-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O76WGnmSCSIWwdGleE9LadszEtdU92zyYfMqpvL8gNVn18/yHTCOu7suadzedqu2 Afe/uSiT5CkwuCfTwXKYsQ== 0000914190-97-000355.txt : 19971015 0000914190-97-000355.hdr.sgml : 19971015 ACCESSION NUMBER: 0000914190-97-000355 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971014 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST TEAM SPORTS INC CENTRAL INDEX KEY: 0000820242 STANDARD INDUSTRIAL CLASSIFICATION: [3949] IRS NUMBER: 411545748 STATE OF INCORPORATION: MN FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16442 FILM NUMBER: 97694709 BUSINESS ADDRESS: STREET 1: 1201 LUND BLVD CITY: ANOKA STATE: MN ZIP: 55303 BUSINESS PHONE: 6127804454 MAIL ADDRESS: STREET 1: 1201 LUND BLVD CITY: ANOKA STATE: MN ZIP: 55303-1092 10-Q 1 FORM 10-Q FOR FIRST TEAM SPORTS, INC. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended: Commission File No.: August 31, 1997 0-16442 FIRST TEAM SPORTS, INC. (Exact name of Registrant as specified in its charter) Minnesota 41-1545748 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1201 Lund Boulevard Anoka, Minnesota 55303 (Address of principal executive offices) Registrant's telephone number, including area code: (612) 576-3500 -------------------------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] --------------------------------------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 5,789,499 shares of Common Stock, $.01 par value per share, outstanding as of October 7, 1997. PART I FINANCIAL INFORMATION Item 1. Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED BALANCE SHEETS August 31, 1997 and February 28, 1997
August 31, February 28, ASSETS 1997 1997 ------------------- -------------------- (Unaudited) CURRENT ASSETS Cash and cash equivalents $686,098 $381,427 Receivables: Trade, less allowance for doubtful accounts of $319,000 at August 31, 1997 and $565,000 at February 28, 1997 14,333,445 17,039,679 Refundable income taxes 113,675 258,492 Inventory 21,257,549 20,881,845 Prepaid expenses 588,743 612,880 Deferred income taxes 997,000 997,000 ------------------- -------------------- Total current assets $37,976,510 $40,171,323 ------------------- -------------------- PROPERTY AND EQUIPMENT, at cost Land $600,000 $600,000 Building 4,988,680 4,988,680 Production equipment 5,265,453 4,715,979 Office furniture and equipment 1,845,310 1,754,017 Warehouse equipment 330,042 325,361 Vehicles 86,606 19,567 ------------------- -------------------- $13,116,091 $12,403,604 Less accumulated depreciation 3,486,304 2,588,404 ------------------- -------------------- $9,629,787 $9,815,200 ------------------- -------------------- OTHER ASSETS License agreements, less accumulated amortization of $3,183,000 at August 31, 1997 and $3,039,000 at February 28, 1997 $1,921,842 $2,065,611 Other 269,947 291,367 ------------------- -------------------- $2,191,789 $2,356,978 ------------------- -------------------- $49,798,086 $52,343,501 =================== ==================== See Notes to Consolidated Financial Statements
FIRST TEAM SPORTS, INC. CONSOLIDATED BALANCE SHEETS (CONTINUED) August 31, 1997 and February 28, 1997
August 31, February 28, LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1997 ------------------- -------------------- (Unaudited) CURRENT LIABILITIES Notes payable to bank $4,294,250 $5,319,250 Current maturities of long-term debt 937,615 662,414 Accounts payable, trade 1,783,664 4,852,459 Accrued expenses 1,318,057 1,415,511 Income taxes - - ------------------- -------------------- Total current liabilities $8,333,586 $12,249,634 ------------------- -------------------- LONG-TERM DEBT, less current maturities $6,504,266 $6,217,936 ------------------- -------------------- DEFERRED INCOME TAXES $530,000 $530,000 ------------------- -------------------- DEFERRED REVENUE $600,000 $600,000 ------------------- -------------------- SHAREHOLDERS' EQUITY Series A Preferred, par value $.01 per share; authorized 680,000 shares; issued and outstanding none at August 31, 1997 and February 28, 1997 - - Common Stock, par value $.01 per share; authorized 10,000,000 shares; issued and outstanding 5,760,008 shares at August 31, 1997, 5,749,796 shares at February 28, 1997 $57,600 $57,498 Additional paid-in capital 9,642,921 9,586,340 Retained earnings 24,129,713 23,102,093 ------------------- -------------------- $33,830,234 $32,745,931 ------------------- -------------------- $49,798,086 $52,343,501 =================== ====================
See Notes to Consolidated Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended Six months ended August 31, August 31, 1997 1996 1997 1996 ------------------- ------------------- -------------------- -------------------- Net sales $10,101,611 $15,634,944 $36,108,873 $46,221,743 Cost of goods sold 7,944,438 11,474,675 26,994,488 32,978,677 ------------------- ------------------- -------------------- -------------------- Gross profit $2,157,173 $4,160,269 $9,114,385 $13,243,066 ------------------- ------------------- -------------------- -------------------- Operating expenses: Selling $1,214,086 $1,954,914 $3,255,917 $4,345,468 General and administrative 1,954,404 1,484,564 3,761,558 3,421,357 ------------------- ------------------- -------------------- -------------------- $3,168,490 $3,439,478 $7,017,475 $7,766,825 ------------------- ------------------- -------------------- -------------------- Operating income ($1,011,317) $720,791 $2,096,910 $5,476,241 Other income (expense): Interest expense (272,748) (399,812) (523,290) (723,071) Other 0 0 0 0 ------------------- ------------------- -------------------- -------------------- Income before income taxes ($1,284,065) $320,979 $1,573,620 $4,753,170 Income taxes (450,000) 110,000 546,000 1,687,000 ------------------- ------------------- -------------------- -------------------- Net income (loss) for the period ($834,065) $210,979 $1,027,620 $3,066,170 =================== =================== ==================== ==================== Net income (loss) per common share: ($0.14) $0.04 $0.18 $0.52 =================== =================== ==================== ==================== Weighted average number of common shares outstanding including Common Share equivalents 5,760,008 5,983,901 5,819,933 5,931,080 =================== =================== ==================== ====================
See Notes to Consolidated Financial Statements FIRST TEAM SPORTS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For Six Months Ended August 31, 1997 and 1996 (Unaudited)
August 31, August 31, 1997 1996 ------------------- -------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $1,027,620 $3,066,170 Adjustments required to reconcile net income to net cash provided by (used in) operating activities: Depreciation 897,900 658,000 Amortization 181,269 316,979 Deferred income taxes - - Change in assets and liabilities: Receivables 2,706,234 (2,178,988) Inventories (375,704) (1,214,009) Prepaid expenses 24,137 273,116 Accounts payable (3,068,795) (6,435,880) Accrued expenses (97,454) (1,686,235) Income taxes 144,817 154,156 ------------------- -------------------- Net cash provided by (used in) operating activities $1,440,024 ($7,046,691) ------------------- -------------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment ($712,487) ($1,035,719) Other (16,080) (27,799) ------------------- -------------------- Net cash used in investing activities ($728,567) ($1,063,518) ------------------- -------------------- CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds (payments) on short-term borrowings ($1,025,000) $7,086,250 Proceeds on long-term borrowings 1,000,000 Principal payments on long-term borrowings (438,469) (621,162) Net proceeds from issuances of common stock 1997; 10,169 shares, 1996; 17,750 shares 56,683 94,657 ------------------- -------------------- Net cash provided by (used in) financing activities ($406,786) $6,559,745 ------------------- -------------------- Increase (decrease) in cash and cash equvalents $304,671 ($1,550,464) Cash and cash equivalents: Beginning $381,427 $2,166,863 ------------------- -------------------- Ending $686,098 $616,399 =================== ====================
See Notes to Consolidated Financial Statements FIRST TEAM SPORTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1. The consolidated condensed balance sheet as of August 31, 1997, and the consolidated statements of operations for the three-month and six-month periods ended August 31, 1997 and August 31, 1996 and the consolidated statements of cash flows for the six-month periods then ended have been prepared by the Company without audit. In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary to present fairly the consolidated financial position, results of operations and cash flows at August 31, 1997 and August 31, 1996 and for all periods presented have been made. The operating results for the period ended August 31, 1997 are not necessarily indicative of the operating results to be expected for the full fiscal year. Certain information and footnote disclosures normally included in consolidated financial statements in accordance with generally accepted accounting principles have been condensed or omitted. PER SHARE DATA In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted at our fiscal year end. At that time we will calculate "basic" and "diluted" earnings per share and restate prior periods. The changes from primary and fully diluted earnings per share are expected to be negligible. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Net Sales. Net sales were $10.1 million in the second quarter of fiscal 1998, a decrease of 35% over the comparable quarter of fiscal 1997 when sales were $15.6 million. Net sales for the first six-months of fiscal 1998 were $36.1 million, compared to $46.2 million for the first six-months of fiscal 1997, a decrease of 22%. In-line skate sales volume decreases, combined with a decrease in the average selling price of the Company's Skate Attack line, were the principal factors in the Company's net sales decline in the second quarter and six-month period of fiscal 1998. The Company's Skate Attack line is sold primarily through the mass merchant retail channel and carries a lower average selling price, which continued to be pressured downward in the second quarter of fiscal 1998. The Company's product groups consist of in-line skates, ice skates, accessories and parts (primarily protective wear and replacement wheels and bearings) and roller hockey products. Within the product groups, the Company maintains an UltraWheels and Skate Attack line of products. The UltraWheels line consists of higher quality and higher priced products that are targeted for the specialty and sporting goods chain store customers, and the Skate Attack line consists of lower priced products for mass merchant customers. In-line skates and parts and accessories sales decreased 31% and 40%, respectively, from the second quarter of fiscal 1997 to fiscal 1998. Sales of in-line skates accounted for approximately 82% of total sales in the second quarter of fiscal 1998 compared to 80% in the second quarter of fiscal 1997. Sales of parts and accessories accounted for approximately 18% of total sales in the second quarter of fiscal 1998 compared to 20% in the second of fiscal 1997. The Company currently distributes products to more than sixty-two countries worldwide. Domestic sales were $7 million or 69% of total sales in the second quarter of fiscal 1998 compared to $9.8 million or 63% in the second quarter of fiscal 1997. Sales in Canada were $1.2 million or 12% of total sales in the second quarter of fiscal 1998 compared to $200,000 or 1% in the second quarter of fiscal 1997. Sales in Europe were $1 million or 10% of total sales in the second quarter of fiscal 1998 compared to $3.6 million or 23% in the second quarter of fiscal 1997. Other international sales were $900,000 or 9% of total sales in the second quarter of fiscal 1998 compared to $2 million or 13% in the second quarter of fiscal 1997. Several factors contributed to the Company's sales performance in the second quarter of fiscal 1998. The decrease in domestic sales was a result of a retail slowdown of in-line skate sales in the later part of the second quarter, combined with a second consecutive fall season of excess inventory in the marketplace. The increase in Canadian sales was due to a continued strong acceptance of the Company's made in USA intec system skates. The decrease in European