Legal Proceedings

Exhibit 10.1.1

SPORT CHALET, INC.

[AMENDED] 1992 INCENTIVE AWARD PLAN¹

ARTICLE I
PURPOSE OF PLAN

     The purpose of this Plan is to promote the growth and profitability of the Company by providing, through the granting of stock appreciation rights, options to purchase stock and other incentive awards, incentives to attract highly talented persons to positions with one or more of the Participating Companies, to retain such persons and to motivate them to use their best efforts on behalf of the Participating Companies.

ARTICLE II
DEFINITIONS

     For the purposes of this Plan, unless the context otherwise requires, the following terms shall have the meanings set forth in this Article II:

2.01 Automatic Option Grants. The term “Automatic Option Grants” shall mean the Non-qualified Stock Options granted to Non-employee Directors pursuant to Article IX of the Plan.

2.02 Automatic Grant Date. The term “Automatic Grant Date” shall mean the date of grant of an Automatic Option Grant.

2.03 Board The term “Board” shall mean the Board of Directors of the Company.

2.04 Committee. The term “Committee” shall mean a committee appointed by the Board pursuant to Section 3.01 constituting not less than two (2) members of the Board.

2.05 Common Stock. The term “Common Stock” shall mean the Company’s common stock, par value $.01 per share.

2.06 Company. The term “Company” shall mean Sport Chalet, Inc., a Delaware corporation, or any successor thereof.

2.07 Director. The term “Director” shall mean a member of the Board or a member of the board of directors of any Participating Company.

2.08 Disinterested Person. The term “Disinterested Person” shall mean a disinterested person as that term is defined in Rule 16b-3.

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2.09 Dividend Equivalent. “Dividend Equivalent” shall mean the cash or additional Common Stock earned in connection with an Option, as described in Article XIII.

2.10 Effective Date. The term “Effective Date” shall mean November 1, 1992.

2.11 Eligible Person. The term “Eligible Person” shall mean any employee, consultant or officer of any Participating Company, including officers who are directors.

2.12 Eligible Person Termination Date. The term “Eligible Person Termination Date” shall mean the date as of which the employment or consultant status of such person by a Participating Company terminates or the date as of which such person’s service as a director of the Company terminates.

2.13 Exchange Act. The term “Exchange Act” shall mean the Securities Exchange Act of 1934, as it may be amended from time to time.

2.14 Exercise Date. The term “Exercise Date” shall mean the date a Right or Option, or any portion thereof, is exercised.

2.15 Fair Market Value. The term “Fair Market Value,” when used with respect to the determination of the fair market value of the Shares, shall mean: (a) if Shares are traded on a national stock exchange or traded on the NASDAQ national market system (“NMS”), the closing sales price per share of the Shares; (b) if Shares are regularly traded in any over-the-counter market other than the NMS, the average of the bid and asked prices per share of the Shares; and (c) if Shares are not traded as described in (a) or (b) above, the per share fair market value of the Shares as determined in good faith by the Board on such basis as the Board in its sole discretion shall choose. The date of determination of Fair Market Value with respect to subparagraphs (a), (b) and (c) shall be the date specified in the Plan or, if no trading in the Shares takes place on such date, on the next preceding trading day on which there has been such trading.

2.16 Holder. The term “Holder” shall mean a person holding an Incentive Award.

2.17 Incentive Award. The term “Incentive Award” shall mean any Non-qualified Stock Option, Incentive Stock Option, Restricted Stock, Stock Appreciation Right, Dividend Equivalent, Stock Payment or Performance Award granted under the Plan.

2.18 Incentive Award Agreement. The term “Incentive Award Agreement” shall mean an agreement relating to the grant of an Incentive Award under the Plan.

2.19 Incentive Award Termination Date. The term “Incentive Award Termination Date” shall mean the date as of which an Incentive Award shall expire and terminate as the Board shall determine.

2.20 Incentive Stock Option. The term “Incentive Stock Option” shall mean an option as defined under Section 422 of the I.R.C., including an Incentive Stock Option granted pursuant to Article VIII of the Plan.

2.21 I.R.C. The term “I.R.C.” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time.

2.22 Non-employee Director. The term “Non-employee Director” shall mean a member of the Board who is not and has not been within the previous one year period also an officer or employee of the Company or any Participating Company.

2.23 Non-qualified Stock Option. The term “Non-qualified Stock Option” shall mean an option other than an Incentive Stock Option granted pursuant to Article VIII of the Plan.

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2.24 Option. The term “Option” shall mean a Non-qualified Stock Option or an Incentive Stock Option.

