-----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, QnFO5eRkmICkxMtTLZBdQlP2at59tulIaea60jm218/V7ugiGKIZ5LlGOkhkUffn h7E7DfWSofEko5A8bGSDbQ== 0001141218-02-000163.txt : 20021223 0001141218-02-000163.hdr.sgml : 20021223 20021220200715 ACCESSION NUMBER: 0001141218-02-000163 CONFORMED SUBMISSION TYPE: SC 13G/A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20021223 GROUP MEMBERS: IRENE M. OLBERZ GROUP MEMBERS: THE OLBERZ FAMILY TRUST FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: OLBERZ NORBERT J CENTRAL INDEX KEY: 0000940867 FILING VALUES: FORM TYPE: SC 13G/A BUSINESS ADDRESS: STREET 1: 920 FOOTHILL BOULEVARD CITY: LA CANADA STATE: CA ZIP: 91011 MAIL ADDRESS: STREET 1: 920 FOOTHILL BOULEVARD CITY: LA CANADA STATE: CA ZIP: 91011 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SPORT CHALET INC CENTRAL INDEX KEY: 0000892907 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-MISCELLANEOUS SHOPPING GOODS STORES [5940] IRS NUMBER: 954390071 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 13G/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-42862 FILM NUMBER: 02865976 BUSINESS ADDRESS: STREET 1: 920 FOOTHILL BLVD CITY: LA CANADA STATE: CA ZIP: 91101 BUSINESS PHONE: 8187902717X256 MAIL ADDRESS: STREET 1: 920 FOOTHILL BLVD CITY: LA CANADA STATE: CA ZIP: 91011 SC 13G/A 1 spch13g.txt SCHEDULE 13G UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13G Under the Securities Exchange Act of 1934 (Amendment No. 4)* SPORT CHALET, INC. (Name of Issuer) Common Stock, par value $0.01 (Title of Class of Securities) 849163100 (CUSIP Number) December 20, 2002 (Date of Event Which Requires Filing of this Statement) Check the appropriate box to designate the rule pursuant to which this Schedule is filed: [ ] Rule 13d-1(b) [ ] Rule 13d-1(c) [x] Rule 13d-1(d) *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required in the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). **This Amendment No. 4 amends the Schedule 13G of the Reporting Person filed on November 24, 1992, and amended as of May 14, 1996 and February 11, 1998. Concurrently herewith, the Reporting Person is filing as a member of a group an Amendment No. 1 to the Schedule 13D filed on June 17, 1997 by Irene M. Olberz and The Olberz Family Trust. Subsequent changes in the Reporting Person's beneficial ownership of the Common Stock of the Issuer will be reported as amendments to such Schedule 13D. SCHEDULE 13G - -------------------------------------------------------------------------------- CUSIP No. 849163100 Page 2 of 7 Pages - -------------------------------------------------------------------------------- NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 1 Norbert J. Olberz I.D. No. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) /x/ (b) |_| - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 CITIZENSHIP OR PLACE OF ORGANIZATION United States of America - -------------------------------------------------------------------------------- NUMBER OF 5 SOLE VOTING POWER SHARES 0 BENEFICIALLY --------------------------------------------------------------- OWNED BY 6 SHARED VOTING POWER EACH 4,351,972 REPORTING --------------------------------------------------------------- PERSON 7 SOLE DISPOSITIVE POWER WITH 0 --------------------------------------------------------------- 8 SHARED DISPOSITIVE POWER 4,351,972 - -------------------------------------------------------------------------------- 9 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,351,972 - -------------------------------------------------------------------------------- 10 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES* |_| - -------------------------------------------------------------------------------- 11 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (9) 65.76% - -------------------------------------------------------------------------------- 12 TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- SCHEDULE 13G - -------------------------------------------------------------------------------- CUSIP No. 849163100 Page 3 of 7 Pages - -------------------------------------------------------------------------------- Item 1. Issuer. (a) The name of the issuer is Sport Chalet, Inc. (the "Issuer"). (b) The address of the Issuer's principal executive office is 839 Houseman Street, La Canada, CA 91011. Item 2. Reporting Person and Security. The Reporting Person is filing this amendment to Schedule 13G in connection with (i) the commitment of 293,625 shares for awards to employees of the Issuer pursuant to the Olberz Family Trust Sport Chalet Restricted Stock Plan (the "Restricted Stock Plan") on March 31, 1998, (ii) the reversion of 1,000 shares on May 30, 2000 under the Restricted Stock Plan, (iii) the grant of 25,000 shares to Craig L. Levra, the Issuer's Chairman of the Board, President and Chief Executive Officer, and 2,645 shares to Howard K. Kaminsky, the Issuer's Executive Vice President-Finance and Chief Financial Officer, on October 17, 2000 and (iv) the grant of an option to purchase, under certain circumstances, 4,351,972 shares (the "Option Shares"). Each of these transactions is described more fully on Exhibit A hereto. (a) The Reporting Person is Norbert J. Olberz, the Chairman Emeritus and a director of the Issuer, and the co-trustee, with his wife, Irene M. Olberz, of The Olberz Family Trust, a revocable grantor trust (the "Trust"). (b) The business address of the Reporting Person is 839 