EXHIBIT 10.11
Employment Agreement
April 30, 2001
Xx. Xxxxxx X. Xxxxxx
Chairman and Chief Executive Officer
The Sports Authority, Inc.
0000 Xxxxx Xxxxx Xxxx 0
Xx. Xxxxxxxxxx, XX 00000
Dear Xx. Xxxxxx:
This letter will confirm our understanding concerning your continued employment
with The Sports Authority, Inc. (the "Company").
1. The Company agrees to employ you as, and you agree to serve as, the Company's
Chief Executive Officer through December 31, 2003, subject to the terms of this
agreement.
2. If your employment with the Company is terminated by the Company other than
for Cause, and if paragraph 3 does not apply, the Company will pay to you
through the later of December 31, 2003 or one year after such termination, a
monthly fee equal to (a) one-twelfth of your annualized base salary in effect on
the date your employment is terminated, plus (b) one-twelfth of the "on plan"
bonus amount targeted for you for the fiscal year during which your employment
is terminated (to be paid on or about the 15th day of each month). In addition,
all of your unvested options to purchase Company stock under the Company's stock
option plans will vest upon the termination of your employment other than for
Cause or upon your death on or before December 31, 2003.
3. If there is a Change in Control of the Company while you are employed by the
Company and if (i) your employment with the Company is terminated by the Company
other than for Cause, or (ii) you terminate your employment with the Company for
Good Reason, in either case within a two-year period following such a Change in
Control, the Company will pay to you an amount equal to 2.99 times the sum of
(i) your annual rate of base salary at the time of termination or immediately
prior to the Change in Control, whichever base salary amount is greater, and
(ii) the "on plan" bonus amount targeted for you for the fiscal year in which
termination occurs or the fiscal year immediately prior to the Change in
Control, whichever bonus amount is greater. Such payment shall be made within
fifteen days after your termination.
4. If there is a Change in Control of the Company while you are employed by the
Company and if, at any time after one year after the Change in Control and
before December 31, 2003, (i) you are not the chief executive officer of (A) the
corporation or other entity (whether or not it is the Company) which is the
survivor of any merger or consolidation resulting from the Change in Control, if
such surviving corporation or entity is not more than 50% owned by any other
corporation or entity, or (B) the corporation or other entity which, as a result
of the Change in Control, owns more than 50% of the stock of the Company or the
corporation or entity which is the survivor of any merger or consolidation
resulting from the Change in Control, other than due to your resignation from
such position or your refusal to serve in such position, and (ii) you terminate
your employment with the Company or such other entity (other than under the
circumstances described in paragraph 3), the Company will pay to you through one
year after the last day of your employment a monthly fee equal to (a)
one-twelfth of your annualized base salary in effect on the date your employment
is terminated, plus (b) one-twelfth of the "on plan" bonus amount targeted for
the fiscal year in which termination occurs or the fiscal year immediately prior
to the Change in Control, whichever bonus amount is greater (to be paid on or
about the 15th day of each month).
5. (a) Termination by the Company for "Cause" means termination based on (i)
conduct which is a material violation of Company policy, as in effect
immediately before any Change in Control, or which is fraudulent or unlawful or
which materially interferes with your ability to perform your duties, (ii)
misconduct which damages or injures the Company or substantially damages the
Company's reputation, or (iii) gross negligence in the performance of, or
willful failure to perform, your duties and responsibilities.
(b) Termination by you for "Good Reason" means termination based on the
occurrence without your express written consent of any of the following: (i) a
significant diminution by the Company of your role with the Company or a
significant detrimental change in the nature and/or scope of your status with
the Company, other than for Cause, (ii) a reduction in your base salary, other
than for Cause and other than as part of an across-the-board reduction in
salaries of management personnel (including all Vice Presidents and above) of
less than 20%, (iii) a material diminution by the Company of benefits (taken as
a whole) provided to you immediately prior to the Change in Control, or (iv) the
relocation of the Company's principal executive offices to a location outside of
Broward County, Palm Beach County or Dade County, Florida or any requirement
that you be based anywhere other than the Company's principal executive offices.
