2004. No amendment or
repeal of this Section nor the adoption of any provision of the Articles of
Incorporation inconsistent with this Section nor a change in law shall adversely
affect any right or protection of a director which is based upon this Section
and arises from conduct that occurred prior to the time of the amendment,
repeal, adoption or change. If the Act is amended, after July 1, 2004
to authorize corporate action further eliminating or limiting the personal
liability of directors of the Corporation, then the liability of directors of
the Corporation shall immediately on the effective date of that amendment be
eliminated or limited to the fullest extent permitted by the Act as so
amended.
Article
7 Incorporator.
The name
and post office address of the Incorporator of the Corporation are as
follows:
Gary D.
Cohen
3308
Mitthoeffer Road
Indianapolis,
IN 46235
Article 8 Provisions for Regulation of Business
and Conduct of Affairs of Corporation.
Section
8.01 Amendments
of Articles of Incorporation. Except as otherwise expressly provided in
Section 8.02 hereof, the Corporation reserves the right to increase or decrease
the number of its authorized shares, or any class or series thereof, and to
reclassify the same, and to amend, alter, change or repeal any provision
contained in these Articles of Incorporation, or any amendment hereto, or to add
any provision to these Articles of Incorporation or to any amendment hereto, in
any manner now or hereafter prescribed or permitted by the Act or any other
applicable laws, and all rights and powers conferred upon shareholders,
directors and/or officers in these Articles of Incorporation, or any amendment
hereto, are granted subject to this reserve power. No shareholder has a vested
property right resulting from any provision in these Articles of Incorporation,
or any amendment hereto, or authorized to be in the Bylaws of the Corporation or
these Articles of Incorporation by the Act, including, without limitation,
provisions relating to management, control, capital structure, dividend
entitlement, or purpose or duration of the
Corporation.
Section
8.02 Certain
Amendments.
Notwithstanding any other provisions of these Articles of Incorporation
or the Bylaws of the Corporation to the contrary and notwithstanding that a
lesser vote or no vote may be specified by law, but, in addition to any
affirmative vote of the holders of any particular class or series of the
Corporation’s shares required by law or any Preferred Share
Designation:
Clause
8.021 the
affirmative vote of the holders of at least eighty percent (80%) of the voting
power of all of the then outstanding voting shares, voting together as a single
class, shall be required to alter, amend or repeal Section 8.04 or Article
9;
Clause
8.022 the
affirmative vote of the holders of at least two-thirds (2/3) of the voting power
of all of the then outstanding voting shares, voting together as a single class,
shall be required to alter, amend or repeal any other provision in these
Articles of Incorporation;
provided,
however, that the amendment shall require only the affirmative vote as is
required by law and any other provisions of these Articles of Incorporation or
the Bylaws of the Corporation if the amendment shall have been approved by at
least two-thirds (2/3) of the members of the Board of Directors and, if there is
an Interested Shareholder, two-thirds (2/3) of the Continuing Directors;
provided, however, that this condition shall not be capable of satisfaction
unless there are at least three (3) Continuing Directors.
Section
8.03 Action
by Shareholders. Meetings of the shareholders of the Corporation shall be
held at such place, within or without the State of Indiana, as may be specified
in the Bylaws of the Corporation or in the respective notices, or waivers of
notice, thereof. No shareholder action may be taken by written
consent.
Section
8.04 Regulation
of Certain Transactions. The following provisions are intended to
establish procedures to regulate transactions that would, when consummated,
result in a change in control of the Corporation as authorized by IC 23-1-22-4.
If there is an Interested Shareholder (as that term is defined in Clause
9.037) then:
Clause
8.041 Any
proposal by the Board of Directors to remove a director shall require, in
addition to the affirmative vote of a majority of the Board of Directors, a
majority of the Continuing Directors (as that term is defined in Clause
9.034).
Clause
8.042 Any
amendment to the Bylaws of the Corporation to provide that Chapter 42 of the Act
(Control Share Acquisitions) shall not apply shall require the approval of a
majority of the Continuing Directors in addition to any other approval required
to amend the Bylaws.
Clause
8.043 Any
other amendment to the Bylaws of the Corporation shall require the approval of a
majority of the Continuing Directors in addition to any other approval required
to amend the Bylaws.
Clause
8.044 A
proposal by the Board of Directors to amend the Articles of Incorporation of the
Corporation shall require, in addition to approval of the Board of Directors,
the affirmative vote of a majority of the Continuing Directors; provided,
however, that this condition shall not be capable of satisfaction unless there
are at least three (3) Continuing
Directors.
Article
9 Provisions
for Certain Business Combinations.
Section 9.01 Vote
Required.
Clause
9.011 Higher
Vote for Certain Business Combinations. Unless (A) the transaction was
approved by a majority of the Continuing Directors (as hereinafter defined)
before the Interested Shareholder (as hereinafter defined) became an Interested
Shareholder, or (B) (i) the purchase of shares made by the Interested
Shareholder was approved by a majority of the Continuing Directors before the
date the person became an Interested Shareholder and (ii) the transaction was
approved by a majority of the Continuing Directors before the transaction was
consummated, then in addition to any affirmative vote required by Chapter 43 of
the Act or as otherwise required by law or by these Articles of Incorporation,
and except as otherwise expressly provided in Section 9.02 of this Article
9:
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(1)
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any
merger or consolidation of the Corporation or any Subsidiary (as
hereinafter defined) with (A) any Interested Shareholder (as hereinafter
defined), or (B) any other corporation, limited liability company or other
entity (whether or not itself an Interested Shareholder) which is, or
after such merger or consolidation would be, an Affiliate (as hereinafter
defined) of an Interested Shareholder;
or
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(2)
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any
sale, lease, exchange, mortgage, pledge, transfer or other disposition (in
one transaction or a series of transactions) to or with any Interested
Shareholder or any Affiliate of any Interested Shareholder, of any assets
of the Corporation or any Subsidiary having an aggregate Fair Market Value
equaling or exceeding twenty-five percent (25%) or more of the combined
assets of the Corporation and its Subsidiaries;
or
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(3)
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the
issuance or transfer by the Corporation or any Subsidiary (in one
transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Shareholder or any
Affiliate of any Interested Shareholder in exchange for cash, securities
or other property (or a combination thereof) having an aggregate Fair
Market Value equaling or exceeding twenty-five percent (25%) of the
combined assets of the Corporation and its Subsidiaries except pursuant to
an employee benefit plan of the Corporation or any Subsidiary thereof;
or
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(4)
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the
adoption of any plan or proposal for the liquidation or dissolution of the
Corporation proposed by or on behalf of an Interested Shareholder or any
Affiliate of any Interested Shareholder;
or
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(5)
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any
reclassification of securities (including any share split, share dividend,
other distribution of shares in respect of shares, or any reverse share
split) or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other transaction
(whether or not with or into or otherwise involving any Interested
Shareholder) which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any class or series
of equity or convertible securities of the Corporation or
any
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Subsidiary
which is Beneficially Owned (as hereinafter defined) directly or
indirectly by any Interested Shareholder or any Affiliate of any
Interested Shareholder
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shall
require the affirmative vote of the holders of at least eighty percent (80%) of
the voting power of all of the then outstanding voting shares, voting together
as a single class. This affirmative vote shall be required notwithstanding that
any other provisions of these Articles of Incorporation, or Chapter 43 of the
Act or any other provision of law, or any Preferred Share Designation, or any
agreement with any national securities exchange or otherwise might otherwise
permit a lesser vote or no vote.
Clause
9.012 Definition
of “Business Combination.” The term “Business Combination” as
used in this Article 9 shall mean any transaction which is referred to in any
one or more of paragraphs (1) through (5) of Clause 9.011 of this Section
9.01.
Section
9.02 When
Higher Vote is Not Required. The provisions of Section 9.01 of this
Article 9 shall not be applicable to any particular Business Combination, and
that Business Combination shall require only the affirmative vote as is required
by Chapter 43 of the Act, any other provision of law, any other provision of
these Articles of Incorporation and any Preferred Share Designation and the
passage of the five (5) year period specified in IC 23-1-43-18(a), if, in the
case of a Business Combination that does not involve any cash or other
consideration being received by the shareholders of the Corporation, solely in
their capacity as shareholders of the Corporation, the condition specified in
the following Clause 9.021 is met or, in the case of any other Business
Combination, the conditions specified in either of the following Clause 9.021 or
Clause 9.022 are met:
Clause
9.021 Approval
by Continuing Directors.
The Business Combination shall have been approved by a majority of the
Continuing Directors (as hereinafter defined); provided, however, that this
condition shall not be capable of satisfaction unless there are at least three
Continuing Directors.
Clause
9.022 Price
and Procedure Requirements.
All of the following conditions shall have been
met:
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(1)
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The
consideration to be received by holders of a particular class (or series)
of outstanding shares (including Common Shares) shall be in cash or in the
same form as the Interested Shareholder or any of its Affiliates has
previously paid for shares of such class (or series). If the Interested
Shareholder or any of its Affiliates has paid for shares of any class (or
series) with varying forms of consideration, the form of consideration to
be received per share by holders of shares of such class (or series) shall
be either cash or the form used to acquire the largest number of shares of
such class (or series) previously acquired by the Interested
Shareholder.
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(2)
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The
aggregate amount of (x) the cash and (y) the Fair Market Value as of the
date (the “Consummation
Date”) of the consummation of the Business Combination, of the
consideration other than cash to be received per share by holders of
Common Shares in the Business Combination shall be at least equal to the
higher of the following (in
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each
case appropriately adjusted in the event of any share dividend, share
split, combination of shares or similar
event):
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(a)
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(if
applicable) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers’ fees) paid by the
Interested Shareholder or any of its Affiliates for any Common Shares
acquired by them within the two-year period immediately prior to the date
of the first public announcement of the proposal of the Business
Combination (the “Announcement Date”) or
in any transaction in which the Interested Shareholder became an
Interested Shareholder, whichever is higher; plus, in either case,
interest compounded annually from the earliest date on which the highest
per share acquisition price was paid through the Consummation Date at the
rate for one year United States Treasury obligations from time to time in
effect; less the aggregate amount of any cash dividends paid and the Fair
Market Value of any dividends paid other than in cash, per common share
since the earliest date, up to the amount of the interest;
and
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(b)
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the
Fair Market Value per share of Common Shares on the Announcement Date or
on the date on which the Interested Shareholder became an Interested
Shareholder (the “Determination Date”),
whichever is higher; plus, in either case, interest compounded annually
from the earliest date on which the highest per share acquisition price
was paid through the Consummation Date at the rate for one year United
States Treasury obligations from time to time in effect; less the
aggregate amount of any cash dividends paid and the Fair Market Value of
any dividends paid other than in cash, per common share since the earliest
date, up to the amount of the
interest.
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(3)
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The
aggregate amount of (x) the cash and (y) the Fair Market Value, as of the
Consummation Date, of the consideration other than cash to be received per
share by holders of shares of any class (or series), other than Common
Shares, of outstanding shares of the Corporation shall be at least equal
to the highest of the following (in each case appropriately adjusted in
the event of any share dividend, share split, combination of shares or
similar event), it being intended that the requirements of this
subparagraph (3) shall be required to be met with respect to every such
class (or series) of outstanding shares whether or not the Interested
Shareholder or any of its Affiliates has previously acquired any shares of
a particular class (or series):
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(a)
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(if
applicable) the highest per share price (including any brokerage
commissions, transfer taxes and soliciting dealers’ fees) paid by the
Interested Shareholder or any of its Affiliates for any shares of such
class (or series) acquired by them within the two-year period immediately
prior to the Announcement Date or in any transaction in which it became an
Interested
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Shareholder,
whichever is higher; plus, in either case, interest compounded annually
from the earliest date on which the highest per share acquisition price
was paid through the Consummation Date at the rate for one year United
States Treasury obligations from time to time in effect; less the
aggregate amount of any cash dividends paid and the Fair Market Value of
any dividends paid other than in cash, per common share since the earliest
date, up to the amount of the
interest;
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(b)
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the
Fair Market Value per share of such class (or series) on the Announcement
Date or on the Determination Date, whichever is higher; plus, in either
case, interest compounded annually from the earliest date on which the
highest per share acquisition price was paid through the Consummation Date
at the rate for one year United States Treasury obligations from time to
time in effect; less the aggregate amount of any cash dividends and the
Fair Market Value of any dividends paid other than in cash, per common
share since the earliest date, up to the amount of the interest;
and
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(c)
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(if
applicable) the highest preferential amount per share, if any, to which
the holders of shares of such class (or series) would be entitled in the
event of any voluntary or involuntary liquidation, dissolution or winding
up of the Corporation; plus the aggregate amount of any dividends declared
or due as to which the holders are entitled before payment of dividends on
some other class or series of shares (unless the aggregate amount of the
dividends is included in the preferential
amount).
