SEVERANCE AGREEMENT
THIS AGREEMENT is made as of the 14th day of January, 1998, between
Sport Supply Group, Inc., a Delaware corporation (the "Company"), and
Xxxx X. Xxxxxx (the "Employee").
WHEREAS, the Board of Directors of the Company (the "Board") desires
to offer an inducement to the Employee to remain an employee of the Company;
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements of the parties herein contained,
this Agreement sets forth benefits which the Company will pay to
Employee in the event of termination of Employee's employment, except as
a result of death, disability, retirement or termination by the Company
for Cause, following a "Change in Control" of the Company (in each case
as such terms or events are defined or discussed herein):
1. Term. The term of this Agreement shall continue until the
earlier of (i) the expiration of the third anniversary of the occurrence
of a Change in Control, (ii) the Employee's death, or (iii) the
Employee's earlier voluntary retirement (except for those events
described in Section 3(a)(2)).
2. Definitions.
(a) Acquiring Person: An "Acquiring Person" shall mean any
person (as defined in Section 2(d)(iii) of this Agreement) that,
together with all Affiliates and Associates of such person, is the
beneficial owner of 15% or more of the outstanding Common Stock.
The term "Acquiring Person" shall not include the Company, any
subsidiary of the Company, any employee benefit plan of the Company
or subsidiary of the Company, any person holding Common Stock for
or pursuant to the terms of any such plan, or Xxxxxxx Radio Corp.
and its Affiliates and Associates. For the purposes of this
Agreement, a person who becomes an Acquiring Person by acquiring
beneficial ownership of 15% or more of the Common Stock at any time
after the date of this Agreement shall continue to be an Acquiring
Person whether or not such person continues to be the beneficial
owner of 15% or more of the outstanding Common Stock.
(b) Affiliate and Associate. "Affiliate" and "Associate"
shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") in effect on
the date of this Agreement.
(c) Cause. For "Cause" shall mean that the Employee shall
have committed:
(i) an intentional material act of fraud or embezzlement
in connection with his duties or in the course of his
employment with the Company;
(ii) intentional wrongful material damage to property of
the Company; or
(iii) intentional wrongful disclosure of material
secret processes or material confidential information of the
Company. For the purposes of this Agreement, no act, or
failure to act, on the part of the Employee shall be deemed
"intentional" unless done, or omitted to be done, by the
Employee not in good faith and without reasonable belief that
his action or omission was in the best interest of the
Company.
(d) Change in Control. A "Change in Control" of the Company
shall have occurred if at any time during the term of this
Agreement any of the following events shall occur:
(i) The Company is merged, consolidated or reorganized
into or with another corporation or other legal person and as
a result of such merger, consolidation or reorganization less
than 60% of the combined voting power to elect each class of
Directors of the then outstanding securities of the remaining
corporation or legal person or its ultimate parent immediately
after such transaction is available to be received by all of
the Company's stockholders (who were stockholders immediately
prior to the merger, consolidation or reorganization) on a pro
rata basis and is actually received in respect of or exchange
for voting securities of the Company pursuant to such
transaction;
(ii) The Company sells all or substantially all of its
assets to any other corporation or other legal person and as a
result of such sale less than 60% of the combined voting power
to elect each class of Directors of the then outstanding
securities of such corporation or legal person or its ultimate
parent immediately after such transaction is available to be
received by all of the Company's stockholders (who were
stockholders immediately prior to the merger, consolidation or
reorganization) on a pro rata basis and is actually received
in exchange for the assets of the Company pursuant to such
sale (provided that this provision shall not apply to a
registered public offering of securities of a subsidiary of
the Company, which offering is not part of a transaction
otherwise a part of or related to a Change in Control);
(iii) Any person (including any "person" as such term
is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act, but excluding Xxxxxxx Radio Corp. and its
Affiliates and Associates) has become the beneficial owner (as
the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange
Act) of securities which when added to any securities already
owned by such person would represent in the aggregate 20% or
more of the then outstanding securities of the Company which
are entitled to vote to elect any class of Directors;
(iv) If at any time, the Continuing Directors then
serving on the Board cease for any reason to constitute at
least a majority thereof;
(v) Any occurrence that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A or
any successor rule or regulation promulgated under the
Exchange Act; or
(vi) Such other events that cause a change in control of
the Company, as determined by the Board in its sole
discretion; provided, however, that a Change in Control of the
Company shall not be deemed to have occurred as the result of
any transaction having one or more of the foregoing effects if
such transaction is proposed by, and includes a significant
equity participation (i.e., an aggregate of at least 20% of
the then outstanding common equity securities of the Company
immediately after such transaction which are entitled to vote
to elect any class of Directors) of executive officers of the
Company as constituted immediately prior to the occurrence of
such transaction or any Company employee stock ownership plan
or pension plan.
