EXECUTION COPY
RETENTION AGREEMENT
BETWEEN
TOYS "R" US, INC.
AND
XXXXX XXX XXXX
DATED AS OF
February 25, 1998
VAN BEEK
TOYS "R" US, INC.
RETENTION AGREEMENT
AGREEMENT (this "Agreement"), by and between Toys "R" Us, Inc., a
Delaware corporation (the "Company"), and Xxxxx Xxx Xxxx (the
"Officer"), dated as of February 25, 1998. Capitalized terms used in
this Agreement and in Exhibit A hereto that are not defined in the
operative provisions shall have the meanings ascribed to them on Exhibit
B hereto.
1. Employment Period. The Company hereby agrees to continue to
employ the Officer and the Officer hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement,
for the Employment Period. The term "Employment Period" means the
period commencing on the date hereof and ending on the second
anniversary of such date as automatically extended for successive
additional one-year periods unless, at least six months prior to the
scheduled expiration of the Employment Period, the Company shall give
notice to the Officer that the Employment Period shall not be so
extended.
2. Terms of Employment. (a) Position. (i) Commencing on the
date hereof and for the remainder of the Employment Period, the Officer
shall serve in the position of President - Toys "R" Us U.S.
Merchandising and Marketing of the Company or such other senior Officer
position to which the Officer may be appointed by the Company. The
Officer shall be based in Northeastern New Jersey.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Officer is entitled, the Officer
agrees to devote full time during normal business hours to the business
and affairs of the Company and to use the Officer's best efforts to
perform faithfully and efficiently such responsibilities. During the
Employment Period, the Officer may, so long as such activities do not
interfere with the performance of the Officer's responsibilities as an
employee of the Company in accordance with this Agreement, continue the
corporate directorships on which the Officer serves, if any, as of the
date hereof and such other corporate directorships as are consented to
by the Chief Executive Officer. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the
Officer with the knowledge of the Company prior to a Change of Control,
the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to a Change of Control
shall not thereafter be deemed to violate this Agreement.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Officer shall
receive the Officer's Annual Base Salary which will be paid in
accordance with the Company's regular payroll policies as in effect from
time to time.
(ii) Incentive Bonus. The Officer shall also be eligible, for
each fiscal year ending during the Employment Period, to receive an
annual incentive bonus and long-term incentive awards pursuant to the
Company's incentive Plans and subject to the terms thereof at a level
commensurate with the Company's grants to the officer currently serving
as President - Toys "R" Us U.S. Merchandising and Marketing or any more
senior position(s) to which the Officer may be appointed. Each such
incentive bonus shall be paid in accordance with the Company's incentive
Plans.
(iii) Participation in Other Plans. During the Employment Period,
the Officer shall be eligible to participate in all other Plans at a
level commensurate with the Officer's position.
(iv) Stock Units. As further inducement for the Officer to enter
into this Agreement and to continue in the employ of the Company, the
Company has granted to the Officer stock units contingent on performance
and future service, pursuant to the Stock Unit Agreement executed and
delivered by the Company on the date hereof in the form attached as
Annex A hereto.
3. Termination of Employment Upon Death, Disability or Retirement.
The Officer's employment shall terminate upon the Officer's death,
Disability or Retirement during the Employment Period and the
obligations of the Company upon such termination shall be limited to
those benefits provided by the Plans at the Date of Termination, except
as specifically set forth herein or in the Stock Unit Agreement.
4. Other Termination of Employment. (a) Company Termination. The
Company may terminate the Officer's employment during the Employment
Period with or without Cause.
(b) Good Reason. The Officer's employment may be terminated during
the Employment Period by the Officer for Good Reason.
(c) Notice of Termination. Any termination by the Company for
Cause, or by the Officer for Good Reason, shall be communicated by
Notice of Termination to the other party hereto given in accordance with
this Agreement. The failure by the Officer or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes
to a showing of Good Reason or Cause shall not waive any right of the
Officer or the Company, respectively, hereunder or preclude the Officer
or the Company, respectively, from asserting such fact or circumstance
in enforcing the Officer's or the Company's rights hereunder.
(d) Obligations of the Company Upon Termination Under Section 4.
If the Officer's employment shall have been terminated under Section
4(a) (other than for Cause) or 4(b):
(i) the Company shall make a lump sum cash payment to the Officer
within 30 days after the Date of Termination in an amount equal to the
sum of (1) the Officer's pro rata Annual Base Salary payable through the
Date of Termination to the extent not theretofore paid, (2) the targeted
amount of the Officer's annual bonus and long-term incentive awards that
would have been payable with respect to the fiscal year in which the
Date of Termination occurs in each case absent the termination of the
Officer's employment prorated for the portion of such fiscal year
through the Date of Termination taking into account the number of
complete months during such fiscal year through the Date of Termination
and (3) the Officer's actual earned annual or long-term incentive awards
for any completed fiscal year or period not theretofore paid or
deferred;
(ii) the Company shall pay to the Officer in equal installments,
made at least monthly, over the twenty-four months following the Date of
Termination an aggregate amount equal to (1) two times the Officer's
Annual Base Salary in effect on the Date of Termination, (2) two times
the targeted amount of the annual incentive bonus that would have been
paid to the Officer with respect to the Company's fiscal year in which
such Date of Termination occurs and (3) two times the targeted amount of
the long-term incentive award that would have been paid to the Officer
with respect to such fiscal year;
(iii) the Company shall continue to provide, in the manner and
timing provided for in the Plans (other than stock options and except as
set forth in this Section 4(d) and in Section 7(b)), the benefits
provided under the Plans that the Officer would receive on an after-tax
basis if the Officer's employment had continued for two years after the
Date of Termination assuming for this purpose that the Officer's
compensation for each such year would have been one-half of the amount
paid pursuant to clause (ii) above, and the Officer shall be fully
vested in any account balance and all other benefits continuation under
such Plans; provided, however that the benefits provided under this
clause (iii) shall be limited to the coverage permitted by law or as
would otherwise not potentially adversely impact on the tax
qualification of any Plans; provided, further, that if such benefits may
not be continued under the Plans, the Company shall pay to the Officer
an amount equal to the Company's cost had such benefits been continued.