(c) A "Change in Control" shall be deemed to have occurred if:
(i) the "beneficial ownership" (as defined in Rule l3d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of securities
representing more than 50% of the combined voting power of the Company is
acquired by any "person" as defined in sections 13(d) and 14(d) of the Exchange
Act (other than
the Company or any trustee or other fiduciary holding securities under an
employee benefit plan of the Company), or
(ii) the shareholders of the Company approve a definitive agreement to
merge or consolidate the Company with or into another corporation or to sell or
otherwise dispose of all or substantially all of its assets, or
(iii) during any period of three consecutive years, individuals who at
the beginning of such period were members of the Board of Directors of the
Company cease for any reason to constitute at least a majority thereof (unless
the election, or the nomination for election by the Company's shareholders, of
each new director was approved by a vote of at least a majority of the directors
then still in office who were directors at the beginning of such period).
6. (a) Anything in this Agreement to the contrary notwithstanding, in the event
that it shall be determined that any payment or distribution to or for your
benefit, whether paid or payable or distributed or distributable pursuant to the
terms of this agreement or otherwise (the "Payment"), would constitute an
"excess parachute payment" within the meaning of Section 280G of the Code, you
shall be paid an additional amount (the "Gross-Up Payment") such that the net
amount retained by you after deduction of any excise tax imposed on you under
Section 4999 of the Code , and any federal, state and local income and
employment tax and excise tax imposed upon the Gross-Up Payment shall be equal
to the Payment. For purposes of determining the amount of the Gross-Up Payment,
you shall be deemed to pay federal income tax and employment taxes at the
highest marginal rate of federal income and employment taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state and locality of your
residence (or, if greater, the state and locality in which you are required to
file a nonresident income tax return with respect to the Payment) on the
Termination Date, net of the maximum reduction in federal income taxes that may
be obtained by you from the deduction of such state and local taxes.
(b) All determinations to be made under this paragraph 6 shall be made by the
Company's independent public accountant immediately prior to the Change of
Control (the "Accounting Firm"), which firm shall provide its determinations and
any supporting calculations both to the Company and you within 10 days of your
termination. Any such determination by the Accounting Firm shall be binding upon
the Company and you. Within five days after the Accounting Firm's determination,
the Company shall pay (or cause to be paid) or distribute (or cause to be
distributed) to you, or for your benefit, such amounts as are then due to you
under this agreement.
(c) You shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company of
the Gross-Up Payment. Such notification shall be given as soon as practicable
but no later than ten business days after you know of such claim and shall
apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid.
You shall not pay such claim prior to the expiration of the thirty day period
following the date on which you give such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies you in writing prior to the expiration of such
period that it desires to contest such claim, you shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company;
(iii) cooperate with the Company in good faith in order to effectively
contest such claim; and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold you harmless, on an after-tax
basis, for any excise tax, income tax or employment tax, including interest and
penalties, with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this paragraph 6, the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearing and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
you to pay the tax claimed and xxx for a refund or contest the claim in any
permissible manner, and you agree to prosecute such contest to a termination
before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine; provided further,
however, that if the Company directs you to pay such claim and xxx for a refund
the Company shall advance the amount of such payment to you, on an interest-free
basis and shall indemnify and hold you harmless, on an after-tax basis, from any
excise tax, income tax or employment tax, including interest or penalties with
respect thereto, imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and provided further that any
extension of the statute of limitations relating to payment of taxes for your
taxable year with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and you shall be entitled to settle or contest, as
the case may be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
(d) If, after the receipt by you of an amount advanced by the Company
pursuant to this Section, you become entitled to receive any refund with respect
to such claim, you shall (subject to the Company's complying with the
requirements of this paragraph) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by you of an amount advanced by the
Company pursuant to this Section, a determination is made that you shall not be
entitled to any refund with respect to such claim and the Company does not
notify you in writing of its intent to contest such denial of refund prior to
the expiration of thirty days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
(e) All of the fees and expenses of the Accounting Firm in performing the
determinations referred to in this paragraph shall be borne solely by the
Company. The Company agrees to indemnify and hold harmless the Accounting Firm
of and from any and all claims, damages and expenses resulting from or relating
to its determinations pursuant to this paragraph, except for claims, damages or
expenses resulting from the gross negligence or willful misconduct of the
Accounting Firm.
