May 26, 2006
May
26,
2006
[Name]
Dear_______:
This
letter will confirm our understanding concerning your employment with Borders
Group, Inc. (the “Company”). You are sometimes referred to herein as the
“Executive.”
1. Subject
to all of the other provisions of this agreement, if your employment with the
Company is terminated by the Company other than for Cause or Disability, the
Company will pay to you:
(a) Your
base
salary through the month during which termination occurred, plus any other
amount due you at the time of termination under any bonus plan of the Company;
and
(b) Monthly
severance payments for the period specified in Section 6 equal to (i) your
monthly base salary at the time of termination, plus (ii) 1/12th
of the
“target” bonus amount targeted for you for the fiscal year in which termination
occurred.
No
payments shall be made under this agreement if your employment with the Company
is terminated because of your death or is terminated by the Company for Cause
or
Disability or if you terminate your employment for any reason.
2. Subject
to all of the other provisions of this agreement, if your employment is
terminated by the Company other than for Cause or Disability during the one-year
period following the commencement of service as chief executive officer of
the
Company (“CEO”) of the CEO that replaces Xx. Xxxxxxxxxx; (i) the monthly
severance payments to be made to you under Section 1(b) shall be 1.5 times
the
amount specified therein, and (ii) the Company will make a cash payment to
you
as soon as practicable following your termination of employment equal to the
fair market value of the restricted shares (but not the restricted share units)
awarded to you in March 2006. The fair market value of the restricted shares
shall be based upon the closing price of the Company’s shares on the New York
Stock Exchange on the day prior to your termination date, without any reduction
for the restrictions.
3.
Subject
to all of the other provisions of this agreement, if your employment is
terminated by the Company other than for Cause or Disability during the one-year
period following a Change in Control, the monthly severance payments to be
made
to you under Section 1(b) shall be for an extended period as specified in
Section 6 and shall be based upon (a) your monthly base salary at the time
of
termination or immediately prior to the Change in Control, whichever base salary
amount is greater, plus (b) 1/12th
of the
“target” bonus amount targeted for you for
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the
fiscal year in which termination occurred or the fiscal year immediately prior
to the Change in Control, whichever bonus amount is greater.
4.
You
agree
to make reasonable efforts to seek (and to immediately notify the Company of)
other employment and to the extent that you receive compensation from other
employment, the severance payments provided herein, other than the payment
in
lieu of restricted shares described in Section 2 (ii), shall be correspondingly
reduced.
5. All
payments hereunder shall be subject to applicable withholding and
deductions.
6. Monthly
severance payments shall commence in the month following termination and shall
continue for twelve months or, in the case of payments under Section 3, for
twenty-four months; provided however, that, if the monthly payment period would
otherwise extend beyond the later of: (i) March 15th
of the
year following the calendar year in which your termination of employment occurs,
or (ii) 2 1/2 months following the end of the fiscal year in which your
termination of employment occurs, an amount equal to the sum of all of the
remaining payments that would have been made to you in monthly installments
shall, in lieu thereof, be paid to you in one lump sum on the last day of the
month immediately preceding the month in which the later of the dates specified
in (i) or (ii) above falls. In calculating the amount of any lump sum payment,
it shall be assumed that any income that you are earning from other employment
on the payment date would continue for the remainder of the applicable period
following your termination of employment. No repayment shall be required if
your
income increases after the lump-sum payment date, and no additional payments
shall be made by the Company after the lump sum payment.
7. Termination
by the Company for “Cause” means termination based on (i) conduct which is a
material violation of Company policy 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.
8. Termination
by you for “Disability” means termination based on inability to perform your
duties and responsibilities by reason of illness or incapacity for a total
of
180 days in any twelve-month period.
9. A
“Change
in Control” shall mean:
(a) The
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (a "Person") of beneficial ownership (within the meaning of
Rule
13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the
then
outstanding shares of common stock of the Company (the "Outstanding Company
Common Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however,
that
for purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i), (ii) and (iii) of
subsection (c) of this Section 9; or
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(b) Individuals
who, as of the date hereof, constitute the Board (the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors then comprising
the
Incumbent Board shall be considered as though such individual were a member
of
the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of
a
Person other than the Board; or
(c) Consummation
of a reorganization, merger or consolidation or sale or other disposition of
all
or substantially all of the assets of the Company (a "Business Combination"),
in
each case, unless, following such Business Combination, (i) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result
of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially
the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation except to the extent
that
such ownership existed prior to the Business Combination and (iii) at least
a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval
by the shareholders of the Company of a complete liquidation or dissolution
of
the Company.
10. Payments
shall be reduced to the extent, if any, determined in accordance with the
following provisions:
(a) For
purposes of this Section 10: (i) a "Payment" shall mean any payment or
distribution in the nature of compensation to or for the benefit of the
Executive, whether paid or payable pursuant to this Agreement or otherwise;
(ii)
"Agreement Payment" shall mean a Payment paid or payable pursuant to this
Agreement (disregarding this Section); (iii) “Net After-Tax Receipt” shall mean
the Present
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Value
of a
Payment net of all taxes imposed on the Executive with respect thereto under
Sections 1 and 4999 of the Code and under applicable state and local laws,
determined by applying the highest marginal rate under Section 1 of the Code
and
under state and local laws which applied to the Executive’s taxable income for
the immediately preceding taxable year, or such other rate(s) as the Executive
shall certify, in the Executive’s sole discretion, as likely to apply to the
Executive in the relevant tax year(s); (iv) "Present Value" shall mean such
value determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4)
of
Code; (v) "Reduced Amount" shall mean the amount of Agreement Payments that
(A)
has a Present Value that is less than the Present Value of all Agreement
Payments and (B) results in aggregate Net After-Tax Receipts for all Payments
that are greater than the Net After-Tax Receipts for all Payments that would
result if the aggregate Present Value of Agreement Payments were any other
amount that is less than the Present Value of all Agreement Payments; and (vi)
“Code” shall mean the Internal Revenue Code of 1986, as amended.