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(4)
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After
such Interested Shareholder has become an Interested Shareholder and prior
to the consummation of such Business Combination: (a) except as
approved by a majority of the Continuing Directors, there shall have been
no failure to declare and pay at the regular date therefor any full
quarterly dividends (whether or not cumulative) on any outstanding
Preferred Shares; (b) there shall have been (i) no reduction in the annual
rate of dividends paid on the Common Shares (except as necessary to
reflect any subdivision of the Common Shares), except as approved by a
majority of the Continuing Directors, and (ii) an increase in such annual
rate of dividends as necessary to reflect any reclassification (including
any reverse share split), recapitalization, reorganization or any similar
transaction which has the effect of reducing the number of outstanding
Common Shares, unless the failure so to increase such annual rate is
approved by a majority of the Continuing Directors; and (c) neither such
Interested Shareholder nor any of its Affiliates shall have become the
beneficial owner of any additional voting shares except as part of the
transaction which results in such Interested Shareholder becoming an
Interested Shareholder; provided, however, that no approval by Continuing
Directors shall satisfy the requirements of this subparagraph (4) unless
at the time of such approval there are at least three Continuing
Directors.
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(5)
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After
such Interested Shareholder has become an Interested Shareholder, such
Interested Shareholder and any of its Affiliates shall not have received
the benefit, directly or indirectly (except proportionately, solely in
such Interested Shareholder’s or Affiliate’s capacity as a Shareholder of
the Corporation), of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax advantages provided
by the Corporation, whether in anticipation of or in connection with such
Business Combination or otherwise.
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(6)
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A
proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder (or any
subsequent provisions replacing such Exchange Act, rules or regulations)
shall be mailed to all shareholders of the Corporation at least thirty
(30) days prior to the consummation of such Business Combination (whether
or not such proxy or information statement is required to be mailed
pursuant to such Exchange Act or subsequent
provisions).
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(7)
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Such
Interested Shareholder shall have provided the Corporation with such
information as shall have been requested pursuant to Section 9.05 of this
Article 9 within the time period set forth
therein.
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Section
9.03 Certain
Definitions. For the purposes of this Article
9:
Clause
9.031 “Affiliate”
or “Associate” shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange Act of
1934.
Clause
9.032 A
person shall be a “beneficial owner” of any voting shares and the voting shares
shall be “Beneficially Owned” by the
person:
(i) which
such person or any of its Affiliates or Associates (as hereinafter defined)
beneficially owns, directly or indirectly within the meaning of Rule 13d-3 under
the Securities Exchange Act of 1934; or
(ii) which
such person or any of its Affiliates or Associates has (a) the right to acquire
(whether such right is exercisable immediately or only after the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise (however, a person is not considered the beneficial owner of shares
tendered under a tender or exchange offer made by the person or any of the
person’s Affiliates or Associates until the tendered shares are accepted for
purchase or exchange), or (b) the right to vote pursuant to any agreement,
arrangement or understanding (but neither such person nor any such Affiliate or
Associate shall be deemed to be the beneficial owner of any voting shares solely
by reason of a revocable proxy granted for a particular meeting of shareholders,
pursuant to a public solicitation of proxies for such meeting, and with respect
to which shares neither
such
person nor any such Affiliate or Associate is otherwise deemed the beneficial
owner); or
(iii) which
are beneficially owned, directly or indirectly, within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934, by any other person with which such
person or any of its Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting (other than solely
by reason of a revocable proxy as described in subparagraph (ii) of this Clause
9.032) or disposing of any voting shares; provided, however, that in the case
of any employee stock ownership or similar plan of the Corporation or of any
Subsidiary in which the beneficiaries thereof possess the right to vote any
voting shares held by such plan, no such plan nor any trustee with respect
thereto (nor any Affiliate of such trustee), solely by reason of such capacity
of such trustee, shall be deemed, for any purpose hereof, to beneficially own
any voting shares held under any such plan.
Clause
9.033 In
the event of any Business Combination in which the Corporation survives, the
phrase “consideration other than cash to be received” as used in Clause 9.022(2)
and Clause 9.022(3) of Section 9.02 of this Article 9 shall include the Common
Shares and/or the shares of any other class (or series) of outstanding shares
retained by the holders of those
shares.
Clause
9.034 “Continuing
Director” for purposes of this Article 9 means any member of the Board of
Directors of the Corporation who is unaffiliated with the Interested Shareholder
and was a member of the Board prior to the time that the Interested Shareholder
became an Interested Shareholder, and any director who is thereafter chosen to
fill any vacancy on the Board of Directors or who is elected and who, in either
event, is unaffiliated with the Interested Shareholder and in connection with
his or her initial assumption of office is recommended for appointment or
election by a majority of Continuing Directors then on the
Board.
Clause
9.035
“Fair Market Value” means: (i) in the case of stock, the highest closing
sale price during the 30-day period immediately preceding the date in question
of a share on the composite tape for New York Stock Exchange listed shares, or,
if the shares are not quoted on the composite tape, on the New York Stock
Exchange, or, if the shares are not listed on such Exchange, on the principal
United States securities exchange registered under the Securities Exchange Act
of 1934, as amended, on which the shares are listed, or, if the shares are not
listed on any such exchange, the highest closing bid quotation with respect to a
share of such stock during the 30-day period preceding the date in question on
the National Association of Securities Dealers, Inc. Automated Quotations System
or any system then in use, or if no such quotations are available, the fair
market value on the date in question of a share as determined by the Board in
accordance with Section 9.04 of this Article 9, in each case with respect to any
class of shares, appropriately adjusted for any dividend or distribution in
shares or any combination or reclassification of outstanding shares into a
smaller number of shares; and (ii) in the case of property other than cash or
shares, the fair market value of such property on the date in question as
determined by the Board in accordance with Section 9.04 of this Article
9.
Clause
9.036 Reference
to “highest per share price” shall in each case with respect to any class of
shares reflect an appropriate adjustment for any dividend or distribution in
shares or any share split or reclassification of outstanding shares into a
greater number of shares or any combination or reclassification of outstanding
shares into a smaller number of shares.
Clause
9.037 “Interested
Shareholder” means any person (other than the Corporation, any Subsidiary or any
person who would otherwise be deemed to be an Interested Shareholder on the date
on which these Restated Articles of Incorporation became effective) who or
which:
(i) is
the beneficial owner (as hereinafter defined), directly or indirectly, of ten
percent (10%) or more of the voting power of the outstanding voting shares;
or
(ii) is
an Affiliate or an Associate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the beneficial
owner, directly or indirectly, of ten percent (10%) or more of the voting power
of the then outstanding voting shares; or
(iii) is
an assignee of or has otherwise succeeded to any voting shares which were at any
time within the two-year period immediately prior to the date in question
Beneficially Owned by any Interested Shareholder, if such assignment or
succession shall have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning of the
Securities Act of 1933, as amended.
Clause
9.038 For
the purposes of determining whether a person is an Interested Shareholder
pursuant to Clause 9.037 of this Section
9.03, the number of voting shares deemed to be outstanding shall include shares
deemed owned through application of Clause 9.032 of this Section
9.03 but shall not include any other unissued voting shares which may be
issuable pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants or options, or
otherwise.
Clause
9.039 A
“person” shall include an individual, a group acting in concert, a corporation,
a partnership, an association, a limited liability company, a joint venture, a
pool, a joint stock company, a trust, an unincorporated organization or similar
company, a syndicate or any other group formed for the purpose of acquiring,
holding or disposing of securities.
Clause
9.0310 “Subsidiary”
means any corporation or limited liability company of which a majority of any
class of equity security is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Interested
Shareholder set forth in Clause 9.037 of this Section
9.03, the term “Subsidiary” shall mean only a corporation or limited liability
company of which a majority of each class of equity security is owned, directly
or indirectly, by the Corporation.
Section
9.04 Powers
of the Board of Directors. A majority of the total number of directors of
the Corporation, but only if a majority of the directors shall then consist of
Continuing Directors or, if a majority of the total number of directors shall
not then consist of Continuing Directors, a majority of the then Continuing
Directors, shall have the power and duty to determine, in good faith, on the
basis of information known to them after reasonable inquiry, all facts necessary
to determine compliance with this Article 9, including, without limitation, (a)
whether a person is an Interested Shareholder, (b) the number of voting shares
Beneficially Owned by any person, (c) whether a person is an Affiliate or
Associate of another, (d) whether the applicable conditions set forth in Clause
9.022 of Section 9.02 have been met with respect to any Business Combination,
(e) the Fair Market Value of shares or other property in accordance with Clause
9.035 of Section 9.03 of this Article 9, and (f) whether the assets which are
the subject of any Business Combination referred to in Clause 9.011(2) of
Section 9.01 have, or the consideration to be received for the issuance or
transfer of securities by the Corporation or any Subsidiary in any Business
Combination referred to in Clause 9.011(3) of Section 9.01 has, an aggregate
Fair Market Value equaling or exceeding twenty-five percent (25%) of the
combined assets of the Corporation and its
Subsidiaries.
Section
9.05 Information
to be Supplied to the Corporation. A majority of the total number of
directors of the Corporation, but only if a majority of the directors shall then
consist of Continuing Directors or, if a majority of the total number of
directors shall not then consist of Continuing Directors, a majority of the then
Continuing Directors, shall have the right to demand that any person who it is
reasonably believed is an Interested Shareholder (or holder of record of voting
shares Beneficially Owned by any Interested Shareholder) supply the Corporation
with complete information as to (i) the record owner(s) of all shares
Beneficially Owned by such person who it is reasonably believed is an Interested
Shareholder, (ii) the number of, and class or series of, shares Beneficially
Owned by such person who it is reasonably believed is an Interested Shareholder
and held of record by each such record owner and the number(s) of the
certificate(s) evidencing such shares, and (iii) any other factual matter
relating to the applicability or effect of this Article 9, as may be reasonably
requested of such person, and such person shall furnish such information within
ten (10) days after receipt of such
demand.
Section
9.06 No
Effect on Fiduciary Obligations of Interested Shareholders. Nothing
contained in this Article 9 shall be construed to relieve any Interested
Shareholder from any fiduciary obligation imposed by
law.
Section
9.07 Redemption
of Shares Acquired in Control Share Acquisitions. If and whenever the
provisions of Chapter 42 of the Act apply to the Corporation, the Corporation is
authorized to redeem its securities pursuant to IC
23-1-42-10.
Article 10 Indemnification of Directors,
Officers and Employees.
Section
10.01 Nature
of Indemnity. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was or has agreed to
become a director or officer of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as a director or officer, of
another corporation, partnership, joint venture, limited liability company,
trust or other enterprise, or by reason of any action alleged to have been taken
or omitted in such capacity, and may indemnify any person who was or is a party
or is threatened to be made a party to such an action, suit or proceeding by
reason of the fact that he or she is or was or has agreed to become an
employee
or agent of the Corporation, or is or was serving or has agreed to serve at the
request of
the
Corporation as an employee or agent of another corporation, partnership, joint
venture, limited liability company, trust or other enterprise, against expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her or on his or her behalf in
connection with such action, suit or proceeding and any appeal therefrom,
if:
(i)
he or she acted (or failed to take action) in good faith;
and
(ii)
he or she reasonably believed his or her conduct was in the Corporation’s best
interest or was at least not opposed to the best interests of the Corporation;
and
(iii)
in the case of a criminal proceeding, he or she either: (a) had
reasonable cause to believe his or her conduct was lawful; or (b) had no reason
to believe his or her conduct was unlawful.
The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, be determinative that the person did not meet
the standard of conduct specified in this Article 10.
Section
10.02 Successful
Defense. To the extent that a director or officer of the Corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 10.01 hereof or in defense of any claim, issue
or matter therein, he or she shall be indemnified against expenses (including
attorneys’ fees) actually and reasonably incurred by him or her in connection
therewith.
Section
10.03 Determination
that Indemnification is Proper. Any indemnification of a director or
officer of the Corporation under Section 10.01 hereof (unless ordered by a
court) shall be made by the Corporation unless a determination is made that
indemnification of the director or officer is not proper in the circumstances
because he or she has not met the applicable standard of conduct set forth in
Section 10.01 hereof. Any indemnification of an employee or agent of the
Corporation under Section 10.01 hereof (unless ordered by a court) may be made
by the Corporation upon a determination that indemnification of the employee or
agent is proper in the circumstances because he or she has met the applicable
standard of conduct set forth in Section 10.01 hereof. Any such determination
shall be made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who are not at the time parties to such action, suit or
proceeding, (ii) if such a quorum is not obtainable, by a majority vote of a
committee (designated by the board of directors) consisting of two (2) or more
directors not at the time parties to the proceeding, (iii) by special legal
counsel in a written opinion, or (iv) by the
shareholders.