sales was primarily a result of adverse spring and summer weather conditions throughout key European retail areas resulting in a slowdown of retail sales. The decrease in other international sales was primarily the result of excess inventory levels in the South American and Pacific Rim markets. Gross Margin. As a percentage of net sales, the gross margin was 21.4% in the second quarter of fiscal 1998 compared to 26.6% in the second quarter of fiscal 1997. The decrease in the gross margin was primarily due to competitive close-out sales, continued excess inventories in the marketplace and continued pricing pressures, especially at the mass merchant level. The Company's UltraWheels brand of in-line skates accounted for 57% of total skate sales in the second quarter of fiscal 1998 compared to 60% in the second quarter of fiscal 1997, while the Company's Skate Attack brand account for 43% of total skate sales in the second quarter of fiscal 1998 compared to 40% in the second quarter of fiscal 1997. Operating Expenses. Selling expenses were $1.2 million or 12% of total net sales in the second quarter of fiscal 1998 compared to $2 million or 12.5% in the second quarter of fiscal 1997. The decrease in selling expenses was primarily the result of a reduction in commissions, royalties and co-op advertising costs associated with the decreased sales volume. General and administrative expenses were $2 million or 19% of total net sales in the second quarter of fiscal 1998 compared to $1.5 million or 10% in the second quarter of fiscal 1997. The increase in general and administrative expenses was primarily due to an increase in expenses associated with the Company's computer systems, expansion of the Company's European office and certain occupancy costs, specifically real estate taxes associated with the Company's facility. Other Income and Expense. Interest expense was $273,000 in the second quarter of fiscal 1998 compared to $400,000 in the second quarter of fiscal 1997. The decrease of approximately $127,000 or 32% was primarily due to a reduction of the interest expense related to the Company's line of credit facility. Due to management's control over expenditures and cash management procedures, the average outstanding balance on the Company's line of credit facility during the second quarter of fiscal 1998 was substantially reduced from the second quarter of fiscal 1997. Net Income/(Loss). The Company had a net loss of ($834,000) or ($ .14) per share in the second quarter of fiscal 1998 compared to net income of $211,000 or $ .04 per share in fiscal 1997. The decrease can be attributed to the decrease in both the sales volume and the gross margins as discussed above. LIQUIDITY AND CAPITAL RESOURCES As of August 31, 1997, total cash and cash equivalents were $686,098 compared to $381,427 as of February 28, 1997. The increase in cash and cash equivalents was a result of $1,440,024 of cash provided by operating activities being offset by $728,567 of cash used in investing activities and $406,786 of cash used in financing activities. The net cash provided by operating activities was primarily from net income, depreciation and amortization, and a decrease in accounts receivable being offset by a decrease in accounts payable. The decrease in accounts receivable is the result of continued collections and a decrease in sales activities. The decrease in accounts payable is a result of a reduction in inventory purchases related to the reduced sales volume. The net cash used in investing activities was primarily for capital expenditures relating to new product production tooling. The net cash used in financing activities was primarily for payments on the Company's line of credit and long-term debt being offset by proceeds received on a new term note. The new note was for the financing of new production tooling costs. The Company's debt-to-worth ratio was .5 to 1 as of August 31, 1997 compared to .6 to 1 as of February 28, 1997. The Company's long-term debt, which consists primarily of a mortgage note on the Company's facility and obligations under endorsement license agreements, less current maturities, was $6,504,266 as of August 31, 1997. As of August 31, 1997, the Company had a revolving line of credit with a bank that provides for borrowings of up to $15,000,000 of which $4,294,250 was outstanding. In addition, the Company had a line of credit established with the bank providing for borrowings of up to $1,000,000 for the purchase of equipment and improvements. As of August 31, 1997 there was a $916,666 balance outstanding on this credit facility. The Company believes its current cash position, funds available under existing bank arrangements and cash generated from profitable operations will be sufficient to finance the Company's operating requirements through fiscal 1998. PART II OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. (a) The Company held its Annual Meeting on June 17, 1997. (b) Proxies for the Annual Meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934. There was no solicitation in opposition to management's nominees as listed in the proxy statement, and all of such nominees were elected. The shareholders set the number of directors at six (6) by a vote of 4,984,710 shares in favor, 82,879 shares against and 34,796 shares abstaining. The following persons were elected to serve as directors of the Company until the next annual meeting of shareholders with the following votes: Number of Number of Nominee Votes For Votes Withheld ------- --------- -------------- John J. Egart 4,780,472 321,913 David G. Soderquist 4,778,886 323,499 Joe Mendelsohn 4,779,591 322,794 Timothy G. Rath 4,787,921 314,464 Stanley E. Hubbard 4,784,948 317,437 William J. McMahon 4,778,565 323,820 The shareholders approved an increase in the number of shares reserved under the Company's 1994 stock option and incentive compensation from 525,000 to 925,000 by a vote of 1,673,068 shares in favor, 727,042 shares against and 52,879 shares abstaining, which votes excluded 2,649,396 shares ("broker non-votes"). Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. See Exhibit Index immediately following the signature page of this Form 10-Q. (b) Reports on Form 8-K. No reports on Form 8-K were filed by the Registrant during the quarter to which this Form 10-Q relates. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST TEAM SPORTS, INC. By: /s/ John J. Egart John J. Egart President and CEO and By: /s/ Robert L. Lenius, Jr. Robert L. Lenius, Jr. Vice President and CFO Dated: October 7, 1997 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 EXHIBIT INDEX TO FORM 10-Q For Quarter Ended: Commission File No.: 0-16422 August 31, 1997 - ------------------------------------------------------------------------------- FIRST TEAM SPORTS, INC. - ------------------------------------------------------------------------------- Exhibit Number Description - -------------- ----------- 3.1 Restated Articles of Incorporation -- incorporated by reference to Exhibit 3.1 to the Company's Form 10-K for the year ended February 28, 1997 3.2 Bylaws -- incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-18 Reg. No. 33-16345C 4.1 Specimen of Common Stock Certificate--incorporated by reference to 4.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended February 28, 1991 4.2 Certificate of Designations of Series A Preferred Stock (included in Restated Articles of Incorporation -- see Exhibit 3.1) 4.3 Rights Agreement dated as of March 15, 1996 between the Company and Norwest Bank Minnesota, N.A. as Rights Agent -- incorporated by reference to Exhibit 2.1 to the Company's Registration Statement on Form 8-A, Reg. No. 0-16422 4.4 Form of Right Certificate -- incorporated by reference to Exhibit 2.2 to the Company's Registration Statement on Form 8-A, Reg. No. 0-16422 4.5 Summary of Rights to Purchase Share of Series A Preferred Stock- incorporated by reference to Exhibit 2.3 to the Company's Registration Statement of Form 8-A, Reg. No. 0-16422 10.1* 1994 Stock Option and Incentive Compensation Plan, as amended through June 17, 1997** 10.2* Employment Agreement dated August 18, 1997 between the Company and Kent Brunner** 27* Financial Data Schedule (included in electronic version only) _____________________________ *Filed herewith. **Management contract or compensatory plan or arrangement. EX-10.1 2 1994 STOCK OPTION AND INCENTIVE COMPENSATION PLAN FIRST TEAM SPORTS, INC. 1994 STOCK OPTION AND INCENTIVE COMPENSATION PLAN (As Amended through June 17, 1997) 1. Purpose. The purpose of the 1994 Stock Option and Incentive Compensation Plan (the "Plan") of First Team Sports, Inc. (the "Company") is to increase shareholder value and to advance the interests of the Company by furnishing a variety of economic incentives ("Incentives") designed to attract, retain and motivate employees, officers, directors, consultants and advisors of the Company. Incentives may consist of opportunities to purchase or receive shares of Common Stock, $0.01 par value, of the Company ("Common Stock"), monetary payments or both on terms determined under this Plan. 2. Administration. The Plan shall be administered by the Board of Directors of the Company (the "Board"), or by a Committee which may be appointed by the Board from time to time. If the Plan is administered by the Board, each member of the Board shall be a "disinterested person" as defined in Rule 16b-3, or any successor provision, of the General Rules and Regulations of the Securities Exchange Act of 1934 (the "1934 Act"), as amended. If a Committee is appointed by the Board to administer the Plan, such Committee shall consist solely of two or more directors of the Company who shall be appointed from time to time and serve at the pleasure of the Board. Each member of the Committee shall be a "disinterested person" within the meaning of Rule 16b-3 of the 1934 Act. The Board may from time to time appoint members of the Committee in substitution for, or in addition to, members previously appointed, and may fill vacancies, however caused, in the Committee. If such Committee is appointed by the Board, the Committee shall select one of its members as its chairman and shall hold its meetings at such times and places as it shall deem advisable. A majority of the Committee's members shall constitute a quorum. All action of the Committee shall be taken by the majority of its members. Any action may be taken by a written instrument signed by majority of the members, and actions so taken shall be fully effective as if it had been made by a majority vote at a meeting duly called and held. The Committee may appoint a secretary, shall keep minutes of its meetings, and shall make such rules and regulations for the conduct of its business as it shall deem advisable. The Board or the Committee, as the case may be, shall have complete authority to award Incentives under the Plan, to interpret the Plan, to prescribe the form and conditions of the respective agreements (which may vary from participant to participant) evidencing each Incentive awarded under the Plan, and to make any other determination which it believes necessary and advisable for the proper administration of the Plan. The Board's or the Committee's decisions and matters relating to the Plan shall be final and conclusive on the Company and participants in the Plan. No member of the Board or the Committee shall be liable for any action taken or determination made in good faith in connection with the administration of the Plan. 3. Participants. The Board or the Committee, as the case may be, shall from time to time, at its discretion and without approval of the shareholders, designate those employees, directors, officers, consultants and advisors of the Company or its subsidiaries or affiliates to whom Incentives may be granted under this Plan; provided, however, that consultants or advisors shall not be eligible to receive Incentives under the Plan unless such consultant or advisor renders bona fide services to the Company or its subsidiaries or affiliates and such services are not in connection with the offer or sale of securities in a capital raising transaction; and provided, further, that directors who are responsible for the administration of the Plan shall not be eligible to receive Incentives under the Plan except pursuant to Section 11 hereof and to the extent otherwise permitted by Rule 16b-3 of the 1934 Act or any successor provision. Employees, consultants and advisors may be designated individually or by groups or categories (for example, by pay grade) as the Board or the Committee deems appropriate. Participation by officers and directors of the Company or its subsidiaries or affiliates and any performance objectives relating to such officers and directors must be approved by the Board or the Committee, as the case may be. Participation by others and any performance objectives relating to others may be approved by groups or categories (for example, by pay grade), and the authority to designate participants who are not officers or directors and to set or modify such performance objectives may be delegated to such officers of the Company as the Board or the Committee may, from time to time and at its sole discretion, deem appropriate. 