(iv) (1) all unvested options held by the Officer shall continue
to vest in accordance with their terms for two years after the Date of
Termination, and all remaining unvested options held by the Officer
shall vest on the two year anniversary date of the Date of Termination,
(2) all unvested profit shares held by the Officer or for the benefit of
the Officer by a grantor trust established by the Company shall continue
to vest in accordance with their terms for two years after the Date of
Termination and all remaining profit shares shall vest on the two year
anniversary date of the Date of Termination, provided that, if permitted
by the terms of any such trust, any unvested profit shares shall
continue to be held by such grantor trust until such profit shares vest
pursuant to this clause (iv) and any such unvested profit share not
permitted to be so held shall vest immediately and be delivered to the
Officer, (3) any other unvested equity based award (including, without
limitation, restricted stock and stock units) held by the Officer shall
vest on the two year anniversary date of the Date of Termination on a
pro rata basis determined by a fraction, the numerator of which is the
number of months elapsed from the grant of such equity award through the
Date of Termination plus the twenty-four months after the Date of
Termination and the denominator of which is the total number of months
in the vesting period for such award and shall be promptly delivered to
the Officer entirely in the form of Common Stock, (4) any options held
by the Officer that are vested on the Date of Termination or vest
thereafter pursuant to this clause (iv) may be exercised until the
earlier of (x) the thirty-month anniversary date of the Date of
Termination and (y) the expiration date of such options and (5) the
Officer shall not be entitled to any additional grants of any stock
options, restricted stock, other equity based or long-term awards; and
(v) the Officer will be entitled to continuation of health
benefits under the Plans at a level commensurate with the Officer's
current position or more senior position(s) to which the Officer may be
appointed, and if the Officer elects to receive such health benefits,
the Company shall pay the medical premiums therefore for the first
twenty-four months after the Date of Termination, and thereafter the
Officer shall pay the premium charged to former employees of the Company
pursuant to Section 4980B of the Code until the Officer is sixty-five
years of age; provided, that the Company can amend or otherwise alter
the Plans to provide benefits to the Officer that are no less than those
commensurate with the Officer's current position or more senior
position(s) to which the Officer may be appointed; provided, that to the
extent such benefits cannot be provided to the Officer under the terms
of the Plans or the Plans cannot be so amended in any manner not adverse
to the Company, the Company shall pay the Officer, on an after-tax
basis, an amount necessary for the Officer to acquire such benefits from
an independent insurance carrier; and provided, further, that the
obligations of the Company under this clause (v) shall be terminated if,
at any time after the Date of Termination, the Officer is employed by or
is otherwise affiliated with a party that offers comparable health
benefits to the Officer.
(e) Cause. If the Officer's employment shall be terminated for
Cause during the Employment Period or if the Officer voluntarily
terminates employment during the Employment Period, excluding a
termination for Good Reason, death, Disability or Retirement, the
Employment Period shall terminate without further obligations to the
Officer other than the obligation to pay to the Officer all payments and
benefits due, in accordance with the Company's Plans through the Date of
Termination.
5. Release Agreement. The benefits pursuant to Section 4 are
contingent upon the Officer (i) executing a Separation and Release
Agreement (the "Release Agreement") upon or after any Date of
Termination, a copy of which is attached as Exhibit A to this Agreement
and (ii) not revoking or challenging the enforceability of the Release
Agreement or this Agreement.
6. Offset. The Company shall have the right to offset the amounts
required to be paid to the Officer under this Agreement against any
amounts owed by the Officer to the Company, and nothing in this
Agreement shall prevent the Company from pursuing any other available
remedies against the Officer.
7. Compensation and Benefits Following Change of Control.
(a) Notwithstanding any provision of this Agreement or any Plan,
in no event shall any compensation or benefits, individually or in the
aggregate, to which the Officer would be entitled be less favorable for
the two years following a Change of Control than the Officer would have
been entitled based upon the most favorable of the Company's Plans in
effect for the Officer at any time during the 120-day period immediately
preceding such Change of Control.
(b) In the event of termination of the Officer's employment under
Section 4(a) (other than for Cause) or 4(b), whether before or after a
Change of Control, following a Change of Control: (i) any remaining
amounts payable under Sections 4(d)(i), (ii) and (iii) shall be payable
in a lump sum within 30 days after the later of the Date of Termination
or the Change of Control and (ii) in lieu of the Company's obligations
under Section 4(d)(iv), all unvested options and equity based awards
shall vest immediately on the later of the Date of Termination or the
Change of Control and all such options may be exercised until the
earlier of (x) the thirty-month anniversary date of the Date of
Termination and (y) the expiration date of such options.
8. Nonexclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Officer's continuing or future participation in any
Plan for which the Officer may qualify nor shall anything herein limit
or otherwise affect such rights as the Officer may have under any
contract or agreement with the Company. Amounts that are vested
benefits or that the Officer is otherwise entitled to receive under any
Plan, contract or agreement with the Company at or subsequent to the
Date of Termination shall be payable in accordance with such Plan, or
contract or agreement except as explicitly modified by this Agreement.