2.25 Option Agreement. The term “Option Agreement” shall mean the agreements required pursuant to Section 8.01 hereof with respect to Incentive Stock Options and Section 9.01 hereof with respect to Non-qualified Stock Options.

2.26 Option Termination Date. The term “Option Termination Date” shall mean the date as of which an Option shall expire and terminate as the Board shall determine.

2.27 Parent Corporation. The term “Parent Corporation” shall mean a member of an affiliated group as that term is defined in I.R.C. Section 424(e).

2.28 Participating Company. The term “Participating Company” shall mean the Company and any parent Corporation or subsidiary Corporation.

2.29 Participant. The term “Participant” shall mean an Eligible Person who has been granted one or more Incentive Awards and a Non-employee Director who has received an Automatic Option Grant.

2.30 Performance Award. The term “Performance Award” shall mean an award whose value may be limited to stock value, book value or other specific performance criteria which may be set by the Board of Directors, but which is paid in cash, stock or a combination of both.

2.31 Person. The term “Person” shall mean a person as that term is defined in Sections 13(d) and 14(d) of the Exchange Act.

2.32 Plan. The term “Plan” shall mean this Sport Chalet, Inc., 1992 Incentive Award Plan.

2.33 Restricted Stock. The term “Restricted Stock” shall mean Common Stock sold or granted to an Eligible Person which is nontransferable and subject to substantial risk of forfeiture until certain restrictions lapse.

2.34 Right. The term “Right” shall mean a stock appreciation right granted pursuant to this Plan which will entitle the holder of such right to receive an amount of cash based on the increase in the Fair Market Value of a Share during the period such stock appreciation right is held by such holder.

2.35 Right Grant Date. The term “Right Grant Date” shall mean the effective date of the grant of a Right. The effective date of the grant shall be deemed to be the date on which the Board authorizes the grant of the Right, unless a subsequent date is specified in such authorization.

2.36 Right Termination Date. The term “Right Termination Date” shall mean the date as of which a Right shall expire and terminate as the Board shall determine.

2.37 Rule 16b-3. The term “Rule 16b-3” shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act, as such rule may be amended from time to time.

2.38 SAR Agreement. The term “SAR Agreement” shall mean the agreement required pursuant to Section 6.01 hereof.

2.39 Share. The term “Share” shall mean a share of Common Stock.

2.40 Stock Payment. The term “Stock Payment” shall mean a payment of Shares to replace all or any portion of the compensation (other than base salary) that would otherwise become payable to an employee in cash.

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2.41 Subsidiary Corporation. The term “Subsidiary Corporation” shall mean a subsidiary corporation as that term is defined in I.R.C. Section 424(f).

2.42 Terminating Transaction. The term “Terminating Transaction” shall mean any of the following events: (a) stockholder approval of the dissolution or liquidation of the Company; (b) stockholder approval of a reorganization, merger or consolidation of the Company with one or more other corporations (other than any Participating Company and other than with respect to a transaction, the purpose of which is to change the domicile of the Company), as a result of which the Company goes out of existence or becomes a subsidiary of another corporation (which shall be deemed to have occurred if another corporation shall own, directly or indirectly, fifty percent (50%) or more of the aggregate voting power of all outstanding equity securities of the Company); (c) stockholder approval of a sale of all or substantially all of the Company’s assets; (d) the subsequent acquisition by a Person (other than the Company, any Participating Company, a Participant or any employee benefit plan of the Company) of equity securities of the Company representing twenty percent (20%) or more of the aggregate voting power of all outstanding equity securities of the Company; or (e) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the entire Board shall cease for any reason to constitute a majority thereof unless the election, or the nomination for election by the Company’s stockholders of each new Director was approved by a vote of at least two-thirds of the Directors then still in office who were Directors at the beginning of such period.

2.43 Termination Date. The term “Termination Date,” shall mean [October 31, 2012.]

2.44 Total Disability. The term “Total Disability” shall mean a total and permanent disability as that term is defined in I.R.C. Section 22(e)(3).

2.45 Vested Incentive Award. The term “Vested Incentive Award” shall mean an Incentive Award, or any portion thereof, that has become exercisable pursuant to the terms and conditions of an applicable Incentive Award Agreement.

ARTICLE III
ADMINISTRATION OF PLAN

3.01 Administration by the Board.

(a)  The Plan shall be administered by the Board, or at the option of the Board, by a committee designated by the Board pursuant to Section 3.02 hereof.