(b) Anything
in the Agreement to the contrary notwithstanding, in the event Ernst & Young
or such other accounting firm as shall be designated by the Company (the
"Accounting Firm") shall determine that receipt of all Payments would subject
the Executive to tax under Section 4999 of the Code, the Accounting Firm shall
determine whether some amount of Agreement Payments meets the definition of
“Reduced Amount.” If the Accounting Firm determines that there is a Reduced
Amount, then the aggregate Agreement Payments shall be reduced to such Reduced
Amount.
(c) If
the
Accounting Firm determines that aggregate Agreement Payments should be reduced
to the Reduced Amount, the Company shall promptly give the Executive notice
to
that effect and a copy of the detailed calculation thereof, and the Executive
may then elect, in his or her sole discretion, which and how much of the
Agreement Payments shall be eliminated or reduced (as long as after such
election the Present Value of the aggregate Agreement Payments equals the
Reduced Amount), and shall advise the Company in writing of his or her election
within ten days of his or her receipt of notice. If no such election is made
by
the Executive within such ten-day period, the Company may elect which of such
Agreement Payments shall be eliminated or reduced (as long as after such
election the Present Value of the aggregate Agreement Payments equals the
Reduced Amount) and shall notify the Executive promptly of such election. All
determinations made by the Accounting Firm under this Section shall be binding
upon the Company and the Executive and shall be made within 60 days of a
termination of employment of the Executive. As promptly as practicable following
such determination, the Company shall pay to or distribute for the benefit
of
the Executive such Agreement Payments as are then due to the Executive under
this Agreement and shall promptly pay to or distribute for the benefit of the
Executive in the future such Agreement Payments as become due to the Executive
under this Agreement.
(d) As
a
result of the uncertainty in the application of Section 4999 of the Code at
the
time of the initial determination by the Accounting Firm hereunder, it is
possible that amounts will have been paid or distributed by the Company to
or
for the benefit of the Executive pursuant to this Agreement which should not
have been so paid or distributed ("Overpayment") or that additional amounts
which will have not
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been
paid or
distributed by the Company to or for the benefit of the Executive pursuant
to
this Agreement could have been so paid or distributed ("Underpayment"), in
each
case, consistent with the calculation of the Reduced Amount hereunder. In the
event that the Accounting Firm, based upon the assertion of a deficiency by
the
Internal Revenue Service against either the Company or the Executive which
the
Accounting Firm believes has a high probability of success determines that
an
Overpayment has been made, any such Overpayment paid or distributed by the
Company to or for the benefit of the Executive shall be treated for all purposes
as a loan to the Executive which the Executive shall repay to the Company
together with interest at the applicable federal rate provided for in Section
7872(f)(2) of the Code; provided,
however, that no such loan shall be deemed to have been made and no amount
shall
be payable by the Executive to the Company if and to the extent such deemed
loan
and payment would not either reduce the amount on which the Executive is subject
to tax under Section 1 and Section 4999 of the Code or generate a refund of
such taxes. In the event that the Accounting Firm, based upon controlling
precedent or substantial authority, determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid by the Company to or
for
the benefit of the Executive together with interest at the applicable federal
rate provided for in Section 7872(f)(2) of the Code.
(e) All
fees and expenses of
the Accounting Firm in implementing the provisions of this Section 10 shall
be
borne by the Company.
11.
The
obligation to make the payments hereunder is conditioned upon your execution
and
delivery to the Company 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 benefit plan
of the Company which provides benefits after termination of employment.
12. You
agree
that any right to receive severance payments hereunder will cease if during
the
one-year period following your termination of employment you directly or
indirectly become an employee, director, advisor of, or otherwise affiliated
with, any other entity or enterprise whose business is in competition with
the
business of the Company or any of its subsidiaries or affiliates.
13. The
severance payments hereunder may not be transferred, assigned or encumbered
in
any manner, either voluntarily or involuntarily. In the event of your death
after your employment has been terminated by the Company other than for Cause
or
Disability, any payments then or thereafter due hereunder will be made to your
estate.
14. 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 benefit plan of the Company which provides
benefits after termination of employment, it being understood and agreed that
no
severance plan shall be deemed to be an employee benefit plan for this
purpose.
15. Notwithstanding
anything herein to the contrary, your employment with the Company is terminable
at will with or without cause; subject, however, to the obligations of the
Company under this agreement.
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16. If
a
dispute arises concerning any provisions of this agreement, it shall be resolved
by arbitration in Ann Arbor, Michigan in accordance with the rules of the
American Arbitration Association. Judgment on the award rendered may be entered
in any court having jurisdiction and enforced accordingly.
17. This
letter 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 or any subsidiary or other affiliate of
the
Company as to such subject matter. This letter 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 letter 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 letter agreement.
Please
indicate your agreement by signing below and retain one copy for your
records.
Agreed
and Accepted:
Sincerely,
BORDERS
GROUP, INC.
By:
Name:
Xxxxxxx X. Xxxxxxxxxx
Its:
Chairman, CEO and President
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