9. Full Settlement; Legal Fees.
(a) No Obligation to Mitigate. In no event shall the Officer be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Officer under any of the
provisions of this Agreement, and, except as specifically provided in
this Agreement, such amounts shall not be reduced whether or not the
Officer obtains other employment.
(b) Expenses of Contests.
(i) The following shall apply for any dispute arising hereunder,
under the Release Agreement or under the Stock Unit Agreement prior to a
Change of Control: In each case solely to the extent that the Officer
is successful with respect thereto, the Company agrees to pay all
reasonable legal and professional fees and expenses that the Officer may
reasonably incur as a result of any contest by the Officer, by the
Company or others of the validity or enforceability of, or liability
under, any provision of this Agreement, the Release Agreement or the
Stock Unit Agreement (including as a result of any contest by the
Officer about the amount of any payment pursuant to this Agreement),
plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Code or any
successor Section of the Code.
(ii) The following shall apply for any dispute arising hereunder,
under the Release Agreement or under the Stock Unit Agreement upon or
following a Change of Control: The Company agrees to advance to the
Officer all reasonable legal and professional fees and expenses that the
Officer may reasonably incur as a result of any contest by the Officer,
by the Company or others of the validity or enforceability of, or
liability under, any provision of this Agreement, the Release Agreement
or the Stock Unit Agreement (including as a result of any contest by the
Officer about the amount of any payment pursuant to this Agreement),
plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Code or any
successor Section of the Code.
(iii) The Officer shall reimburse the Company for its reasonable
legal and professional fees and expenses, and in the case of advances
made pursuant to paragraph (ii) above, shall refund the Company the
amount of such advances, to the extent there is a final determination
that such fees, expenses or advances relate to claims brought by the
Officer against, or defenses by the Officer of any claim of, the Company
with respect to this Agreement, the Release Agreement or the Stock Unit
Agreement that were determined to have been made or asserted by the
Officer in bad faith or frivolously.
10. Certain Additional Payments by the Company. Anything in this
Agreement to the contrary notwithstanding, in the event that any actual
or constructive payment or distribution by the Company to or for the
benefit of the Officer (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement, the Stock Unit
Agreement or otherwise) is subject to the excise tax imposed by Section
4999 of the Code or any successor provision of the Code (the "Excise
Tax"), then the Company shall make the payments described on Exhibit C
hereto.
11. Restrictions and Obligations of the Officer.
(a) Consideration for Restrictions and Covenants. The parties
hereto acknowledge and agree that the principal consideration for the
agreement to make the payments provided in Sections 3 and 4 hereof from
the Company to the Officer and the grant to the Officer of the stock
units of the Company as set forth in Section 2 hereof is the Officer's
compliance with the undertakings set forth in this Section 11.
Specifically, Officer agrees to comply with the provisions of this
Section 11 irrespective of whether the Officer is entitled to receive
any payments under Section 3 or 4 of this Agreement.
(b) Confidentiality. The confidential and proprietary information
and in any material respect trade secrets of the Company are among its
most valuable assets, including but not limited to, its customer and
vendor lists, database, computer programs, frameworks, models, its
marketing programs, its sales, financial, marketing, training and
technical information, and any other information, whether communicated
orally, electronically, in writing or in other tangible forms concerning
how the Company creates, develops, acquires or maintains its products
and marketing plans, targets its potential customers and operates its
retail and other businesses. The Company has invested, and continues to
invest, considerable amounts of time and money in obtaining and
developing the goodwill of its customers, its other external
relationships, its data systems and data bases, and all the information
described above (hereinafter collectively referred to as "Confidential
Information"), and any misappropriation or unauthorized disclosure of
Confidential Information in any form would irreparably harm the Company.
The Officer shall hold in a fiduciary capacity for the benefit of the
Company all Confidential Information relating to the Company and its
business, which shall have been obtained by the Officer during the
Officer's employment by the Company and which shall not be or become
public knowledge (other than by acts by the Officer or representatives
of the Officer in violation of this Agreement). After termination of
the Officer's employment with the Company, the Officer shall not,
without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate, divulge or use any such
information, knowledge or data to anyone other than the Company and
those designated by it.
(c) Non-Solicitation or Hire. During the Employment Period and
for a two-year period following the termination of the Officer's
employment for any reason, the Officer shall not, directly or indirectly
(i) employ or seek to employ any person who is at the Date of
Termination, or was at any time within the six-month period preceding
the Date of Termination, an officer, general manager or director or
equivalent or more senior level employee of the Company or any of its
subsidiaries or otherwise solicit, encourage, cause or induce any such
employee of the Company or any of its subsidiaries to terminate such
employee's employment with the Company or such subsidiary for the
employment of another company (including for this purpose the
contracting with any person who was an independent contractor
(excluding consultant) of the Company during such period) or (ii) take
any action that would interfere with the relationship of the Company or
its subsidiaries with their suppliers and franchisees without, in either
case, the prior written consent of the Company's Board of Directors, or
engage in any other action or business that would have a material
adverse effect on the Company.
(d) Non-Competition and Consulting. (i) During the Employment
Period and for a two-year period (the "Consulting Period") following the
termination of the Officer's employment for any reason, the Officer
shall not, directly or indirectly:
(x) engage in any managerial, administrative, advisory,
consulting, operational or sales activities in a Restricted Business
anywhere in the Restricted Area, including, without limitation, as a
director or partner of such Restricted Business, or
(y) organize, establish, operate, own, manage, control or have a
direct or indirect investment or ownership interest in a Restricted
Business or in any corporation, partnership (limited or general),
limited liability company enterprise or other business entity that
engages in a Restricted Business anywhere in the Restricted Area; and
(ii) During the Consulting Period, the Officer shall
(x) be available to render services to the Company as an
independent contractor/consultant but not as an employee of the Company;
and
(y) perform such duties as may be reasonably requested in writing
from time to time during the Consulting Period by the Chief Executive
Officer; provided that such duties shall not conflict with the duties of
the Officer for a new employer if such employment does not violate the
terms of Section 11(d)(i) hereof.