(b) The Board shall have full and absolute power and authority in its sole discretion to (i) determine which Eligible Persons shall receive incentive Awards, (ii) determine the time when Incentive Awards shall be granted, (iii) determine the terms and conditions, not inconsistent with the provisions of the Plan, of any Incentive Awards granted hereunder, and (iv) interpret the provisions of the Plan and of any Incentive Awards granted under the Plan. Neither the Board nor the Committee shall have the authority or power, however, to affect in any manner any Automatic Option Grants made pursuant to Article IX of this Plan.

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3.02 Action by Committee.

3.03 Rules and Regulations. The Board may adopt such rules and regulations as it, in its discretion, may deem necessary or appropriate to carry out the purposes of the Plan.

3.04 Authority. All decisions, determinations, interpretations, or other actions by the Board (or the Committee, if applicable) shall be final, conclusive, and binding on all Eligible Persons, Participants, Participating Companies and any successors-in-interest to such persons.

ARTICLE IV
NUMBER OF RIGHTS OR SHARES AVAILABLE UNDER THE PLAN

4.01 Maximum Number of Rights or Shares in the Aggregate. Subject to Sections 4.02 and 15.08 hereof, the maximum number of Rights and Shares which may become subject to Incentive Awards granted under the Plan shall be [One Million Two] Hundred Thousand [(1,200,000)] in the aggregate of which [One Hundred One] Thousand [(101,000)] are reserved for the Automatic Option Grants to Non-employee Directors as set forth in Article IX.

4.02 Additional Availability. If Incentive Awards granted under the Plan shall for any reason terminate, lapse, be forfeited, or expire without being exercised, the Shares related thereto, if any, shall again be available for granting under the Plan and shall not be included in the calculations of the maximum number of Shares which may be granted under the Plan.

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ARTICLE V
TERM OF PLAN

     The Plan shall be effective as of the Effective Date and shall terminate on the Termination Date. No Incentive Awards may be granted hereunder after October 31, [2012].

ARTICLE VI
STOCK APPRECIATION RIGHTS

6.01 Form of SAR Agreement. Any Right granted under the Plan shall be evidenced by an agreement (“SAR Agreement”) in such form as the Board, in its discretion, may from time to time approve. Any SAR Agreement shall incorporate the Plan by reference and shall contain such terms and conditions as the Board, in its discretion, may deem necessary or appropriate and which are not inconsistent with the provisions of the Plan.

6.02 Limitations on Grants. No Right may be granted which is exercisable after the expiration of ten (10) years after the Right Grant Date.

6.03 Exercisability of Rights.

6.04 Payment Upon Exercise of Rights.

ARTICLE VII
NON-QUALIFIED STOCK OPTIONS

7.1 The Committee may grant Non-qualified Stock Options to purchase Common Stock to Eligible Persons, subject to the following terms and conditions:

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ARTICLE VIII
INCENTIVE STOCK OPTIONS

8.01 Incentive Stock Options. The Committee may grant Incentive Stock Options to purchase Common Stock to Eligible Persons, subject to the following terms and conditions:

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ARTICLE IX
AUTOMATIC OPTION GRANTS TO NON-EMPLOYEE DIRECTORS

9.01     (a) Automatic Grants. Each Non-employee Director shall automatically be granted Non-qualified Options (“Automatic Option Grants”) to purchase the number of shares of Common Stock set forth below (subject to adjustment under Section 15.08) hereof on the dates and terms set forth below:

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ARTICLE X
RESTRICTED STOCK

     The Committee may grant Restricted Stock to Eligible Persons, subject to the following terms and conditions:

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ARTICLE XI
PERFORMANCE AWARDS

     The Committee may grant Performance Awards to Eligible Persons. Such awards may be based on Common Stock performance over a period determined in advance by the Committee or any other measures as determined appropriate by the Committee. Payment will be in cash unless replaced by a Stock Payment in full or in part as determined by the Committee. Concurrent with the receipt of a Performance Award, the Holder shall enter into an Incentive Award Agreement in the form approved by the Committee. No Shares granted as part of a Performance Award granted to an officer of the Company subject to 16(b) of the Exchange Act may be sold or otherwise disposed of prior to the date that is six (6) months and one (1) day following the date of grant. The Committee shall confirm in writing Performance Awards previously granted under earlier Company plans as being granted under this plan and as being subject to its terms and conditions from and after the date of adoption of this plan. On the Effective Date, the existing rights issued under the Company’s Stock Appreciation Rights Plan, dated April 1, 1990 (the “1990 Plan”) shall be converted into Performance Awards under this plan with similar terms and conditions as those of the 1990 Plan and evidenced by written agreements with the participants.

ARTICLE XII
STOCK PAYMENT

     The Committee may grant Stock Payments of Common Stock to Eligible Persons for all or any portion of the compensation (other than base salary) that would otherwise become payable to an Employee in cash. No Shares granted as part of a Stock Payment granted to an officer of the Company subject to 16(b) of the Exchange Act may be sold or otherwise disposed of prior to the date that is six (6) months and one (1) day following the date of grant.