Houseman Street, La Canada, CA 91011. (c) The Reporting Person is a citizen of the United States of America. The Trust is a California revocable grantor trust. (d) The title of the class of securities to which this statement relates is the common stock, par value $0.01, of the Issuer (the "Common Stock"). (e) The CUSIP number is 849163100. Item 3. If This Statement is Filed Pursuant to Rule 13d-1(b) or 13d-2(b) or (c), Check Whether the Person Filing is a: (a) [ ] Broker or dealer registered under Section 15 of the Act (15 U.S.C. 78o). (b) [ ] Bank as defined in Section 3(a)(6) of the Act (15 U.S.C. 78c). (c) [ ] Insurance company as defined in Section 3(a)(19) of the Act (15 U.S.C. 78c). (d) [ ] Investment company registered under Section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8). SCHEDULE 13G - -------------------------------------------------------------------------------- CUSIP No. 849163100 Page 4 of 7 Pages - -------------------------------------------------------------------------------- (e) [ ] An investment adviser in accordance with ss. 240.13d-1(b)(1)(ii)(E); (f) [ ] An employee benefit plan or endowment fund in accordance with ss. 240.13d-1(b)(1)(ii)(F); (g) [ ] A parent holding company or control person in accordance with ss. 240.13d-1(b)(1)(ii)(G); (h) [ ] A savings association as defined in Section 3(b) of the Federal Deposit Insurance Act (12 U.S.C. 1813); (i) [ ] A church plan that is excluded from the definition of an investment company under Section 3(c)(14) of the Investment Company Act of 1940 (15 U.S.C. 80a-3); (j) [ ] Group, in accordance with ss. 240.13d-1(b)(1)(ii)(J). Not Applicable. Item 4. Ownership. Provide the following information regarding the aggregate number and percentage of the class of securities of the Issuer identified in Item 1. (a) Amount beneficially owned: 4,351,972 (b) Percent of class: 65.76% (c) Number of shares as to which the person has: (i) Sole power to vote or to direct the vote: 0 (ii) Shared power to vote or to direct the vote: 4,351,972 (iii) Sole power to dispose or to direct the disposition of: 0 (iv) Shared power to dispose or to direct the disposition of: 4,351,972 Item 5. Ownership of Five Percent or Less of a Class. If this Schedule is being filed to report the fact that as of the date hereof the Reporting Person has ceased to be the beneficial owner of more than five percent of the class of securities, check the following [__] Not Applicable. Item 6. Ownership of More than Five Percent on Behalf of Another Person. If any other person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, such securities, a statement to that effect should be included in response to this item and, if such interest relates to more than five percent of the class, such SCHEDULE 13G - -------------------------------------------------------------------------------- CUSIP No. 849163100 Page 5 of 7 Pages - -------------------------------------------------------------------------------- person should be identified. A listing of the shareholders of an investment company registered under the Investment Company Act of 1940 or the beneficiaries of employee benefit plan, pension fund or endowment fund is not required. Not Applicable. Item 7. Identification and Classification of the Subsidiary Which Acquired the Security Being Reported on By the Parent Holding Company or Control Person. If a parent holding company or control person has filed this Schedule, pursuant to Rule 13d-1(b)(1)(ii)(G), so indicate under Item 3(g) and attach an exhibit stating the identity and the Item 3 classification of the relevant subsidiary. If a parent holding company or control person has filed this Schedule pursuant to Rule 13d-1(c) or Rule 13d-1(d), attach an exhibit stating the identification of the relevant subsidiary. Not Applicable. Item 8. Identification and Classification of Members of the Group. If a group has filed this Schedule pursuant to Rule 13d-1(b)(1)(ii)(J), so indicate under item 3(j) and attach an exhibit stating the identity and Item 3 classification of each member of the group. If a group has filed this Schedule pursuant to Rule 13d-1(c) or Rule 13d-1(d), attach an exhibit stating the identity of each member of the group. Not Applicable. Item 9. Notice of Dissolution of Group. Notice of dissolution of a group may be furnished as an exhibit stating the date of the dissolution and that all further filings with respect to transactions in the security reported on will be filed, if required, by members of the group, in their individual capacity. See Item 5. Not Applicable. Item 10. Certifications. Not Applicable. SCHEDULE 13G - -------------------------------------------------------------------------------- CUSIP No. 849163100 Page 6 of 7 Pages - -------------------------------------------------------------------------------- SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this amendment to Schedule 13G is true, complete and correct. /s/ NORBERT J. OLBERZ * ------------------------------- NORBERT J. OLBERZ *By: /s/ Howard K. Kaminsky ---------------------- Name: Howard K. Kaminsky Title: Attorney-In-Fact SCHEDULE 13G - -------------------------------------------------------------------------------- CUSIP No. 849163100 Page 7 of 7 Pages - -------------------------------------------------------------------------------- EXHIBIT INDEX Exhibit A Transaction Summary Exhibit B Olberz Family Trust Sport Chalet Restricted Stock Plan* Exhibit C Option