(iii) Section 11(d) shall not bind the Officer during any period
following the termination of the Officer's employment if there has been
a Change of Control irrespective of whether the Change of Control occurs
before or after the Date of Termination.
(iv) Nothing contained in this Section 11(d) shall prohibit or
otherwise restrict the Officer from acquiring or owning, directly or
indirectly, for passive investment purposes not intended to circumvent
this Agreement, securities of any entity engaged, directly or
indirectly, in a Restricted Business if either (i) such entity is a
public entity and such Officer (A) is not a controlling Person of, or a
member of a group that controls, such entity and (B) owns, directly or
indirectly, no more than 3% of any class of equity securities of such
entity or (ii) such entity is not a public entity and the Officer (A) is
not a controlling Person of, or a member of a group that controls, such
entity and (B) does not own, directly or indirectly, more than 1% of any
class of equity securities of such entity.
(e) Definitions. For purposes of this Section 11 TC "(e)
Definitions. For purposes of this Section 11" \f C \l "2" :
(i) "Restricted Business" means the retail store or mail order
business or any business, in each case if it is involved in the
manufacture or marketing of toys, juvenile or baby products, juvenile
furniture or children's clothing or any other business in which the
Company may be engaged on the Date of Termination.
(ii) "Restricted Area" means any country in which the Company or
its subsidiaries owns or franchises any retail store operations or
otherwise has operations on the Date of Termination.
(f) Relief. The parties hereto hereby acknowledge that the
provisions of this Section 11 are reasonable and necessary for the
protection of the Company and its subsidiaries. In addition, the
Officer further acknowledges that the Company and its subsidiaries will
be irrevocably damaged if such covenants are not specifically enforced.
Accordingly, the Officer agrees that, in addition to any other relief to
which the Company may be entitled, the Company will be entitled to seek
and obtain injunctive relief (without the requirement of any bond) from
a court of competent jurisdiction for the purposes of restraining the
Officer from any actual or threatened breach of such covenants. In
addition, without limiting the Company's remedies for any breach of any
restriction on the Officer set forth in Section 11, except as required
by law, the Officer shall not be entitled to any payments set forth in
Section 3 or 4 hereof if the Officer breaches any of the covenants
applicable to the Officer contained in this Section 11, the Officer will
immediately return to the Company any such payments previously received
upon such a breach, and, in the event of such breach, the Company will
have no obligation to pay any of the amounts that remain payable by the
Company under Section 3 or 4.
12. Successors. (a) This Agreement is personal to the Officer
and without the prior written consent of the Company shall not be
assignable by the Officer otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Officer's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will, within thirty days after a Change of
Control, and the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company within
thirty days after any such event of succession to, assume expressly 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. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid that assumes and agrees to perform
this Agreement by operation of law, or otherwise.
13. Miscellaneous. (a) Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of
New Jersey, without reference to principles of conflict of laws.
(b) Captions. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
(c) Amendment. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
(d) Notices. All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
(i) If to the Officer, to the address on file with the Company;
and
(ii) If to the Company, to it at Toys "R" Us, Inc., 000 Xxxx Xxxx,
Xxxxxxx, Xxx Xxxxxx 00000, Attention: Senior Vice President - Human
Resources;
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
(e) Assistance to Company. At all times during and after the
Employment Period and at the Company's expense for significant out-of-
pocket expenses actually and reasonably incurred by the Officer in
connection therewith, the Officer shall provide reasonable assistance to
the Company in the collection of information and documents and shall
make the Officer available when reasonably requested by the Company in
connection with claims or actions brought by or against third parties or
investigations by governmental agencies based upon events or
circumstances concerning the Officer's duties, responsibilities and
authority during the Employment Period.
(f) Severability of Provisions. Each of the sections contained in
this Agreement shall be enforceable independently of every other section
in this Agreement, and the invalidity or nonenforceability of any
section shall not invalidate or render unenforceable any other section
contained in this Agreement. The Officer acknowledges that the
restrictive covenants contained in Section 11 are a condition of this
Agreement and are reasonable and valid in geographical and temporal
scope and in all other respects. If any court or arbitrator determines
that any of the covenants in Section 11, or any part of any of them, is
invalid or unenforceable, the remainder of such covenants and parts
thereof shall not thereby be affected and shall be given full effect,
without regard to the invalid portion. If any court or arbitrator
determines that any of such covenants, or any part thereof, is invalid
or unenforceable because of the geographic or temporal scope of such
provision, such court or arbitrator shall reduce such scope to the
minimum extent necessary to make such covenants valid and enforceable.
(g) Withholding. The Company may withhold from any amounts
payable under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable law or
regulation.
(h) Waiver. The Officer's or the Company's failure to insist upon
strict compliance with any provision hereof or any other provision of
this Agreement or the failure to assert any right the Officer or the
Company may have hereunder shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.
(i) Arbitration. Except as otherwise provided for herein, any
controversy arising under, out of, in connection with, or relating to,
this Agreement, and any amendment hereof, or the breach hereof or
thereof, shall be determined and settled by arbitration in New York, New
York, by a three person panel mutually agreed upon, or in the event of a
disagreement as to the selection of the arbitrators, in accordance with
the Employment Dispute Resolution Rules of the American Arbitration
Association. Any award rendered therein shall specify the findings of
fact of the arbitrator or arbitrators and the reasons of such award,
with the reference to and reliance on relevant law. Any such award
shall be final and binding on each and all of the parties thereto and
their personal representatives, and judgment may be entered thereon in
any court having jurisdiction thereof.