Section
10.04 Advance
Payment of Expenses. Expenses incurred by a director or officer in
defending a civil or criminal action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding if: (i) the Corporation receives a written affirmation of
the director or officer’s good faith belief that the director or officer has met
the standard of care described in Section 10.01; (ii) the Corporation receives
an unconditional written undertaking by or on behalf of the director or officer
to repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by the Corporation as authorized in this Article; and
(iii) a determination is made that the facts known to those making the
determination would not preclude indemnification under this Article. The
expenses
incurred by other employees and agents may be so paid upon such terms and
conditions,
if any,
as the Board of Directors deems appropriate. The Board of Directors may
authorize the Corporation’s counsel to represent the director, officer, employee
or agent in any action, suit or proceeding, whether or not the Corporation is a
party to such action, suit or proceeding.
Section
10.05 Procedure
for Indemnification of Directors and Officers. Any indemnification of a
director or officer of the Corporation under Section 10.01 and Section 10.02 or
advance of costs, charges and expenses to a director or officer under Section
10.04 shall be made promptly, and in any event within thirty (30) days, upon the
written request of the director or officer. If a determination by the
Corporation that the director or officer is entitled to indemnification pursuant
to this Article is required, and the Corporation fails to respond within sixty
(60) days to a written request for indemnity, the Corporation shall be deemed to
have approved such request. If the Corporation denies a written request for
indemnity or advancement of expenses, in whole or in part, or if payment in full
pursuant to such request is not made within thirty (30) days, the right to
indemnification or advances as granted by this Article shall be enforceable by
the director or officer in any court of competent jurisdiction. The person’s
costs and expenses incurred in connection with successfully establishing his or
her right to indemnification, in whole or in part, in any such action shall also
be indemnified by the Corporation. It shall be a defense to any such action
(other than an action brought to enforce a claim for the advance of costs,
charges and expense under Section 10.04 of this Article where the required
affirmation and undertaking, if any, have been received by the Corporation) that
the claimant has not met the standard of conduct set forth in Section 10.01 of
this Article, but the burden of proving this defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, its independent legal counsel, and its shareholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in Section 10.01 of this Article 10,
nor the fact that there has been an actual determination by the Corporation
(including its Board of Directors, its independent legal counsel, and its
shareholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of
conduct.
Section
10.06 Survival;
Preservation of Other Rights. The foregoing indemnification provisions
shall be deemed to be a contract between the Corporation and each director,
officer, employee and agent who serves in any such capacity at any time while
these provisions as well as the relevant provisions of the Act are in effect and
any repeal or modification thereof shall not affect any right or obligation then
existing with respect to any state of facts then or previously existing or any
action, suit, or proceeding previously or thereafter brought or threatened based
in whole or in part upon any such state of facts. This contract right may not be
modified retroactively without the consent of the director, officer, employee or
agent.
The
indemnification provided by this Article 10 shall not be deemed exclusive of any
other rights to which those indemnified may be entitled under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section
10.07 Severability.
If this Article 10 or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Corporation shall
nevertheless
indemnify each director or officer and may indemnify each employee or agent of
the Corporation as to costs, charges and expenses (including attorneys’ fees),
judgments, fines and
amounts
paid in settlement with respect to any action, suit or proceeding, whether
civil, criminal, administrative or investigative, including an action by or in
the right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the fullest
extent permitted by applicable law.
Section
10.08 Insurance.
The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or who is or was serving at the request of the Corporation as a director,
officer, partner, trustee, employee or agent of another corporation,
partnership, limited liability company, joint venture, trust, employee benefit
plan or other enterprise, against any liability asserted against or incurred by
the individual in that capacity or arising from the individual’s status as a
director, officer, employee or agent, whether or not the Corporation would have
power to indemnify the individual against the same liability under this
Article.
Section
10.09 Additional
Definitions. For purposes of this Article, references to the
“Corporation” shall include any domestic or foreign predecessor entity of the
Corporation in a merger or other transaction in which the predecessor’s
existence ceased upon consummation of the
transaction.
For
purposes of this Article, serving an employee benefit plan at the request of the
Corporation shall include any service as a director or officer of the
Corporation which imposes duties on, or involves services by such director or
officer with respect to an employee benefit plan, its participants, or
beneficiaries. A person who acted in good faith and in a manner he or she
reasonably believed to be in the best interests of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner “not opposed to the best interests of the Corporation” referred to in
this Article.
For
purposes of this Article, “party” includes any individual who is or was a
plaintiff, defendant or respondent in any action, suit or proceeding, or who is
threatened to be made a named defendant or respondent in any action, suit or
proceeding.
For
purposes of this Article, “official capacity,” when used with respect to a
director, shall mean the office of director of the Corporation; and when used
with respect to an individual other than a director, shall mean the office in
the Corporation held by the officer or the employment or agency relationship
undertaken by the employee or agent on behalf of the Corporation. “Official
capacity” does not include service for any other foreign or domestic corporation
or limited liability company or any partnership, joint venture, trust, employee
benefit plan, or other enterprise, whether for profit or not.
Section
10.10 Business
Expense. Any payments made to any indemnified party under this Article or
under any other right to indemnification shall be deemed to be an ordinary and
necessary business expense of the Corporation, and payment thereof shall not
subject any person responsible for the payment, or the Board of Directors, to
any action for corporate waste or to any similar
action.
In
Witness Whereof the undersigned authorized officer of the Corporation has
executed these Restated Articles of Incorporation.
____________________________________
Steven J.
Schneider, President
Appendix
B
Amendment
No. 3 to the
2002
Stock Incentive Plan of The Finish Line, Inc.
(As
Amended and Restated July 21, 2005)
This
Amendment No. 3 to the 2002 Stock Incentive Plan of The Finish Line, Inc. (As
Amended and Restated July 21, 2005) (this “Amendment”) is effective as of
the date this Amendment is approved by the shareholders of The Finish Line, Inc.
(the “Effective
Date”).
1. Section
3.1 of the 2002 Stock Incentive Plan of The Finish Line, Inc. (As Amended and
Restated July 21, 2005) (the “Original Plan”) is hereby
deleted in its entirety and replaced with the following:
“3.1
Aggregate Limits. The aggregate number of shares of the Company’s
Class A Common Shares, no par value, and Class B Common Shares, no par value
(collectively, “Shares”), issued pursuant to all Awards granted under this Plan
shall not exceed 6,500,000 (in the aggregate), plus the number of shares subject
to awards granted under the Company’s Non-Employee Director Stock Option Plan or
the Company’s 1992 Employee Stock Incentive Plan but which are not issued under
such plans as a result of the cancellation, expiration or forfeiture of such
awards; provided
that no more than 15% of such Shares may be issued pursuant to all Incentive
Bonuses and Incentive Stock Awards granted under this Plan. The aggregate number
of Shares available for issuance under this Plan and the number of Shares
subject to outstanding Options or other Awards shall be subject to adjustment as
provided in Section 10. The Shares issued pursuant to this Plan may be Shares
that either were reacquired by the Company, including Shares purchased in the
open market, or authorized but unissued
Shares.”
2. The
following is hereby added as Section 3.4 of the Original Plan:
“2.4
Exchange. Notwithstanding anything herein to the contrary, the
Committee may at any time and from time to time, with the consent of the
affected Participant, exchange the class of Shares a Participant holds pursuant
to unvested and outstanding awards of Incentive Stock from Class A Common Shares
to Class B Common Shares.”
3. The
first sentence of Section 9.1 is hereby deleted in its entirety and replaced
with the following: “Except as otherwise permitted by Section 2.4 hereof, unless
the agreement or other document evidencing an Award (or an amendment thereto
authorized by the Committee) expressly states that the Award is transferable as
provided hereunder, no Award granted under this Plan, nor any interest in such
Award, may be sold, assigned, conveyed, gifted, pledged, hypothecated or
otherwise transferred in any manner prior to the vesting or lapse of any and all
restrictions applicable thereto, other than by will or the laws of descent and
distribution.”
4. Except
as specifically amended herein, all other terms and conditions contained in the
Original Plan shall remain unchanged and shall continue in full force and
effect.
[Signature
Page Immediately Follows.]
In
Witness Whereof, the Board of Directors has caused this Amendment No. 3 to the
2002 Stock Incentive Plan of The Finish Line, Inc. (As Amended and Restated July
21, 2005) to be amended effective as of the Effective Date.
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The
Finish Line, Inc.
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Printed:
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Appendix
C
The
Finish Line, Inc.
2009
Incentive Plan
Article
1.
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Establishment,
Purpose and Term.
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Section 1.1 Establishment. The
Finish Line, Inc. 2009 Incentive Plan (“Plan”)
is hereby established by The Finish Line, Inc. (“Company”).
Subject to Section 13.1, Awards may be
granted as provided herein for the term of the Plan.
Section
1.2 Purposes. The
purposes of the Plan are to foster and promote the long-term financial success
of the Company and materially increase shareholder value by motivating
performance through incentive compensation. The Plan also is intended to
encourage Participant ownership in the Company, attract and retain talent, and
enable Participants to participate in the long-term growth and financial success
of the Company. In addition, the Plan provides the ability to make Awards linked
to the profitability of the Company’s businesses and increases in shareholder
value.
Section
1.3 Term. The
Plan shall be effective on the date the Plan is approved by the Board of
Directors. Any Awards granted under the Plan prior to the date the Plan is
approved by shareholders of the Company shall be contingent upon the approval of
the Plan by shareholders and no Award may be exercised until the Plan is
approved by Shareholders. No additional Incentive Stock Options shall be made
after the tenth anniversary of the date the Plan is approved by the Company’s
shareholders. After the expiration or termination of the Plan, outstanding
Awards shall be administered in accordance with the provisions hereof and
thereof. The Plan shall continue in effect until all matters relating to the
settlement of Awards and administration of the Plan have been
completed.
For
purposes of the Plan, the following terms are defined as set forth below and
certain other terms used herein have definitions given to them in the first
place in which they are used:
Section
2.1 “2002 Plan” means
the 2002 Stock Inventive Plan of The Finish Line, Inc. (as Amended and Restated
July 21, 2005), as amended.
Section
2.2 “Affiliate” means
any individual, corporation, partnership, association, limited liability
company, joint-stock company, trust, unincorporated association or other entity
that directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under control with, the Company.
Section
2.3 “Agreement” means
any agreement entered into pursuant to the Plan by which an Award is granted to
a Participant.
Section
2.4 “Award” means any
Bonus Award, Stock Option, Stock Appreciation Right, Restricted Stock, Deferred
Stock, or Performance Award granted to a Participant under the Plan. Awards
shall be subject to the terms and conditions of the Plan and shall be evidenced
by an Agreement containing such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee shall deem
desirable.
Section
2.5 “Beneficiary” means
any person or other entity, which has been designated by a Participant in his or
her most recent written beneficiary designation filed with the Committee to
receive the compensation, awarded to such Participant under the Plan, to the
extent permitted. If there is no designated beneficiary, then the term “Beneficiary” means any person
or other entity entitled by will or the laws of descent and distribution to
receive such compensation.
Section
2.6 “Board of Directors”
or “Board” means the
Board of Directors of the Company.
Section
2.7 “Cause” means,
unless otherwise specifically provided in an Agreement, any act or omission
which permits the Company to terminate the written employment agreement or
arrangement between the Participant and the Company or an Affiliate for “cause”
as defined in such agreement or arrangement, or in the event there is no such
agreement or arrangement or the agreement or arrangement does not define the
term “cause,” then “Cause” means the occurrence of
one or more of the following events: (a) the willful and continued failure by
the Participant to perform his or her material duties with respect to the
Company or its Affiliates for a period of more than 30 days; (b) the willful or
intentional engaging by the Participant in conduct within the scope of his or
her employment that causes material and demonstrable injury, monetarily or
otherwise, to the Company including, without limitation, embezzlement or theft;
(c) the Participant’s conviction for, or a plea of nolo contendere to, the
commission of a felony involving moral turpitude; or (d) a material breach of
the Participant’s covenants set forth in any other agreement between the
Participant and the Company, that causes a material and demonstrable injury,
monetarily or otherwise, to the Company.