ARTICLE XIII
DIVIDEND EQUIVALENTS

     The Committee may grant a Holder at no additional cost “Dividend Equivalents” based on the dividends declared on the Common Stock on record dates during the period between the date an Option is granted and the date such Option is exercised, or such other equivalent period, as determined by the Committee. Such Dividend Equivalents shall be converted to additional Shares or cash by such formula as may be determined by the Committee.

     Dividend Equivalents shall be computed, as of each dividend record date, both with respect to the number of Shares under the Option and with respect to the number of Dividend Equivalent Shares previously earned by the Holder (or his successor in interest) and not issued during the period prior to the dividend record date.

ARTICLE XIV

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AMENDMENT OR TERMINATION OF PLAN

14.01 Board Authority. Subject to the provisions of Section 14.02 below, the Board may amend, suspend, alter, or terminate the Plan at any time; provided, however, that unless required by applicable law, rule, or regulation, the Board shall not amend the Plan in the following respects without approval of the amendment either (i) by a majority of the vote cast at a duly held stockholders’ meeting at which a quorum representing a majority of all of the outstanding voting stock of the Company is, either in person or by proxy, present and voting on the amendment; or (ii) by the written consent of the holders of a majority of the outstanding shares of the Company’s voting stock:

14.02 Limitation on Board Authority. The Board or the Committee may amend the terms of any Incentive Awards previously granted, prospectively or retroactively, and may amend the Plan in accordance with the provisions of Section 14.01; provided, however, that (i) unless required by applicable law, rule, or regulation, no amendment of the Plan or of any Incentive Award Agreement shall, without the consent of any Participant holding any such affected Incentive Awards, be permitted if such amendment would affect in a material and adverse manner an Incentive Award granted prior to the date of any such amendment and (ii) the provisions of Article IX hereof and any other provisions respecting Automatic Option Grants to Non-employee Directors in the Plan may not be amended more than one time during any six-month period except for any amendments to comport with changes in the I.R.C., the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder.

14.03 Contingent Grants Based on Amendments. Incentive awards may be granted in reliance on and consistent with any amendment adopted by the Board and which is necessary to enable such Incentive Awards to be granted under the Plan even though such amendment requires future stockholder approval; provided, however, that any such contingent Incentive Awards by its terms may not be exercised prior to stockholder approval of such amendment, and provided further, that in the event stockholder approval is not obtained within twelve (12) months of the date of grant of such contingent Incentive Awards, then such contingent Incentive Awards shall be deemed cancelled and no longer outstanding.

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ARTICLE XV
GENERAL PROVISIONS

15.01 Termination of Eligible Person Status or of Directorship Other Than by Reason of Death or Disability. In the event that the Eligible Person status of a Participant is terminated, or the Participant ceases to be a director of the Company, for any reason other than by reason of death or Total Disability, any Incentive Awards, or portions thereof, held by such Participant which have not vested as of the Eligible Person Termination Date shall expire and become unexercisable as of such date. Except as set forth in Section 15.04 hereof, all Vested Incentive Awards, or portions thereof, which have not been exercised prior to the Eligible Person Termination Date shall expire and become unexercisable as of the earlier of:

15.02 Leave of Absence. In the case of any employee on an approved leave of absence, the Board may make such provision respecting continuance of the Incentive Awards as the Board, in its discretion, deems appropriate, except that in no event shall an Incentive Award be exercisable after the date by which the Board has determined for the termination of such Incentive Award.

15.03 Death or Total Disability of a Participant. In the event that the Eligible Person status of a Participant is terminated, or the Participant ceases to be a director of the Company, by reason of death or Total Disability, any Incentive Award, or portions thereof, held by such Participant which have not vested as of the Eligible Person Termination Date shall expire and become unexercisable as of such date. Except as set forth in Section 15.04 hereof, all Vested Incentive Awards, or portions thereof, which have not been exercised prior to the Eligible Person Termination Date shall expire and become unexercisable as of the earlier of:

     Any vested Incentive Awards of a deceased Participant may be exercised prior to their respective expiration dates only by the person or persons to whom the Participant’s Incentive Award pass by will or the laws of descent and distribution.

15.04 Extensions. Notwithstanding the provisions covering the exercisability of Incentive Awards following the Eligible Person Termination Date set forth in Sections 15.01 and 15.03, respectively, the Board may, in its sole discretion, with the consent of the Participant, extend the period of time during which a Vested Incentive Award shall remain exercisable, provided that in no event shall such extension extend beyond the Incentive Award Termination Date.