4. Types of Incentives. Incentives under the Plan may be granted in any one or a combination of the following forms: (a) incentive stock options and non-qualified stock options (Section 6 and Section 11); (b) stock appreciation rights ("SARs") (Section 7); (c) stock awards (Section 8); (d) restricted stock (Section 8); (e) performance shares (Section 9); and (f) cash awards (Section 10). 5. Shares Subject to the Plan. 5.1. Number of Shares. Subject to adjustment as provided in Section 12.6, the number of shares of Common Stock which may be issued under the Plan shall not exceed Nine Hundred Twenty-five Thousand (925,000) shares of Common Stock. 5.2. Cancellation. To the extent that cash in lieu of all or a portion of the shares of Common Stock is delivered upon the exercise of an SAR pursuant to Section 7.3, such unissued shares that previously reduced the available number of shares of Common Stock may again be issued under the Plan, either pursuant to stock options, SARs or otherwise. If an SAR is granted with respect to any stock option granted under this Plan, the Company shall be deemed, for purposes of applying the limitation on the number of shares, to have issued the greater of the number of shares of Common Stock which it is entitled to issue upon the exercise of the SAR or on the exercise of the related option. In the event that a stock option or SAR granted hereunder expires or is terminated or cancelled unexercised as to any shares of Common Stock, such shares may again be issued under the Plan either pursuant to stock options, SARs or otherwise. In the event that shares of Common Stock are issued as restricted stock or pursuant to a stock award and thereafter are forfeited or reacquired by the Company pursuant to rights reserved upon issuance thereof, such forfeited and reacquired shares may, to the extent permitted by Rule 16b-3, or any successor provision, of the 1934 Act, again be issued under the Plan, either as restricted stock, pursuant to stock awards or otherwise. The Committee may also determine to cancel, and agree to the cancellation of, stock options in order to make a participant eligible for the grant of a stock option at a lower price than the option to be cancelled. 6. Stock Options. A stock option is a right to purchase shares of Common Stock from the Company. Except as provided in this Section 6, each stock option granted by the Board or the Committee, as the case may be, under this Plan shall be subject to such terms and conditions, which may vary from participant to participant, as the Board or the Committee may, in its sole discretion, deem appropriate, including but not limited to the extent to which a stock option may be exercisable (including the participant's right to exercise such stock option upon the participant's, death, disability, retirement or termination of employment or other relationship with the Company or its subsidiaries or affiliates), the manner in which the stock option may be exercised, and the form of agreement that shall evidence the stock option. 6.1. Price. The option price per share shall be determined by the Board or the Committee, as the case may be, subject to adjustment under Section 12.6. 6.2. Number. The number of shares of Common Stock subject to the option shall be determined by the Board or the Committee, as the case may be, subject to adjustment as provided in Section 12.6. The number of shares of Common Stock subject to a stock option shall be reduced in the same proportion that the participant exercises an SAR if any SAR is granted to the participant in conjunction with or related to the stock option. 6.3. Duration and Time for Exercise. Subject to earlier termination as provided in Section 12.4, the term of each stock option shall be determined by the Board or the Committee, as the case may be, but shall not exceed ten years and one day from the date of grant. Each stock option shall become exercisable at such time or times during its term as shall be determined by the Board or the Committee at the time of grant. The Board or the Committee, as the case may be, may accelerate the exercisability of any stock option. Subject to the foregoing and with the approval of the Board or the Committee, all or any part of the shares of Common Stock with respect to which the right to purchase has accrued may be purchased by the participant at the time of such accrual or at any time or times thereafter during the term of the option. 6.4. Payment of Option Price. The option price per share shall, in the sole discretion of the Board or the Committee, be payable in United States dollars upon exercise of a stock option and may be paid by cash, certified check, bank draft, by the delivery of previously acquired shares of Common Stock in payment of all or any part of the option price, which shares shall be valued for this purpose at the Fair Market Value on the date such stock option is exercised, or in such other manner and subject to such rules as may be adopted by the Board or the Committee from time to time. For purposes of this Section 6.4, "previously acquired shares" shall include shares of Common Stock that are already owned by the participant at the time of exercise. 6.5. Incentive Stock Options. Notwithstanding anything in the Plan to the contrary, the following additional provisions shall apply to the grant of stock options which are intended to qualify as "incentive stock options" (as such term is defined in Section 422 of the Internal Revenue Code of 1986, and the regulations as amended, or any successor provision): (a) Any incentive stock option authorized under the Plan shall contain such terms and conditions, as the Board or the Committee, as the case may be, shall deem advisable, but shall in all events be consistent with and contain such restrictions and limitations as shall be necessary in order to qualify the options as incentive stock options. (b) All incentive stock options must be granted within ten years from the earlier of the date on which this Plan was adopted by the Board or the date this Plan was approved by the shareholders. (c) Unless sooner exercised, all incentive stock options shall expire no later than ten years after the date of grant; provided, however, that incentive stock options granted to a participant who owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or its subsidiaries or affiliates shall expire no later than five years after the date of grant. (d) To the extent required to qualify the stock option as an incentive stock option, the option price per share for incentive stock options shall not be less than the Fair Market Value of the Common Stock subject to the option on the date of grant; provided, however, that the option price per share for incentive stock options granted to a participant who owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or its subsidiaries or affiliates shall not be less than 110% of the Fair Market Value of the Common Stock subject to the stock option on the date of grant. 6.6 Rights as a Shareholder. Prior to the issuance of shares of Common Stock upon the exercise of a stock option, a participant shall have no rights as a shareholder with respect to shares subject to such option. Except as provided in Section 12.6, no adjustments shall be made for dividends or other cash distributions or for other rights that have a record date preceding the date the participant becomes the holder of record of the shares of Common Stock subject to the stock option. 7. Stock Appreciation Rights. An SAR is a right to receive, without payment to the Company, a number of shares of Common Stock, cash or any combination thereof, the amount of which is determined pursuant to the formula set forth in Section 7.3. An SAR may be granted (a) with respect to any stock option granted under this Plan, either concurrently with the grant of such stock option or at such later time as determined by the Board or the Committee (as to all or any portion of the shares of Common Stock subject to the stock option), or (b) alone, without reference to any related stock option. Except as provided in this Section 7, each SAR granted by the Board or the Committee, as the case may be, under this Plan shall be subject to such terms and conditions, which may vary from participant to participant, as the Board or the Committee may, in its sole discretion, deem appropriate, including but not limited to the extent to which an SAR may be exercisable (including the participant's right to exercise the SAR upon the participant's death, disability, retirement or termination of employment or other relationship with the Company or its subsidiaries or affiliates), the manner in which the SAR may be exercised and the form of agreement that shall evidence the SAR. 7.1. Number. Each SAR granted to any participant shall relate to such number of shares of Common Stock as shall be determined by the Board or the Committee, as the case may be, subject to adjustment as provided in Section 12.6. In the case of an SAR granted with respect to a stock option granted to the participant, the number of shares of Common Stock to which the SAR pertains shall be reduced in the same proportion that the participant exercises the related stock option. 7.2. Duration. Subject to earlier termination as provided in Section 12.4, the term of each SAR shall be determined by the Board or the Committee, as the case may be, but shall not exceed ten years and one day from the date of grant. Unless otherwise provided by the Board or the Committee, each SAR shall become exercisable at such time or times, to such extent and upon such conditions as the stock option, if any, to which it relates is exercisable. The Board or the Committee, as the case may be, may in its discretion accelerate the exercisability of any SAR. 7.3. Payment. Subject to the right of the Board or the Committee, as the case may be, to deliver cash in lieu of shares of Common Stock (which, as it pertains to officers and directors of the Company, shall comply with all requirements of the 1934 Act), the number of shares of Common Stock which shall be issuable upon the exercise of an SAR shall be determined by dividing: (a) the number of shares of Common Stock as to which the SAR is exercised multiplied by the amount of the appreciation in such shares (for this purpose, the "appreciation" shall be the amount by which the Fair Market Value of the shares of Common Stock subject to the SAR on the exercise date exceeds (1) in the case of an SAR related to a stock option, the purchase price of the shares of Common Stock under the stock option or (2) in the case of an SAR granted alone, without reference to a related stock option, an amount which shall be determined by the Committee at the time of grant, subject to adjustment under Section 12.6); by (b) the Fair Market Value of a share of Common Stock on the exercise date. In lieu of issuing shares of Common Stock upon a participant's exercise of an SAR, the Board or the Committee, as the case may be, may elect to pay the participant cash equal to the Fair Market Value on the exercise date of any or all of the shares which would otherwise be issuable. No fractional shares of Common Stock shall be issued to the participant upon the exercise of an SAR; instead, the participant shall be entitled to receive a cash adjustment equal to the same fraction of the Fair Market Value of a share of Common Stock on the exercise date or to purchase the portion necessary to make a whole share at its Fair Market Value on the date of exercise. 