Exhibit 10.3
------------
Severance Agreement - SVP
-------------------------
August 28, 2001
Dear _______________:
This letter will confirm our understanding on the matters set forth below,
and supersedes all prior agreements between us on the same subject.
1. Subject to your execution of the release required by paragraph 11, if
your employment with The Sports Authority, Inc. (the "Company") is terminated by
the Company other than for Cause and paragraph 2 does not apply, the Company
will pay to you your base salary through the date termination occurs, and
thereafter the Company will pay you twenty-six (26) bi-weekly severance payments
equal to your bi-weekly base salary at the time of termination. In addition, on
the next ensuing date when bonuses are paid under the bonus plan of the Company
in which you are a participant at the time of your termination, the Company will
pay you in a lump sum an amount equal to (i) the bonus you would have received
if you had remained employed by the Company through that date, multiplied by
(ii) a fraction, the numerator of which is the number of days in the Company
fiscal year for which such bonus is payable in which you were employed by the
Company and the denominator of which is the number of days in such fiscal year.
2. Notwithstanding paragraph 1, if there is a Change in Control while you
are employed by the Company and if your employment with the Company is
terminated by the Company other than for Cause within a two-year period
following such a Change in Control, or if you terminate your employment with the
Company for Good Reason between ninety days and two years after such Change in
Control, the Company will pay to you an amount equal to two times the sum of (i)
your annual rate of base salary (A) at the time of your termination, or (B)
immediately prior to the Change in Control, or (C) immediately prior to any
reduction in your base salary at any time after the commencement of negotiations
with another party which ultimately results in a Change in Control, whichever
base salary amount is greatest, and (ii) the "on plan" bonus amount targeted for
you for the fiscal year in which your 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. If your
employment is terminated by the Company other than for Cause before a Change in
Control but after the commencement of negotiations with another party which
ultimately result in a Change in Control, your termination shall be treated as a
termination under this paragraph 2 as of the date of the Change in Control, and
the payment made to you under this paragraph 2 shall be reduced by any payments
made to you pursuant to paragraph 1 before the Change in Control.
3. (a) Termination by the Company for "Cause" means termination based on
(i) conduct which is a material violation of Company policy (as in effect on the
date your employment is terminated, if it is terminated under paragraph 1, and
as in effect immediately before the Change in Control, if your employment is
terminated under paragraph 2), or which is fraudulent or unlawful, (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)
at any time after the commencement of negotiations with another party which
ultimately result in a Change in Control, (A) 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, or
(B) 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%, or (ii) at any time after a
Change in Control, (A) a material diminution by the Company of benefits (taken
as a whole) provided to you immediately prior to the Change in Control, (B) 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,
or (C) the Company's breach of its obligation under paragraph 12 of this
agreement.
(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).
4. (a) Anything in this Agreement to the contrary notwithstanding, in
the event that it shall be determined that any payment or distribution by the
Company 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 4 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 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 4, 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.
5. 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.
6. In consideration of the obligations of the Company hereunder, you
shall not,
(i) for a period of one year from the date of any termination of your
employment other than under paragraph 2, or for a period of two years
from the date of any termination of your employment under paragraph 2,
directly or indirectly become an employee, director, consultant or
advisor of, or otherwise affiliated with, (A) any company listed on
Exhibit A or any successor thereof, or (B) any other retailer of
---------
sporting goods, athletic footwear or athletic apparel which sells in
the United States through any retail channel, including without
limitation stores, catalogs, direct mail, the Internet and commercial
and/or institutional sales (unless (i) sporting goods, athletic
footwear and athletic apparel constitute less than 50% of the sales of
such retailer during its last completed fiscal year, or (ii) such
retailer had sales totaling less than $300,000,000 during its last
completed fiscal year and less than 20 retail outlets in the United
States at the end of such fiscal year, or (iii) 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 its
last completed fiscal year),
(ii) for a period of one year from the date of any termination of your
employment other than under paragraph 2, or for a period of two years
from the date of any termination of your employment under paragraph 2,
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),
(iii) for a period of two years from the date of any termination of your
employment, 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
(iv) for a period of two years from the date of any termination of your
employment, 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 trade secrets or 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.
