EXHIBIT 10.20
EMPLOYMENT AGREEMENT
February 2, 1998
Xx. Xxxxxx X. Xxxxxx
Vice Chairman
The Sports Authority, Inc.
0000 Xxxxx Xxxxx Xxxx 0
Xx. Xxxxxxxxxx, XX 00000
Dear Xx. Xxxxxx:
This letter will confirm our understanding concerning your employment
with The Sports Authority, Inc. (the "Company"), and shall be considered an
agreement entered into as of February 2, 1998.
1. Your salary for the Company's 1998 fiscal year will be at an annual
rate of $500,000 per year. You will be eligible for benefits under the Company's
benefit plans to the same extent as other executive officers of the Company.
2. Pursuant to action taken by the Compensation Committee of the Board
of Directors on January 28, 1998 under the Company's 1996 Stock Option and
Restricted Stock Plan (the "Plan"), you have been granted options to purchase
250,000 shares of the Company's Common Stock, effective as of your first day of
employment, February 2, 1998, at an option price of $12.375 per share. The terms
of your option grant are set forth in the Non-Qualified Option Agreement between
the Company and you dated as of February 2, 1998 (the "Option Agreement").
3 Pursuant to action taken by the Compensation Committee of the Board of
Directors on January 28, 1998 under the Plan, you have been granted 50,000
restricted shares of the Company's Common Stock, effective as of your first day
of employment, February 2, 1998. The terms of your grant are set forth in the
Restricted Stock Agreement between the Company and you dated as of February 2,
1998 (the "Restricted Stock Agreement").
4. The Company will pay for all of your reasonable expenses for
temporary living in Florida and commuting between Florida and your current home
before August 2, 1998. The Company will also pay the reasonable costs of
relocating you and your family from your current home to Florida during your
employment with the Company. All such payments will be grossed up as necessary
to compensate you for taxation of such payments.
5. For purposes of your bonus eligibility for the 1998 fiscal year under
the Company's Annual Incentive Bonus Plan, your job has been classified as Grade
78.
6. You have been elected as a Class I Director of the Company, effective
as of February 2, 1998, and you haven been nominated by the Board of Directors
for election by the stockholders of the Company for a three-year term as a Class
I Director at the 1998 Annual Meeting of Stockholders.
7. Over the next year, certain executive responsibilities and duties
will be transitioned to you. By [confidential portion omitted and filed
separately with the Commission], you will be evaluated by the Chairman and the
Board of Directors for election as the Company's Chief Executive Officer. If you
are employed by the Company on [confidential portion omitted and filed
separately with the Commission], you will be elected by the Board of Directors
as the Company's Chief Executive Officer and will thereupon assume all
responsibilities and duties of that office. It is understood that your
responsibilities will not include those of the Chairman of the Board of
Directors. It is also understood that, if you cease to be employed by the
Company before [confidential portion omitted and filed separately with the
Commission], you will resign at the same time as a Director of the Company.
8. If your employment with the Company is terminated by the Company
other than for Cause, or if your employment is terminated by death, the Company
will pay to you (or, in the case of death, your estate) through June 30, 2000, 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.
9. If there is a Change in Control of the Company while you are employed
by the Company and if your employment with the Company is terminated by the
Company other than for Cause or if you terminate your employment with the
Company for Good Reason, or if your employment is terminated by death, in any
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; provided, however, that the amount of such payment may
be reduced as provided in paragraph 12. Such payment shall be made within
fifteen days after your termination, or as promptly thereafter as possible if
the procedures set forth in paragraph 12 cannot be completed within fifteen
days.
10. If there is a Change in Control of the Company while you are
employed by the Company and if you terminate your employment with the Company
(other than under the circumstances described in paragraph 9) at any time after
one year after the Change in Control and before June 30, 2000, the Company will
pay to you through the earlier of one year after the last day of your employment
or June 30, 2000, 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).
11. (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).
12. If it is determined that any payment or distribution by the Company
to you or for your benefit, whether paid or payable or distributed or
distributable pursuant to the terms of this agreement or otherwise (a
"Payment"), would constitute an "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), the
aggregate present value of amounts payable or distributable to you or for your
benefit pursuant to this agreement (such payments or distributions pursuant to
this agreement are hereinafter referred to as "Agreement Payments") shall be
reduced (but not below zero) to the Reduced Amount. The "Reduced Amount" shall
be an amount expressed in present value which maximizes the aggregate present
value of Agreement Payments without causing any Payment to be subject to
taxation under Section 4999 of the Code. For this purpose, present value shall
be determined in accordance with Section 280G(d)(4) of the Code.
All determinations to be made under this paragraph 12 shall be made by
the Company's independent public accountant immediately prior to the Change in
Control (the "Accounting Firm")), which firm shall provide its determinations
and any supporting calculations both to the Company and to you within ten days
of your termination. Any such determination by the Accounting Firm shall be
binding on both the Company and you. You shall, in your sole discretion,
determine which and how much of any Payment will be eliminated or reduced
consistent with the requirements of this paragraph 12. Within five days after
your determination, the Company shall pay (or cause to be paid) or distribute
(or cause to be distributed) to or for your benefit such amounts as are then due
to you under this agreement.
As a result of the uncertainty in the application of Section 280G of the
Code at the time of the initial determination by the Accounting Firm hereunder,
it is possible that Agreement Payments will have been made by the Company which
should not have been made ("Overpayment") or that additional Agreement Payments
which have not been made by the Company could have been made ("Underpayment"),
in each case, consistent with the calculations required to be made hereunder.
Within two years after the termination of your employment, the Accounting Firm
shall review the determination made by it pursuant to the preceding paragraph.
If the Accounting Firm determines that an Overpayment has been made, any such
Overpayment shall be treated for all purposes as a loan to you which you shall
repay to the Company together with interest at the applicable Federal rate
provided for in Section 7872(f)(2) of the Code (the "Federal Rate"); provided,
however, that no amount shall be payable by you to the Company if and to the
extent such payment would not reduce the amount which is subject to taxation
under Section 4999 of the Code. If the Accounting Firm determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to you or for your benefit, together with interest at the Federal Rate.
All of the fees and expenses of the Accounting Firm in performing the
determinations referred to above shall be borne solely by the Company. The
Company agrees to indemnify and hold harmless the Accounting Firm against any
and all claims, damages and expenses resulting from or relating to such
determinations, except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of the Accounting Firm.
13. In consideration of the obligations of the Company hereunder, unless
an event occurs entitling you to payments under paragraph 9, you agree that you
shall not (i) directly or indirectly become an employee, director or advisor of,
or otherwise affiliated with, any other entity or enterprise whose business is
in competition with the business of the Company, (ii) 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 this agreement,
unless at the time of such solicitation the person solicited had not been an
employee of the Company for more than twelve months, and (iii) without the
written consent of the Board of Directors or a person authorized thereby,
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 by any other officer thereof to a third party
without restrictions on the disclosure of such information. Your obligations
under this paragraph will continue until June 30, 2000.
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.
14. 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.
15. 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 9 or paragraph 10 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 4 of this agreement.
16. 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.
17. 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 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.
18. All payments hereunder shall be subject to applicable tax
withholding and deductions.
19. This agreement, together with the Option Agreement and the
Restricted Stock 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.
20. 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.
21. 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/ Xxxx X. Xxxxx
---------------------------------
Xxxx X. Xxxxx
Chairman and Chief Executive
Officer
Agreed:
/s/ Xxxxxx X. Xxxxxx
--------------------
Xxxxxx X. Xxxxxx