Agreement Exhibit D Power of Attorney *Incorporated by reference to Exhibit D to the Schedule 13D filed on December 20, 2002, by the Reporting Person, Irene M. Olberz and The Olberz Family Trust. SCHEDULE 13G EXHIBIT A --------- Transaction Summary ------------------- On May 6, 1997, Norbert J. Olberz transferred to The Olberz Family Trust, a revocable grantor trust (the "Trust"), 4,660,979 shares of the Common Stock of the Issuer. The Reporting Person and his wife, Irene M. Olberz, are the co-trustees of the Trust (the "Trustees"). Restricted Stock Plan. On March 31, 1998, the Trust committed 293,625 shares of the Common Stock owned by it to awards for employees and directors of the Issuer pursuant to the Olberz Family Trust Sport Chalet Restricted Stock Plan (the "Restricted Stock Plan"). Under the Restricted Stock Plan, more than 100 employees and directors have been awarded a portion of these shares. These awards require no consideration to be paid by the recipient, but are subject to the restrictions contained in the Restricted Stock Plan. These awards have been made by Mr. and Mrs. Olberz in appreciation and recognition of, and to reward recipients for, their loyalty and service to the Issuer. Shares were awarded to eligible employees of the Issuer based on the responsibilities of the employee, the value of the employee's services to the Issuer, the employee's tenure with the Issuer and other factors deemed pertinent by the committee responsible for administering the Restricted Stock Plan. On May 30, 2000, 1,000 shares of Common Stock reverted to the Trust upon the termination of the recipient for cause. A copy of the Restricted Stock Plan is attached as Exhibit B. Grant of Shares. On October 12, 2000, the Trust granted 25,000 shares of Common Stock to Craig L. Levra, the Issuer's Chairman of the Board, President and Chief Executive Officer, and 2,645 shares to Howard K. Kaminsky, the Issuer's Executive Vice President-Finance and Chief Financial Officer. Option Agreement. On December 20, 2002, the Trust granted to SC Option LLC, a California limited liability company (the "LLC"), an option (the "Option") to purchase the Option Shares pursuant to an Option Agreement dated as of December 20, 2002 (the "Option Agreement"), between the LLC and the Trustees. The Option is exercisable upon the death of Norbert J. Olberz. A copy of the Option Agreement is attached as Exhibit C hereto. The LLC and the Trustees entered into the Option Agreement to provide for the smooth transition of control of the Issuer in the event of the death of Mr. Olberz, the founder, Chairman Emeritus and a director of the Issuer. Pursuant to the Option Agreement, the LLC acquired the Option for $1,000 to purchase all, but not less than all, of the Option Shares at any time during the period of 181 days from and after the date of death of Mr. Olberz (the "vesting" or "measurement" date). Prior to the vesting date, the Trustees are permitted to encumber the Option Shares and to sell Option Shares privately or in the market and to transfer Option Shares as a gift or otherwise as long as the Trust continues to hold at least 51% of the outstanding Common Stock on a fully diluted basis. The purchase price per share for the Option Shares is equal to the closing price of the Common Stock on the day preceding the vesting date. The Option Agreement also provides the LLC with a right to negotiate with the Trustee if the Trustee desires to entertain or effect, or commences any activities that might reasonably be expected to result in, any "Acquisition Proposal" (as defined in the Option Agreement). The Option Agreement is subject to termination upon certain events, including the mutual consent of the Trust and the LLC or in the event Craig L. Levra ceases to be the Chief Executive Officer of the Issuer for any reason. In addition, the purchase of the Option Shares by the LLC upon exercise of the Option is subject to certain conditions, including the ability of the LLC to obtain sufficient financing to purchase the Option Shares. The Option Agreement was negotiated directly between Norbert J. Olberz and the members of the LLC. SCHEDULE 13G EXHIBIT C --------- OPTION AGREEMENT THIS OPTION AGREEMENT (the "Agreement") is made and entered into as of this 20th day of December, 2002, by and between SC OPTION, LLC, a California limited liability company (the "Optionee"), and NORBERT OLBERZ AND IRENE OLBERZ (the "Trustees"), as Co-Trustees of the Olberz Family Trust under agreement dated May 6, 1997 (the "Trust") (individually, a "Party" and collectively, the "Parties"). RECITALS A. The Trustees are the record and beneficial owners of an aggregate of 4,351,972 shares of Common Stock, par value $0.01 per share (the "Common Stock"), of Sport Chalet, Inc, a Delaware corporation (the "Company"), constituting approximately 66% of its outstanding Common Stock. B. The Trustees desire to grant to certain senior executives of the Company, and these senior executives desire to acquire from the Trustees, an option to purchase shares of Common Stock upon the death of Norbert Olberz and certain rights with respect to any sale of the Company or of Common Stock by the Trustees during his lifetime. C. Optionee has been established by these senior executives to facilitate the acquisition of the option and these other rights, and implementation of any purchase of Common Stock on exercise of the option. NOW, THEREFORE, in consideration of the