EXHIBIT 10.18
EMPLOYMENT AGREEMENT
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This Agreement ("Agreement") is made and entered into as of the 21st
day of May 2001 between C. Xxxxx Xxxx residing at 0000 Xxxxxxxxx Xxxx, Xxxxxxxx,
Xxxx 00000 ("Employee"), and Xxxxxx'x Trading Company, Inc., an Indiana
corporation ("Company").
1. TERM OF EMPLOYMENT: Subject to the terms of this Agreement, Company
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hereby agrees to employ Employee, and Employee hereby agrees to accept such
employment, for the period beginning on May 29th, 2001 (the "Effective Date")
and ending at the close of business on the third anniversary of the Effective
Date or on such earlier date upon which this Agreement is terminated in
accordance with the provisions set forth herein (the "Initial Term"). The term
of this Agreement will automatically extend past the Initial Term for succeeding
periods of one year each unless either party terminates this Agreement as of the
end of the Initial Term, or as of the end of any subsequent one-year period (in
either case, the "Termination Date"), by delivering notice to the other party
specifying the applicable Termination Date not later than 90 days prior to the
date so specified. The "Term" of this Agreement shall include any automatic
extensions pursuant to the preceding sentence.
2. POSITION AND DUTIES:
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(a) General Duties; Performance: At all times during the Term,
Employee shall (i) serve as General Counsel, Secretary and Executive Vice
President responsible for real estate and legal and, in such capacity, shall
perform such duties and have such responsibilities not materially inconsistent
with the foregoing as may from time to time be assigned or delegated to him by
the Chief Executive Officer of the Company (the "CEO") or the Chief Operating
Officer of the Company (the "COO"). During this period, Employee shall
diligently and conscientiously devote his full and exclusive business time,
energy and ability to his duties and the business of Company. At all times
during the Term (i) Employee shall perform his duties faithfully and
efficiently, subject to the direction of the CEO and the COO; and (ii) Employee
shall observe and comply with all directions, policies and regulations given or
promulgated by the CEO or the COO.
(b) Non-Contravention: Employee represents and warrants that (i) he
has the full right and authority to enter into this Agreement and to render the
services as required under this Agreement, (ii) by signing this Agreement he is
not breaching any contract or legal obligation he owes to any third party and
(iii) he is not party to any other agreement with Company or any other party
providing for the performance by him of services or, in the case of Company and
its subsidiaries, for any compensation to be paid to him.
3. COMPENSATION, BENEFITS AND EXPENSES: During the Term, Company shall
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compensate Employee for his services as follows:
(a) Salary and Expenses: Company shall pay Employee a base salary at
an annual rate of $300,000 for the period from the Effective Date through and
including February 2/nd/ 2002 and $325,000 for fiscal year 2002, with an
increase to at least $350,000 per year for fiscal year 2003, in each case less
standard income and payroll tax withholding and other authorized deductions.
Such salary shall be earned and shall be payable in regular installments in
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accordance with Company's normal payroll practices. Employee shall also be
entitled to reimbursement for reasonable business expenses in accordance with
Company policy.
(b) Health Insurance: Employee and his dependents shall be eligible to
participate in Company's group health plan as in effect from time to time for
employees of Company.
(c) Bonus: Employee shall be eligible to receive an annual bonus in
accordance with the Company's existing bonus program, with such bonus to be
determined based on Company achieving its targeted operating income for the
applicable fiscal year (the "Target Income") as set forth in Company's annual
budget for such fiscal year prepared by management and approved by the Board.
The "Target Bonus" shall be equal to 40% of base salary in each fiscal year
beginning in fiscal year 2001 with the ability to earn up to 200% of the Target
Bonus if the Target Income is exceeded by an amount to be determined by the
Board.
(d) Vacation: Employee shall be entitled to annual paid vacation in
accordance with Company's policies as in effect from time to time for similarly
situated executive employees of Company, but not less than four weeks of paid
vacation per year.