8. Stock Awards and Restricted Stock. A stock award consists of the transfer by the Company to a participant of shares of Common Stock, without other payment therefor, as additional compensation for services to the Company. A share of restricted stock consists of shares of Common Stock which are sold or transferred by the Company to a participant at such price (which price shall be at least equal to the minimum price required by applicable law for the issuance of a share of Common Stock) and subject to restrictions on their sale or other transfer by the participant as determined by the Board or the Committee, as the case may be. Except as provided in this Section 8, the transfer of Common Stock pursuant to stock awards and the transfer and sale of restricted stock shall be subject to such terms and conditions, which may vary from participant to participant, as the Board or the Committee may, in its sole discretion, deem appropriate, including the form of agreement, if any, that shall evidence the stock award or restricted stock. 8.1. Number of Shares. The number of shares to be transferred or sold by the Company to a participant pursuant to a stock award or as restricted stock shall be determined by the Board or the Committee, as the case may be. 8.2. Sale Price. The Board or the Committee, as the case may be, shall determine the price, if any, at which shares of restricted stock shall be sold to a participant, which may vary from time to time and among participants and which may be below the Fair Market Value of such shares of Common Stock at the date of sale. 8.3. Restrictions. All shares of restricted stock transferred or sold hereunder, including any additional shares of Common Stock received by the participant as the result of any dividend paid on the shares of restricted stock or as the result of any stock split, stock distribution or combination of shares that affects such restricted stock, shall be subject to such restrictions as the Board or the Committee, as the case may be, may determine, which may vary from time to time and among participants, including, without limitation, any or all of the following: (a) a prohibition against the sale, transfer, pledge, assignment or other encumbrance of the shares of restricted stock, such prohibition to lapse at such time or times as the Board or the Committee, as the case may be, shall determine (whether in annual or more frequent installments, upon the participant's death, disability, retirement or termination of employment or other relationship with the Company or its subsidiaries or affiliates, or otherwise); (b) a requirement that the participant forfeit or, in the case of shares sold to the participant, resell back to the Company at his or her cost, all or a part of such shares in the event of termination of his or her employment or other relationship with the Company or its subsidiaries or affiliates during any period in which such shares are subject to restrictions; (c) such other conditions or restrictions as the Board or the Committee, as the case may be, may deem advisable. 8.4. Escrow. In order to enforce the restrictions imposed by the Board or the Committee, as the case may be, pursuant to Section 8.3, the participant receiving restricted stock shall enter into an agreement with the Company setting forth the conditions of the grant. Shares of restricted stock shall be registered in the name of the participant and deposited, together with a stock power endorsed in blank, with the Company. Each such certificate shall bear a legend in substantially the following form: The transferability of this certificate and the shares of Common Stock represented by it are subject to the terms and conditions (including conditions of forfeiture) contained in the 1994 Stock Option and Incentive Compensation Plan of First Team Sports, Inc. (the "Company"), and an agreement entered into between the registered owner and the Company. A copy of the Plan and the agreement is on file in the office of the secretary of the Company. 8.5. End of Restrictions. Subject to Section 12.3, at the end of any time period during which the shares of restricted stock are subject to forfeiture and restrictions on transfer, such shares will be delivered free of all restrictions to the participant or to the participant's legal representative, beneficiary or heir. 8.6. Rights as Shareholder. Subject to the terms and conditions of the Plan, each participant receiving restricted stock shall have all the rights of a shareholder with respect to shares of stock during any period in which such shares are subject to forfeiture and restrictions on transfer, including without limitation, the right to vote such shares. Dividends paid in cash or property other than Common Stock with respect to shares of restricted stock shall be paid to the participant currently. 8.7 Modification of Restrictions. The Board or the Committee, as the case may be, may, in its sole discretion, modify the manner in which the prohibition on the sale or other transfer of the shares of restricted stock awarded to the participant may lapse, subject to such limitations as may be imposed by the Rule 16b-3, or any successor provision, of the 1934 Act. Any such modification shall apply only to those shares of Common Stock which are restricted as of the effective date of the modification, and shall be reflected, if deemed appropriate by the Board or the Committee, as the case may be, in an amendment to any agreement with respect to which such modification applies. 9. Performance Shares. A performance share consists of an award which shall be paid in cash or shares of Common Stock, as described below. Except as provided in this Section 9, each grant of performance shares by the Board or the Committee, as the case may be, under the Plan shall be subject to such terms and conditions, which may vary from participant to participant, as the Board or the Committee may, in its sole discretion, deem appropriate, including the number of performance shares granted to the participant, the valuation of such performance shares, the extent to which such performance shares may become payable or will expire (including the payment or expiration of such performance shares upon the participant's death, disability, retirement, termination of employment or other relationship with the Company or its subsidiaries or affiliates), and the form of agreement that shall evidence the grant of performance shares. 9.1. Performance Objectives. Each grant of performance shares will be subject to performance objectives for the Company or one of its operating units, which performance objectives must be achieved by the end of a period specified in the agreement evidencing such grant. Such performance objectives may include business or financial objectives relating to the Company or one of its operating units, whether or not related to any equity security of the Company, and shall be set forth in the agreement evidencing the grant of the performance shares. When establishing such performance objectives, the Board or the Committee, as the case may be, or such other individual to whom such authority has been delegated pursuant to Section 3 of the Plan, may consider the recommendations of management of the Company or its subsidiaries or affiliates. If such performance objectives are achieved, each participant will be paid in shares of Common Stock, cash or any combination thereof as determined by the Board or the Committee, as the case may be, and subject to such rules as the Board or the Committee may adopt from time to time. If such performance objectives are not met, each grant of performance shares may provide for lesser payments in accordance with formulas established in the agreement evidencing the grant of performance shares. 9.2. No Rights as Shareholder. The grant of performance shares to a participant shall not create any rights in such participant as a shareholder of the Company, until the payment of shares of Common Stock with respect to such grant. 9.3. No Adjustments. No adjustment shall be made in performance shares granted on account of cash dividends which may be paid or other rights which may be issued to the holders of Common Stock prior to the end of any period for which performance objectives were established. 9.4 Amendment of Performance Objectives. The Board or the Committee, as the case may be, may, at any time during the period specified in the agreement evidencing the grant of the performance shares, suspend, modify or terminate the grant of such performance shares or adjust the performance objectives relating to such performance shares upon the occurrence of any extraordinary event which substantially affects the Company or its subsidiaries or affiliates, including, but not limited to, a merger, consolidation, exchange, divestiture (including a spin-off) reorganization or liquidation of the Company or its subsidiary or affiliate, or the sale by the Company or its subsidiary or affiliate of substantially all of its assets and the consequent discontinuance of its business. 10. Cash Awards. A cash award consists of a monetary payment made by the Company to a participant as additional compensation for his or her services to the Company or its subsidiaries or affiliates. Payment of a cash award will normally depend on achievement of performance objectives by the Company or by the participant. Such performance objectives may include business or financial objectives relating to the Company or one of its operating units, whether or not related to any equity security of the Company, and may be adjusted by the Board or the Committee, as the case may be, upon the occurrence of any extraordinary event which substantially affects the Company or its subsidiaries or affiliates. The amount of any monetary payment constituting a cash award shall be determined by the Board of the Committee, as the case may be, in its sole discretion. Cash awards may be subject to such terms and conditions, which may vary from time to time and among participants, as the Board or the Committee, as the case may be, deems appropriate. 11. Options to Non-Employee Directors. 11.1 Upon Joining Board. Each person who, after the date this Plan is adopted by the Board of Directors, is elected or appointed for the first time as a director of the Company and who is not an employee of, or a paid consultant or advisor to, the Company or any subsidiary of the Company (a "Non-Employee Director") shall, as of the date of such initial election or appointment to the Board, automatically be granted an option to purchase 7,500 shares of the Common Stock at an option price per share equal to 100% of the fair market value of the Common Stock on the date of such election or appointment. Such option shall be immediately exercisable to the extent of twenty percent (1,500 shares) of the total number of shares subject to such option, and shall be exercisable to the extent of an additional twenty percent (1,500 shares) on each of the first, second, third, and fourth anniversaries of the date of grant. 11.2 Upon Re-election to Board. Each Non-Employee Director who, after the date this Plan is adopted by the Board of Directors, is re-elected as a director of the Company or whose term of office continues after a meeting of shareholders at which directors are elected shall, as of the date of such re-election or shareholder meeting, automatically be granted an option to purchase 3,000 shares of Common Stock at an option price per share equal to 100% of the fair market value of the Common Stock on the date of such re-election or shareholder meeting; provided that a Non-Employee Director who receives an option pursuant to Section 11.1 above shall not be entitled to receive an option pursuant to this Section 11.2 until at least ten months after such Non-Employee Director's initial election to the Board. Options granted pursuant to this Section 11.2 shall be immediately exercisable in full. 11.3 General. No director shall receive more than one option to purchase 3,000 shares pursuant to this Section 11 in any one fiscal year. No director shall receive an option under this Section if and to the extent such director receives an option pursuant to Section 19 of the Company's 1987 Stock Option Plan, as amended, in connection with the same election or re-election to the Board. All options granted pursuant to this Section 11 shall be designated as non-qualified options and shall be subject to the same terms and provisions as are then in effect with respect to granting of non-qualified options to officers and employees of the Company, except that the option shall expire on the earlier of (i) three months after the optionee ceases to be a director (except by disability or death) and (ii) ten (10) years after the date of grant. Notwithstanding the foregoing, in the event disability or death or a Non-Employee Director, any option granted to such Non-Employee Director may be exercised at any time within twelve months of the disability or death of such Non-Employee Director or on the date on which the option, by its terms expire, whichever is earlier. For purposes of this Section 11, a director's receipt of an annual retainer, per meeting fees, and/or expense reimbursement shall not cause such director to be deemed to be a paid advisor or consultant to the Company for purposes of determining whether such director is a "Non-Employee Director." 