7. The Company will provide you with life insurance coverage as follows.
(a) In the event your employment is terminated by death on or before December
31, 2003 and paragraph 3 does not apply, such insurance will pay to your
designated beneficiary or beneficiaries (collectively, "Beneficiary") in a lump
sum the present value, using a discount rate equal to the asked yield on the
longest term U.S. Treasury xxxx quoted in The Wall Street Journal on the date of
your death (the "Present Value") of the following amount: a monthly amount equal
to (a) one-twelfth of your annualized base salary in effect on the date of your
death, plus (b) one-twelfth of the "on plan" bonus amount targeted for you for
the fiscal year during which your death occurs (due on or about the 15th day of
each month), through the later of December 31, 2003 or one year after your
death.
(b) In the event you die after your employment has been terminated under
paragraph 2 but before the date the last payment due to you under paragraph 2 is
made, such insurance will pay to your Beneficiary in a lump sum the Present
Value of the following amount: (i) a monthly amount equal to (a) one-twelfth of
your annualized base salary in effect on the date your employment was
terminated, plus (b) one-twelfth of the "on plan" bonus amount targeted for you
for the fiscal year during which your employment was terminated (due on or about
the 15th day of each month), through the later of December 31, 2003 or one year
after such termination, less (ii) all amounts already paid to you under
paragraph 2.
(c) In the event your employment is terminated by death within a two-year
period following a Change in Control, such insurance will pay to your
Beneficiary an
amount equal to 2.99 times the sum of (i) your annual rate of base salary at the
time of your death or immediately prior to the Change in Control, whichever base
salary amount is greater, and (ii) the "on plan" bonus amount targeted for you
for the fiscal year in which your death occurs or the fiscal year immediately
prior to the Change in Control, whichever bonus amount is greater.
8. In consideration of the obligations of the Company hereunder, you agree that
you shall not, for a period of one year from the termination of your employment
by you or the Company for any reason (or the later of one year from the
termination of your employment or December 31, 2003, if your employment is
terminated under paragraph 2), (a) directly or indirectly become an employee,
director, consultant or advisor of, or otherwise affiliated with, any retailer
of sporting goods, athletic footwear or athletic apparel which sells in the
United States though any retail channel (unless the classes of products sold by
such retailer constitute less than 10% of the total sales by the Company and its
licensees in the United States during the fiscal year of the Company immediately
preceding the year of such termination), (b) directly or indirectly solicit or
hire, or encourage the solicitation or hiring of, any person who was an employee
of the Company at any time on or after the date of such termination (unless more
than six months shall have elapsed between the last day of such person's
employment by the Company and the first date of such solicitation or hiring),
(c) disparage the name, business reputation or business practices of the Company
or any of its officers or directors, or interfere with the Company's existing or
prospective business relationships, or (d) without the written consent of the
Chief Executive Officer of the Company, disclose to any person other than as
required by law or court order, any confidential information obtained by you
while in the employ of the Company, provided, however, that confidential
information shall not include any information known generally to the public
(other than as a result of unauthorized disclosure by you) or any specific
information or type of information generally not considered confidential by
persons engaged in the same business as the Company, or information disclosed by
the Company by any member of its Board of Directors or any other officer thereof
to a third party without restrictions on the disclosure of such information.