(e) Retirement Plan: Employee shall be eligible to participate in
Company's retirement plans applicable to Employee, in accordance with the terms
of such plans. Employee understands that the Board monitors such plans or
arrangements and may, from time to time, add benefits to or delete benefits from
the plans or arrangements, or modify or terminate existing plans or
arrangements, provided that no such modification or termination shall decrease
the retirement benefits accrued by the Employee prior to the modification or
termination without the written consent of the Employee.
(f) Stay Bonus: So long as this Agreement has not been terminated by
Employee or by Company for Cause (as hereinafter defined), at the end of each of
fiscal year 2001, 2002 and 2003, Company shall pay to Employee a stay bonus of
$100,000 in accordance with its customary bonus payment schedule.
(g) Company Stock/Options. The Company shall grant to Employee (i) the
right to purchase shares of Class A common stock of Company (the "Common
Stock") upon the terms and conditions set forth in a Stock Subscription
Agreement attached hereto as Exhibit A and (ii) 110,000 options with a $19.00
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exercise price pursuant to Company's 1999 Stock Option Plan (collectively, the
"Options"); provided that the grant of Options is subject to Employee purchasing
at least 30,000 shares of Common Stock at a per share price of $19.00 (up to
$285,000 of which may be financed by the Company on the terms and conditions set
forth in the Stock Subscription Agreement and the related Stock Pledge Agreement
and Secured Promissory Note attached hereto as Exhibit B and Exhibit C,
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respectively) pursuant to clause (i) hereof. The Options shall become vested in
one-third increments on the Employee's first anniversary, second anniversary and
third anniversary with the Company. The Options shall be governed by and
subject to the terms and conditions of the 1999 Stock Option Plan and Employee's
Stock Option Agreement.
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(h) Moving Expenses: Company shall reimburse Employee for (1)
reasonable expenses incurred in connection with Employee's relocation to
Indiana, (2) the reasonable commuting and temporary living costs for a period of
up to eight months from the Effective Date, including, without limitation,
airfare and ground transportation between Columbus, Ohio and Indianapolis,
Indiana every other week during such eight-month period, house hunting and
relocation trips to Indianapolis, Indiana for Employee's wife during such eight-
month period and (3) points associated with the purchase of a residence in the
greater Indianapolis area, in each case upon the provision to the Company of
receipts evidencing such expenses. In addition to the foregoing, Company agrees
to make on June 1, 2001 a one time payment to Employee in the amount of $50,000
for incidental expenses incurred by Employee in connection with his relocation.
Company agrees to indemnify Employee against any incremental income tax
liability incurred as a result of the payment of his temporary living costs and
any other non-deductible relocation costs by Company (other than the $50,000
payment described in the immediately preceding sentence).
4. TERMINATION: Employee's employment with Company during the Term may be
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terminated by Company under the circumstances described in this Paragraph 4, and
subject to the provisions of Paragraph 5:
(a) Cause: Company may immediately terminate Employee's employment for
Cause by giving written notice to Employee identifying in reasonable detail the
act or acts said to constitute "Cause." For purposes of this Agreement, "Cause"
shall mean that Company, acting reasonably and in good faith based upon the
information then known to Company, determines that Employee has engaged in or
committed: willful misconduct; gross negligence; theft, fraud or other illegal
conduct; any willful act that is likely to materially injure the reputation,
business or a business relationship of Company; refusal or unwillingness to
perform his duties or responsibilities under this Agreement in a satisfactory
manner or failure to comply with written policies and directives of Company, in
either case for thirty (30) days following specific written notice thereof;
Employee's death or Disability (as defined below); or material breach of any
term of this Agreement following specific notice thereof from Company. For
purposes of this Paragraph 4(a), "Disability" shall mean a physical or mental
impairment which substantially limits a major life activity of Employee and
which renders Employee unable to perform the essential functions of his
position, even with reasonable accommodation which does not impose an undue
hardship on Company. Company, acting reasonably and in good faith, shall have
the right to make the determination of disability under this Agreement.
(b) Other than Cause: Company may immediately terminate Employee's
employment for any reason other than Cause by giving ten (10) days written
notice to Employee.