(j) Resignation. Without limiting the obligations of the Officer,
or the rights of the Company, in connection with, or relating to, this
Agreement, the Officer agrees that in order for the Officer to resign
his employment with the Company or any of its Subsidiaries, the Officer
shall provide the Company with six (6) months notice of resignation
prior to the effective date of such resignation.
IN WITNESS WHEREOF, the Officer has hereunto set the Officer's hand
and the Company has caused these presents to be executed in its name on
its behalf, all as of the day and year first above written.
XXXXX XXX XXXX
/s/ Xxxxx Xxx Xxxx
TOYS "R" US, INC.
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: Sr. V.P. - Human Resources
EXHIBIT A
SEPARATION AND RELEASE AGREEMENT
This Separation and Release Agreement ("Agreement") is entered into
as of this day of , 19 , between TOYS "R" US,
INC. and any successor thereto (collectively, the "Company") and Xxxxx
Xxx Xxxx (the "Officer").
The Officer and the Company agree as follows:
1. The employment relationship between the Officer and the Company
terminated on (the "Termination Date").
2. In accordance with the Officer's Retention Agreement, the
Company has agreed to pay the Officer certain payments and to make
certain benefits available after the Termination Date.
3. In consideration of the above, the sufficiency of which the
Officer hereby acknowledges, the Officer, on behalf of the Officer and
the Officer's heirs, executors and assigns, hereby releases and forever
discharges the Company and its members, parents, affiliates,
subsidiaries, divisions, any and all current and former directors,
officers, employees, agents, and contractors and their heirs and
assigns, and any and all employee pension benefit or welfare benefit
plans of the Company, including current and former trustees and
administrators of such employee pension benefit and welfare benefit
plans, from all claims, charges, or demands, in law or in equity,
whether known or unknown, which may have existed or which may now exist
from the beginning of time to the date of this letter agreement,
including, without limitation, any claims the Officer may have arising
from or relating to the Officer's employment or termination from
employment with the Company, including a release of any rights or claims
the Officer may have under Title VII of the Civil Rights Act of 1964, as
amended, and the Civil Rights Act of 1991 (which prohibit discrimination
in employment based upon race, color, sex, religion, and national
origin); the Americans with Disabilities Act of 1990, as amended, and
the Rehabilitation Act of 1973 (which prohibit discrimination based upon
disability); the Family and Medical Leave Act of 1993 (which prohibits
discrimination based on requesting or taking a family or medical leave);
Section 1981 of the Civil Rights Act of 1866 (which prohibits
discrimination based upon race); Section 1985(3) of the Civil Rights Act
of 1871 (which prohibits conspiracies to discriminate); the Employee
Retirement Income Security Act of 1974, as amended (which prohibits
discrimination with regard to benefits); any other federal, state or
local laws against discrimination; or any other federal, state, or local
statute, or common law relating to employment, wages, hours, or any
other terms and conditions of employment. This includes a release by
the Officer of any claims for wrongful discharge, breach of contract,
torts or any other claims in any way related to the Officer's employment
with or resignation or termination from the Company. This release also
includes a release of any claims for age discrimination under the Age
Discrimination in Employment Act, as amended ("ADEA"). The ADEA
requires that the Officer be advised to consult with an attorney before
the Officer waives any claim under ADEA. In addition, the ADEA provides
the Officer with at least 21 days to decide whether to waive claims
under ADEA and seven days after the Officer signs the Agreement to
revoke that waiver. This release does not release the Company from any
obligations due to the Officer under Section 4, 7, 9(b), 10, 11 or 13(e)
of the Officer's Retention Agreement, the Officer's Indemnification
Agreement with the Company or under this Agreement.
Additionally, the Company agrees to discharge and release the
Officer and the Officer's heirs from any claims, demands, and/or causes
of action whatsoever, presently known or unknown, that are based upon
facts occurring prior to the date of this Agreement, including, but not
limited to, any claim, matter or action related to the Officer's
employment and/or affiliation with, or termination and separation from
the Company; provided that such release shall not release the Officer
from any loan or advance by the Company or any of its subsidiaries, any
act that would constitute "Cause" under the Officer's Retention
Agreement or a breach under Section 9(b), 11 or 13(e) of the Officer's
Retention Agreement.
4. This Agreement is not an admission by either the Officer or the
Company of any wrongdoing or liability.
5. The Officer waives any right to reinstatement or future
employment with the Company following the Officer's separation from the
Company on the Termination Date.
6. The Officer agrees not to engage in any act after execution of
the Separation and Release Agreement that is intended, or may reasonably
be expected to harm the reputation, business, prospects or operations of
the Company, its officers, directors, stockholders or employees. The
Company further agrees that it will engage in no act which is intended,
or may reasonably be expected to harm the reputation, business or
prospects of the Officer.
7. The Officer shall continue to be bound by Sections 11 and 13(e)
of the Officer's Retention Agreement.
8. The Officer shall promptly return all the Company property in
the Officer's possession, including, but not limited to, the Company
keys, credit cards, cellular phones, computer equipment, software and
peripherals and originals or copies of books, records, or other
information pertaining to the Company business. The Officer shall
return any leased or Company car at the expiration of the Consulting
Period (as defined in the Officer's Retention Agreement).
9. This Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey, without reference to the
principles of conflict of laws. Exclusive jurisdiction with respect to
any legal proceeding brought concerning any subject matter contained in
this Agreement shall be settled by arbitration as provided in the
Officer's Retention Agreement.