12. General. 12.1. Effective Date. The Plan will become effective upon its adoption by the Board, subject to approval by the shareholders of the Company within twelve months following such adoption. If the Plan is not approved by the shareholders within twelve months after the date of the Plan's adoption by the Board, the Plan shall not be effective for any purpose, and all Incentives awarded under the Plan shall be revoked. 12.2. Duration. The Plan shall remain in effect until all Incentives granted under the Plan have either been satisfied by the issuance of shares of Common Stock or the payment of cash or have been terminated under the terms of the Plan and all restrictions imposed on shares of Common Stock in connection with their issuance under the Plan have lapsed. No Incentives may be granted under the Plan after the tenth anniversary of the date the Plan is adopted by the Board. 12.3. Nontransferability of Incentives. No stock option, SAR, restricted stock award or performance share award may be transferred, pledged or assigned by the participant except, in the event of the participant's death, by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Internal Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the regulations thereunder, and the Company shall not be required to recognize any attempted assignment of such rights by any participant. During a participant's lifetime, an Incentive may be exercised only by the participant or by his or her guardian or legal representative. 12.4. Effect of Termination of Employment or Death. In the event that a participant ceases to be an employee, consultant or advisor of the Company or its subsidiaries or affiliates for any reason, including death, any Incentives awarded to the participant may be exercised or shall expire at such times as may be determined by the Board or the Committee, as the case may be, and as set forth in the agreement evidencing the Incentive. 12.5. Additional Condition. Notwithstanding anything in this Plan to the contrary: (a) the Company may, if it shall determine it necessary or desirable for any reason, at the time of award of any Incentive or the issuance of any shares of Common Stock pursuant to any Incentive, require the recipient of the Incentive, as a condition to the receipt thereof or to the receipt of shares of Common Stock issued pursuant thereto, to deliver to the Company a written representation of present intention to acquire the Incentive or the shares of Common Stock issued pursuant thereto for his or her own account for investment and not for distribution; and (b) if at any time the Company further determines, in its sole discretion, that the listing, registration or qualification (or any updating of any such document) of any Incentive or the shares of Common Stock issuable pursuant thereto is necessary on any securities exchange or under any federal or state securities or blue sky law, or that the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with the award of any Incentive, the issuance of shares of Common Stock pursuant thereto, or the removal of any restrictions imposed on such shares, such Incentive shall not be awarded or such shares of Common Stock shall not be issued or such restrictions shall not be removed, as the case may be, 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 Company. 12.6. Adjustment. Unless otherwise provided in the agreement evidencing the grant of the Incentive, in the event of a sale by the Company of substantially all of its assets and the consequent discontinuance of its business, or in the event of a merger, consolidation, exchange, reorganization, reclassification, extraordinary dividend, divestiture (including a spin-off) or liquidation of the Company (collective referred to as a "transaction") after which the Company is not the surviving corporation, the Board may, in connection with the Board's adoption of the plan for such transaction, in its sole discretion, provide for one or more of the following: (a) The equitable acceleration of the exercisability of any outstanding stock option or SAR, the termination of any restrictions on restricted stock awards, or the adjustment of any performance share objectives; (b) The complete termination of this Plan and the cancellation of outstanding stock options or SARs which are not exercised prior to a date specified by the Board (which date shall give the participant a reasonable period of time in which to exercise the options prior to the effective date of the transaction), the cancellation of any restricted stock awards for which the restrictions have not lapsed, or the cancellation of any performance share awards for which the performance objectives have not yet been achieved; (c) The continuance of the Plan with respect to the exercise of stock options or SARs, the lapse of restrictions on restricted stock awards or the achievement of any performance share objectives which were outstanding as of the date of adoption by the Board of the plan for the transaction, and to provide participants the right to receive an equivalent number of shares of stock of the corporation succeeding the Company or other securities to which the shareholders of the Company may be entitled by reason of such transaction. The grant of any Incentive under this Plan shall not in any way limit the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, exchange or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets. In the event of an increase or decrease in the number of shares of Common Stock resulting from any recapitalization, stock dividend, stock split, combination of shares or other change in the Common Stock, the number of shares of Common Stock then subject to the Plan, including shares subject to restrictions, options or the achievement of performance share objectives, shall be adjusted in proportion to the change in outstanding shares of Common Stock. In the event of any such adjustments, the purchase price of any option, the performance objectives for any grant of performance shares, and the shares of Common Stock issuable pursuant to any Incentive shall be adjusted as and to the extent appropriate, in the discretion of the Board or Committee, to provide participants with the same relative rights before and after such adjustment. Additional shares of Common Stock which may be credited to such Incentives pursuant to this Section 12.6 shall be subject to the same terms and conditions that apply to the shares with respect to which the adjustment relates. 12.7. Incentive Agreements. The terms of each Incentive shall be stated in an agreement approved by the Board or the Committee, as the case may be. The Board or the Committee may, in its sole discretion, also enter into agreements with participants to reclassify or convert certain outstanding options, within the terms of the Plan, as incentive stock options or as non-qualified stock options, or to eliminate SARs with respect to all or part of such options and any other previously issued options. 12.8. Withholding. (a) The Company shall have the right to withhold from any payments made under the Plan or to collect as a condition of payment, any federal, state or local taxes required by law to be withheld upon the exercise of a stock option, the settlement of an SAR, the grant of a stock award, the lapse of restrictions on a restricted stock award, the payment of any performance share award, or the payment of any cash award. At any time when a participant is required to pay to the Company an amount required to be withheld under applicable income tax laws in connection with a distribution of Common Stock or upon exercise of an option or SAR, the participant may satisfy this obligation in whole or in part by electing (the "Election") to have the Company withhold from the distribution shares of Common Stock having a value up to the amount required to be withheld. The value of the shares to be withheld shall be based on the Fair Market Value of the Common Stock on the date that the amount of tax to be withheld shall be determined ("Tax Date"). (b) Each Election must be made prior to the Tax Date. The Board or the Committee, as the case may be, may disapprove of any Election, may suspend or terminate the right to make Elections, may provide that the right to make Elections shall not apply with respect to any Incentive and may adopt such rules relating to Elections as it shall deem appropriate. A participant's Election shall be irrevocable. (c) If a participant is an officer or director of the Company within the meaning of Section 16 of the 1934 Act, or any successor provision, then an Election must comply with all of the requirements of the 1934 Act. 12.9. No Continued Employment or Right to Corporate Assets. No participant under the Plan shall have any right, because of his or her participation, to continue in the employ of the Company or its subsidiaries or affiliates for any period of time or to any right to continue his or her present or any other rate of compensation. Nothing contained in the Plan shall be construed as giving an employee, consultant or advisor, his or her beneficiaries or any other person any equity or interests of any kind in the assets of the Company or creating a trust of any kind or a fiduciary relationship of any kind between the Company or its subsidiaries or affiliates and any such person. 12.10. Deferral Permitted. Payment of cash or distribution of any shares of Common Stock to which a participant is entitled under any Incentive shall be made as provided in the agreement evidencing such Incentive. Payment of cash may be deferred at the option of the participant if provided in the Incentive and subject to such rules as the Board or the Committee may, in its discretion, adopt from time to time. 12.11. Amendment of the Plan. The Board may amend or discontinue the Plan at any time. However, no such amendment or discontinuance shall, subject to adjustment under Section 12.6, change or impair, without the consent of the recipient, an Incentive previously granted. Notwithstanding the foregoing, no such amendment shall: (a) materially increase the maximum number of shares of Common Stock which may be issued to all participants under the Plan, (b) materially increase the benefits that may be granted or that accrue to participants under the Plan, (c) materially modify the requirements as to eligibility for participation in the Plan, or (d) decrease the price at which stock options, SARs or other Incentives may be granted, unless such amendment is approved by the shareholders of the Company. 