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, that any
violation of these restrictions will result in irreparable harm to the Company,
and that the damages suffered by the Company would be extremely difficult to
calculate. You agree that, if you violate these restrictions, the Company shall
be entitled to damages in an amount equal to the aggregate severance payments
you have received or are entitled to receive under paragraph 1 or paragraph 2,
plus, in any event, any additional damages provable by the Company, and that the
Company may cease making any severance payments required under paragraph 1 or
paragraph 2, to the extent necessary to satisfy your obligations to the Company
under this sentence. You also 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 of these restrictions, which rights
shall be cumulative and in addition to any other rights or remedies to which the
Company may be entitled. You represent that the above restrictions on competing
with the Company will not interfere with your ability to earn a livelihood if
your employment with the Company is terminated.
7. The Company agrees that, after termination of your employment, it
will not issue any communications, written or otherwise, that disparage,
criticize or otherwise injure or reflect adversely on you.
8. If your employment with the Company is terminated and the Company is
obligated to make any payments to you pursuant to paragraph 1 or paragraph 2,
the Company shall maintain for your benefit liability insurance for all acts by
you before such termination, no less favorable to you than the liability
insurance in force for other officers of the Company as of the date of your
termination and, if your employment is terminated
under paragraph 2, no less favorable to you than the liability insurance in
force for other officers of the Company immediately prior to the Change in
Control.
9. The parties irrevocably and unconditionally (i) agree that any legal
proceeding arising out of this agreement 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. The parties
also irrevocably and unconditionally consent to the service of any process,
pleadings, notices or other papers in any manner permitted by law.
10. In any action or proceeding between you and the Company arising from
or relating to the interpretation or enforcement of this agreement, the party
which prevails in such litigation shall be entitled to full reimbursement by the
other party for all reasonable expenses (including reasonable attorneys' fees
and expenses) incurred in connection with such action.
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 either indemnified pursuant to
the bylaws of the Company or insured pursuant to a liability insurance policy
maintained by the Company, in either case 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 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. Nothing in this agreement shall be construed as giving you any right
to be retained in the employ of the Company. You understand and acknowledge that
your employment is on an "at-will" basis, and that you are employed by the
Company for an unspecified duration, that your employment may be terminated at
any time, with or without cause, and with or without notice, at either your
option or the Company's option.
15. This agreement shall not apply to any termination of your employment
after November 30, 2004 (the "agreement termination date"), provided that the
agreement termination date shall be automatically extended for successive one-
year periods unless, at least ninety days prior to the agreement termination
date, the Company notifies you or you notify the Company in writing that the
agreement termination date will not be so extended. All of the provisions of
this agreement shall remain in effect after the agreement termination date to
the extent applicable to any termination of your employment on or before such
date.
16. This agreement shall be governed by and interpreted under the laws of
the State of Florida without giving effect to any conflict of laws provisions.
17. This agreement sets forth the entire understanding with respect to the
subject matter hereof and supersedes all prior agreements, written or oral or
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.
18. 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.
19. The language of this agreement shall be construed in accordance with
its fair meaning and not for or against any party.
Please indicate your agreement by signing below and retain one copy for you
records.
Sincerely,
THE SPORTS AUTHORITY, INC.
By:__________________________
Agreed:
_____________________________
Date: _______________________
EXHIBIT A
---------
Academy Sports
The Athlete's Foot
Bass Pro Shops
Big 5 Sports
Chick's
Decathlon
Dick's Clothing & Sporting Goods
Xxxxxx'x Sports
Footstar, Inc., Footaction and Just for Feet
Galyans Trading Co., Inc.
Gart Sports Company
G.I. Joe's
Global Sports, Inc.
Hibbett Sporting Goods, Inc.
MC Sports
Modell's
REI
Sport Chalet
Venator Group, including only Venator corporate and Eastbay, Footlocker, Lady
Footlocker and Champs