(e) Code. The "Code" shall mean the Internal Revenue Code of
1986, as amended.
(f) Continuing Director. A "Continuing Director" shall mean
a Director of the Company who (i) is not an Acquiring Person, an
Affiliate or Associate, or a representative of an Acquiring Person
or nominated for election by an Acquiring Person, and (ii) was
either a member of the Board of Directors of the Company on the
date of this Agreement or subsequently became a Director of the
Company and whose initial election or initial nomination for
election by the Company's stockholders was approved by a majority
of the Continuing Directors then on the Board of Directors of the
Company.
(g) Employment Term. The "Employment Term" shall be the
period of employment under this Agreement commencing on the day
prior to a Change in Control and continuing until the expiration of
this Agreement.
(h) Severance Compensation. The "Severance Compensation"
shall be a lump sum amount equal to 299% of the sum of (A) the
highest annual salary of the Employee in effect at any time during
the Employment Term or the salary of the Employee in effect
immediately prior to the Change in Control, whichever is the larger
amount, plus (B) the bonus or incentive compensation of the
Employee, based upon the dollar amount of bonus or incentive
compensation that the Employee received from the Company for the
fiscal year preceding the year in which the Change in Control
occurred or for the fiscal year preceding the year in which the
Termination Date occurs, whichever is the larger amount.
(i) Termination Date. The "Termination Date" shall be the
date upon which the Employee or the Company effectively terminates
the employment of the Employee.
3. Rights of Employee Upon Change in Control or Termination.
(a) The Company shall provide the Employee, within ten days
following the Termination Date, Severance Compensation in lieu of
compensation to the Employee for periods subsequent to the
Termination Date, but without affecting the rights of the Employee
at law or in equity, if, following the occurrence of a Change in
Control, any of the following events shall occur:
(1) the Company terminates the Employee's employment
during the Employment Term other than for any of the following
reasons:
(i) the Employee dies;
(ii) the Employee becomes permanently disabled and
is unable to work for a period of 180 consecutive days;
or
(iii) for Cause,
(2) the Employee terminates his employment after such
Change in Control and the occurrence of at least one of the
following events:
(i) An adverse change in the nature or scope of the
authorities, functions or duties attached to the position
with the Company that the Employee had immediately prior
to the Change in Control, any reduction in the Employee's
salary during the Employment Term or any reduction in
bonus or incentive compensation (based upon the dollar
amount of bonus or incentive compensation that the
Employee received from the Company for the fiscal year
preceding the year in which the Change in Control
occurred or for the fiscal year preceding the year in
which the Termination Date occurs, whichever is the
larger amount) or a significant reduction in scope or
value of the aggregate other monetary or nonmonetary
benefits to which the Employee was entitled from the
Company immediately prior to the Change in Control, any
of which is not remedied within ten calendar days after
receipt by the Company of written notice from the
Employee of such change, reduction, alteration or
termination, as the case may be;
(ii) A determination by the Employee made in good
faith that as a result of a Change in Control and a
change in circumstances thereafter significantly
affecting his position, changes in the composition or
policies of the Board, or of other events of material
effect, he has been rendered substantially unable to
carry out, or has been substantially hindered in the
performance of, the authorities, functions or duties
attached to his position immediately prior to the Change
in Control, which situation is not remedied within ten
calendar days after receipt by the Company of written
notice from the Employee of such determination;
(iii) The Company shall require the Employee to
relocate his principal location of work by more than 20
miles from the location thereof immediately prior to the
Change in Control or to travel away from his office in
the course of discharging his responsibilities or duties
hereunder significantly more (in terms of either
consecutive days or aggregate days in any calendar year)
than required of him prior to the Change in Control
without in either case his prior written consent; or
(iv) the Company commits any material breach of this
Agreement.