mutual representations, warranties and covenants contained herein, the parties agree as follows: 1. GRANT OF OPTION 1.1 The Option The Trustees hereby grant to Optionee, and Optionee hereby acquires from the Trustees, the exclusive option (the "Option") to purchase all the 4,351,972 shares of Common Stock owned by the Trustees, less the number of shares sold or reserved for commitments by the Trustees under the Principal Stockholder Award Plan (as defined below) or sold or transferred by the Trustees pursuant to Section 5.2 (the "Option Shares"). For this purpose, the term "Common Stock" shall mean the Common Stock as currently constituted and any equity securities into which the Common Stock may be reconstituted as a result of any stock split, reverse stock split, recapitalization, reclassification or otherwise, and the number of Option Shares shall be adjusted as appropriate. 1.2 Term of Option The term of the Option (the "Option Term") shall commence on the date hereof and shall continue until the earlier of the expiration of the Option without exercise by Optionee pursuant to Section 2.1 or the termination of the Option pursuant to Section 7. 1.3 Option Price The price paid by Optionee for the Option is the sum of $1,000.00, receipt of which is hereby acknowledged by the Trustees. 2. EXERCISE OF OPTION; CLOSING 2.1 Exercise of Option Optionee may exercise the Option as to all, but not less than all, the Option Shares by notifying the Trustees in writing of such exercise (the "Exercise Notice") at any time during the period of 181 days from and after the date of death of Norbert Olberz (the "Commencement Date"). The Exercise Notice shall provide that, upon satisfaction of all the conditions set forth in Section 6, Optionee shall purchase the Option Shares for the Purchase Price (as defined below), whereupon the Trustees shall be obligated to sell the Option Shares to Optionee for the Purchase Price. 2.2 Determination of Purchase Price The price that Optionee shall pay for the Option Shares (the "Purchase Price") will be the Market Price multiplied by the number of Option Shares. For this purpose, the "Market Price" shall be an amount equal to the closing price of the Common Stock on the Nasdaq National Market as reported in the Wall Street Journal or a similar publication on the day immediately prior to the Commencement Date, provided, however, that (i) if the Common Stock is not traded on the Nasdaq National Market, the closing price on an established securities exchange or any other established interdealer quotation system shall be used, or (ii) if the Common Stock is listed on multiple exchanges or systems, the closing price on the primary exchange or system shall be used. 2.3 Closing The closing (the "Closing") for the exercise of the Option and purchase of the Option Shares shall take place at the location, date and time designated by Optionee, which shall be not later than 60 days after the date of delivery of the Exercise Notice, subject to extension pursuant to Section 6. The date of the Closing shall be referred to as the "Closing Date." 2.4 Deliveries at Closing At the Closing, Optionee shall pay to the Trustees the Purchase Price by wire transfer or bank cashiers' check, and the Trustees shall deliver to Optionee certificates, endorsed in blank or in proper form for transfer, evidencing the Option Shares. -2- 3. REPRESENTATIONS AND WARRANTIES OF TRUSTEES The Trustees represent and warrant to Optionee as follows: 3.1 The Trust The Trust is a revocable grantor trust established by the Trustees under agreement dated May 6, 1997 (the "Trust Agreement"), and the Trustees are the only acting trustees of the Trust. 3.2 Authority This Agreement has been duly executed and delivered by the Trustees and constitutes the legal, valid and binding obligation of the Trustees, enforceable against them and the Trust in accordance with its terms. The Trustees have the absolute and unrestricted right, power, authority and capacity to execute and deliver this Agreement on behalf of the Trust and to perform their obligations under this Agreement. The Trust Agreement grants the Trustees the power to take whatever action may be necessary or appropriate to sell shares of the Common Stock of the Company. 3.3 No Conflicts Neither the execution and delivery of this Agreement nor the consummation and performance of any of the transactions contemplated by this Agreement will: (a) directly or indirectly contravene, conflict with, or result in the violation of any provision of the certificate of incorporation or bylaws of the Company; (b) contravene, conflict with or result in the violation of or give any governmental body or any other person the right to challenge the contemplated transactions or to exercise any remedy or obtain any relief under any order to which the Trustees, in their individual or fiduciary capacities, or the Company or any of the assets owned or used by the Company may be subject; or (c) contravene, conflict with or result in a violation or breach of any agreement or any provision of any agreement to which the Trustees, in their individual or fiduciary capacities, are a party or give any person the right to declare a default or exercise any remedy under, or accelerate the maturity or performance of or to cancel, terminate or modify any agreement to which the Trustees, in their individual or fiduciary capacities, are a party. 