Section
2.8 “Class A Common
Stock” means the Company’s class A common stock as set forth and
described in the Company’s articles of incorporation, as amended, whether
presently or hereinafter issued, and any other stock or security resulting from
adjustment thereof as described hereinafter.
Section
2.9 “Class B Common
Stock” means the Company’s class B common stock as set forth and
described in the Company’s articles of incorporation, as amended, whether
presently or hereinafter issued, and any other stock or security resulting from
adjustment thereof as described hereinafter.
Section
2.10 “Code” means the
Internal Revenue Code of 1986, as amended from time to time, and any successor
thereto and the regulations thereunder, as amended from time to
time.
Section
2.11 “Commission” means
the Securities and Exchange Commission or any successor thereto.
Section
2.12 “Committee” means
the committee of the Board responsible for granting and administering Awards
under the Plan, which initially shall be the Compensation and Stock Option
Committee of the Board, until such time as the Board may designate another
committee. The Committee shall consist solely of two or more directors and each
member of the Committee shall be a “non-employee director” within the meaning of
Rule 16b-3 and also an “outside director” under Section 162(m) of the Code. In
addition, each member of the Committee shall satisfy any independence or other
corporate governance standards imposed by the Nasdaq Stock Market or other
securities market on which the Stock shall be listed from time to time.
Notwithstanding the foregoing, if and to the extent that no Committee exists
which has the
authority
to administer the Plan, the functions of the Committee shall be exercised by the
Board and all references herein to the Committee shall be deemed to be
references to the Board.
Section
2.13 “Company” means The
Finish Line, Inc., an Indiana corporation, and includes any successor or
assignee corporation or corporations into which the Company may be merged,
changed or consolidated; any corporation for whose securities the securities of
the Company shall be exchanged; and any assignee of or successor to
substantially all of the assets of the Company. Wherever the context of the Plan
so admits or requires, “Company” also means “Affiliate.”
Section
2.14 “Covered Employee”
means a Participant who is a “covered employee” within the meaning of Section
162(m) of the Code.
Section 2.15
“Deferred
Stock” means a right granted to a Participant under Section
9.1 hereof to receive Stock at the end of a specified deferral
period.
Section
2.16 “Domestic Relations
Order” has the meaning set forth in the Code.
Section
2.17 “Exchange Act”
means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
Section
2.18 “Exercise Price”
means the price that a Participant must pay to exercise an Award or the amount
upon which the value of an Award is based.
Section
2.19 “Fair Market Value”
means, as of any given date, the average of the high and low market price on the
Nasdaq Stock Market or such other public trading market on which the Stock is
traded on that date. If there is no regular public trading market for such
Stock, the Fair Market Value of the Stock shall be determined by the Committee
in good faith. In each case, the Fair Market Value shall be determined without
regard to whether the Stock is restricted or represents a minority
interest.
Section
2.20 “Grant Date” means
the date as of which an Award is granted pursuant to the Plan. In no event may
the Grant Date be earlier than the Effective Date unless the effectiveness of
the Award is contingent on the approval of the Plan by the Company’s
shareholders.
Section
2.21 “Incentive Stock
Option” means any Option that is intended to be, is designated as, and
actually qualifies as, an “incentive stock option” within the meaning of Section
422 of the Code.
Section
2.22 “Non-Qualified Stock
Option” means a Stock Option that is not an Incentive Stock
Option.
Section 2.23
“Option
Period” means the period during which the Option shall be exercisable in
accordance with an Agreement and Article 6.
Section 2.24
“Participant”
means a person who satisfies the eligibility conditions of Section
4.6 and to whom an Award has been granted by the Committee under the
Plan. In the event that a Representative is appointed for a Participant, then
the term “Participant” shall mean such appointed Representative. Notwithstanding
the appointment of a Representative, the term “Termination
of Employment” shall mean the Termination of Employment of the
Participant.
Section 2.25
“Performance
Award” means an Award consisting of Performance Shares or Performance
Units described in Article 10.
Section
2.26 “Performance Goals”
mean the level of performance established by the Committee as the Performance
Goal with respect to a Performance Measure. Performance Goals may vary from
Performance Period to Performance Period and from Participant to Participant and
may be established on a stand-alone basis, in tandem or in the
alternative.
Section
2.27 “Performance
Measure” means any measure based on any of the performance criteria set
out in this Section, either alone or in any combination, and, if not based on
individual performance, on either a consolidated or a division or business unit
level, as the Committee may determine and measured on an absolute basis or
relative to a pre-established target, to previous years results or to a
designated comparison group: individual Participant financial or non-financial
performance goals; sales; cash flow; cash flow from operations; operating profit
or loss; operating income or loss; net operating income or loss; net income or
loss; operating margin; net income margin; profit margin; return on assets;
return on net assets; four-wall contribution; economic value added; return on
total assets; return on equity; return on capital; return on operating income;
total shareholder return; revenue or loss; revenue growth or decline; earnings
before interest, taxes, depreciation and amortization (“EBITDA”); EBITDA growth or
decline; basic earnings per share (positive or negative); diluted earnings per
share (positive or negative); funds from operations per share; per share growth
(positive or negative); cash available for distribution; market share; cash
available for distribution per share; per share growth or decline; share price
performance on an absolute basis and relative to an index of earnings per share;
improvements in the Company’s attainment of expense levels; overhead reduction;
expense reduction or control; or implementing or completion of critical
projects. The foregoing criteria shall have any reasonable definitions that the
Committee may specify, which may include or exclude any or all of the following
items as the Committee may specify: extraordinary, unusual or non-recurring
items; effects of accounting changes; effects of financing activities; expenses
for restructuring or productivity initiatives; other non-operating items;
spending for acquisitions; effects of divestitures; and effects of litigation
activities and settlements. Any such performance criterion or combination of
such criteria may apply to the Participant’s Award opportunity in its entirety
or to any designated portion or portions of the Award opportunity, as the
Committee may specify. In the event Section 162(m) of the Code or applicable tax
or other laws change to permit the Committee discretion to alter the governing
performance measures without obtaining shareholder approval of such changes, the
Committee shall have sole discretion to make such changes without obtaining
shareholder approval. Performance Measures may vary from Performance Period to
Performance Period and from Participant to Participant.
Section
2.28 “Performance
Period” means the time period during which a Performance Award shall be
earned and shall be at least one (1) fiscal year in length, unless otherwise
determined by the Committee.
Section 2.29
“Performance
Unit” means a right granted pursuant to the terms and conditions
established by the Committee which is described in Section 10.1.
Section 2.30
“Performance
Share” means a right granted pursuant to the terms and conditions
established by the Committee which is described in Section 10.1.
Section
2.31 “Plan” means The
Finish Line, Inc. 2009 Incentive Plan, as herein set forth and as may be amended
from time to time.
Section
2.32 “Representative”
means (a) the person or entity acting as the executor or administrator of a
Participant’s estate pursuant to the last will and testament of a Participant or
pursuant to the laws of the jurisdiction in which the Participant had the
Participant’s primary residence at the date of the Participant’s death; (b) the
person or entity acting as the guardian or temporary guardian of a Participant;
or (c) the person or entity which is the Beneficiary of the Participant upon or
following the Participant’s death; provided that only one of the foregoing shall
be the Representative at any point in time as determined under applicable law
and recognized by the Committee.
Section 2.33
“Restricted
Stock” means Stock granted to a Participant under Section 8.1 and which is
subject to certain restrictions and to a risk of forfeiture or repurchase by the
Company.
Section
2.34 “Rule
16b-3” means Rule 16b-3, as from time to time in effect and applicable to
the Plan and Participants, promulgated by the Commission under Section 16 of the
Exchange Act.
Section
2.35 “Stock”
means the Company’s Class A Common Stock or Class B Common Stock, as applicable,
whether presently or hereafter issued, and any other stock or security resulting
from adjustment thereof as described hereinafter.
Section 2.36
“Stock
Appreciation Right” means a right granted under Section 7.1.
Section 2.37
“Stock
Option” or “Option”
means a right, granted to a Participant under Section 6.1, to purchase
Stock at a specified price during specified time periods.
Section
2.38 “Termination
of Employment” means the occurrence of any act or event whether pursuant
to an employment agreement or otherwise that actually or effectively causes or
results in the person’s ceasing, for whatever reason, to be an officer or
employee of the Company or of any Affiliate, including, without limitation,
death, disability, dismissal, severance at the election of the Participant,
retirement, or severance as a result of the discontinuance, liquidation, sale or
transfer by the Company or its Affiliates of a business owned or operated by the
Company or its Affiliates. With respect to any non-employee member of the Board
or of a board of directors of an Affiliate, Termination of Employment means the
termination of a Participant’s status as a non-employee director of the Board or
of a board of directors of an Affiliate. With respect to any other person who is
not an employee with respect to the Company or an Affiliate, the Agreement shall
establish what act or event shall constitute a Termination of Employment for
purposes of the Plan. A Termination of Employment shall occur with respect to an
employee who is employed by an Affiliate if the Affiliate shall cease to be an
Affiliate and the Participant shall not immediately thereafter become an
employee of the Company or an Affiliate.
Article
3.
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Compensation
Committee Administration.
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Section
3.1 Committee
Structure. The Plan shall be administered by the Committee,
but any action that may be taken by the Committee may also be taken by the full
Board of Directors of the Company.
Section
3.2 Committee
Actions. Subject to the Committee’s charter, the Committee may
authorize any one or more of its members or an officer of the Company to execute
and deliver documents on behalf of the Committee or the Committee may allocate
among one or
more of
its members, or may delegate to one or more of its agents, such duties and
responsibilities as it determines.
Section
3.3 Committee
Authority. Subject to applicable law, the Company’s articles
of incorporation and by-laws, the Committee’s charter or the terms of the Plan,
the Committee shall have the authority:
(a) to
select those persons to whom Awards may be granted from time to
time;
(b) to
determine whether and to what extent Awards are to be granted
hereunder;
(c) to
determine the class of Stock to be covered by each award granted
hereunder;
(d) to
determine the number of shares of Stock to be covered by each Award granted
hereunder;
(e) to
determine the terms and conditions of any Award granted hereunder, including any
provisions deemed by the Committee in good faith to be necessary or appropriate
for a “nonqualified deferred compensation plan,” as defined in Section
409A(d)(1) of the Code, to avoid being subject to taxation under Section
409A(a)(1) of the Code, provided that the Exercise Price of any Option or Stock
Appreciation Right shall not be less than the Fair Market Value per share of the
underlying Stock as of the Grant Date;
(f) to
adjust the terms and conditions, at any time or from time to time, of any Award
(including acceleration of vesting of any Award), subject to the limitations
contained elsewhere herein, including, but not limited to, Section
13.1 and Section 13.10;
(g) to
determine to what extent and under what circumstances Stock and other amounts
payable with respect to an Award shall be deferred, subject to compliance in
good faith with the requirements of the Plan and Section 409A of the Code to
avoid the Award being subject to taxation under Section 409A(a)(1) of the
Code;
(h) to
provide for the forms of Agreement to be utilized in connection with this
Plan;
(i) to
determine what legal requirements are applicable to the Plan, Awards, and the
issuance of Stock, and to require of a Participant that appropriate action be
taken with respect to such requirements;
(j) to
cancel, with the consent of the Participant (if required under the Plan or the
applicable Agreement) or as otherwise provided in the Plan or the applicable
Agreement, outstanding Awards;
(k) to
require as a condition of the exercise of an Award or the issuance or transfer
of a certificate (or other representation of title) of Stock, the withholding
from a Participant of the amount of any taxes as may be necessary in order for
the Company or any other employer to obtain a deduction or as may be otherwise
required by law;
(l) to
determine whether and with what effect an individual has incurred a Termination
of Employment;
(m) to
determine the restrictions or limitations on the transfer of Stock;
(n) to
determine whether an Award is to be adjusted, modified or purchased, or is to
become fully or partially exercisable, under the Plan or the terms of an
Agreement;
(o) to
determine the permissible methods of Award exercise and payment within the terms
and conditions of the Plan and the applicable Agreement;
(p) to
adopt, amend and rescind such rules and regulations as, in its opinion, may be
advisable in the administration of this Plan;
(q) to
appoint and compensate agents, counsel, auditors or other specialists to aid it
in the discharge of its duties; and
(r) to
make all other determinations which may be necessary or advisable for the
administration of the Plan.
The
Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any Agreement) and to otherwise
supervise the administration of the Plan. The Committee’s policies and
procedures may differ with respect to Awards granted at different times and may
differ with respect to a Participant from time to time, or with respect to
different Participants at the same or different times.