10. This Agreement represents the complete agreement between the
Officer and the Company concerning the subject matter in this Agreement
and supersedes all prior agreements or understandings, written or oral.
This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective
successors and legal representatives.
11. Each of the sections contained in this Agreement shall be
enforceable independently of every other section in this Agreement, and
the invalidity or nonenforceability of any section shall not invalidate
or render unenforceable any other section contained in this Agreement.
12. It is further understood that for a period of 7 days following
the execution of this Agreement in duplicate originals, the Officer may
revoke this Agreement, and this Agreement shall not become effective or
enforceable until the revocation period has expired. No revocation of
this Agreement by the Officer shall be effective unless the Company has
received within the 7-day revocation period, written notice of any
revocation, all monies received by the Officer under this Agreement and
all originals and copies of this Agreement.
13. This Agreement has been entered into voluntarily and not as a
result of coercion, duress, or undue influence. The Officer
acknowledges that the Officer has read and fully understands the terms
of this Agreement and has been advised to consult with an attorney
before executing this Agreement. Additionally, the Officer acknowledges
that the Officer has been afforded the opportunity of at least 21 days
to consider this Agreement.
The parties to this Agreement have executed this Agreement as of
the day and year first written above.
TOYS "R" US, INC.
By: ________________________
Name:
Title:
XXXXX XXX XXXX
_____________________________
EXHIBIT B
Capitalized terms used in the Agreement that are not elsewhere
defined in the Agreement have the definitions set forth below:
"Annual Base Salary" means $375,000 per annum as may be increased
from time to time in the discretion of either the Committee, the Board
or any appropriate committee of the Board.
"Board" means the Board of Directors of the Company.
"Cause" means: (i) the conviction of, or pleading guilty or nolo
contendere to, a felony involving moral turpitude; (ii) the commission
of any fraud, misappropriation or misconduct which causes demonstrable
injury to the Company or a subsidiary; (iii) an act of dishonesty
resulting or intended to result, directly or indirectly, in material
gain or personal enrichment to the Officer at the expense of the Company
or a subsidiary; (iv) any material breach of the Officer's fiduciary
duties to the Company as an employee or officer; (v) a serious violation
of the Toys "R" Us Ethics Agreement or any other serious violation of a
Company policy; (vi) the willful and continued failure of the Officer to
perform substantially the Officer's duties with the Company or one of
its subsidiaries (other than any such failure resulting from incapacity
due to physical or mental illness resulting in a Disability), within a
reasonable time after a written demand for substantial performance is
delivered to the Officer by the Board, which specifically identifies the
manner in which the Board believes that the Officer has not
substantially performed the Officer's duties; (vii) the failure by the
Officer to comply, in any material respect, with the provisions of
Section 11 of the Agreement; or (viii) the failure by the Officer to
comply with any other undertaking set forth in the Agreement or any
breach by the Officer hereof that is reasonably likely to result in a
material injury to the Company.
For purposes of this provision, no act or failure to act, on the
part of the Officer, shall be considered "willful" unless it is done, or
omitted to be done, by the Officer in bad faith or without reasonable
belief that the Officer's action or omission was in the best interests
of the Company. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or based upon the
advice of regular outside counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Officer in good faith
and in the best interests of the Company. The cessation of employment
of the Officer shall not be deemed to be for Cause unless and until
there shall have been delivered to the Officer a copy of a resolution
duly adopted by the affirmative vote of a majority of the entire
membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Officer and the
Officer is given an opportunity, together with counsel, to be heard
before the Board), finding that, in the good faith opinion of the Board,
the Officer is guilty of the conduct described, and specifying the
particulars thereof in detail.
"Change of Control" - See Exhibit C.
"Committee" means the Company's Management Compensation and Stock
Option Committee of the Board of Directors or any successor committee of
the Board performing equivalent functions.
"Date of Termination" means (i) if the Officer's employment is
terminated by the Company for Cause, or by the Officer for Good Reason,
the date of receipt of the Notice of Termination or any later date
specified therein, as the case may be (although such Date of Termination
shall retroactively cease to apply if the circumstances providing the
basis of termination for Cause or Good Reason are cured in accordance
with the Agreement), (ii) if the Officer's employment is terminated by
the Company other than for Cause, the Date of Termination shall be the
date so designated by the Company in its notification to the Officer of
such termination, (iii) if the Officer's employment is terminated by
reason of death or Disability, the Date of Termination shall be the date
of death of the Officer or the effective date of the Disability, as the
case may be, and (iv) the last day of the Employment Period during which
the Company shall have given notice to the Officer that the Employment
Period shall not be extended.
"Disability" means the determination that the Officer is disabled
pursuant to the terms of the TRU Partnership Employees' Savings and
Profit Sharing Plan, as amended and restated as of October 1, 1993, as
the same may be amended from time to time.
"Good Reason" means, without the Officer's prior written consent,
the occurrence of any of the following, provided that the Officer
delivers a Notice of Termination specifying such occurrence within 30
days thereof:
(i) the assignment of the Officer to a position materially
inconsistent with the requirements of Section 2(a) of the Agreement,
excluding for this purpose an action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given
by the Officer; provided, however, that the foregoing shall not
constitute "Good Reason" if it is not attendant to a reduction in the
Officer's Annual Base Salary or total target compensation except that a
request by the Company for the Officer to relocate outside Northeastern
New Jersey shall constitute "Good Reason";
(ii) any failure by the Company to comply in any material respect
with any of the provisions of Section 2(b) of the Agreement, other than
failure not occurring in bad faith and that is remedied by the Company
within a reasonable time after receipt of notice thereof given by the
Officer;
(iii) any failure by the Company to comply with and satisfy
Section 12(c) of the Agreement; or
(iv) notice by the Company that it is not extending the
termination date of the Employment Period.