12.12. Immediate Acceleration of Incentives. Notwithstanding any provision in this Plan or in any Incentive to the contrary, the restrictions on all shares of restricted stock awards shall lapse immediately, all outstanding options and SARs will become exercisable immediately, and all performance share objectives shall be deemed to be met and payment made immediately, if, subsequent to the date that the Plan is approved by the Board, any of the following events occur: (a) Any person or group of persons, other than the shareholders of record of the Company as of the date this Plan is adopted by the Board, becomes the beneficial owner of 25% or more of any equity security of the Company entitled to vote for the election of directors; (b) A change in the composition of the Board within any consecutive two-year period such that the "Continuing Directors" cease to constitute a majority of the Board. For purposes of this event, the "Continuing Directors" shall mean those members of the Board who either: (i) were directors at the beginning of such two-year period, or (ii) were elected by, or on nominations or recommendations of, at least two-thirds of the then-existing Board members; (c) The consummation of a merger or consolidation (whether or not the Company is the surviving corporation), other than a merger or consolidation in which the holders of the Company's stock immediately prior thereto hold immediately thereafter securities representing more than 70% of the combined voting power of the voting securities of the merged or consolidated entity; or (d) The consummation of a sale or all or substantially all of the Company's assets or a plan of complete liquidation of the Company. For purposes of this Section 12.12, beneficial ownership by a person or group of persons shall be determined in accordance with Regulation 13D (or any similar successor regulation) promulgated by the Securities and Exchange Commission pursuant to the 1934 Act. Beneficial ownership of 25% or more of an equity security may be established by any reasonable method, but shall be presumed conclusively as to any person who files a Schedule 13D report with the Securities and Exchange Commission reporting such, ownership. If the restrictions and forfeitability periods are eliminated by reason of provision (a), the limitations of this Plan shall not become applicable again should the person cease to own 25% or more of any equity security of the Company. A participant shall not be entitled to the immediate acceleration of an Incentive as provided in this Section 12.12 if such acceleration would, with respect to the participant, constitute a "parachute payment" for purposes of Internal Revenue Code Section 280G, or any successor provision. The participant shall have the right to designate those Incentives which would be reduced or eliminated so that the participant will not receive a "parachute payment." Prior to one of the events described in (a), (b) or (c) above, the participant shall have no rights under this Section 12.12, and the Board shall have the power and right, within its sole discretion, to rescind, modify or amend this Section 12.12 without any consent of the participant. In all other cases, and notwithstanding the authority granted to the Board or the Committee, as the case may be, to exercise discretion in interpreting, administering, amending or terminating this Plan neither the Board nor the Committee shall, following one of the events described in (a), (b) or (c) above, have the power to exercise such authority or otherwise take any action which is inconsistent with the provisions of this Section 12.12. 12.13 Definition of Fair Market Value. For purposes of the Plan, the "Fair Market Value" of the Company's Common Stock as of any applicable date shall mean: (a) if the Company's Common Stock is reported in the Nasdaq National Market or is listed upon an established exchange or exchanges, the reported closing price of such stock in such Nasdaq National Market or on such stock exchange or exchanges on the date the Incentive is granted or, if no sale of such stock shall have occurred on that date, on the next preceding day on which there was a sale of stock; (b) if the Company's Common Stock is not so reported in the Nasdaq National Market or listed upon an exchange, the average of the closing "bid" and "asked" prices quoted on the Nasdaq Small-Cap Market on the date the Incentive is granted, or if there are no such quoted "bid" and "asked" prices on such date, on the next preceding date for which there are such quotes; (c) if the Company's Common Stock is not listed or traded on any securities exchange, the Nasdaq National Market or the Nasdaq Small-Cap Market, the per share value determined by a market maker of the Company's Common Stock on the date the Incentive is granted or, if there is no such market maker, the per share value determined by the Board or the Committee, in its sole discretion, by applying principles of valuation with respect to all such Incentives. EX-10.2 3 KENT BRUNNER EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT THIS AGREEMENT effective as of August 18, 1997, between FIRST TEAM SPORTS, INC., a Minnesota corporation (the "Company"), and Kent Brunner, a resident of Minnesota ("Executive"). WITNESSETH WHEREAS, Executive has been employed as Vice President-Finance since September 1996; and WHEREAS, the Company desires to continue to have the benefit of Executive's experience and loyalty, and Executive is willing to provide Executive's services on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: 1. Definitions. The following capitalized terms used in this Agreement shall be defined as follows: "Agreement" shall mean this Agreement between the Company and Executive. "Base Salary" shall mean the annual base salary payable to Executive pursuant to Section 4(a) hereof, and "monthly Base Salary" shall mean the Base Salary divided by twelve (12). "Board" shall mean the Board of Directors of First Team Sports, Inc. "Cause" shall mean Executive's (1) gross misconduct, dishonesty or disloyalty; (2) willful and material breach of this Agreement by Executive; or (3) conviction or entry of a plea of guilty or nolo contendere to any felony or to any misdemeanor involving fraud, misrepresentation or theft. A "Change of Control" shall be deemed to have occurred if (1) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power (with respect to the election of directors) of the Company's then outstanding securities; (2) at any time after the execution of this Agreement, individuals who as of the date of the execution of this Agreement constitute the Board (and any new director whose election to the Board or nomination for election to the Board by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office) cease for any reason to constitute a majority of the Board; (3) the consummation of a merger or consolidation of the Company with or into any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 70% of the combined voting power (with respect to the election of directors) of the securities of the Company or of such surviving entity outstanding immediately after such merger or consolidation; or (4) the consummation of a plan of complete liquidation of the Company or of an agreement for the sale or disposition by the Company of all or substantially all of the Company's business or assets. "Change of Control Payments" shall mean any payment (including any benefit or transfer of property) in the nature of compensation, to or for the benefit of Executive under any arrangement, which is partially or entirely contingent on a Change of Control, or is deemed to be contingent on a Change of Control for purposes of Section 280G of the Code. As used in this definition, the term "arrangement" includes any agreement between Executive and the Company and any and all of the Company's salary, bonus, incentive, compensation or benefit plans, programs or arrangements, and shall include this Agreement. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated thereunder. A "Commencement Date" shall occur on (1) such date as the Company enters into negotiations leading toward an agreement in principle or definitive agreement pursuant to which a Change of Control thereafter occurs; or (2) the date on which a tender or exchange offer or proxy contest is commenced pursuant to which a Change of Control thereafter occurs. "Company" shall mean First Team Sports, Inc., a Minnesota corporation, any subsidiaries thereof, and any successors or assigns, including any Successor. "Company Product" means any product, product line or service (including any component thereof or research to develop information useful in connection with a product or service) that is being designed, developed, manufactured, marketed or sold by the Company or with respect to which the Company has acquired Confidential Information which it intends to use, or uses, in the design, development, manufacture, marketing or sale of a product or service. "Competitive Product" means any product, product line or service (including any component thereof or research to develop information in connection with a product or service) that is being designed, developed, manufactured, marketed or sold by anyone other than the Company and is of the same general type, performs similar functions, or is used for the same purposes as a Company Product. "Confidential Information" means any information or compilation of information that Executive learns or develops during the course of Executive's employment that derives independent economic value from not being generally known, or readily ascertainable by proper means, by other persons who can obtain economic value from its disclosure or use. It includes but is not limited to trade secrets, inventions, and discoveries, and may relate to such matters as research and development, manufacturing processes, management systems and techniques, and sales and marketing plans and information. "Executive" shall mean Kent Brunner, a resident of Minnesota. "Good Reason" shall mean (1) a substantial reduction in the nature or status of Executive's responsibilities hereunder; (2) a reduction by the Company in the Base Salary of Executive except to the extent permitted under Section 4(a) hereof; (3) the failure by the Company to allow Executive to participate to the full extent to which Executive is eligible in all plans, programs or benefits in accordance with Sections 4(b) to (e), inclusive, hereof; or (4) relocation of Executive's principal office more than 20 miles from its current location. Notwithstanding the foregoing, "Good Reason" shall be deemed to occur only if such event enumerated in (1) through (4) above has not been corrected by the Company within two weeks of receipt of notice from Executive of the occurrence of such event, which notice shall specifically describe such event. "Incentive Stock Option Plans" shall mean any such plans within the meaning of Section 422 of the Code or any successor provision thereof. "Inventions" means any inventions, discoveries, improvements, ideas, or works of authorship (whether patentable or not and including those which may be subject to copyright protection) generated, conceived, authored, or reduced to practice by Executive alone or in conjunction with others, during or after working hours, while an employee of the Company, and that: (i) are derived in whole or in part from, or use, incorporate, or represent any improvement to any Invention or trade secret of the Company; or (ii) result from any work Executive performs for the Company; or (iii)use any of the Company's equipment, supplies, or facilities, or trade secret information; or (iv) otherwise relate to the Company's products or the Company's present or possible future research or development. "Permanently Disabled" shall mean permanently disabled in accordance with the Company's long-term disability plan in effect at the time of commencement of such permanent disability and as evaluated by sufficient documentation including doctors statements, etc. as requested by the Company. "Person" shall mean an individual, partnership, corporation, estate or trust or other entity. "Short-Term Plan" shall mean the annual Executive Bonus Plan of the Company in effect from time to time. "Successor" shall be any entity acquiring substantially all of the assets of the Company or a corporation into which the Company is merged or with which it is consolidated. "Term" shall mean the term of Executive's employment including any period of renewal, under Section 3 hereof. "Transition Period" shall be that period of time commencing on the earlier of a Commencement Date or a Change of Control and continuing for 365 days following a Change of Control. 2. Employment and Duties. (a) General. The Company hereby employs Executive as Vice President-Finance upon the terms and conditions set forth in this Agreement. Executive agrees to serve as Vice President-Finance and perform the duties and responsibilities normally vested in the Vice President-Finance of a company, and those duties and responsibilities as may, from time to time, be assigned to Executive by the Board. (b) Exclusive Services. Throughout the Term, Executive shall, except as may from time to time be otherwise agreed in writing by the Company and unless prevented by ill health, devote his full-time working hours to his duties hereunder. (c) No Other Employment. Throughout the Term, Executive shall not, directly or indirectly, render services to any other person or organization for which he receives compensation (excluding volunteer services or outside Board activities with modest time commitments) without the consent of the Board or otherwise engage in activities which would interfere significantly with the performance of his duties hereunder. 