EXHIBIT 10.2
Severance Agreement
October 9, 2000
Xx. Xxxxxxx Xxxxxx
Dear Xxxxxxx:
This letter will confirm our understanding concerning your employment
with The Sports Authority, Inc. (the "Company").
1. Your employment commences on October 9, 2000. Your title is
Executive Vice President - Merchandising and Sales Promotion.
2. Your initial base salary will be $500,000. On the date hereof,
you will be granted options to purchase 125,000 shares of the Company's Common
Stock and 10,000 restricted shares, pursuant to the terms of the Company's 2000
Stock Option and Stock Award Plan (the "Plan"). During your employment you will
also be granted options to purchase 100,000 shares in each of February 2001 and
February 2002, pursuant to the terms of the Plan. You will be granted 250,000
units during your employment in each of February 2001 and February 2002,
pursuant to the terms of the Company's Performance Unit Plan.
3. If your employment is terminated by the Company other than for
Cause and paragraph 5 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.
4. If you terminate your employment at any time between October
1, 2001 and March 31, 2002 (other than a termination for Good Reason under
paragraph 5), the Company will pay to you an amount equal to your monthly rate
of base salary at the time of termination, multiplied by the number of whole
calendar months between October 1, 2000 and the date of your termination. (For
example, if you terminate your employment on December 5, 2001, you would receive
14 months of base salary). Such payment shall be made within fifteen days after
your termination. If any amount is payable by the Company under this paragraph,
no payment shall be made by the Company under any other paragraph of this
Agreement.
5. Notwithstanding paragraph 3, 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. Such payment shall be made within fifteen days after your termination.
6. (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 3, and as in effect immediately before the Change in Control, if your
employment is terminated under paragraph 5), 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).
7. (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 7 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 7, 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.
8. 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.
9. 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 5, and (ii) two years from the date of any other
termination of your employment other than under paragraph 5, (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.
10. 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.
11. This agreement (other than the provisions with respect to
grants of options and performance units contained in paragraph 2 and the
provisions of paragraph 4) 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.
12. 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.
13. 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.
14. All payments hereunder shall be subject to applicable tax
withholding and deductions.
15. Nothing in this agreement shall be construed as giving you any
right to be retained in the employ of the Company.
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.
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.
Please indicate your agreement by signing below and retain one copy for
you records.
Sincerely,
THE SPORTS AUTHORITY, INC.
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Agreed:
/s/ Xxxxxxx Xxxxxx
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Date:
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