(c) Good Reason. Employee may terminate employment hereunder for "Good
Reason" by delivering to the Company (1) a Preliminary Notice of Good Reason (as
defined below), and (2) not earlier than thirty (30) days and not later than
three (3) months from the delivery of such Preliminary Notice of Good Reason, a
Notice of Termination. For purposes of this Agreement, "Good Reason" means, the
assignment (without the express written consent of Employee) to Employee of a
significantly lower position in the organization in terms of his responsibility,
authority and status, any significant reduction in Employee's authority or
status, or requiring Employee to perform services not commensurate with
Employee's ability,
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experience and qualifications; requiring Employee (without his consent) to
relocate his primary work location more than 50 miles away from the current
principal office of the Company in Plainfield, Indiana, any reduction in the
Employee's base salary or bonus opportunity; or any material breach by the
Company of the terms of this Agreement; provided that "Good Reason" shall not
include (A) acts not taken in bad faith which are cured by the Company in all
respects not later than thirty (30) days from the receipt by the Company of a
written notice from the Employee identifying in reasonable detail the act or
acts constituting "Good Reason" (a "Preliminary Notice of Good Reason") or (b)
acts taken by the Company as a result of grounds for termination of employment
for Cause pursuant to Section 4(a) hereof. A Preliminary Notice of Good Reason
shall not, by itself, constitute a Notice of Termination.
5. OBLIGATIONS UPON TERMINATION:
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(a) Cause: If Company terminates Employee for Cause at any time during
the Term, Employee (or his estate in the event of his death) will receive his
base salary and other compensation and benefits earned under this Agreement but
not yet paid or delivered to Employee as of the date of termination, including
retirement benefits accrued through the date of such termination and payable
under the terms of such plans, but excluding (except in the case of death or
disability) any bonus. In the event of disability or death, Employee (or his
estate) shall also receive a payment (at the time Company traditionally makes
such payment) equal to a pro-rata share of the annual bonus he would have earned
(as determined in a manner consistent with Paragraph 3(c) hereof) based on
Company's actual results for the fiscal year. For purposes of the preceding
sentence, Employee's pro-rata share shall be a fraction of the number of days in
the fiscal year, the numerator of which shall be the number of days in the
fiscal year prior to Employee's death or disability and the denominator of which
shall be 365. Other than the amounts specified in this Paragraph 5(a), Employee,
as a result of a termination for Cause, will not be entitled to any severance
pay or any other compensation or benefits of any nature whatsoever, except as
may be payable under the terms of other plans or agreements in the event of
disability or death.
(b) Other Than Cause: If Company terminates Employee for any reason
other than Cause at any time during the Term or if Employee terminates
employment for any Good Reason, Employee shall receive, subject to the
limitations set forth below, (i) his base salary and other compensation and
benefits earned under this Agreement but not yet paid or delivered to Employee
as of the date of his termination, including retirement benefits accrued through
the date of such termination and payable under the terms of such plans, (ii) the
Target Bonus, if any, for the applicable fiscal year in which the Employee is
terminated and (iii) severance pay constituting the continuation of his then-
current base salary, less standard income and payroll tax withholding and other
authorized deductions, plus continued health coverage and a payment equal to the
benefits that absent termination of employment would have accrued under the
Company's tax-qualified and non-qualified retirement plans (which benefits shall
be deemed fully vested), until the later of the date that is (x) the first
anniversary of the date of his termination and (y) the third anniversary of the
Effective Date.
(c) Exclusive Remedy: Employee acknowledges that, other than the
payments described in this Paragraph 5, he shall have no other claims against,
and be entitled to no other
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payments from, Company or its direct or indirect parents, subsidiaries,
affiliates or related companies upon any termination or breach by Company of
this Agreement.