(b) Notwithstanding the above section or any other provision
of this Agreement, in no event shall the Company pay or be
obligated to pay the Employee an amount which would be an Excess
Parachute Payment. For purposes of this Agreement, the term
"Excess Parachute Payment" shall mean any payment or any portion
thereof which would be an "excess parachute payment" within the
meaning of Section 280G of the Code, and would result in the
imposition of an excise tax under Section 4999 of the Code, in the
opinion of tax counsel selected by the Company's independent
accountants and acceptable to the Employee. If it is established
pursuant to a final determination of a court or an Internal Revenue
Service administrative appeals proceeding that, notwithstanding the
good faith of the Employee and the Company in applying the terms of
this Agreement, a payment (or portion thereof) made is an Excess
Parachute Payment, then, except as hereafter provided, the Employee
shall have an obligation to repay the Company upon demand an amount
equal to the minimum amount (but without interest) necessary to
insure that no payments made or to be made by the Company pursuant
to this Agreement is an Excess Parachute Payment; provided,
however, that if, in the opinion of tax counsel selected by the
Company's independent accountants and acceptable to the Employee
(in the circumstance where the Company or Employee has requested
such opinion), such repayment will not ensure that no Excess
Parachute Payment would be made hereunder, then (1) no such
repayment obligation will exist and (2) the Company shall pay to
the Employee an additional amount in cash equal to the amount
necessary to cause the amount of the aggregate after-tax cash
compensation and benefits otherwise receivable by the Employee to
be equal to the aggregate after-tax cash compensation and benefits
he would have received as if Sections 280G and 4999 of the Code had
not been enacted.
(c) Upon written notice given by the Employee to the Company
prior to the receipt of Severance Compensation, the Employee, at
his sole option, may elect to have all or any part of any such
amount paid to him, without interest, on an installment basis
selected by him.
(d) The payment of Severance Compensation by the Company to
the Employee shall not affect any rights and benefits which the
Employee may have pursuant to any other agreement, policy, plan,
program or arrangement of the Company providing benefits to the
Employee prior to the Termination Date, which rights shall be
governed by the terms thereof, except that payments hereunder after
termination shall reduce by an equal amount any sums payable after
termination under the Employment Agreement, dated the date hereof,
by and between the Company and the Employee. The Company shall
provide to the Employee throughout the Employment Term benefits
substantially similar to those which the Employee was receiving or
entitled to receive immediately prior to the Termination Date.
Such benefits as provided by the Company, however, shall be reduced
to the extent comparable benefits are actually received by the
Employee during the Employment Term as a result of employment other
than with the Company.
(e) The Company shall pay to the Employee all reasonable
legal fees and expenses incurred by him as a result of the
enforcement of any of Employee's rights hereunder within ten
business days of the date such expenses are incurred (including
without limitation all such fees and expenses, if any, incurred in
contesting or disputing any termination of employment or in seeking
to obtain or enforce any right or benefit provided by this
Agreement in accordance with Section 12 hereof).
(f) The Company shall have no right of set-off or
counterclaim in respect of any claim, debt or obligation against
any payment or benefit to or for the benefit of the Employee
provided for in this Agreement.
(g) Without limiting the rights of the Employee at law or in
equity, if the Company fails to make any payment required to be
made hereunder on a timely basis, the Company shall pay interest on
the amount thereof on demand at an annualized rate of interest
equal to 120% of the then applicable Federal rate determined under
Section 1274(d) of the Code, compounded semi-annually (but in no
event shall such interest exceed the highest lawful rate).
4. No Mitigation Required. In the event that this Agreement or
the employment of the Employee hereunder is terminated, the Employee
shall not be obligated to mitigate his damages nor the amount of any
payment provided for in this Agreement by seeking other employment or
otherwise, and except for the termination of benefits pursuant to
Section 3(d), the acceptance of employment elsewhere after termination
shall in no way reduce the amount of Severance Compensation payable
hereunder.
5. Successors; Binding Agreement.
(a) The Company will require any successor and any
corporation or other legal person (including any "person" as
defined in Section 2(d)(iii) of this Agreement) which is in control
of such successor (as "control" is defined in Regulation 230.405 or
any successor rule or regulation promulgated under the Securities
Act of 1933, as amended) to all or substantially all of the
business and/or assets of the Company (by purchase, merger,
consolidation or otherwise), by agreement in form and substance
satisfactory to the Employee, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
agreement prior to the effectiveness of any such succession shall
be a material breach of this Agreement by the Company.