3.4 Ownership of Stock At the date of this Agreement, the Trust is the sole, true, lawful, record and beneficial owner of the Common Stock as set forth in Recital A above, free and clear of all liens and encumbrances and without restrictions on voting rights or rights of disposition and, except for this Agreement and the 293,625 shares of Common Stock subject to the Olberz Family Trust Sport Chalet -3- Restricted Stock Award Plan (the "Principal Stockholder Award Plan"), has not entered into any contract relating to the issuance, sale or transfer of any Common Stock of the Company. 4. REPRESENTATIONS AND WARRANTIES OF OPTIONEE Optionee represents and warrants to the Trustees as follows: 4.1 Formation; Standing Optionee is a duly formed limited liability company and is existing in good standing under the laws of the State of California. 4.2 Authority This Agreement has been duly authorized by all necessary limited liability company action on the part of Optionee, has been duly executed and delivered by Optionee and constitutes the legal, valid and binding obligation of Optionee, enforceable against it in accordance with its terms. 4.3 No Conflicts Neither the execution and delivery of this Agreement, nor the consummation and performance of the transactions contemplated hereby, will contravene, conflict with or result in a violation or breach of any agreement or any provision of any agreement to which Optionee is a party or give any person the right to declare a default or exercise any remedy under, or accelerate the maturity or performance of or to cancel, terminate or modify any agreement to which Optionee is a party. 4.4 Members of Optionee At the date of this Agreement, the members of Optionee consist entirely of senior executives of the Company. 4.5 Investment Representation Subject to Section 8.4, Optionee will acquire any Option Shares on exercise of the Option for investment purposes only and will not engage in any distribution thereof within the meaning of the Securities Act of 1933, as amended. 4.6 Lack of Reliance Optionee and its members are fully familiar with the business and affairs (financial and other) of the Company, and are not relying on the Trustees for any such information or disclosures pertaining to the Company. -4- 5. COVENANTS 5.1 Restrictions on Sale, Transfer or Encumbrance Except as permitted by Sections 2, 5.2 or 5.3 or to fulfill their obligations under the Principal Stockholder Award Plan, the Trustees will not during the Option Term, directly or indirectly, sell, assign, transfer, encumber or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to the direct or indirect sale, assignment, transfer, encumbrance or other disposition of, any Option Shares. 5.2 Sale, Transfer or Encumbrance Prior to Commencement Date Prior to the Commencement Date and during the Option Term, the Trustees may sell, assign, transfer, encumber or otherwise dispose of Option Shares as follows: (a) The Trustees may from time to time sell Option Shares privately or in the market and transfer Option Shares as a gift or otherwise, provided that in no event shall the number of Option Shares remaining after any such sale or transfer constitute less than 51% of the then outstanding Common Stock on a fully-diluted basis (taking into account all shares issuable on exercise of any options outstanding or subject to future grant under the existing stock option plans, on exercise of any outstanding warrants or other rights or on conversion of any outstanding convertible securities). (b) The Trustees may pledge or otherwise create liens on any or all of the Option Shares to secure indebtedness for money borrowed by the Trust and/or the Trustees, in their individual capacities, and such Option Shares may be transferred to or sold by a pledgee or obligee after a default in any obligation secured by such pledge or lien, provided that until any such sale or transfer the Option Shares shall remain subject to the Option for purposes of Section 1.1. 5.3 Acquisition Proposals Prior to Commencement Date If at any time prior to the Commencement Date and during the Option Term, the Trustees or the Company desire to entertain or effect an Acquisition Proposal, or to commence any activities with respect to, or that might reasonably be expected to result in, any Acquisition Proposal, the Trustees shall promptly notify Optionee, which notice shall refer to this Section 5.3 and describe in general terms the material elements of (i) the Acquisition Proposal that the Trustees or the Company may desire to entertain or effect, or (ii) the Acquisition Proposal that is the subject of such proposed activities. Before the Trustees shall take (or permit the Company to take) any action to (i) solicit, initiate, encourage, induce or facilitate, (ii) engage in discussions or negotiations with any person with respect to, (iii) approve, endorse or recommend, (iv) grant any proxies or enter into any voting trust or other similar agreement or arrangement with respect to the voting of any Common Stock in favor of, (v) vote any Common Stock in favor of, or (vi) enter into any letter of intent, purchase agreement, stockholder agreement or similar document or any agreement contemplating or otherwise relating to, an Acquisition Proposal -5- with any third party or parties, they shall first attempt to reach agreement with Optionee with respect to an Acquisition Proposal by negotiating in good faith with Optionee for a period of 90 days from the date of notice to Optionee. If at