6. LOYALTY, NON-COMPETITION AND CONFIDENTIALITY: In consideration of the
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employment provided by Company, Employee agrees with Company as follows:
(a) Non-Competition: Employee acknowledges that his position will give
him access to confidential and highly sensitive non-public information of
substantial importance to Company, including but not limited to financial
information, identities of distributors, contractors and vendors utilized in
Company's business, non-public forms, contracts and other documents used in
Company's business, trade secrets used, developed or acquired by Company,
information concerning the manner and details of Company's operation,
organization and management, Company's business plans and strategies, price
information, customer lists and research and development data, and that the
services he will provide to Company are unique. During the "Non-Competition
Period" as defined in Paragraph 6(f) hereof, Employee agrees that in addition to
any other limitation, he will not directly or indirectly engage in, as an
employee, consultant or otherwise, any business in the United States primarily
engaged in the retail sporting goods or retail sports apparel business, nor will
he accept employment, consult for, or participate, directly or indirectly, in
the ownership or management of any enterprise in the United States engaged in
such a business. Notwithstanding the foregoing, Employee may invest as the
holder of not more than four percent (4%) of the outstanding shares of any
corporation whose stock is listed on any national or regional securities
exchange or reported by the National Association of Securities Dealers Automated
Quotation System or any successor thereto.
(b) Other Employees, Customers: Employee agrees that during the Non-
Competition Period, neither he nor any entity with which he is at the time
affiliated (and which is not affiliated with Company) shall, directly or
indirectly, hire or offer to hire or entice away or in any other manner persuade
or attempt to persuade any officer, employee, agent or customer of Company or
any of its affiliates, or any person who supplies goods or services or licenses
intangible or tangible property to Company or any of its affiliates to
discontinue his, her or its relationship with such entity.
(c) Confidentiality: Except in the normal and proper course of his
duties hereunder, Employee will not use for his own account or disclose to
anyone else, during or after the Term of this Agreement, any confidential or
proprietary information or material relating in the reasonable opinion of
Company to Company's operations or businesses, including Company's subsidiaries,
which he may obtain from Company, its subsidiaries or their officers, directors
or employees, or otherwise during or by virtue of Employee's employment by
Company. Confidential or proprietary information or material includes, without
limitation, the following types of information or material, both existing and
contemplated, regarding Company, its direct or indirect parents, subsidiaries,
affiliates or related companies: proprietary data processing systems and
software; corporate information, including contractual arrangements, plans,
strategies, tactics, policies, resolutions, patent, copyright, trademark, and
tradename applications, and any litigation or negotiations; marketing
information, including sales or product plans, strategies, methods, customers,
prospects, or market research data; financial information, including cost and
performance data, debt arrangements, equity structure, investors, and
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holdings; operational and scientific information, including trade secrets,
technical information, and personnel information, including personnel lists,
resumes, personnel data, organizational structure, and performance evaluations;
provided, however, that confidential or proprietary information shall not
include any information that is generally available to the public without breach
of this Agreement.
(d) Intangible Property: All right, title and interest of every kind
and nature whatsoever, whether now known or unknown, in and to any intangible
property, including all trade names, unregistered trademarks and service marks,
brand names, patents, copyrights, registered trademarks and service marks and
all trade secrets and confidential know-how (collectively, the "Intangible
Property"), invented, created, written, developed, furnished, produced or
disclosed by Employee in the course of rendering his services to Company
hereunder shall, as between the parties hereto, be and remain the sole and
exclusive property of Company for any and all purposes and uses whatsoever, and
Employee shall have no right, title or interest of any kind or nature in such
Intangible Property, or in or to any results or proceeds therefrom. Employee
will, at the request of Company, execute such assignments, certificates and
other instruments as Company may from time to time deem necessary or desirable
to evidence, establish, maintain, perfect, protect, enforce or defend its right,
title and interest in and to, any of the foregoing.
(e) Return of Documents: Employee agrees that all documents of any
nature pertaining to activities of Company, its direct or indirect parents,
subsidiaries, affiliates and related companies, used, prepared, or made
available to Employee in the course of rendering his services to Company
hereunder, including the information or materials covered by Paragraphs 6(c) and
6(d) hereof, are and shall be the property of Company or, as the case may be,
its direct or indirect parents, subsidiaries, affiliates or related companies,
and that all copies of such documents shall be surrendered to Company whenever
requested by the Company.
(f) Non-Competition Period: "Non-Competition Period" means the period
beginning on the Effective Date and ending on the date that is the later of (i)
the second anniversary of the date of termination of Employee's employment with
Company and (ii) three years from the Effective Date.
