EXHIBIT 10.18
SEVERANCE AGREEMENT
[Date]
Dear _______________:
This letter will confirm our understanding on the matters set forth
below.
1. 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, plus any other amount due you at the time of termination under any bonus
plan of the Company, 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 the bonus
you would have received if you had remained employed by the Company through that
date.
2. Notwithstanding paragraph 1, 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, in either case within a
two-year period following such a 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 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 4. Such payment shall be made within fifteen days after your
termination, or as promptly thereafter as possible if the procedures set forth
in paragraph 4 cannot be completed within fifteen days.
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 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).
4. If your employment is terminated under paragraph 2 and 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 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 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 4. Within five days after
this 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.
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
agree that you shall not, for a period of (i) one year from the date of any
termination of your employment by the Company other than for Cause and other
than under paragraph 2, and (ii) two years from the date of any other
termination of your employment other than under paragraph 2, (a) directly or
indirectly become an employee, director, consultant or advisor of, or otherwise
affiliated with, any retailer of sporting goods, footwear or apparel with retail
outlets in the United States (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.
7. In the event you initiate legal action against the Company to
enforce your rights under 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.
8. This agreement shall terminate on November 30, 2001 and shall be
automatically renewed for successive one-year periods unless the Company
notifies you or you notify the Company in writing that this agreement will not
be renewed at least sixty days prior to the end of the current term, provided,
however, that (i) after a Change in Control during the term of this agreement,
this agreement shall remain in effect until all of the obligations of the
parties hereunder are satisfied, and (ii) this agreement shall terminate if,
prior to a Change in Control, your employment with the Company shall terminate
for any reason other than as provided herein.
9. 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.
10. 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.
11. All payments hereunder shall be subject to applicable tax
withholding and deductions.
12. Nothing in this agreement shall be construed as giving you any
right to be retained in the employ of the Company.
13. 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.
14. 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.
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.
Please indicate your agreement by signing below and retain one copy for
you records.
Sincerely,
THE SPORTS AUTHORITY, INC.
By:__________________________
Agreed:
_______________________________
Date: ________________________