the expiration of such 90-day period, no definitive agreement for an Acquisition Proposal has been entered into with Optionee, the Trustees shall be permitted to take the action set forth in the preceding sentence for a period of one year, after which Section 5.1 and this Section 5.3 shall reapply. For purposes of this Section 5.3 and Section 5.4, an "Acquisition Proposal" shall mean (A) any merger, consolidation, share exchange, business combination, tender offer, exchange offer or other similar transaction in which the Company is a constituent party, in which a person or "group" (as defined in the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder) would acquire beneficial or record ownership of securities representing more than 15% of the outstanding securities of any class of voting securities of the Company; (B) any transaction in which the Company would issue or sell securities representing more than 20% of the outstanding securities of any class of its voting securities; (C) any transaction in which the Trustees would sell or transfer to a third party or parties all or a significant portion of the Option Shares; or (D) any sale or transfer (other than sales of inventory in the ordinary course of business), exchange or disposition of any business or businesses or assets that constitute or account for 20% or more of the consolidated net revenues, net income or total assets of the Company. 5.4 Acquisition Proposals on or After Commencement Date On or after the Commencement Date and during the Option Term, except with the prior written consent of Optionee, the Trustees will not (i) solicit, initiate, encourage, induce or facilitate, (ii) engage in discussions or negotiations with any person with respect to, (iii) approve, endorse or recommend, (iv) grant any proxies or enter into any voting trust or other similar agreement or arrangement with respect to the voting of any Common Stock in favor of, (v) vote any Common Stock in favor of, or (vi) enter into any letter of intent, purchase agreement, stockholder agreement or similar document or any agreement contemplating or otherwise relating to, an Acquisition Proposal. 5.5 Conduct of Trustees and Optionee Except as otherwise contemplated by this Agreement, neither the Trustees nor Optionee will (i) take, agree or commit to take any action that would make any representations and warranties hereunder inaccurate in any respect as of any time prior to the termination or expiration of the Option, or (ii) omit, or agree or commit to omit, to take any action necessary to prevent any such representation or warranty from being inaccurate in any respect at any such time. 5.6 Required Filings As promptly as practicable after the date of this Agreement, the date of the Exercise Notice and the Closing Date, the Trustees and Optionee (including its members) will make, and cause to be made, all filings required by law, governmental authorities or markets on which the Common Stock is listed or -6- quoted, including filings under the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder, or required by the Nasdaq Stock Market. 5.7 Amendment of Trust Agreement As promptly as practicable after the date of this Agreement, the Trustees will amend the Trust Agreement to add specific instructions to the Trustees to comply with the terms of this Agreement. 6. CONDITIONS TO PURCHASE OF OPTION SHARES Optionee's obligation to purchase the Option Shares following delivery of an Exercise Notice shall be conditioned upon the following, any of which can be waived by Optionee: (a) Optionee being able to obtain sufficient financing to purchase the Option Shares; (b) there being no proceedings involving a challenge or seeking damages or relief in connection with this Agreement or the purchase of the Option Shares or that might have the effect of preventing, delaying, making illegal or otherwise interfering with the purchase of the Option Shares; (c) the Trustees' ability to deliver certificates evidencing the Option Shares free and clear of all liens and encumbrances; and (d) receipt of all required consents, if any, including governmental consents. In the event that a proceeding under (b) above is pending or any required consents under (d) above have not been secured by the date designated by Optionee under Section 2.3, Optionee shall have the right by notice to the Trustees to extend the Closing to a date that is not later than 120 days after the date of delivery of the Exercise Notice. 7. TERMINATION This Agreement shall terminate upon, and the Parties shall have no further obligations hereunder from and after the occurrence of, any of the following: (a) the mutual agreement of the Trustees and Optionee; (b) Craig L. Levra ceasing to be the Chief Executive Officer of the Company at any time prior to the Commencement Date, whether by reason of death, voluntary resignation, termination by the Company or otherwise; or -7- (c) the consummation of an Acquisition Proposal as contemplated by Section 5.3 prior to the Commencement Date, whereby the Trustees no longer own any Option Shares. 