(g) Enforcement: Employee acknowledges that irreparable damage would
result to Company or its direct or indirect parents, subsidiaries, affiliates or
related companies if the provisions of this Paragraph 6 are not specifically
enforced, and agrees that Company shall be entitled to any appropriate legal,
equitable, or other remedy, including injunctive relief, in respect of any
failure to comply with the provisions of this Paragraph 6.
7. ENTIRE AGREEMENT: This Agreement contains the entire understanding
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between Company and Employee concerning Employee's employment with Company, and
supersedes all prior negotiations, term sheets, and agreements between them.
8. MODIFICATION: No provision of this Agreement may be amended, modified,
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or waived except by written agreement signed by both Company and Employee.
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9. GOVERNING LAW: The provisions of this Agreement shall be construed in
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accordance with, and governed by, the laws of the State of Indiana without
regard to principles of conflict of laws.
10. SAVINGS CLAUSE: If any provision of this Agreement or the application
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thereof is held invalid, the invalidity shall not affect other provisions or
applications of the Agreement which can be given effect without the invalid
provisions or applications and to this end the provisions of this Agreement are
declared to be severable.
11. SUCCESSORS; NO ASSIGNMENT OF AGREEMENT: Except as otherwise provided
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herein, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective legal representatives, heirs, successors
and assigns. Employee acknowledges that his services are unique and personal.
Accordingly, Employee may not assign his rights or delegate his duties or
obligations under this Agreement to any person or entity.
12. ADDITIONAL REPRESENTATIONS: Employee represents and warrants to
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Company that he is knowledgeable and sophisticated as to business matters,
including the subject matter of this Agreement, that he has read this Agreement
and that he understands its terms. Employee acknowledges that, prior to
assenting to the terms of this Agreement, he had been given a reasonable time to
review it, to consult with counsel of his choice, and to negotiate at arm's-
length with Company as to its contents. Company and Employee agree that the
language used in this Agreement is the language chosen by the parties to express
their mutual intent, and that Employee has entered into this Agreement freely
and voluntarily and without pressure or coercion from anyone. Employee
represents and warrants to Company that he is not bound by any agreement or
subject to any restriction which would interfere with or prevent his entering
into or carrying out this Agreement.
13. RIGHTS AND WAIVERS: All rights and remedies of the parties hereto are
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separate and cumulative, and no one of them, whether exercised or not, shall be
deemed to be to the exclusion of any other rights or remedies or shall be deemed
to limit or prejudice any other legal or equitable rights or remedies which
either of the parties hereto may have. No party to this Agreement shall be
deemed to waive any rights or remedies under this Agreement unless such waiver
is in writing and signed by such party. No delay or omission on the part of
either party in exercising any right or remedy shall operate as a waiver of such
right or remedy or any other rights or remedies. A waiver on any one occasion
shall not be construed as a bar to or a waiver of any right or remedy on any
future occasion.
14. SURVIVABILITY: The expiration or termination of this Agreement shall
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not operate to affect such of the provisions hereof as are expressed to remain
in full force and effect notwithstanding such termination.
15. CAPTIONS: The captions of this Agreement are for descriptive purposes
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only and are not part of the provisions hereof and shall have no force or
effect.
16. NOTICES: All notices and other communications hereunder shall be in
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writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows (or to such other party or address as
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Company or Employee may designate in notice duly delivered to the other pursuant
to this paragraph):
If to Employee, to him at his address set forth in the preamble
hereto, except that after August 15, 2001, notices to Employee shall be sent to:
0000 Xxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000.
If to Company, to it at:
Xxxxxx'x Trading Company, Inc.
0000 X. Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxx Xxxxxx
With copies to:
O'Melveny & Xxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxx
and
Xxxxxxx Xxxxxx & Co.
000 Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxx
(Remainder of Page Intentionally Left Blank)
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IN WITNESS WHEREOF, Company and Employee, intending to be legally
bound, have executed this Agreement on the day and year first above written.
EMPLOYEE: COMPANY:
XXXXXX'X TRADING COMPANY, INC.
/s/ C. Xxxxx Xxxx /s/ Xxxxxx Xxxx
________________________________ By:____________________________
C. Xxxxx Xxxx Xxxxxx Xxxx
Chief Executive Officer
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