Section
3.4 Committee Determinations
and Decisions. Any determination made by the Committee
pursuant to the provisions of the Plan shall be made in its sole discretion, and
in the case of any determination relating to an Award may be made at the time of
the grant of the Award or, unless in contravention of any express term of the
Plan or an Agreement, at any time thereafter. All decisions made by the
Committee pursuant to the provisions of the Plan shall be final and binding on
all persons, including the Company and Participants unless revised by the
Committee, subject to any ratifications or approvals of the Board that the
Committee or Board may request. Any determination shall not be subject to de
novo review if challenged in court. Neither the Committee (including any member
thereof) nor the Company shall have any liability to any Participant for any
matter it determined in good faith as being in compliance with the Code even if
such determination was later proved incorrect.
Article
4.
|
Shares
and Eligibility.
|
Section
4.1 Number of
Shares. The maximum number of shares of Class A Common Stock
and Class B Common Stock (in the aggregate) which may be used for Awards under
this Plan (all of which may be issued pursuant to the exercise of Incentive
Stock Options) shall be equal to 6,500,000 shares; provided that in any case the
maximum number of such shares which may be used for Awards other than Stock
Options or Stock Appreciation Rights shall be 2,500,000 shares. Upon approval of
the Plan by shareholders, the 2002 Plan will immediately cease to be available
for use for the grant of new incentive awards other than awards granted wholly
from shares returned to the 2002 Plan by forfeiture after the annual shareholder
meeting in July, 2009 and the issuance of Class B Common Stock in substitution
for Class A Common Stock as provided in Section 3.4 of the 2002 Plan. The shares
of Stock available under the Plan may be Class A Common Stock, Class B Common
Stock or any combination thereof and may be
authorized
and unissued shares, treasury shares or a combination thereof, as the Committee
shall determine.
Section 4.2 Release
of Shares. Subject to Section 4.1, the Committee
shall have full authority to determine the class and number of shares of Stock
available for Awards. In its discretion the Committee may include (without
limitation), as available for distribution, (a) shares of Stock subject to any
Award that have been previously forfeited; or (b) shares under an Award that
otherwise terminates without issuance of Stock being made to a Participant. Any
shares that are available immediately prior to the termination of the Plan, or
any shares of Stock returned to the Company for any reason subsequent to the
termination of the Plan, may be transferred to a successor
plan.
Section
4.3 Restrictions on
Shares. Stock issued upon exercise of an Award shall be
subject to the terms and conditions specified herein and to such other terms,
conditions and restrictions as the Committee in its discretion may determine
and/or provide in the Agreement. The Company shall not be required to issue or
deliver any certificates for Stock, cash or other property prior to (a) the
completion of any registration or qualification of such shares under federal,
state or other law, or any ruling or regulation of any government body which the
Committee determines to be necessary or advisable; (b) the satisfaction of any
applicable withholding obligation in order for the Company or an Affiliate to
obtain a deduction or discharge its legal obligation with respect to the
exercise of an Award; and (c) satisfaction of any other terms, conditions or
restrictions specified by the Committee herein, in any applicable Agreement or
otherwise. The Company may cause any certificate (or other representation of
title) for any shares of Stock to be delivered to be properly marked with a
legend or other notation reflecting the limitations on transfer of such Stock as
provided in this Plan, any shareholder agreement then in effect, or as the
Committee may otherwise require. The Committee may require any person exercising
an Award to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of the Stock in
compliance with applicable law or otherwise.
Section
4.4 Shareholder
Rights. No person shall have any rights of a shareholder as to
Stock subject to an Award until, after proper exercise of the Award or other
action required, such shares shall have been recorded on the Company’s official
shareholder records as having been issued and transferred. Upon exercise of the
Award or any portion thereof, the Company will have a reasonable period in which
to issue and transfer the shares, and a Participant will not be treated as a
shareholder for any purpose whatsoever prior to such issuance and transfer. No
adjustment shall be made for cash dividends or other rights for which the record
date is prior to the date such shares are recorded as issued and transferred in
the Company’s official shareholder records, except as provided herein or in an
Agreement.
Section
4.5 Effect of Certain Corporate
Changes. Notwithstanding anything to the contrary herein, in
the event of any share dividend, share split, combination or exchange of shares,
recapitalization or other change in the capital structure of the Company,
corporate separation or division of the Company (including, but not limited to,
a split-up, spin-off, split-off or distribution to Company shareholders other
than a cash dividend), reorganization, rights offering, a partial or complete
liquidation, or any other corporate transaction, Company securities offering or
event involving the Company and having an effect similar to any of the
foregoing, then the Committee shall make appropriate adjustments or
substitutions as described below in this Section and in compliance with the
Code. The adjustments or substitutions may relate to the
number of
shares of Stock available for Awards under the Plan, the number of shares of
Stock covered by outstanding Awards, the Exercise Price per share of outstanding
Awards, and any other characteristics or terms of the Awards as the Committee
may deem necessary or appropriate to reflect equitably the effects of such
changes to the Participants; provided, however, that to the
extent that Section 409A, Section 422 or Section 162(m) of the Code shall apply
to an Award, any such adjustments or substitutions shall only be made to the
extent that, in the Committee’s good faith determination, they comply with the
requirements of Section 409A to avoid being subject to taxation under Section
409A(a)(1) of the Code, Section 422 of the Code to continue treatment as
“incentive stock option” under Section 422 of the Code and Section 162(m) of the
Code to continue treatment as qualified performance based compensation under
Section 162(m) of the Code.
Section
4.6 Eligibility. Except
as herein provided, the persons who shall be eligible to participate in the Plan
and be granted Awards shall be those persons who are current or prospective
employees of, or consultants or advisors to, the Company or any Affiliate, or
current or prospective non-employee members of the Board of Directors of the
Company or any Affiliate. Of those persons described in the preceding sentence,
the Committee may, from time to time, select persons to be granted Awards and
shall determine the terms and conditions with respect thereto. In making any
such selection and in determining the form of the Award, the Committee shall
give consideration to such factors deemed appropriate by the
Committee.
Section
4.7 Exchange. Notwithstanding
anything herein or in any Agreement to the contrary, the Committee may at any
time and from time to time, with the consent of the affected Participant,
exchange the class of Stock a Participant holds pursuant to unvested and
outstanding Awards of Restricted Stock from Class A Common Shares to Class B
Common Shares.
(a) General. The
Committee shall have authority to establish, from time to time, various programs
under the Plan pursuant to which Participants may be granted Bonus Awards. A
Bonus Award shall entitle the Participant to earn incentive compensation based
on the achievement of performance goals established for one or more performance
periods. For each program, the Committee shall establish the terms and
conditions of each program which may include, without limitation, the
performance period, the Participants who will participate in the program, the
various possible award levels for each Participant, which may include a
threshold, target and maximum award and may or may not be based on percentages
of base salary, and the performance goals that must be met for each award level
to be earned. An Agreement with each Participant shall not be
necessary.
(b) Earning Bonus
Award. A Participant shall not earn a Bonus Award and no
payment shall be made until the Committee determines that the performance goals
have been obtained for the relevant award level for the relevant performance
period and that the other material terms have been satisfied for the performance
period. Whether or not a Participant has earned a Bonus Award shall be
determined by the Committee in its sole discretion. Following determination of a
Bonus Award, the Committee may make adjustments to a Bonus Award to reflect
individual performance during such performance period.
(c) Payment. Unless
otherwise determined by the Committee, payment for all Bonus Awards shall be
made in cash within the short-term deferral period in accordance with Section
409A of the Code unless otherwise deferred pursuant to the Company’s then
applicable non-qualified deferred compensation plan.
(d) Non-transferability of Bonus
Awards. Unless otherwise specifically provided in the
Agreement, no Bonus Award shall be sold, assigned, margined, transferred,
encumbered, conveyed, gifted, alienated, hypothecated, pledged or disposed of,
other than by will or by the laws of descent and distribution; provided, however, under no
circumstances may a Participant assign, transfer, convey or dispose of a Bonus
Award for consideration unless pursuant to a Domestic Relations
Order.
Article
6.
|
Stock
Options.
|
Section
6.1 General. The
Committee shall have authority to grant Options under the Plan at any time or
from time to time. The Committee shall consider the potential impact of Section
409A of the Code on each grant of Options and, if necessary, shall make the
terms and conditions of the Options, in its good faith determination, comply
with the requirements of Section 409A of the Code to avoid being subject to
taxation under Section 409A(a)(1) of the Code. An Option shall entitle the
Participant to receive Stock upon exercise of such Option, subject to the
Participant’s satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with the Plan or an Agreement (the terms and
provisions of which may differ from other Agreements) including, without
limitation, payment of the Exercise Price.
Section
6.2 Grant. The grant of
an Option shall occur as of the Grant Date determined by the Committee, provided
that the Grant Date shall not be earlier than the date upon which the Committee
acts to grant the Option. Options may be granted alone or in connection with
other Awards. An Award of Options shall be evidenced by, and subject to the
terms of, an Agreement. The Committee shall have the authority to grant any
Participant Incentive Stock Options, Non-Qualified Stock Options or both types
of Options (in each case with or without Stock Appreciation Rights); provided, however, only a
person who is a common-law employee of the Company, any “parent corporation” of
the Company, or a “subsidiary corporation” of the Company (each term as defined
in Section 424 of the Code) on the date of grant shall be eligible to be granted
an Incentive Stock Option. To the extent that any Option is not designated as an
Incentive Stock Option or even if so designated does not qualify as an Incentive
Stock Option, it shall constitute a Non-Qualified Stock Option.
Section
6.3 Terms and
Conditions. Options shall be subject to such terms and
conditions as shall be determined by the Committee, including and subject to the
following:
(a) Exercise
Price. The Exercise Price per share shall not be less than the
Fair Market Value per share on the Grant Date. If an Option which is intended to
qualify as an Incentive Stock Option is granted to an individual who owns or who
is deemed to own shares possessing more than ten percent (10%) of the combined
voting power of all classes of shares of the Company, a parent corporation or
any subsidiary corporation (each term as defined in Section 6.2) (a “10%
Owner”), the Exercise Price per share shall not be less than one hundred
ten percent (110%) of the Fair Market Value per share on the Grant
Date.
(b) Option
Period. The Option Period of each Option shall be fixed by the
Committee. In the case of an Incentive Stock Option, the Option Period shall not
exceed ten (10) years from the Grant Date. If an Option which is
intended to be an Incentive Stock Option is granted to a 10% Owner, the Option
Period shall not exceed five (5) years from the Grant Date. No Option
which is intended to be an Incentive Stock Option
shall be
granted more than ten (10) years from the date the Plan is adopted by the
Company or the date the Plan is approved by the shareholders of the Company,
whichever is earlier.
(c) Exercisability. Subject
to Section 11.1 and Section
6.4,
an Option shall be exercisable in whole or in such installments and at such
times, as established by the Committee in an Agreement; provided,
however,
no Incentive Stock Option may be exercised before the Plan is approved by the
shareholders of the Company in the manner prescribed by Section 422 of the Code.
The Committee may provide in an Agreement for an accelerated exercise of all or
part of an Option upon such events or standards that it may determine, including
one or more Performance Measures. In addition, the Committee may at any time
accelerate the exercisability of all or part of any Option. If an Option is
designated as an Incentive Stock Option, the aggregate Fair Market Value
(determined on the Grant Date of the Option) of the Stock as to which such
Incentive Stock Option which is exercisable for the first time during any
calendar year (under the Plan or any other plan of the Company or any parent
corporation or subsidiary corporation) shall not exceed $100,000. Except as
otherwise provided in Article 11 in
connection with acceleration events, or certain occurrences of termination, no
Award granted under this Plan to an officer or director of the Company may be
exercised, and no restrictions relating thereto may lapse, within six months of
the date of such grant if (i) the requirements of Exchange Act Rule 16b-3(d)(1)
were not satisfied with respect to the issuance of such Award; and (ii) the
Committee has not otherwise waived such limitation.
(d) Method
of Exercise. Subject to the provisions of this Article
6 and the applicable Agreement, a Participant may exercise Options,
in whole or in part, during the Option Period by giving written notice of
exercise on a form provided by the Committee to the Company specifying the
number of shares of Stock subject to the Option to be purchased. Such notice
shall be accompanied by payment in full of the purchase price by cash or
certified check or such other form of payment as the Company may accept. If
permitted in the applicable Agreement or otherwise by the Committee, payment in
full or in part may also be made by (i) delivering Stock already owned by the
Participant (for any minimum period required by the Committee) having a total
Fair Market Value on the date of such delivery equal to the Exercise Price; (ii)
the delivery of cash by a broker-dealer as a “cashless” exercise, provided such
method of payment may not be used by an executive officer of the Company or a
member of the Board to the extent such payment method would violate Rule 16b-3
or the Exchange Act; (iii) withholding by the Company of Stock subject to the
Option having a total Fair Market Value as of the date of delivery equal to the
Exercise Price; or (iv) any combination of cash and the
foregoing.