"Notice of Termination" means a written notice that (i) indicates
the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Officer's employment under the provision so indicated and (iii) if the
Date of Termination (as defined above) is other than the date of receipt
of such notice, specifies the termination date (which date shall be not
more than thirty days after the giving of such notice).
"Plans" means all employee compensation, benefit and welfare plans,
policies and programs of the Company, which may include, without
limitation, incentive, savings, retirement, stock option, restricted
stock, supplemental Officer retirement, pension, medical, prescription,
dental, disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans, vacation
practices, fringe benefit practices and policies relating to the
reimbursement of business expenses.
"Retirement" shall have the meaning ascribed to that term in the
Plan under which benefits are being sought by the Officer.
EXHIBIT C
CHANGE OF CONTROL AND TAX GROSS-UP
I. Certain Definitions
"Change of Control" means, after the date hereof:
(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 25% 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 by the Company or any of its subsidiaries, (ii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any subsidiary of the Company, (iii) any
acquisition by any Person pursuant to a transaction that complies with
clauses (i), (ii) and (iii) of subsection (c) below, or (iv) any
acquisition by any entity in which the Officer has a material direct or
indirect equity interest; or
(b) The cessation of the "Incumbent Board" for any reason to
constitute at least a majority of the Board. "Incumbent Board" means
the members of the Board on the date hereof and any member of the Board
subsequent to the date hereof whose election, or nomination for election
by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board, except
that the Incumbent Board shall not include any member of the Board 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.
(c) The 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,
immediately following such Business Combination each of the following
would be correct:
(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 Person resulting from such Business Combination
(including, without limitation, a Person 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, and
(ii) no Person (excluding (A) any employee benefit plan (or
related trust) sponsored or maintained by the Company or any subsidiary
of the Company, or such corporation resulting from such Business
Combination or any Affiliate of such corporation, or (B) any entity in
which the Officer has a material equity interest, or any "Affiliate" (as
defined in Rule 405 under the Securities Act of 1933, as amended) of
such entity) beneficially owns, directly or indirectly, 25% 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 stockholders of the Company of a complete
liquidation or dissolution of the Company.
II. Tax Gross-Up
(a) If required by Section 10 of the Agreement, in addition to the
payments described in Sections 4 and 7 of the Agreement and the grants
described in the Stock Unit Agreement, the Company shall pay to the
Officer an amount (the "Gross-up") such that the net amount retained by
the Officer, after deduction of any Excise Tax and any United States
Federal, state and local income taxes, equals the amount of such
payments that the Officer would have retained had such Excise Tax not
been imposed. In addition, the Company shall indemnify and hold the
Officer harmless on an after-tax basis from any Excise Tax imposed on or
with respect to any such payment (including, without limitation, any
interest, penalties and additions to tax) payable in connection with any
such Excise Tax. For purposes of determining the amount of any Gross-up
or the amount required to make an indemnity payment on an after-tax
basis, it shall be assumed that the Officer is subject to Federal, state
and local income tax at the highest marginal statutory rates in effect
for the relevant period after taking into account any deduction
available in respect of any such tax (e.g., if state and local taxes are
deductible for Federal income tax purposes in the relevant period, it
shall be assumed that such taxes offset income that would otherwise be
subject to Federal income tax at the highest marginal statutory rate in
effect for such period).
(b) Subject to the provisions of paragraph (c) of this Exhibit C ,
the determination of (i) whether a Gross-up is required and the amount
of such Gross-up and (ii) the amount necessary to make any payment on an
after-tax basis, shall be made in accordance with the assumptions set
forth in paragraph (a) of this Exhibit C by Ernst & Young LLP or such
other "Big Six" accounting firm designated by the Officer and reasonably
acceptable to the Company.
(c) The Officer shall notify the Company as soon as practicable in
writing of any claim by the Internal Revenue Service that, if
successful, would require any Gross-up or indemnity payment. The
Officer shall not pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice to the Company.
If the Company notifies the Officer in writing prior to the expiration
of such period that it desires to contest such claim, the Officer shall
take all actions necessary to permit the Company to control all
proceedings taken in connection with such contest. In that connection,
the Company may, at its sole option, pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences in respect
of such claim and may, at its sole option, either direct the Officer to
pay the tax claimed and xxx for a refund or contest the claim in any
permissible manner; provided, however, that the Company shall pay and
indemnify the Officer from and against all costs and expenses incurred
in connection with such contest; provided further, however, that if the
Company directs the Officer to pay such claim and xxx for a refund, the
Company shall advance the amount of such payment to the Officer on an
interest-free basis and at no net after-tax cost to the Officer. If the
Officer becomes entitled to receive any refund or credit with respect to
such claim (or would be entitled to a refund or credit but for a
counterclaim for taxes not indemnified hereunder), the Officer shall
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon) plus the amount of any tax benefit
available to the Officer as a result of making such payment (any such
benefit calculated based on the assumption that any deduction available
to the Officer offsets income that would otherwise be taxed at the
highest marginal statutory rates of Federal, state and local income tax
for the relevant periods).
ANNEX A
STOCK UNIT AGREEMENT
STOCK UNIT AGREEMENT, dated as of February 25, 1998 (the "Unit
Agreement"), between TOYS "R" US, INC., a Delaware corporation (the
"Company"), and Xxxxx Xxx Xxxx (the "Officer").