15.05 Partial Exercise. A Participant may exercise all or less than all of his or her Incentive Awards. Incentive Awards may be exercised by the Participant by giving written notice of exercise to the Company, which notice shall specify the number of Incentive Awards to be exercised.

15.06 Incentive Awards Not Transferable. Incentive Awards granted under this Plan may not be sold, pledged, hypothecated, assigned, encumbered, gifted or otherwise transferred or alienated in any manner, either voluntarily or involuntarily, or by operation of law, other than by will or the laws of descent and distribution, and may be exercised during the lifetime of a Participant only by such Participant. Upon any attempt to transfer Incentive Awards other than by will or the laws of descent and distribution, or to assign, pledge, hypothecate or otherwise dispose of Incentive Awards, or upon the levy of any execution, attachment or similar process thereon, such Incentive Awards

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shall become null and void and any subsequent attempted exercise of the Incentive Awards shall be ineffective against the Company. The terms of the Incentive Awards shall be binding upon the executors, administrators, heirs, successors and assigns of the Participants.

15.07 Restrictions on Grants and Exercise.

15.08 Capitalization Adjustments. If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of shares of the Company through reorganization, recapitalization, reclassification, stock dividend, stock split or reverse stock split, upon authorization by the Board an appropriate and proportionate adjustment shall be made in the number of Incentive Awards and the kind of Shares to which the Incentive Awards relate.

15.09 Acceleration Upon a Terminating Transaction. Upon the occurrence of a Terminating Transaction and for the period of thirty (30) days immediately thereafter, any Participant holding outstanding Incentive Awards shall have the right to exercise his or her Incentive Awards to the full extent not theretofore exercised, including any Incentive Awards which have not yet become Vested Incentive Awards (subject, however, to the provisions of Section 6.03(a) above). For purposes of determining the cash payment pursuant to Section 6.04(a) hereof upon an exercise of Right: during such thirty (30) day period, the Fair Market Value of a Share on the Exercise Date shall equal the highest reported sales price of a Share within the sixty (60) day period immediately preceding the date of the Terminating Transaction, as reported on any securities exchange upon which the Shares are traded.

15.10 Taxes. The Board shall make such provisions and take such steps as it deems necessary or appropriate for the withholding of any federal, state, local and other tax required by law to be withheld with respect to the grant or exercise of the Incentive Awards under the Plan, including, without limitation, (i) the deduction of the amount of any such withholding tax from any compensation, any amounts payable hereunder, or other amounts payable to a Participant by any member of the Participating Companies, or (ii) requiring a Participant (or the Participant’s beneficiary or legal representative) as a condition of granting or exercising a Incentive Award to pay to any member

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of the Participating Companies any amount required to be withheld, or to execute much other documents as the Board deems necessary or desirable in connection with the satisfaction of any applicable withholding obligation.

15.11 Legends on Agreements. Each Incentive Award Agreement shall be endorsed with all legends, if any, required by applicable federal and state securities laws to be placed on the Incentive Award Agreement. The determination of which legends, if any, shall be placed upon these agreements shall be made by the Board in its sole discretion and such decision shall be final and binding.

15.12 Availability of Plan. A copy of this Plan shall be delivered to any Eligible Person and any Non-employee Director making reasonable inquiry concerning the Plan.

5.13 Notice. Any notice or other communication required or permitted to be given pursuant to the Plan or under any Incentive Award Agreement must be in writing and may be given by registered or certified mail, and if given by registered or certified mail, shall be determined to have been given and received on the date three days after a registered or certified letter containing such notice, properly addressed with postage prepaid, is deposited in the United States mails; and if given other than by registered or certified mail, it shall be deemed to have been given when delivered to and received by the party to whom addressed. Notice shall be given to Eligible Persons and Non-employee Directors at their most recent addresses shown in the Company’s records. Notice to the Company shall be addressed to the Company at the address of the Company’s principal executive offices, to the attention of the Secretary of the Company.

15.14 Titles and Headings. Titles and headings of sections and articles of this Plan document are for convenience of reference only and shall not affect the construction of any provision of this Plan.

15.15 Governing Law. Except with respect to matters relating to general corporation law which shall be governed by the General Corporation Law of the State of Delaware, this Plan shall be governed by, interpreted under, and construed and enforced in accordance with the internal laws, and not the laws pertaining to conflicts or choice of laws, of the State of California applicable to agreements made and to be performed wholly within the State of California.

15.16 Information. During the period that Incentive Awards are outstanding, the Company will provide Participants with copies of all reports, proxy statements and other communications distributed to its stockholders generally.

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