(e) Conditions for Issuance of
Shares. No shares of Stock shall be issued until full payment
therefor has been made. A Participant shall have all of the rights of a
shareholder of the Company holding the class of shares that is subject to such
Option (including, if applicable, the right to vote the shares and the right to
receive dividends) when the Participant has given written notice of exercise,
has paid in full for such shares, and such shares have been recorded on the
Company’s official shareholder records as having been issued and
transferred.
(f) Non-transferability of
Options. Unless otherwise specifically provided in the
applicable Agreement, no Option shall be sold, assigned, margined,
transferred,
encumbered,
conveyed, gifted, alienated, hypothecated, pledged, or disposed of, other than
by will or by the laws of descent and distribution, and all Options shall be
exercisable during the Participant’s lifetime only by the Participant; provided, however, under no
circumstances may a Participant assign, transfer, convey or dispose of an Option
for consideration unless pursuant to a Domestic Relations Order.
Section
6.4 Termination of
Employment. Except as otherwise provided by the Committee in
the applicable Agreement, any portion of the Option that was not vested and
exercisable on the date of Termination of Employment shall expire and be
forfeited on such date, and any portion of the Option that was vested and
exercisable on date of Termination of Employment shall also expire and be
forfeited on such date to the extent not exercised before that date.
Notwithstanding the foregoing, (a) with respect to Options granted to employees,
except for such longer or shorter periods as provided in the applicable
Agreement with respect to Non-Qualified Stock Options and for such shorter
periods as provided in the applicable Agreement with respect to Incentive Stock
Options, if the Termination of Employment was other than for Cause, death or
disability (as defined in Section 22(e)(3) of the Code), the portion of the
Option that is vested as of the date of Termination of Employment shall expire
and be forfeited at midnight ninety (90) days from the date of such termination
and if Termination of Employment was on account of death or disability (as
defined above) the portion of the Option that is vested as of the date of
Termination of Employment shall expire and be forfeited at midnight one (1) year
from the date of such termination, and (b) with respect to Options granted to
non-employee members of the Board of Directors the portion of the Option that is
vested as of the date of Termination of Employment shall expire and be forfeited
at midnight two (2) years from the date of such termination. Notwithstanding
anything herein to the contrary, no Option shall be exercisable after the date
set forth in the applicable agreement.
Article
7.
|
Stock
Appreciation Rights.
|
Section 7.1 General. The
Committee shall have authority to grant Stock Appreciation Rights under the Plan
at any time or from time to time. Stock Appreciation Rights may be awarded alone
or in tandem with other Awards granted under the Plan. The Committee shall
consider the potential impact of Section 409A of the Code on each grant of Stock
Appreciation Rights and, if determined to be necessary, shall make the terms of
conditions of the Stock Appreciation Rights, in its good faith determination,
comply with the requirements of Section 409A of the Code to avoid being subject
to taxation under Section 409A(a)(1) of the Code. Subject to the Participant’s
satisfaction in full of any conditions, restrictions or limitations imposed in
accordance with the Plan or the applicable Agreement, a Stock Appreciation Right
shall entitle the Participant to surrender to the Company the Stock Appreciation
Right and to receive in Stock the number of shares described in Section
7.3(b).
Section 7.2 Grant. The
grant of a Stock Appreciation Right shall occur as of the Grant Date determined
by the Committee. A Stock Appreciation Right entitles a Participant to receive
Stock as described in Section 7.3(b). An Award of
Stock Appreciation Rights shall be evidenced by, and subject to the terms of, an
Agreement.
Section
7.3 Terms and
Conditions. Stock Appreciation Rights shall be subject to such
terms and conditions as shall be determined by the Committee and set forth in an
Agreement, including (but not limited to) the following:
(a) Period
and Exercise. The term of a Stock Appreciation Right shall be
established by the Committee. A Stock Appreciation Right shall be for such
period and, subject to Section 11.1 and Section
7.3(e), shall be exercisable in whole or in installments and at such times as
established by the Committee in an Agreement. The Committee may provide in an
Agreement for an accelerated exercise of all or part of a Stock Appreciation
Right upon such events or standards that it may determine, including one or more
Performance Measures. In addition, the Committee may at any time accelerate the
exercisability of all or part of any Stock Appreciation Right. Stock
Appreciation Rights shall be exercised by the Participant’s giving written
notice of exercise, on a form provided by the Committee, to the Company
specifying the portion of the Stock Appreciation Right to be
exercised.
(b) Delivery of
Stock. Upon the exercise of a Stock Appreciation Right, a
Participant shall receive a number of shares of Stock equal in value to the
excess of the Fair Market Value per share of Stock on the date of exercise over
the Exercise Price per share of Stock specified in the related Agreement,
multiplied by the number of shares in respect of which the Stock Appreciation
Right is exercised; provided, however, the
Agreement may provide for payment in cash, or a combination of Stock and cash,
or the Committee may reserve the right to determine the manner of payment at the
time the Stock Appreciation Right is exercised. The Exercise Price per share
shall not be less than the Fair Market Value per share on the Grant Date. The
aggregate Fair Market Value per share of Stock shall be determined as of the
date of exercise of such Stock Appreciation Right.
(c) If
the Stock Appreciation Right is granted in connection with an Option under the
Plan then (i) the Participant, upon exercise of all or any part of the Stock
Appreciation Rights, shall surrender to the Company, unexercised, that portion
of the underlying Option relating to the same number of shares of Stock as is
covered by the Stock Appreciation Rights (or the portion of the Stock
Appreciation Rights so exercised), (ii) the Stock Appreciation Right shall
terminate and no longer be exercisable upon the termination or exercise of the
related Option and Options which have been so surrendered shall no longer be
exercisable to the extent the related Stock Appreciation Rights have been
exercised, and (iii) the Stock Appreciation Right shall be exercisable only to
the extent that the related Option is exercisable and the Stock Appreciation
Right shall expire no later than the date on which the related Option
expires.
(d) Non-transferability of Stock
Appreciation Rights. Except as specifically provided in the
Plan or in the applicable Agreement, no Stock Appreciation Rights shall be sold,
assigned, margined, transferred, encumbered, conveyed, gifted, alienated,
hypothecated, pledged or disposed of, other than by will or the laws of descent
and distribution, and all Stock Appreciation Rights shall be exercisable during
the Participant’s lifetime only by the Participant; provided, however, under no
circumstances may a Participant assign, transfer, convey or dispose of a Stock
Appreciation Right for consideration unless pursuant to a Domestic Relations
Order.
(e) Termination
of Employment. A Stock Appreciation Right shall be forfeited
or terminated at such time as an Option would be forfeited or terminated under
Section 6.4, unless otherwise provided in an Agreement.
Article
8. Restricted
Stock.
Section
8.1 General. The
Committee shall have authority to grant Restricted Stock under the Plan at any
time or from time to time. The Committee shall consider the potential impact of
Section 409A of the Code on each grant of Restricted Stock and, if determined to
be necessary, shall make the terms and conditions of the Restricted Stock, in
its good faith determination, comply with the requirements of Section 409A of
the Code to avoid being subject to taxation under Section 409A(a)(1) of the
Code. The Committee may also require the recipient of the grant to make an
election under Section 83(b) of the Code if the Restricted Stock so granted is
subject to transfer restrictions or a substantial risk of forfeiture and if not
required by the Company but the Participant makes an election under Section
83(b) of the Code the Participant shall promptly file a copy of such election
with the Company. The Committee shall determine the number of shares of
Restricted Stock to be awarded to any Participant, the time or times within
which such Awards may be subject to forfeiture, and any other terms and
conditions of the Awards. Each Award shall be confirmed by, and be subject to
the terms of, an Agreement which contains the applicable terms and conditions of
the Award, including the rate or times provided by the Committee for the lapse
of any forfeiture restrictions or other conditions regarding the Award. The
Committee may provide in an Agreement for an accelerated lapse of any such
restrictions upon such events or standards that it may determine, including one
or more Performance Measures. In addition, the Committee may at any time
accelerate the lapse of any such restrictions with respect to all or part of any
Restricted Stock.
Section
8.2 Grant, Awards and
Certificates. The grant of an Award of Restricted Stock shall
occur as of the Grant Date determined by the Committee. Restricted Stock may be
awarded either alone or in addition to other Awards granted under the Plan.
Notwithstanding the limitations on issuance of Stock otherwise provided in the
Plan, each Participant receiving an Award of Restricted Stock shall be issued a
certificate (or other representation of title) in respect of such Restricted
Stock. Such certificate shall be registered in the name of such Participant and
shall bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such Award as determined by the Committee and any
restrictions the Stock may be subject to, including any shareholder agreement
then in effect. The Committee may require that the certificates evidencing such
shares be held in custody by the Company until the restrictions thereon shall
have lapsed and that, as a condition of any Award of Restricted Stock, the
Participant shall have delivered a share power, endorsed in blank, relating to
the Stock covered by such Award.
Section
8.3 Terms and
Conditions. Restricted Stock shall be subject to such terms
and conditions as shall be determined by the Committee, including the
following:
(a) Rights. Except
as provided in Section 8.3(c) and
notwithstanding Section 4.4 and except
as otherwise provided in the applicable Agreement, (i) the Participant shall
have, with respect to the Restricted Stock, all of the rights of a shareholder
of the Company holding the class of Stock that is the subject of the Restricted
Stock, including, if applicable, the right to vote the shares, and (ii) for
Restricted Stock which is performance based the Participant shall not have the
right to receive any dividends until the Restricted Stock is vested at which
time all unpaid and accrued dividends shall be paid. If any dividends or other
distributions are paid in shares of Stock, all such shares
shall be subject
to the same restrictions on transferability as the shares of Restricted Stock
with respect to which they were paid.
(b) Criteria. As
described in Section 8.1 above, the
Committee may provide in an Agreement for the lapse of restrictions in
installments and may accelerate the vesting of all or any part of any Award and
waive the restrictions for all or any part of such Award; such provisions of an
Agreement or Committee action may be based on service, performance by the
Participant or by the Company or the Affiliate, including any division or
department for which the Participant is employed, Performance Goals for a
Performance Period, or such other factors or criteria as the Committee may
determine.
(c) Limitations on
Transferability. Subject to the provisions of the Plan and the
Agreement, during a period set by the Committee, commencing with the date of
such Award (the “Restriction
Period”), the Participant shall not be permitted to sell, assign, margin,
transfer, encumber, convey, gift, alienate, hypothecate, pledge or dispose of
Restricted Stock; provided, however, under no
circumstances may a Participant assign, transfer, convey or dispose of
Restricted Stock for consideration unless pursuant to a Domestic Relations
Order.
(d) Termination of
Employment. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant incurs a Termination of
Employment all shares of Restricted Stock still subject to restriction shall be
forfeited by the Participant, except the Committee shall have the discretion to
waive in whole or in part any or all remaining restrictions with respect to any
or all of such Participant’s Restricted Stock.
Article
9.
|
Deferred
Stock.
|
Section 9.1 General. The
Committee shall have authority to grant an Award of Deferred Stock under the
Plan at any time or from time to time. Deferred Stock may be awarded either
alone or in addition to other Awards granted under the Plan. The Committee may
denominate a Deferred Stock Award in either shares of Stock or units. The
Committee shall consider the impact of Section 409A of the Code on each grant of
Deferred Stock and, if determined to be necessary, shall make the terms and
conditions of the Deferred Stock, in its good faith determination, comply with
the requirements of Section 409A of the Code to, except as otherwise provided in
Section 9.2(e) or Section 9.2(f), avoid being
subject to taxation under Section 409A(a)(1) of the Code. The Committee shall
determine the number of shares of Deferred Stock to be awarded to any
Participant, the duration of the period (the “Deferral
Period”) prior to which the Stock will be delivered, and the conditions
under which receipt of the Stock will be deferred and any other terms and
conditions of the Awards. Each Deferred Stock Award shall be evidenced by, and
subject to the terms of, an Agreement.
Section
9.2 Terms and
Conditions. Deferred Stock Awards shall be subject to such
terms and conditions as shall be determined by the Committee, including the
following:
(a) Rights. Any rights,
other than any rights explicitly set forth herein, with respect to Deferred
Stock shall be provided for in an Agreement.
