EMPLOYMENT AGREEMENT

(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, store planning 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”).  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 (ii) Employee shall observe and comply with all directions, policies and regulations given or promulgated by the CEO.

(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.

(a)

Salary and Expenses:  Company shall pay Employee a base salary at an annual rate of $350,000 for the period from the date hereof through and including January 31, 2004, $375,000 for Company’s fiscal year 2004, and $400,000 for Company’s fiscal year 2005, 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 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 50% of base salary and Stay Bonus (as hereinafter defined) in each fiscal year beginning in fiscal year 2003 and may be increased by an uncapped, additional amount of Target Bonus pursuant to the schedule for incremental Target Bonus increases approved by the Board from time to time.

(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 2003, 2004 and 2005, Company shall pay to Employee a stay bonus of $100,000 (“Stay Bonus”) in accordance with its customary bonus payment schedule; provided, however, that on the final day of the Term of this Agreement, if such date is other than the last day of Company’s fiscal year, Employee shall be entitled to receive a pro rata portion of such Stay Bonus, which shall equal $100,000 multiplied by a fraction, the numerator of which shall be the number of days in such fiscal year prior to such date, and the denominator of which shall be 365.  The Stay Bonus shall be deemed earned on the last day of such fiscal year so long as this Agreement has not been terminated by Employee or by Company for Cause, or on the last day of the Term, as the case may be.

(g)

Company Stock/Options.  Subject to the provisions of this Section 3(g), beginning with the 2004 fiscal year, Employee shall be eligible to receive an annual grant of options commensurate with Employee’s position and responsibilities (the “Annual Options”), pursuant to the Company’s 1999 Stock Option Plan, as amended (the “Option Plan”), with an exercise price equal to the closing price of the Common Stock on the grant date; provided, however, Company shall not be required to issue Annual Options to Employee after such

time as it has discontinued the issuance of options to other senior management employees, using instead another form of incentive compensation, provided that Employee receives incentive compensation in the same form as other senior management employees.  The Annual Options granted during a fiscal year shall be granted not later than the end of the fourth full month of that fiscal year and shall be contingent on Employee being employed by Company on the grant date and Company having achieved its Target Income for the immediately preceding fiscal year.  The Annual Options shall be governed by and subject to the terms and conditions of the Option Plan.

(h)

Financial Planning Services:  Company shall pay for financial planning services for Employee from the firm of Brownson, Rehmus Foxworth, and Company and shall indemnify Employee against any incremental income tax liability incurred as a result of Company’s payment for such services.

(a)

Termination by Company for 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” means Employee’s (i) intentional act of fraud, embezzlement, theft, or other material violation of the law in connection with or in the course of his employment, (ii) intentional illegal act that is likely to materially injure the reputation, business, or a business relationship of Company; (iii) intentional wrongful damage to material assets of Company; (iv) intentional wrongful disclosure of material confidential information of Company; (v) intentional wrongful competitive activity in material breach of Employee’s duty of loyalty; or (vi) breach of any material term of any stated material employment policy of Company; provided Company has given Employee written notice of such breach, and Employee has failed to cure such breach within ten (10) days after receipt of such notice.  For purposes of the preceding sentence, no act, or failure to act, on the part of Employee shall be deemed “intentional” if it was due primarily to an error in judgment or negligence, but shall be deemed “intentional” only if done, or omitted to be done, by Employee not in good faith and without reasonable belief that his act or omission was in or not opposed to the best interest of Company.

(b)

Termination by Company for Other than Cause, Death, or Disability:  Company may immediately terminate Employee’s employment for any reason other than Cause, death, or Disability by giving ten (10) days written notice to Employee.

(c)

Death:  Employee’s employment shall automatically terminate upon his death.