3. Term of Employment. The Company shall retain Executive and Executive shall serve in the employ of the Company for a minimum period of one (1) year commencing as of the date of this Agreement; provided, however, that either Executive or the Company may terminate the employment of Executive during the Term or any one-year renewal period in accordance with, and subject to the right of Executive to receive payments and other benefits that may be due pursuant to, this Agreement. This Agreement will be subject to automatic renewals for successive additional one (1)-year periods, unless nonrenewed as provided in Section 9 of this Agreement or terminated as provided in this Agreement. All payments and benefits under this Agreement, including termination payments and benefits, are subject to ordinary withholding and deductions. 4. Compensation and Other Benefits. Subject to the provisions of this Agreement, the Company shall pay and provide the following compensation and other benefits to Executive during the Term as compensation for services rendered hereunder: (a) Base Salary. The Company shall pay to Executive a Base Salary at the rate of $71,000 per annum, payable semi-monthly. The Company shall be entitled to deduct or withhold all taxes and charges which the Company may be required to deduct or withhold therefrom. The Base Salary will be reviewed not less than annually by the Board and may be increased, reduced, or left unchanged; provided, however, that any reduction shall be permitted only if the Company then reduces the base compensation of its executive employees generally and shall not exceed the average percentage reduction for all such executive employees. (b) Incentive Compensation. At all times during the Term, unless prohibited by the Code or other applicable law, Executive shall be entitled to participate in all incentive compensation plans and programs of the Company, currently existing or subsequently adopted. (c) Stock Options. At all times during the Term, Executive shall, unless prohibited by the Code or other applicable law, be entitled to participate in all stock option plans and programs of the Company currently existing or subsequently adopted, unless otherwise agreed to by Executive and the Board or unless such plan or program is specifically for the Company's non-executive employees. (d) Executive Benefit Plans. At all times during the Term, Executive shall, unless prohibited by the Code or other applicable law, be eligible to participate in all pension and welfare plans and programs of the Company for executive employees, currently existing or subsequently adopted, including but not limited to the following: (i) all qualified pension plans (e.g., profit sharing and 401(k) plans); (ii) all long-term disability and life insurance plans and programs; (iii) all group health insurance plans; and (iv) all supplemental retirement plans and programs. 5. Termination of Employment for Cause; Resignation Without Good Reason. (a) Compensation and Benefits. If, prior to the expiration of the Term, Executive's employment is terminated by the Company for Cause or if Executive resigns from employment hereunder other than for Good Reason, then Executive shall not be eligible to receive any compensation or benefits, or to participate in any benefit plans or programs, under Section 4 hereof with respect to future periods after the date of such termination or resignation except for the right to receive any vested benefits in accordance with the terms of such plan or program, or to continue or convert at Executive's expense group insurance coverage as provided by law or the terms of such plan or program. (b) Date of Termination. The date of termination of Executive's employment by the Company under this Section 5 shall be one (1) month after receipt by Executive of written notice of termination. The date of resignation by Executive under this Section 5 shall be one (1) month after receipt by the Company of written notice of resignation. 6. Termination of Employment Without Cause or Resignation for Good Reason Other Than During Change of Control. (a) Compensation and Benefits. If, other than during a Transition Period, Executive's employment is terminated by the Company without Cause or Executive resigns from his employment hereunder for Good Reason, Executive shall be entitled only to receive the following from the Company promptly following the Effective Date of termination or cessation of employment with the Company: (i) The Company shall make a cash payment to Executive equal to the greater of (A) the sum of Executive's monthly Base Salary times the number of full calendar months remaining in the Term (without regard to renewals) under this Agreement, plus a fraction of the incentive bonus earned by Executive in the prior fiscal year the numerator of which equals the number of full calendar months remaining in the Term (without regard to renewals) and the denominator of which equals twelve (12) (i.e., [monthly Base Salary X full calendar months) + (incentive bonus X full calendar months / 12)], or (B) one-half (1/2) the sum of Executive's annual Base Salary plus incentive bonus earned by Executive during the prior fiscal year. (ii) With respect to any stock options, SARs, restricted stock awards or performance share awards granted to Executive and outstanding immediately prior to such termination or resignation, all restrictions (other than those imposed by law) on all shares of restricted stock awards shall lapse immediately, all outstanding options and SARs will become exercisable immediately, and all performance share objectives shall be deemed to be met. (iii) Executive shall be entitled to continued participation in the Company's group health insurance plan as permitted by COBRA and the terms of such plan. Company shall, for a one-year period following termination of Executive's employment, continue to pay a portion of Executive's Company group health insurance premiums equivalent to that portion it pays on behalf of its employees during such one-year period, subject to Executive paying the employee portion of such premiums and subject to termination of participation upon Executive becoming entitled to group health insurance coverage on subsequent employment or upon Executive's electing not to continue coverage or termination of such plan by Company. (b) Date of Termination. The date of termination of Executive's employment by the Company under this Section 6 shall be the date specified in the written notice of termination to Executive, or if no such date is specified therein, the date on which such notice is given to Executive. The date of resignation by Executive under this Section 6 shall be two weeks after receipt by the Company of written notice of resignation, provided that the Good Reason specified in such notice shall not have been corrected by the Company during such two-week period. 7. Termination of Employment Without Cause or Resignation With Good Reason After Change of Control. (a) Compensation and Benefits. If, prior to the expiration of the Term and as of a date during a Transition Period, Executive's employment is terminated by the Company or its Successor without Cause or if Executive resigns from employment hereunder for Good Reason, Executive shall, subject to subsection (c) below, be entitled only to receive the following from the Company or its Successor promptly following the Effective Date of termination or cessation of employment with the Company: (i) Subject to paragraph (c) hereof, the Company shall make a cash payment to Executive equal to the sum of (A) the amount of Executive's Base Salary at the time of termination of Executive's employment, and (B) the total amount of any incentive bonuses which, absent termination of Executive's employment, could have been earned by Executive during the fiscal year of the Company in which Executive's employment is terminated. For purposes of clause (B), the computation of the amount of incentive bonuses shall be based upon the incentive bonus programs in effect at the time of termination of Executive's employment and such computation shall assume that target performance levels are satisfied for all purposes during such fiscal year. Such payment shall be made in cash within fifteen (15) days from and after termination of Executive's employment. (ii) Executive shall not be eligible to receive any compensation or benefits or to participate in any plans or programs with respect to future periods after the date of such termination or resignation except for the right to receive any vested benefits in accordance with the terms of such plan or program or to continue or convert at Executive's expense group insurance coverage as provided by law or the terms of such plan or program. With respect to any stock options, SARs, restricted stock awards or performance share awards granted to Executive and outstanding immediately prior to such termination or resignation, all restrictions (other than those imposed by law) on all shares of restricted stock awards shall lapse immediately, all outstanding options and SARs will become exercisable immediately, and all performance share objectives shall be deemed to be met. (b) Date of Termination. The date of termination of Executive's employment by the Company under this Section 7 shall be the date specified in the written notice of termination to Executive, or if no such date is specified therein, the date on which such notice is given to Executive. The date of resignation by Executive under this Section 7 shall be two weeks after receipt by the Company of written notice of resignation, provided that the Good Reason specified in such notice shall not have been corrected by the Company during such two-week period. (c) Limitation on Change of Control Compensation. In the event that Executive is a "disqualified individual" within the meaning of Section 280G of the Code, the parties expressly agree that the payments described in this Section 7 or in Section 9 shall be considered together with all Change of Control Payments so that, with respect to Executive, all Change of Control Payments are collectively subject to an overall maximum limit. Such maximum limit shall be One Dollar ($1.00) less than the largest amount under which no portion of the Change of Control Payments is considered a "parachute payment" within the meaning of Section 280G of the Code. Accordingly, to the extent that the Change of Control Payments would be considered a "parachute payment" with respect to Executive, then the portions of such Change of Control payments shall be reduced or eliminated in the following order until the remaining Change of Control Payments with respect to Executive is one Dollar ($1.00) less than the maximum allowable which would not be considered a "parachute payment" under the Code: (i) First, any cash payment to Executive; (ii) Second, any Change of Control Payments not described in this Agreement; and (iii) Third, any forgiveness of indebtedness of Executive to the Company. Executive expressly and irrevocably waives any and all rights to receive any Change of Control payments which would be considered a "parachute payment" under the Code. 8. Termination of Employment by Disability or Death. (a) Compensation and Benefits. If Executive becomes Permanently Disabled prior to the expiration of the Term, the Company shall be entitled to terminate Executive's employment subject to the Company's normal policies in such matters as applied to all other salaried employees. In the event of such termination of Executive's employment or termination of Executive's employment by reason of the death of Executive prior to the expiration of the Term, the Executive (or Executive's estate, as the case may be) shall be entitled to receive from the Company only the following: (i) In the event of termination after Executive has become Permanently Disabled, Executive shall be entitled to continued participation in hospital and medical plans and programs of the Company at Executive's own expense, as required by COBRA and in accordance with Company policy as it pertains to disabled salaried employees; that is for the period of said disability or until normal retirement age subject to rules and practice of the plan(s). Company may, in its discretion, provide the benefits described herein under the Company's