(b) Criteria. Based on
service, performance by the Participant or by the Company or the Affiliate,
including any division or department for which the Participant
is
employed, Performance Goals for a Performance Period, or such other factors or
criteria as the Committee may determine, the Committee may provide for the lapse
of deferral
limitations in installments and may accelerate the vesting of all or any part of
any Award and waive the deferral limitations for all or any part of such
Award.
(c) Limitations on
Transferability. Subject to the provisions of the Plan and the
Agreement, Deferred Stock Awards may not be sold, assigned, margined,
transferred, encumbered, conveyed, gifted, alienated, hypothecated, pledged, or
disposed of during the Deferral Period; provided, however, under no
circumstances may a Participant assign, transfer, convey or dispose of Deferred
Stock Award for consideration unless pursuant to a Domestic Relations
Order.
(d) Termination of
Employment. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant incurs a Termination of
Employment the rights to the shares still covered by the Award shall be
forfeited by the Participant, except the Committee shall have the discretion to
waive in whole or in part any or all remaining deferral limitations with respect
to any or all of such Participant’s Deferred Stock.
(e) Delivery. At the
expiration of the Deferral Period, the Committee shall deliver Stock to the
Participant pursuant to the Deferred Stock Award; provided, however, an Agreement
may provide for the further deferral of receipt of the Deferred Stock payable
under an Award for a specified time (or pursuant to a fixed schedule) or until
the occurrence of a permissible distribution event under Section 409A of the
Code; provided,
further, however, the deferral
in such Agreement must be fixed no later than the time specified by Section 409A
of the Code.
(f) Election. If
permitted in an Agreement, a Participant may elect to further defer receipt of
the Deferred Stock payable under an Award for a specified time (or pursuant to a
fixed schedule) or until the occurrence of a permissible distribution event
under Section 409A of the Code, subject to such terms and conditions determined
by the Committee. Any such election must be made no later than the time provided
by Section 409A of the Code, as determined by the Committee.
Article
10.
|
Performance
Awards.
|
Section
10.1 General. The
Committee shall have authority to grant Performance Awards under the Plan at any
time or from time to time. The Committee shall consider the impact of Section
409A of the Code on each grant of a Performance Award and, if determined to be
necessary, shall make the terms and conditions of the Performance Awards, in its
good faith determination, comply with the requirements of Section 409A of the
Code to avoid being subject to taxation under Section 409A(a)(1) of the Code. A
Performance Unit and a Performance Share each consist of the right to receive
shares of Stock or cash, as provided in the particular Agreement, and may be
awarded either alone or in addition to other Awards granted under the Plan.
Performance Units shall be denominated in units of value (including dollar value
of shares of Stock) and Performance Shares shall be denominated in a number of
shares of Stock. Subject to the terms of the Plan, the Committee shall have
complete discretion to determine the number of Performance Units and Performance
Shares, if any, granted to each Participant, the conditions for vesting or
lapsing of restrictions, the time or times within which such Awards may be
subject
to
forfeiture, whether dividend equivalents shall be paid and any other terms and
conditions of the
Awards. Each Performance Award shall be evidenced by, and be subject to the
terms of, an Agreement.
Section
10.2 Earning Performance
Awards. The Committee shall determine the extent to which any
Performance Award has been earned.
Section
10.3 Termination of
Employment. Unless otherwise specifically provided in an
Agreement or determined by the Committee, in the event that a Participant incurs
a Termination of Employment, all Performance Awards shall be forfeited by the
Participant to the Company. Any distribution of earned Performance Awards
authorized by an Agreement or determined by the Committee may be made at the
same time payments are made to Participants who did not incur a Termination of
Employment during the applicable Performance Period.
Section
10.4 Nontransferability. Unless
otherwise specifically provided in an Agreement, Performance Awards may not be
sold, assigned, margined, transferred, encumbered, conveyed, gifted, alienated,
hypothecated, pledged, or disposed of, other than by will or by the laws of
descent and distribution; provided, however, under no
circumstances may a Participant assign, transfer, convey or dispose of a
Performance Award for consideration unless pursuant to a Domestic Relations
Order.
Article
11.
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Change
in Control Provisions.
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Section 11.1 Impact
of Event. Notwithstanding any other provision of the Plan to
the contrary, other than Section 11.2, and unless
otherwise specifically provided in an Agreement, in the event of a company sale
which shall include, without limitation, the sale of all or substantially all of
the Company’s assets, the merger or consolidation of the Company with another
entity and as a result the Company is not the surviving entity, the acquisition
of more than 50% of the equity securities of the Company with the right to vote
by one person or a group of persons acting in concert or other similar
transaction deemed appropriate by the Committee, the Committee may provide, in
its discretion, that (a) the Bonus Awards, Stock Options, Stock Appreciation
Rights, Restricted Stock and Deferred Stock shall immediately vest and any
performance goal or other condition with respect to any Performance Shares or
Performance Units shall be deemed satisfied and/or (b) any Award shall terminate
or be cancelled if not exercised as of the date of such
event.
Section 11.2 Additional
Discretion. The Committee shall have full discretion,
notwithstanding anything herein or in an Agreement to the contrary, with respect
to an outstanding Award upon a transaction described in Section 11.1 to provide
that the securities of another entity be substituted hereunder for the Stock and
to make equitable adjustment with respect thereto.
Section 11.3 Sole
Determination. The adjustments contained in this Article
11 and the manner of
application of its provisions shall be determined solely by the
Committee.
Article
12.
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Provisions
Applicable to Shares Acquired Under this
Plan.
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Section
12.1 No Company
Obligation. Except to the extent specifically required by
applicable securities laws, none of the Company, an Affiliate or the Committee
shall have any duty or obligation to affirmatively disclose material information
to a record or beneficial holder
of Stock
or an Award, and such holder shall have no right to be advised of any material
information regarding the Company or any Affiliate at any time prior to, upon,
or in connection with receipt or the exercise or distribution of an Award. The
Company makes no representation or warranty as to the future value of the Stock
issued or acquired in accordance with the provisions of the Plan.
Article
13.
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Miscellaneous.
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Section
13.1 Amendments and
Termination. The Board may amend, alter, or discontinue the
Plan at any time, but no amendment, alteration or discontinuation shall be made
which would materially impair the rights of a Participant under an Award
theretofore granted without the Participant’s consent. Notwithstanding the
immediately preceding sentence, an amendment may be made without a Participant’s
consent to (a) cause the Plan or an Award to comply with applicable law
(including, but not limited to, any changes needed to avoid taxation of an Award
as a “nonqualified deferred compensation plan” under Section 409A or under
Section 280G of the Code) or (b) permit the Company or an Affiliate a tax
deduction under applicable law including, without limitation, Section 162(m) of
the Code. The Committee may amend, alter or discontinue the terms of any Award
theretofore granted, prospectively or retroactively, on the same conditions and
limitations (and exceptions to limitations) as apply to the Board, and further
subject to any approval or limitations the Board may impose. Notwithstanding the
foregoing, any amendments to the Plan shall require shareholder approval to the
extent required by federal or state law or any regulations or rules promulgated
thereunder or the rules of the national securities exchange or market on which
shares of Stock are listed.
Section
13.2 Unfunded Status of
Plan. It is intended that the Plan be an “unfunded” plan for
incentive compensation. The Company may create trusts or other arrangements to
meet the obligations created under the Plan to deliver Stock or make payments;
provided, however, that the
existence of such trusts or other arrangements is consistent with the “unfunded”
status of the Plan and all property held thereunder and income thereon shall
remain solely the property and rights of the Company (without being restricted
to satisfying the obligations created under the Plan) and shall be subject to
the claims of the Company’s general creditors. The Company’s obligations created
under the Plan shall constitute a general, unsecured obligation, payable solely
out of its general assets.
Section
13.3 Listing, Registration and
Compliance with Laws and Regulations. All Awards made under
this Plan shall be subject to the requirement that if at any time the Committee
shall determine, in its discretion, that the listing, registration or
qualification of the Stock subject to such Award upon any securities exchange or
under any state or federal securities or other law or regulation, or the consent
or approval of any governmental regulatory body, is necessary or desirable as a
condition to or in connection with the granting of the Awards or the issuance or
purchase of shares thereunder, no Awards may be granted or exercised and no
restrictions on Awards be lifted, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee. The holders of
such Awards shall supply the Company with such certificates, representations and
information as the Company shall request and shall otherwise cooperate with the
Company in obtaining such listing, registration, qualification, consent or
approval. In the case of officers and other Persons subject to Section 16(b) of
the Exchange Act, the Committee may at any time impose any limitations upon the
exercise of an Option, Stock
Appreciation
Right or Restricted Stock or the lifting of restrictions on an Award of Deferred
Stock or a Performance Award that, in the Committee’s discretion, are necessary
or desirable in order to comply with such Section 16(b) and the rules and
regulations thereunder. If the Company, as part of an offering of securities or
otherwise, finds it desirable because of federal or state regulatory
requirements to reduce the period during which any Options, Stock Appreciation
Rights or Restricted Stock may be exercised, the Committee, may, in its
discretion and without the Participant’s consent, so reduce such period on not
less than 15 days written notice to the holders thereof.
Section
13.4 Provisions Relating to
Section 162(m) of the Code.
Awards to Covered
Employees shall be governed by the terms and conditions of this Section
13.4 in addition to the remainder of the Plan, to the extent the
Committee desires such Awards to be qualified performance-based compensation
under Section 162(m) of the Code. Notwithstanding anything herein to the
contrary, the Committee may establish Awards where only a portion is structured
to satisfy the requirements for qualified performance-based compensation under
Section 162(m) of the Code as long as it is objectively clear which portion of
the Award is not structured to satisfy the requirements for qualified
performance-based compensation under Section 162(m) of the Code and which
portion is structured to satisfy such requirements. Should terms and conditions
set forth under this Section 13.4 conflict
with the remainder of the Plan, the terms and conditions of this Section
13.4 shall prevail.
(a) No Delegation. The
Committee shall not delegate responsibility for any employee the Committee
believes may be a Covered Employee.
(b) Performance Goals. The
specific Performance Goals for employees who are Covered Employees shall be
based upon one or more of the Performance Measures that apply to the individual,
a business unit or the Company as a whole, and measured over a Performance
Period.
(c) Establishment of Performance
Goals. All Performance Goals relating to Covered Employees for a relevant
Performance Period shall be established by the Committee in writing prior to the
beginning of the Performance Period, or by such other later date for the
Performance Period as may be permitted under Section 162(m) of the Code, which
is currently no later than ninety (90) days after the commencement of a
Performance Period (or, if shorter, no later than after 25% of the Performance
Period has elapsed).
(d) Objective. The Performance
Goals must be objective and must satisfy third party “objectivity” standards as
provided in Section 162(m) of the Code.
(e) Adjustments. The Committee
shall appropriately adjust any evaluation of performance under Performance
Measures to exclude any of the following events that occurs during a Performance
Period (as long as such exclusion does not result in any Award or program with
regard to Covered Employees to fail to satisfy the requirements to be qualified
performance-based compensation under Section 162(m) of the Code): (i) asset
write-downs, (ii) litigation or claim judgments or settlements, (iii) the effect
of changes in tax law, accounting principles or other such laws or provisions
affecting reported results, (iv) accruals for reorganization and restructuring
programs and (v) any extraordinary non-recurring items as described in
Accounting Principles Board Opinion
No. 30
and/or in management’s discussion and analysis of financial condition and
results of operations appearing in the Company’s annual report to shareholders
for the applicable year.
(f) Negative Discretion Only. The
Committee shall have no discretion to increase any payment, but shall have
negative discretion to decrease any payment.
(g) Pre-Payment Certification. The
Award and payment of any Award under the Plan to a Covered Employee shall be
contingent upon the attainment of the Performance Goals that are applicable to
such Award. The Committee shall certify in writing prior to payment of any such
Award that such applicable Performance Goals have been satisfied. Resolutions
adopted by the Committee may be used for this purpose.
(h) Limitations on Stock Options and
Stock Appreciation Rights. The total aggregate maximum number
of shares of Stock for which Stock Options and Stock Appreciation Rights, in the
aggregate, may be granted to any Covered Employee during any period of twelve
consecutive months shall not exceed 1,000,000 shares.
(i) Limitation on Bonus
Award. The total aggregate maximum amount of compensation that
could be paid to any Covered Employee pursuant to a Bonus Award during any
period of twelve consecutive months shall not exceed $2.5 million.