You acknowledge that these restrictions are reasonable and necessary to protect
the Company's legitimate interests, that the Company would not have entered into
this agreement in the absence of such restrictions, and that any violation of
these restrictions will result in irreparable harm to the Company. You agree
that the Company shall be entitled to preliminary and permanent injunctive
relief, without the necessity of proving actual damages, as well as an equitable
accounting of all earnings, profits and other benefits arising from any
violation hereof, which rights shall be cumulative and in addition to any other
rights or remedies to which the Company may be entitled. You irrevocably and
unconditionally (i) agree that any legal proceeding arising out of this
paragraph may be brought in the United States District Court for the Southern
District of Florida, or if such court does not have jurisdiction or will not
accept jurisdiction, in any court of general jurisdiction in Broward County,
Florida, (ii) consent to the non-exclusive jurisdiction of such court in any
such proceeding, and (iii) waive any objection to the
laying of venue of any such proceeding in any such court. You also irrevocably
and unconditionally consent to the service of any process, pleadings, notices or
other papers.
9. The payments provided hereunder shall constitute the exclusive payments due
you from, and the exclusive obligation of, the Company in the event of any
termination of your employment, except for any benefits which may be due you in
normal course under any employee or executive benefit plan of the Company which
provides benefits after termination of employment, other than a severance pay
plan. You shall not be required to mitigate the amount of any payment or benefit
provided for in this agreement by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for herein be reduced by any
compensation earned by other employment or otherwise. The payments hereunder may
not be transferred, assigned or encumbered in any manner, either voluntarily or
involuntarily. In the event of your death, any payments then or thereafter due
hereunder will be made to your estate.
10. It is the intent of the parties that you not be required to incur any
expenses associated with the enforcement of your right to receive payments due
under paragraph 3 or paragraph 4 of this agreement by arbitration, litigation or
other legal action because the cost and expense thereof would substantially
detract from the benefits intended to be extended to you. Accordingly, the
Company shall pay you on demand the amount necessary to reimburse you in full
for all reasonable expenses (including all attorneys' fees and legal expenses)
incurred by you in enforcing the obligations of the Company to make the payments
due under paragraph 3 or paragraph 4 of this agreement.
11. The obligation to make the payments hereunder is conditioned upon your
execution and delivery to the Company at the time of the termination of your
employment of a release, in form satisfactory to the Company, of any claims you
may have as a result of your employment or termination of employment under any
federal, state or local law, excluding any claim for benefits which may be due
you in normal course under any employee or executive benefit plan of the Company
which provides benefits after termination of employment, other than a severance
pay plan, and excluding any claims for reimbursement for liabilities, costs or
expenses incurred in any action against you within the scope of your employment
by the Company and for which you would have been indemnified pursuant to the
bylaws of the Company as of the date hereof (in which case you shall notify the
Company in writing within ten days after receiving service of process as to the
commencement of the action and give the Company the right to control the defense
of any such action), unless later limited in accordance with applicable law.
12. The Company shall require any successor or successors (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to you, to acknowledge expressly that this
agreement is binding upon and enforceable against the Company in accordance with
the terms hereof, and in the same manner and to the same extent that the Company
would be required to perform if no such succession or successions had taken
place. Failure of the Company to obtain such agreement prior to
1
the effectiveness of any such succession shall be a breach of this agreement. As
used in this agreement, the Company shall mean the Company as hereinbefore
defined and any such successor or successors to its business and/or assets,
jointly and severally.
13. All payments hereunder shall be subject to applicable tax withholding and
deductions.
14. This agreement sets forth the entire understanding between you and the
Company concerning your relationship with the Company and supersedes all prior
agreements, written or oral, express or implied, between you and the Company as
to such subject matter. This agreement may not be amended, nor may any provision
hereof be modified or waived, except by an instrument in writing duly signed by
you and the Company.
15. If any provision of this agreement, or any application thereof to any
circumstances, is invalid, in whole or in part, such provision or application
shall to that extent be severable and shall not affect other provisions or
applications of this agreement.
16. This agreement shall be governed by and interpreted under the laws of the
State of Delaware without giving effect to any conflict of laws provisions.
Please indicate your agreement by signing below and retain one copy for you
records.
Sincerely,
THE SPORTS AUTHORITY, INC.
By: /s/ Xxxxxxx X. Xxxxx
Xxxxxxx Xxxxx
Chair, Compensation Committee
Agreed:
/s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