(d)

Disability:  Employee shall not be considered in breach of this Agreement, if he fails to perform the material duties of his employment because of a physical or mental condition that renders him unable to perform such services (hereafter referred to as “Disability”).  If for a continuous period of twelve (12) months during the Term, Employee fails to perform the material duties of his employment because of Disability, his employment shall terminate on the first anniversary of the beginning of his Disability.  If there is any dispute as to whether Employee has a Disability, this issue shall be settled by the opinion of an impartial reputable physician qualified to make the determination agreed upon for the purpose by Employee and Company, or failing such agreement within fourteen (14) days of a written request therefor by either party to the other, by an impartial reputable physician qualified to make the determination who is selected by agreement of a reputable physician selected by Company and a reputable physician selected by Employee.

(e)

Termination by Employee for Good Reason.  Employee may terminate employment during the Term for “Good Reason” by delivering to Company (i) a Preliminary Notice of Good Reason (as defined below), and (ii) 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 (i) the assignment (without the express written consent of Employee) to Employee of a materially lower position in the organization in terms of his responsibility, authority and status, any material reduction in Employee’s authority or status, or requiring Employee to perform services not commensurate with Employee’s ability, experience and qualifications; (ii) requiring Employee (without his consent) to relocate his primary work location more than fifty (50) miles away from the current principal office of Company in Plainfield, Indiana; (iii) any reduction in Employee’s base salary or bonus opportunity; (iv) any material breach by Company of the terms of this Agreement; or (v) failure of any successor of the Company to assume this Agreement; provided that “Good Reason” shall not include (A) acts not taken in bad faith which are cured by Company in all respects not later than twenty (20) days from the receipt by Company of a written notice from Employee identifying in reasonable detail the act or acts constituting “Good Reason” (a “Preliminary Notice of Good Reason”) or (B) acts taken by Company as a result of grounds for termination of employment for Cause pursuant to Section 4(a).  A Preliminary Notice of Good Reason shall not, by itself, constitute a Notice of Termination.

(a)

Termination by Company for Cause:  If Company terminates Employee for Cause at any time during the Term, Employee 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 any bonus.

(b)

Termination by Company for Other Than Cause, Disability, Death, or by Employee for Good Reason:  If Company terminates Employee’s employment for any reason other than Cause, Disability, or death at any time during the Term, or if Employee terminates employment for Good Reason pursuant to Section 4(e) during the Term, 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 any bonus owed for the immediately preceding fiscal year and retirement benefits accrued through the date of such termination and payable under the terms of such plans, (ii) a lump sum payment equal to Employee’s Target Bonus for the fiscal year of termination, (iii) a lump sum equal to then-current base salary, less standard income and payroll tax withholding and other authorized deductions, from the date of termination until the later of the date that is (A) the first anniversary of the date of his termination or (B) the second anniversary of the date hereof (such period hereafter referred to as the “Severance Period); (iv) continued health coverage for the Severance Period, and (vi) a lump sum equal to the benefits that absent termination of employment would have accrued under Company’s tax-qualified and non-qualified retirement plans (which benefits shall be deemed fully vested) until the end of the Severance Period.

(c)

Death or Disability: If Employee’s employment terminates pursuant to Section 4(c) or (d) as a result of his death or Disability, Employee shall be entitled to the same compensation as provided under Section 5(a).  In addition, Employee (or his estate) shall receive a payment (at such time as is consistent with the administration of Company’s bonus program) equal to a pro-rata share of the annual bonus he would have earned (as determined in a manner consistent with Section 3(c)) 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 termination of employment pursuant to Section 4(d) and the denominator of which shall be 365.

(d)

Exclusive Remedy:  Employee acknowledges that, other than the payments described in this Section 5 and Employee’s rights under any benefit plan of Company in which Employee participates, he shall have no other claims against, and be entitled to no other payments from, Company or its direct or indirect parents, subsidiaries, affiliates or related companies upon any termination or breach by Company of this Agreement.

(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 Section 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 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 Sections 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 date hereof 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 date hereof .

(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 Section 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 Section 6.

EMPLOYEE:

COMPANY:
GALYAN’S TRADING COMPANY, INC.

By:

/s/ C. David Zoba

By:

/s/ Robert B. Mang

C. David Zoba

Robert B. Mang
Chief Executive Officer