(j) Limitation on Restricted
Stock. The total aggregate maximum number of shares of
Restricted Stock that may be granted to any Covered Employee during any period
of twelve consecutive months shall not exceed 750,000 shares.
(k) Limitation on Deferred Stock and
Performance Awards. The total aggregate maximum value
(determined on the date of grant) of Awards of Deferred Stock and Performance
Awards, in the aggregate, that may be granted to any Covered Employee during any
period of twelve consecutive months shall not exceed $5 million.
(l) Deduction. Notwithstanding
anything contained in this Plan to the contrary, the Company may delay payment
to any Participant to the extent that the Company reasonably anticipates that if
the payment were made as scheduled, the Company’s deduction with respect to such
payment would not be permitted due to the application of Section 162(m) of the
Code and then only if all payments that could be delayed are also delayed. The
delayed payment shall be made at the time required by Section 409A of the Code.
To the extent not prohibited by Section 409A of the Code, if the delayed payment
consists of cash, interest shall accrue on the delayed payment at the rate of 7%
per annum and if the delayed payment consists of Stock, dividends and
distributions paid with respect to such Stock shall be added to the delayed
payment. This Section 13.4(l) shall be
interpreted and implemented in accordance with Section 409A of the Code and may
be amended by the Committee in the Committee’s sole discretion to ensure such
compliance.
(m) Other
Restrictions. All Awards under the Plan to Covered Employees
or to other Participants who may become Covered Employees at a relevant future
date shall be further subject to such other terms, conditions, restrictions, and
requirements as the Committee may determine to be necessary to carry out the
purposes of this Section 13.4 which is to
avoid the loss of deduction by the Company under Section 162(m) of the
Code.
(n) No Impermissible
Discretion. To the extent any provision of the Plan creates
impermissible discretion under Section 162(m) of the Code or would otherwise
violate Section 162(m) of the Code with regard to Covered Employees, such
provision shall have no force or effect.
Section
13.5 No Additional
Obligation. Nothing contained in the Plan shall prevent the
Company or an Affiliate from adopting, other or additional compensation or
benefit arrangements for its employees.
Section
13.6 Withholding. No
later than the date as of which an amount first becomes includible in the gross
income of the Participant for federal income tax purposes with respect to any
Award, the Participant shall pay to the Company (or other entity identified by
the Committee), or make arrangements satisfactory to the Company or other entity
identified by the Committee regarding the payment of, any federal, state, or
local taxes of any kind (including any employment taxes) required by law to be
withheld with respect to such income. The obligations of the Company under the
Plan shall be conditional on such payment or arrangements, and the Company and
its Affiliates shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment otherwise due to the Participant. Subject to
approval by the Committee, a Participant may elect to have such tax withholding
obligation satisfied, in whole or in part, by (a) authorizing the Company to
withhold from shares of Stock to be issued pursuant to any Award a number of
shares with an aggregate Fair Market Value (as of the date the withholding is
effected) that would satisfy the required statutory minimum (but no more than
such required minimum) with respect to the Company’s withholding obligation, or
(b) transferring to the Company shares of Stock owned by the Participant with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the required statutory minimum (but no more than such required
minimum) with respect to the Company’s withholding obligation.
Section
13.7 Controlling
Law. The Plan and all Awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Indiana (other than its law respecting choice of law). The Plan shall be
construed to comply with all applicable law and to avoid liability to the
Company, an Affiliate or a Participant. In the event of litigation arising in
connection with actions under the Plan, the parties to such litigation shall
submit to the jurisdiction of courts located in Marion County, Indiana, or to
the federal district court that encompasses said county.
Section
13.8 Offset. Any amounts
owed to the Company or an Affiliate by the Participant of whatever nature may be
offset by the Company from the value of any Award to be transferred to the
Participant, and Stock, cash or other thing of value under this Plan or an
Agreement may be held by the Company and not transferred to such Participant
unless and until all disputes between the Company and the Participant have been
fully and finally resolved and the Participant has waived all claims to such
against the Company or an Affiliate.
Section
13.9 No Rights with Respect to
Continuance of Employment. Nothing contained herein shall be
deemed to alter the relationship between the Company or an Affiliate and a
Participant, or the contractual relationship between a Participant and the
Company or an Affiliate if there is a written contract regarding such
relationship. Nothing contained herein shall be construed to constitute a
contract of employment between the Company or an Affiliate and a Participant.
The Company or an Affiliate and each of the Participants continue to have the
right
to
terminate the employment or service relationship at any time for any reason,
except as provided in a written contract. The Company or an Affiliate shall have
no obligation to retain the Participant in its employ or service as a result of
this Plan. There shall be no inference as to the length of employment or service
hereby, and the Company or an Affiliate reserves the same rights to terminate
the Participant’s employment or service as existed prior to the individual
becoming a Participant in this Plan.
Section
13.10 Awards in Substitution
for Awards Granted by Other Corporations. Awards may be
granted under the Plan from time to time in substitution for awards held by
employees, directors or service providers of other corporations who are about to
become officers or employees of the Company or an Affiliate as the result of a
merger or consolidation of the employing corporation with the Company or an
Affiliate, or the acquisition by the Company or an Affiliate of the assets of
the employing corporation, or the acquisition by the Company or Affiliate of the
shares of the employing corporation, as the result of which it becomes an
Affiliate. The terms and conditions of the Awards so granted may vary from the
terms and conditions set forth in this Plan at the time of such grant as the
Committee may deem appropriate to conform, in whole or in part, to the
provisions of the awards in substitution for which they are granted and to
ensure that the requirements imposed under Sections 162(m), 409A and 424 of the
Code are met.
Section
13.11 Delivery of Stock
Certificates. To the extent the Company uses certificates to
represent shares of Stock, certificates to be delivered to Participants under
this Plan shall be deemed delivered for all purposes when the Company or a stock
transfer agent of the Company shall have mailed such certificates in the United
States mail, addressed to the Participant, at the Participant’s last known
address on file with the Company. Any reference in this Section or elsewhere in
the Plan or an Agreement to actual stock certificates and/or the delivery of
actual stock certificates shall be deemed satisfied by the electronic
record-keeping and electronic delivery of shares of Stock or other mechanism
then utilized by the Company and its agents for reflecting ownership of such
shares.
Section
13.12 Indemnification. To
the maximum extent permitted under the Company’s Articles of Incorporation and
by-laws, each person who is or shall have been a member of the Committee, or of
the Board, shall be indemnified and held harmless by the Company against and
from (a) any loss, cost, liability or expense (including attorneys’ fees) that
may be imposed upon or reasonably incurred by him or her in connection with or
resulting from any claim, action, suit or proceeding to which he or she may be a
party or in which he or she may be involved by reason of any action taken or
failure to act under this Plan or any Award Agreement, and (b) from any and all
amounts paid by him or her in settlement thereof, with the Company’s prior
written approval, or paid by him or her in satisfaction of any judgment in any
such claim, action, suit or proceeding against him or her; provided, however, that he or
she shall give the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be entitled under
the Company’s Articles of Incorporation or by-laws, by contract, as a matter of
law or otherwise, or under any power that the Company may have to indemnify them
or hold them harmless.
Section
13.13 Severability. If
any provision of this Plan shall for any reason be held to be invalid or
unenforceable, such invalidity or unenforceability shall not effect any
other
provision
hereby, and this Plan shall be construed as if such invalid or unenforceable
provision were omitted.
Section
13.14 Successors and
Assigns. This Plan shall inure to the benefit of and be
binding upon each successor and assign of the Company. All obligations imposed
upon a Participant, and all rights granted to the Company hereunder, shall be
binding upon the Participant’s heirs, legal representatives and
successors.
Section
13.15 Entire
Agreement. This Plan and the Agreements constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of this Plan shall control.
Section
13.16 Gender and
Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.
Section
13.17 Headings. The
headings contained in this Plan are for reference purposes only and shall not
affect the meaning or interpretation of this Plan.
Section
13.18 Notice. All notices
and other communications required or permitted to be given under the Plan shall
be in writing or other form approved by the Committee and shall be deemed to
have been duly given as follows (a) if to the Company mailed first class,
postage prepaid at the principal business address of the Company to the
attention of the Secretary of the Company; or (b) if to any Participant then
delivered personally, mailed first class, postage prepaid at the last address of
the Participant known to the sender at the time the notice or other
communication is sent or delivered, or by e-mail, interoffice mail, intranet or
other means of office communication determined by the Committee.
C-23
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ATTN:
GARY D. COHEN
3308
NORTH MITTHOEFFER ROAD
INDIANAPOLIS,
IN 46235
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VOTE
BY MAIL
Mark, sign
and date your proxy card and return it in the postage-paid envelope we
have provided or return it to The Finish Line, Inc., c/o Broadridge, 51
Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK
BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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M15476-P81351
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KEEP THIS
PORTION FOR YOUR RECORDS
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DETACH AND
RETURN THIS PORTION ONLY
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THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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THE
FINISH LINE, INC.
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For
All
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Withhold
All
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For
All
Except
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To withhold
authority to vote for any individual nominee(s), mark "For All Except" and
write the number(s)of the nominee(s)on the line
below.
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1.
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To elect two
Class II directors to serve on the Company's Board of Directors until the
2012 Annual Meeting of Shareholders;
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NOMINEES:
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01) Bill
Kirkendall
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02) William P.
Carmichael
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Vote On Proposals
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For
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Against
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Abstain
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2.
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To adopt an
amendment to the Company's Articles of Incorporation that will convert all
outstanding high voting Class B Common Shares into Class A Common Shares
as of the day after the Company's shareholder meeting to be held in 2012
(in lieu of the current provision which converts those shares only once
they constitute less than 5% of the total Class A Common Shares and Class
B Common Shares outstanding as of a record date for an annual meeting) and
will also limit the aggregate voting power of the Class B Common Shares to
41% should the total voting power of the Class B Common Shares ever exceed
that amount in the future;
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3.
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To adopt an
amendment to the Company's Articles of Incorporation that will
automatically convert all Class B Common Shares that may be issued to
Company employees or directors in the future into Class A Common Shares
upon their death or termination of employment or service;
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4.
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To approve and
ratify an amendment to the Company's 2002 Stock Incentive Plan (the "2002
Plan") to add the Company's Class B Common Shares as a class of shares
that may be awarded under the 2002 Plan,in order to permit, if authorized
by the Company's Board of Directors in the future, the exchange of Class B
Common Shares for Class A Common Shares that remain unvested under the
2002 Plan, and, to the extent the 2009 Incentive Plan is not approved
(Item 5), to grant awards of Class B Common Shares;
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5.
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To approve and
adopt the Company's 2009 Incentive Plan; and
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6.
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To ratify the
selection of Ernst & Young LLP as the Company's independent registered
public accounting firm for the Company's fiscal year ending February 27,
2010
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Please
indicate if you plan to attend this meeting.
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Yes
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No
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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 PROPOSALS 1, 2, 3, 4, 5, AND 6 AND ACCORDING TO THE JUDGMENT
OF THE PROXIES WITH RESPECT TO ANY OTHER MATTER THAT MAY BE PROPERLY
BROUGHT BEFORE THE ANNUAL MEETING.
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Signature
[PLEASE SIGN WITHIN BOX]
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Date
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Signature
(Joint Owners) |
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M15477-P81351
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The
Finish Line, Inc.
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CLASS A
COMMON SHARES
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Proxy for the
Annual Meeting of Shareholders, July 23, 2009.
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This
Proxy is solicited on behalf of the Board of Directors for the Annual
Meeting of Shareholders to be held on July 23, 2009, at 9:00 a.m. E.D.T.
at the Company's Corporate Office located at
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3308 N.
Mitthoeffer Rd., Indianapolis, IN 46235
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The undersigned hereby
acknowledges receipt of the Notice of Annual Meeting of Shareholders and
the accompanying Proxy Statement for the 2009 Annual Meeting and, revoking
all prior Proxies, appoints Steven J. Schneider and Donald E. Courtney,
and each of them, with full power of substitution in each, the Proxies of
the undersigned, to represent the undersigned and vote all Class A shares
of the undersigned in The Finish Line, Inc. at the Annual Meeting of
Shareholders to be held on July 23, 2009, and any adjournments or
postponements thereof upon the matters listed on the reverse side and in
the manner designated on the reverse side of this card. The Notice of
Annual Meeting of Shareholders and Proxy Statement, 2009 Annual Report on
Form 10-K of The Finish Line, Inc., and form of proxy for the annual
meeting are also available at www.finishline.com.
You also may request a copy of these materials by sending an e-mail to
IR@finishline.com. For meeting directions please call (317) 899-1022,
extension 4.
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