8. MISCELLANEOUS 8.1 Interpretation Section and other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All pronouns and all variations thereof will be deemed to refer to the masculine, feminine or neuter, and all terms to the singular or plural, as the context in which they are used may require. In the event any claim is made relating to the construction or interpretation of any provision of this Agreement, no presumption or burden of proof or persuasion will be implied by virtue of the fact that this Agreement was initially drafted by or at the request of a particular Party or its counsel. Unless otherwise expressly provided, "including" does not limit the preceding words or terms, "or" is used in the inclusive sense and references to numbered Sections refer to such Sections to this Agreement. 8.2 Governing Law The validity, construction and performance of this Agreement shall be governed by the laws, without regard to the laws as to choice or conflict of laws, of the State of California. 8.3 Entire Agreement This Agreement embodies the entire agreement and understanding between the Parties pertaining to the subject matter of this Agreement, and supersedes all prior agreements, understandings, negotiations, representations and discussions, whether verbal or written, of the Parties pertaining to that subject matter. 8.4 Assignment Neither this Agreement nor any rights under this Agreement may be assigned or transferred by the Trustees or Optionee without the prior written consent of the other Party; provided, however, that Optionee may assign its rights hereunder directly to its members on the dissolution or liquidation of Optionee prior to the Closing Date. Notwithstanding the foregoing, Optionee or the members of Optionee shall be able to assign an interest in the Option and/or the Option Shares to other individuals or entities for purposes of completing or financing the purchase of the Option Shares, provided that no such individual or entity shall be directly engaged in a sporting goods retail business in competition with the Company. 8.5 Binding Effect The provisions of this Agreement shall bind and inure to the benefit of the Parties and their respective successors, including any surviving or successor trustees of the Trust, and permitted assigns. -8- 8.6 Parties in Interest Nothing in this Agreement, expressed or implied, is intended to confer on any person or entity other than the Parties any right or remedy under or by reason of this Agreement. 8.7 Notices Any notice or communication required or contemplated by this Agreement shall be in writing and shall be deemed given (i) when delivered personally, (ii) when transmitted by facsimile, provided confirmation is generated by the transmitting equipment and confirmatory notice is sent by first class mail, postage prepaid, or (iii) forty-eight (48) hours after deposit with the U.S. Postal Service as first class mail, registered or certified, postage prepaid, and addressed as follows: If to Trustees: Olberz Family Trust c/o Karl I. Swaidan, Esq. Hahn & Hahn 301 E. Colorado Blvd. Pasadena, CA 91101-1915 Facsimile: (626) 449-7357 If to Optionee: Mr. Craig L. Levra Manager SC Option, LLC c/o Sport Chalet, Inc. 920 Foothill Boulevard La Canada, CA 91011 Facsimile: (818) 790-0677 or such other address as such Party shall have designated by notice so given to the other Party. 8.8 Expenses Each Party will bear its own expenses incurred in connection with the negotiation, execution and delivery of this Agreement and the consummation of the transactions described in this Agreement. 8.9 Counterparts This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute a single agreement. -9- 8.10 Amendment; Waiver This Agreement may be amended, modified or supplemented only by a writing executed by each of the Parties. Either Party may in writing waive any provision of this Agreement to the extent such provision is for the benefit of that Party. No waiver by either Party of a breach of any provision of this Agreement shall be construed as a waiver of any subsequent or different breach, and no forbearance by a Party to seek a remedy for noncompliance or breach by the other Party shall be construed as a waiver of any right or remedy with respect to such noncompliance or breach. 8.11 Further Assurances The Trustees and Optionee will execute and deliver, or cause to be executed and delivered, all further documents and instruments, and use their respective best efforts to secure such consents and take all such further action, as may be reasonably necessary in order to perform their obligations under this Agreement. 8.12 Dispute Resolution The Parties desire to resolve disputes arising out of or related to this Agreement without litigation and therefore agree to the following procedure: (a) Except as provided in subsection (d) below, in the event of any dispute, controversy or claim arising out of or related to this Agreement, including a breach hereof, the Parties shall consult and attempt to settle such dispute, controversy or claim. If they do not reach a settlement with 30 days, then upon notice by a Party, any such dispute, controversy or claim shall be settled by arbitration administered by the American Arbitration Association in accordance with its applicable Commercial Arbitration Rules. (b) There shall be one arbitrator who shall be designated by the Parties or, if the Parties cannot agree, by the American Arbitration Association. The arbitration shall be held in Los Angeles, California. The arbitration award shall be in writing and shall specify the factual and legal bases for the award. The award shall be final and binding on the Parties and judgment thereon may be entered in any court having jurisdiction thereof or having jurisdiction over either of the Parties or their assets. (c) Each Party shall bear