group plans or under no less favorable insurance contracts or arrangements secured by the Company. (ii) Executive (or, in the event of Executive's death, Executive's estate or Executive's designated beneficiary) shall be entitled to receive any vested benefits in accordance with the terms of any such benefit plans. Executive shall be entitled to continued contributions under the Company's qualified profit sharing and 401(k) plans to the extent permitted in said plans. (b) Date of Termination. The date of termination of Executive's employment under this Section 8 shall be the date Executive becomes Permanently Disabled or the date of Executive's death as the case may be. 9. Termination of Employment by Written Notice of Nonrenewal. (a) Notice. This Agreement may be terminated with or without Cause upon delivery of written notice of nonrenewal by either party to the other between ninety (90) and sixty (60) days prior to the end of the Term or of any renewal period. (b) Compensation and Benefits. If Executive's employment is not renewed under this Section 9, Executive shall be entitled only to the following severance benefits: (i) Unless the notice of nonrenewal is given during a Transition Period, the Company shall make a cash payment equal to one-half (1/2) of Executive's Base Salary at the time of termination of employment. Such payment shall be made in cash within fifteen (15) days from and after the end of Executive's employment. If the notice of nonrenewal is given during a Transition Period, then, subject to Section 7(c), the Company shall make a cash payment to Executive equal to the sum of (A) the amount of Executive's Base Salary at the time of termination of Executive's employment and (B) the amount of any incentive bonuses which, absent termination of Executive's employment, could have been earned by Executive during the fiscal year of the Company in which Executive's employment under this Agreement ceases. For purposes of clause (B), the computation of the amount of incentive bonuses shall be based upon the incentive bonus programs in effect at the time of termination of Executive's employment and such computation shall assume that target performance levels are satisfied for all purposes during such fiscal year. Such payment shall be made in cash within fifteen (15) days from and after Executive's employment under this Agreement ceases. (ii) Executive shall be entitled to continued participation in Company's group health insurance plan as permitted by COBRA and the terms of such plan. Company shall, for a one-year period following termination of Executive's employment, continue to pay a portion of Executive's Company group health insurance premiums equivalent to that portion it pays on behalf of its employees during such one-year period, subject to Executive paying the employee portion of such premiums and subject to termination of participation upon Executive becoming entitled to group health insurance coverage on subsequent employment or upon Executive's electing not to continue coverage or termination of such plan by Company. (c) Date of Termination. The date of termination of Executive's employment by the Company under this Section 9 shall be the date on which the term of Executive's employment expires. 10. Legal Fees and Expenses. The Company shall pay or reimburse Executive for all reasonable legal fees and expenses incurred by Executive in seeking to obtain or enforce any right or benefit provided by this Agreement from or against the Company in a proceeding before a court of competent jurisdiction. 11. Assignment of Inventions. Executive agrees to promptly disclose to the Company in writing all Inventions. All such Inventions shall be the exclusive property of the Company and are hereby assigned by Executive to the Company. Further, Executive will, at the Company's expense, give the Company all assistance it reasonably requires to perfect, protect, enforce, and use its rights to Inventions. In particular, but without limitation, Executive will sign all documents, do all things, and supply all information that the Company may deem necessary or desirable to: (i) transfer or record the transfer of Executive's entire right, title and interest in Inventions; and (ii) enable the Company to obtain or enforce patent, copyright or trademark protection for Inventions anywhere in the world. The obligations of this Section shall continue beyond the termination of employment with respect to Inventions conceived or made by Executive during the period of Executive's employment and shall be binding upon assigns, executors, administrators and other legal representatives. For purposes of this Agreement, any Invention relating to the business of the Company on which Executive files a patent application within six (6) months after termination of employment with the Company shall be presumed to cover Inventions conceived by Executive during the term of Executive's employment, subject to proof to the contrary by good faith, written and duly corroborated records establishing that such Invention was conceived and made following termination of employment. NOTICE: Pursuant to Minnesota Statutes ss. 181.78, Executive is hereby notified that this Section 11 does not apply to any invention for which no equipment, supplies, facility, or trade secret information of the Company was used and which was developed entirely on Executive's own time, and (1) which does not relate (a) directly to the business of the Company or (b) to the Company's actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by the employee for the Company. 12. Confidential Information. Executive agrees not to directly or indirectly use or disclose Confidential Information for the benefit of anyone other than the Company, either during or after employment, for as long as the information retains the characteristics of Confidential Information described in Section 1 above. 13. Return of Documents and Property. All documents and tangible items provided to Executive by the Company, or possessed, obtained, or created by Executive for use in connection with Executive's employment, are the property of the Company and shall be promptly returned to the Company on termination of employment together with all copies, recordings, abstracts, notes or reproductions of any kind made from or about the documents and tangible items or the information they contain. 14. Noncompetition. In consideration of Executive's rights under this Agreement, including without limitation Sections 5 through 9 hereof, Executive agrees that, from and after the Effective Date and continuing until the one-year anniversary of termination or cessation of Executive's employment with the Company, Executive will not, alone or in any capacity with another person or entity: (i) directly or indirectly, own any interest in, control, be employed by or associated with, or render services to (including but not limited to services in research), any person, entity, or subsidiary, subdivision, division, or joint venture of such entity in connection with the design, development, manufacture, marketing, or sale of a Competitive Product that is sold or intended for use or sale in any geographic area in which the Company actively markets a Company Product or intends to actively market a Company Product of the same general type or function; (ii) directly or indirectly, solicit any of the Company's present or future employees for the purpose of hiring them or inducing them to leave their employment with the Company; (iii) directly or indirectly, solicit, attempt to solicit, interfere, or attempt to interfere with the Company's relationship with its customers or potential customers, on behalf of Executive or any other person or entity engaged in the design, development, manufacture, marketing, or sale of a Competitive Product; or (iv) directly or indirectly design, develop, manufacture, market, or sell any Competitive Product that is sold or intended for use or sale in any geographic area in which the Company actively markets a Company Product or intends to actively market a Company Product of the same general type or function. 15. Breach of Noncompetition Provisions of this Agreement. In addition to any other relief or remedies afforded by law or in equity, if Executive breaches Section 14 of this Agreement, Executive agrees that the Company shall be entitled, as a matter of right, to injunctive relief in any court of competent jurisdiction plus its costs, including but not limited to its reasonable attorneys' fees for securing such relief. Executive recognizes and hereby admits that irreparable damage will result to the Company if Executive violates or threatens to violate the terms of Section 14 of this Agreement. This Section 15 shall not preclude the granting of any other appropriate relief including, without limitation, money damages against Executive for breach of Section 14 of this Agreement. 16. Effect of Other Obligations. It is intended that the obligation of the parties to perform the terms of this Agreement is unconditional and does not depend on the performance or non-performance of any terms, duties or obligations not specifically recited in this Agreement. 17. Binding Agreement. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto, any Successor to or assigns of the Company, and Executive's heirs and the personal representative of Executive's estate. 18. Severability. If a Court finds that any provision of this Agreement is not enforceable, Executive and the Company agree that the Court should modify the provision to make it enforceable to the maximum extent possible. If the provision cannot be modified, Executive and the Company agree that the provision may be severed, and the other provisions of this Agreement shall remain in full force and effect. 19. Amendment; Waiver. This Agreement may not be modified, amended or waived in any manner except by an instrument in writing signed by both parties hereto. The waiver by either party of compliance with any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by such party of a provision of this Agreement. 20. Governing Law. All matters affecting this Agreement, including the validity thereof, are to be governed by, interpreted and construed in accordance with the laws of the State of Minnesota. 21. Notices. Any notice hereunder by either party to the other shall be given in writing by personal delivery or certified mail, return receipt requested. If addressed to Executive, the notice shall be delivered or mailed to Executive at the address specified under Executive's signature hereto, or if addressed to the Company, the notice shall be delivered or mailed to the Company at its executive offices to the attention of the Board of Directors of the Company. A notice shall be deemed given, if by personal delivery, on the date of such delivery or, if by certified mail, on the date shown on the applicable return receipt. 22. Supersedes Previous Agreements. This Agreement supersedes all prior or contemporaneous negotiations, commitments, agreements and writings with respect to the subject matter hereof, all such other negotiations, commitments, agreements and writings will have no further force or effect, and the parties to any such other negotiation, commitment, agreement or writing will have no further rights or obligations thereunder. 23. Headings; Construction. The headings of Sections and paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. This Agreement shall be construed without regard to any presumption or other rule requiring construction hereof against the party causing this Agreement to be drafted. 24. Benefit. Nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors or assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its officer pursuant to the authority of its Board, and Executive has executed this Agreement, as of the day and year first written above. FIRST TEAM SPORTS, INC. By: /s/ John J. Egart John J. Egart, President /s/ Kent Brunner Kent Brunner EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FORM 10-Q FOR PERIOD ENDED 8/31/97 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 U.S. Dollars 6-MOS FEB-28-1998 MAR-01-1997 AUG-31-1997 1 636,098 0 14,652,445 319,000 21,257,549 37,976,510 13,116,091 3,486,304 49,798,086 8,333,586 6,504,266 0 0 57,600 33,772,634 49,798,086 36,108,873 36,108,873 26,994,488 26,994,488 0 0 523,290 1,573,620 546,000 1,027,620 0 0 0 1,027,620 .18 .18
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