W I T N E S S E T H:
WHEREAS, the Company proposed for the approval of the stockholders
of the Company at the 1997 Annual Meeting of Stockholders an Amendment
(the "Amendment") to the Company's 1994 Stock Option and Performance
Incentive Plan (the "Plan") providing for performance criteria that may
be utilized by the Management Compensation and Stock Option Committee
(the "Committee") in connection with the grant of Performance Shares (as
defined in the Plan and referred to herein as "Stock Units"), and the
Stockholders approved such Amendment;
WHEREAS, the Officer and the Company are entering into a Retention
Agreement, dated as of even date herewith (the "Retention Agreement");
WHEREAS, as further inducement for the Officer to execute the
Retention Agreement and continue in the employ of the Company, the
Committee has determined to grant the Officer the Stock Units as
described in this Unit Agreement, and
WHEREAS, the Board and the Committee desire that the compensation
arising from the Stock Units shall qualify as "performance-based
compensation" for purposes of Section 162(m) of the Internal Revenue
Code of 1986, as amended.
NOW, THEREFORE, in consideration of the covenants set forth herein
and for other good and valuable consideration, the parties agree as
follows:
1. Definitions. Capitalized terms used herein without definition
shall have the meanings ascribed to them in the Plan.
2. Stock Unit Grant. Subject to the terms and conditions set
forth in this Unit Agreement and in Section 10 of the Plan, the Officer
is hereby granted 20,000 Stock Units. Each Stock Unit represents the
right to receive one share of Common Stock (collectively, with other
shares of Common Stock relating to the Stock Units and held in the
Officer's account in the Trust (as defined below) in respect of the
Stock Units, the "Shares"). The 20,000 Shares shall be promptly
deposited after the date hereof in the grantor trust created pursuant to
the Grantor Trust Agreement, dated as of October 1, 1995 between the
Company and American Express Trust Company, a Minnesota trust company
(together with any grantor trust subsequently established by the
Company, the "Trust") and shall be allocated by the Trust to the
Officer's account therein subject to the forfeiture conditions of
Section 3 below. Any property attributable to the Shares, including,
without limitation, dividends and distributions thereon, shall be
deposited into the Trust, shall as promptly as practicable be reinvested
in shares of Common Stock, and shall be allocated by the Trust to the
Officer's account therein subject to the forfeiture conditions of
Section 3 below.
3. Forfeiture Conditions. The Stock Units granted to the Officer
hereunder shall be forfeited in their entirety, subject to the terms of
the Retention Agreement, if:
(i) the Officer's employment with the Company terminates prior to
the fifth anniversary of the date hereof ; or
(ii) the Performance Objective set forth on Exhibit A hereto is
not achieved.
4. Payment of Stock Units. As soon as practicable but no later
than February 25, 2003, the Committee shall determine whether the
Performance Objective set forth on Exhibit A has been achieved. The
Shares, together with any property attributable thereto (including,
without limitation, dividends and distributions thereon), shall be
delivered to the Officer promptly following February 25, 2003 unless the
Officer has elected to defer receipt of such Shares in accordance with
the terms and conditions of any deferred compensation program maintained
by the Company or has failed to satisfy the condition set forth in
Section 3(i) hereof.
5. Investment Representation. The Shares acquired by the Officer
under this Unit Agreement will be acquired for the Officer's account and
not with a view to the distribution thereof, and the Officer will not
sell or otherwise dispose of the Shares unless the Shares are registered
under the Securities Act of 1933, as amended (the "Act"), or the Officer
shall furnish the Company with an opinion of counsel reasonably
satisfactory to the Company that such registration is not required, and
a legend to such effect may be placed on the certificate for the Shares.
6. Liability; Indemnification. No member of the Committee, nor
any person to whom ministerial duties have been delegated, shall be
personally liable for any action, interpretation or determination made
with respect to this Unit Agreement, and each member of the Committee
shall be fully indemnified and protected by the Company with respect to
any liability such member may incur with respect to any such action,
interpretation or determination, to the extent permitted by applicable
law and to the extent provided in the Company's Certificate of
Incorporation and Bylaws, as amended from time to time, or under any
agreement between any such member and the Company.
7. Severability. Each of the Sections contained in this Unit
Agreement shall be enforceable independently of every other section in
this Unit Agreement, and the invalidity or nonenforceability of any
section shall not invalidate or render unenforceable any other section
contained in this Unit Agreement
8. Governing Law. This Unit Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey,
without reference to principles of conflict of laws. Exclusive
jurisdiction with respect to any legal proceeding brought concerning any
subject matter contained in this Unit Agreement shall be settled by
arbitration as provided in the Retention Agreement.
9. Captions. The captions of this Unit Agreement are not part of
the provisions hereof and shall have no force or effect.
10. Amendment. This Unit Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
11. Notices. All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
(i) If to the Officer, to the address on file with the Company;
and
(ii) If to the Company, to it at Toys "R" Us, Inc., 000 Xxxx Xxxx,
Xxxxxxx, Xxx Xxxxxx 00000, Attention: Senior Vice President - Human
Resources;
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and communications
shall be effective when actually received by the addressee.
12. Interpretation. The interpretation and decision with regard
to any question arising under this Unit Agreement or with respect to the
Stock Units made by the Committee shall be final and conclusive on the
Officer.
13. Successors. This Unit Agreement shall be binding upon the
Company and its successors and assigns.
IN WITNESS WHEREOF, this Agreement has been executed by the Company
by one of its duly authorized officers as of the date specified above.
TOYS "R" US, INC.
By: /s/ Xxxxx X. Xxxxxx
Title: Sr. V.P. - Human Resources
I hereby acknowledge receipt of
the Stock Units and agree to the
provisions set forth in this Agreement.
/s/ Xxxxx Xxx Xxxx
XXXXX XXX XXXX