its own legal fees and other costs. The Parties shall equally share the fees of the arbitration and the arbitrator; provided, however, that the arbitrator may apportion the fees of the arbitration and the arbitrator, but not the Parties' legal fees and other costs. (d) The Parties agree that Optionee may be irreparably damaged if the Trustees fail to sell the Option Shares upon exercise of the Option or to perform any of their other obligations under this Agreement, and that Optionee would not have an adequate remedy at law for money damages. Accordingly, Optionee shall be entitled to commence litigation seeking specific performance and injunctive or other equitable relief to enforce performance of this Agreement by -10- the Trustees, including an action to compel compliance with the foregoing dispute resolution procedure. The prevailing party in any such litigation shall be entitled to recover its legal fees and other costs. 8.13 Survival All representations and warranties contained in this Agreement shall survive the grant of the Option and the delivery of and payment for the Option Shares. [Signature Page Follows] -11- IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the date and year first above written. OPTIONEE SC Option, LLC By: /s/ Craig Levra By: /s/ Howard Kaminsky ----------------------- ------------------------- Name: Craig Levra Name: Howard Kaminsky Title: Manager Title: Manager TRUSTEES By: /s/ Norbert Olberz By: /s/ Irene Olberz ------------------------ -------------------------- Norbert Olberz, as Co-Trustee Irene Olberz, as Co-Trustee of the Olberz Family Trust of the Olberz Family Trust To induce SC Option, LLC to enter into the foregoing Option Agreement (the "Agreement"), the undersigned, in their individual capacities and as Co-Trustees of the Olberz Family Trust (the "Trust"), agree (i) to cause the existing and any successor trustees of the Trust to comply with the terms of the Agreement; (ii) not to take any action, or permit any action to be taken, that would revoke the Trust, and (iii) not to amend the provisions of the agreement governing the Trust that deal with either the powers of the trustees to sell shares of the Common Stock of Sport Chalet, Inc., or the instructions to the trustees to comply with the terms of the Agreement. /s/ Norbert Olberz ......................................... Norbert Olberz /s/ Irene Olberz ......................................... Irene Olberz -12- SCHEDULE 13G Exhibit D --------- POWER OF ATTORNEY Know all by these presents, that the undersigned hereby constitutes and appoints each of Howard K. Kaminsky and Scott Soper, signing singly, as the undersigned's true and lawful attorney-in-fact to: (a) execute for and on behalf of the undersigned, in the undersigned's capacity as an officer, director and/or shareholder of Sport Chalet, Inc. (the "Company"), Forms 3, 4 and 5 in accordance with Section 16(a) of the Securities Exchange Act of 1934 and the rules thereunder (the "Act") and Schedules 13D or 13G in accordance with Section 13 of the Act; (b) do and perform any and all acts for and on behalf of the undersigned which may be necessary or desirable to complete and execute any such Form 3, 4 or 5 or Schedule 13D or 13G, complete and execute any amendment or amendments thereto, and file such form, schedule or amendment with the United States Securities and Exchange Commission and any stock exchange or similar authority; and (c) take any other action of any type whatsoever in connection with the foregoing which, in the opinion of such attorney-in-fact, may be of benefit to, in the interest of, or legally required by, the undersigned, it being understood that the documents executed by such attorney-in-fact on behalf of the undersigned pursuant to this Power of Attorney shall be in such form and shall contain such terms and conditions as such attorney-in-fact may approve in such attorney-in-fact's discretion. The undersigned hereby grants to each such attorney-in-fact full power and authority to do and perform any and every act and thing whatsoever requisite, necessary, or proper to be done in the exercise of any of the rights and powers herein granted, as fully to all intents and purposes as the undersigned might or could do if personally present, with full power of substitution or revocation, hereby ratifying and confirming all that such attorney-in-fact, or such attorney-in-fact's substitute or substitutes, shall lawfully do or cause to be done by virtue of this Power of Attorney and the rights and powers herein granted. The undersigned acknowledges that the foregoing attorneys-in-fact, in serving in such capacity at the request of the undersigned, are not assuming, nor is the Company assuming, any of the undersigned's responsibilities to comply with Section 16 or Section 13 of the Securities Exchange Act of 1934. This Power of Attorney shall remain in full force and effect until the undersigned is no longer required to file Forms 3, 4 and 5 or Schedules 13D or 13G with respect to the undersigned's holdings of and transactions in securities issued by the Company, unless earlier revoked by the undersigned in a signed writing delivered to the foregoing attorneys-in-fact. IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to be executed as of this 13th day of December, 2002. /s/ Norbert J. Olberz - --------------------- Signature Norbert J. Olberz - ----------------- Print Name -----END PRIVACY-ENHANCED MESSAGE-----