Notwithstanding the foregoing, any such assumption shall not, in
any way, affect or limit the liability of the Company under the
terms of this Agreement or release the Company from any obligation
hereunder. As used in this Agreement, "Company" shall mean the
Company as herein before defined and any successor to its business
and/or all or part of its assets as aforesaid which executes and
delivers the agreement provided for in this Section 5 or which
otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
(b) This Agreement and all rights of the Employee hereunder
shall inure to the benefit of and be enforceable by the Employee's
personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
6. Notice. The Company shall give written notice to Employee
within ten days after any Change in Control. Failure to give such
notice shall constitute a material breach of this Agreement. For
purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to
have been duly given when delivered or received after being mailed by
United States registered mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Employee:
Xxxx X. Xxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxx Xxxxxx, Xxxxx 00000
If to the Company:
Sport Supply Group, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxx Xxxxxx, Xxxxx 00000
Attention: Chairman of the Board
or to such other address as any party may have furnished to the other in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
7. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Employee and such
officer as may be specifically designated by the Board. No waiver by
either party hereto of, or compliance with, any condition or provision
of this Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No agreements or representations, oral
or otherwise, express or implied, unless specifically referred to
herein, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this agreement. The
validity, interpretation, construction and performance of this Agreement
shall be governed by the substantive laws of the State of Delaware,
without regard to principles of conflicts of law.
8. Validity. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
10. Employment Rights. Nothing expressed or implied in this
Agreement shall create any right or duty on the part of the Company or
the Employee to have the Employee remain in the employment of the
Company prior to any Change in Control; provided, however, that any
termination of employment of the Employee or removal of the Employee as
an elected officer of the Company following the commencement of any
discussion authorized by the Board of Directors of the Company with a
third person that ultimately results in a Change in Control shall be
deemed to be a termination or removal of the Employee after a Change in
Control for purposes of this Agreement and shall entitle the Employee to
all Severance Compensation. Notwithstanding any other provision hereof
to the contrary, the Employee may, at any time during the Employment
Term, upon the giving of 30 days prior written notice, terminate his
employment hereunder. If this Agreement or the employment of the
Employee is terminated under circumstances in which the Employee is not
entitled to any Severance Compensation, the Employee shall have no
further obligation or liability to the Company hereunder or otherwise
with respect to his prior or any future employment by the Company.
11. Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or government regulation
or ruling; provided, however, that no withholding pursuant to Section
4999 of the Code shall be made unless, in the opinion of tax counsel
selected by the Company's independent accountants and acceptable to the
Employee, such withholding relates to payments which result in the
imposition of an excise tax pursuant to Section 4999 of the Code.
12. Legal Fees and Expenses. It is the intent of the Company that
the Employee not be required to incur the expenses associated with the
enforcement of his rights under this Agreement by litigation or other
legal action because the cost and expense thereof would substantially
detract from the benefits intended to be extended to the Employee
hereunder. Accordingly, if it should appear to the Employee that the
Company has failed to comply with any of its obligations under the
Agreement or in the event that the Company or any other person takes any
action to declare the Agreement void or unenforceable, or institutes any
litigation designed to deny, or to recover from, the Employee the
benefits intended to be provided to the Employee hereunder, the Company
irrevocably authorizes the Employee from time to time to retain counsel
of his choice, at the expense of the Company as hereafter provided, to
represent the Employee in connection with the initiation or defense of
any litigation or other legal action, whether by or against the Company
or any director, officer, stockholder or other person affiliated with
the Company, in any jurisdiction. Notwithstanding any existing or prior
attorney-client relationship between the Company and such counsel, the
Company irrevocably consents to the Employee's entering into an
attorney-client relationship with such counsel, and in that connection
the Company and the Employee agree that a confidential relationship
shall exist between the Employee and such counsel. The Company shall
pay and be solely responsible for any and all attorneys' and related
fees and expenses incurred by the Employee as a result of the Company's
failure to perform this Agreement or any provision thereof or as a
result of the Company or any person contesting the validity or
enforceability of this Agreement or any provision thereof as aforesaid.
13. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Employee is intended to be exclusive
of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or
in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective on the date and year first above written.
SPORT SUPPLY GROUP, INC.
By: /s/ Xxxxxxxx X. Xxxxxx
Xxxxxxxx X. Xxxxxx,
Chief Executive Officer and
Chairman of the Board
/s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx
