EMPLOYMENT AGREEMENT
This
Employment Agreement (this “Agreement”)
is
entered into as of this 5th
day of
June 2006, by and between The Bombay Company, Inc., a Delaware corporation
(the
“Company”),
and
Xxxxx X. Xxxxxxx (the “Executive”).
RECITALS
WHEREAS,
the Company is engaged, directly or indirectly, in the business of designing,
sourcing and marketing home accessories, wall décor and furniture (the
“Business”);
WHEREAS,
the Company believes that it would benefit from the Executive’s skill,
experience and background, and wishes to employ the Executive as its Chief
Executive Officer;
WHEREAS,
the Company expects to elect the Executive to serve as a Director of the
Company
at the next meeting of the Board of Directors following the Effective Date;
and
WHEREAS,
the parties desire by this Agreement to set forth in greater detail the terms
and conditions of the employment relationship between the Company and the
Executive.
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants herein
set
forth, and for other good and valuable consideration, the Company and the
Executive hereby agree as follows:
1. Employment
of Executive.
(a) General
Duties.
The
Company hereby employs the Executive as its Chief Executive Officer, and
the
Executive accepts such employment, on the terms and subject to the conditions
provided in this Agreement. As Chief Executive Officer, the Executive shall
be
directly or indirectly responsible for all operations of the Company, and
every
employee of the Company shall report, directly or indirectly, to the Executive.
The Executive shall report solely to the Company’s Board of Directors (the
“Board”)
and
shall devote substantially all of his professional time, efforts, attention,
energy and skill to performing the duties of Chief Executive Officer of the
Company. As part of these duties, the Executive may serve on the Board of
Directors of subsidiaries of the Company as may be requested by the Company
from
time to time. Executive’s primary place of employment shall be the Company’s
executive offices in Fort Worth, Texas, or such other place as such executive
offices may be moved with the Executive’s advance written consent. Provided that
such activities do not violate any term or condition of this Agreement, or
materially interfere with the performance of his duties hereunder, nothing
herein shall prohibit the Executive from (a) participating in other business
activities approved in advance by the Board in accordance with any terms
and
conditions of such approval, (b) engaging in educational, charitable,
civic, fraternal or trade group activities or (c) investing his personal
assets
in the Company or other entities or business ventures, subject to any applicable
legal requirements and any policies of the Company applicable to all executive
personnel of the Company and members of the Board. All communications and
notices that the Executive desires to give to the Board in his capacity as
an
officer of the Company shall be given to the non-executive Chairman or to
the
“Lead
Director”
who
is
designated from time to time by the entire Board.
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(b) D&O
Insurance.
The
Company shall use reasonable best efforts to provide directors’ and officers’
liability insurance coverage for the benefit of the Executive and his estate
at
all times during the “Employment Term” (defined below) on the same terms and in
the same amount as the Company then provides for its other directors and
executive officers. Upon the expiration of the Employment Term and for a
period
thereafter equal to the shorter of (i) six (6) years or (ii) the expiration
of
the applicable statute of limitations (the “Post-Termination
Coverage Period”),
the
Company will use reasonable best efforts to maintain directors’ and officers’
liability insurance coverage for its directors and executive officers in
a
manner that will continue to provide coverage for the Executive’s acts and
omissions during the Employment Term. Notwithstanding the foregoing sentences
of
this Section 1(b), from and after the occurrence of a ‘Change of Control” (as
defined below), the Company shall be obligated to use best efforts to maintain
directors’ and officers’ liability insurance coverage during the Employment Term
and the Post-Termination Coverage Period on terms and in amounts substantially
similar to those maintained by the Company immediately prior to the Change
of
Control.
2. Employment
Term.
Subject
to the terms and conditions of this Agreement, the Executive’s term of
employment under this Agreement (the “Employment
Term”)
shall
commence on the date hereof (the “Effective
Date”)
and
continue until June 5, 2009. Notwithstanding the foregoing, the Employment
Term and the Executive’s employment hereunder may be terminated in accordance
with the provisions of Section 4.
3. Compensation.
As
compensation for performing the services required by this Agreement, and
during
the Employment Term, the Executive shall be compensated as follows:
(a) Base
Compensation.
The
Company shall pay to the Executive as base compensation an annual salary
(“Base
Compensation”)
of Six
Hundred Thousand Dollars ($600,000). Subject to subparagraph (b) below, the
Base Compensation shall be payable in accordance with the general policies
and
procedures for payment of salaries to senior executive personnel of the Company
as implemented by the Board, in substantially equal installments, subject
to
withholding for applicable federal, state, local and foreign taxes. Increases
in
Base Compensation, if any, shall be determined by the Compensation and Human
Resources Committee of the Board (the “Compensation
Committee”)
based
on an annual review of the Executive’s performance to be conducted after
January 1 and prior to June 3 of each year during the Employment Term,
subject to approval by the Board. Upon the completion of each such review,
but
no later than June 3 of each year, the Company shall provide the Executive
with a written notice that sets forth the amount of Base Compensation to
be paid
to the Executive during the twelve-month period that begins on June 3 of
such year.
(b) Cash
Incentive Compensation.
At the
end of each fiscal year of the Company during the Employment Term and subject
to
the conditions specified herein, the Executive shall be eligible to receive
a
cash bonus as incentive compensation in addition to his Base Compensation
(the
“Cash
Incentive Compensation”).
The
Executive’s target Cash Incentive Compensation shall be equal to seventy-five
percent (75%) of his Base Compensation for each such fiscal year and shall
be
determined pursuant to the Executive Performance Bonus Grid for such fiscal
year. “Executive
Performance Bonus Grid”
means
the criteria established for each fiscal year by the Compensation Committee
for
all executive officers of the Company that specifies the percentage of each
executive’s base salary that is eligible to be paid to such executive as an
incentive bonus upon the Company’s achievement of certain profitability
thresholds for such fiscal year. In no event shall the amount of Cash Incentive
Compensation paid to Executive for any fiscal year exceed two hundred percent
(200%) of his target Cash Incentive Compensation for such year.
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Payment
of the Cash Incentive Compensation for each fiscal year will be made in
accordance with the general policies and procedures for payment of incentive
compensation to senior executive personnel of the Company. For the period
from
the Effective Date through February 3, 2007 (the last day of the Company’s 2007
fiscal year), the target Cash Incentive Compensation shall be pro-rated at
$262,500; provided,
that
$131,250 of such pro-rated amount (the “Fiscal
2007 Incentive Guarantee”)
shall
not be subject to performance goals or similar criteria.
(c) Equity-Based
Incentive Compensation.
On the
Effective Date, the Company will grant to the Executive options to purchase
550,000 shares of the Company’s common stock, par value $1.00 per share
(“Common
Stock”),
with
an exercise price per share equal to the closing sale price of a share of
Common
Stock as quoted on the New York Stock Exchange on such date (the “Option
Award”)
and a
three-year vesting period. The terms and conditions relating to the Option
Award
are set forth in the form of stock option agreement attached hereto as
Exhibit A
(the
“Option
Award Agreement”).
(d) Employee
Benefits: Fringe Benefits.
During
the Employment Term, the Executive and his eligible dependents (where
applicable) shall have the right to participate in each retirement, pension,
insurance, health and other benefit plan or program that has been or is
hereafter adopted by the Company (or in which the Company participates)
according to the terms of such plan or program with all the benefits, rights
and
privileges as are generally enjoyed by senior executive personnel of the
Company; provided,
however,
that no
policy adopted by the Company or the Board for the benefit of executives
who do
not have employment agreements (for example, the Bombay Executive Management
Severance Policy) shall apply to the Executive in a manner that would conflict
with any term in this Agreement, or expand on or increase any benefit
specifically granted in this Agreement. The Executive also shall be entitled
to
all fringe benefits, if any, that generally are enjoyed by senior executive
personnel of the Company. Regardless of whether such benefits are available
to
other senior executives, the Executive shall be entitled to the following
benefits at the expense of the Company:
(1) supplemental
long-term disability insurance that, collectively with the Company’s other
disability insurance plans, provides the Executive with an annual benefit
equal
to sixty percent (60%) of the Executive’s Base Compensation and target Cash
Incentive Compensation in effect on the date that he becomes disabled;
provided,
that
such coverage shall not commence until sixty (60) days after the Effective
Date;
(2) a
supplemental life insurance policy that, collectively with the Company’s other
life insurance policies, provides the Executive with term life insurance
coverage in an amount equal to one and one-half (1.5) times his Base
Compensation and target Cash Incentive Compensation in effect at any time
during
the Employment Term;
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(3) annual
physical medical examination and evaluation the total expense of which shall
not
exceed $5,000 per year;
(4) first
class ticketing on all air travel for Business purposes;
(5) a
one-time reimbursement for the Executive’s actual, out-of-pocket legal fees and
expenses incurred in the preparation, review and negotiation of this
Agreement;
(6) a
one-time reimbursement for the reasonable, documented out-of-pocket costs
incurred by the Executive in connection with relocating his primary residence
from Toronto, Ontario to the Dallas/Fort Worth area, including (i) real estate
commissions of up to six percent (6%) on the sale of the Executive’s current
Toronto residence, (ii) packing and moving costs, (iii) up to three (3) months
temporary apartment rent, utility expenses and automobile rental in the
Dallas/Fort Worth area, and (iv) up to three (3) trips, with the Executive’s
spouse, to the Dallas/Fort Worth area to purchase a home in that area, including
airfare first class, hotel, car rental and meals; provided,
that
the Executive shall submit to the Company’s Lead Director, in advance, any such
expense (or series of related expenses) that will exceed $10,000, and
reimbursement of such expense shall be subject to the prior approval of the
Lead
Director (which approval shall not be withheld if such expense is reasonable
and
within the parameters described in this paragraph (6)). The Executive shall
use
his reasonable best efforts (taking into account his duties to the Company
pursuant to this Agreement) to complete his move and establish a primary
residence in the Dallas/Fort Worth area on or before September 1, 2006. The
Company also shall pay to the Executive an additional, one-time amount equal
to
all federal, state, local and foreign income and employment tax liability
that
the Executive owes as a result of the Company’s reimbursement of the relocation
and moving expenses described in this paragraph (6), to substantially the
effect
that the Executive shall receive the benefit of the relocation and moving
expense reimbursements as if there were no federal, state, local and foreign
income and employment tax for such reimbursements; and
(7) a
one-time reimbursement for the reasonable, documented out-of-pocket costs
incurred by the Executive in connection with his making a reasonable number
of
personal trips to Canada between the Effective Date and the earlier of September
1, 2006 or the date on which the Executive actually establishes his primary
residence in the Dallas/Fort Worth area, including first class ticketing
on air
travel.
(e) Vacation;
Sick Leave; Holidays; Leaves of Absence.
The
Executive shall be entitled to four (4) weeks of paid vacation leave each
year
on dates mutually agreed upon by the Company and the Executive. The Executive
also shall be entitled to the same paid holidays provided to the other employees
of the Company. In addition, the Executive may be granted leaves of absence
with
pay for such valid and legitimate reasons as the Board in its sole and absolute
discretion may determine or as required by law.
4
(f) Expenses.
The
Executive shall be entitled to receive reimbursement for all reasonable and
necessary expenses incurred by him in connection with the performance of
his
Company related duties under this Agreement, subject to the Executive’s
compliance in all material respects with the Company’s reasonable policies for
recording such expenses and for submitting them for reimbursement.
(g) Taxes.
Except
as specifically provided for herein, the Executive shall be responsible for
payment of all federal, state, and local income and employment taxes, any
applicable excise taxes, and any other government assessments owing by the
Executive for all benefits received pursuant to this Agreement. All payments
required to be made by the Company hereunder and all other benefits provided
to
the Executive hereunder shall be subject to the withholding of such amounts
relating to taxes and other government assessments as the Company may reasonably
determine it should withhold pursuant to any applicable law, rule or
regulation.
4. Termination
and Termination Benefits.
(a) Termination
by the Company.
(1) For
Cause.
The
Company may terminate the Employment Term and the Executive’s employment under
this Agreement for “Cause” (as defined below) by written notice to the
Executive. The Executive’s employment hereunder shall terminate immediately upon
his receipt of such notice unless the Company specifies a later effective
date
of termination therein. In the event of such a termination, the Company shall
provide the Executive (A) the Base Compensation earned but not paid to the
Executive prior to the effective date of termination, (B) the benefits
described in Section 3(d) through the effective date of termination, (C) a
cash payment in lieu of the Executive’s accrued vacation leave provided for in
Section 3(e) that is unused as of the effective date of termination,
(D) reimbursement pursuant to Section 3(f) and then only for expenses
incurred up to the effective date of termination and (E) any unpaid Cash
Incentive Compensation for a prior fiscal year of the Company. In addition,
options for Common Stock which have vested in favor of the Executive prior
to
the date of termination shall remain exercisable by the Executive or his
estate,
as applicable, in whole or in part until the earlier of (i) the date that
is
ninety (90) days after termination of employment (or such later date as is
set
forth in any applicable stock option agreement) or (ii) the last day of the
original term of the option. The payments and benefits described in (A)-(E)
of
this paragraph shall be referred to hereinafter as the “Accrued
Obligations”.
Except
for the foregoing Accrued Obligations, the Company shall have no further
obligations or liability to the Executive under this Agreement.
For
purposes of this Agreement, “Cause”
means
(1) the Executive’s substantial failure to perform his duties under this
Agreement if not remedied in all material respects by the Executive within
thirty (30) days after receipt of a written notice from the Company specifying
such failure in reasonable detail, (2) fraud, misconduct or neglect by the
Executive that causes or is likely to cause material harm to the Company
(such
misconduct may include, without limitation, insobriety at the workplace during
working hours or the use of illegal drugs), (3) any failure to follow
directions of the Board that are consistent with the Executive’s duties under
this Agreement that results in material harm to the Company, if not remedied
in
all material respects by the Executive within ten (10) days after receipt
of a
written notice from the Board specifying such failure in reasonable detail,
(4)
the Executive’s conviction of, or entry of a pleading of guilty or nolo
contendre to, any crime involving moral turpitude, or the entry of an order
duly
issued by any federal or state regulatory agency having jurisdiction in the
matter permanently prohibiting the Executive from participating in the conduct
of the affairs of the Company or (5) any other breach of this Agreement by
the
Executive that is not remedied in all material respects within 30 days after
receipt of written notice from the Company specifying such breach in reasonable
detail.
5
(2) Without
Cause.
The
Company may terminate the Employment Term and the Executive’s employment under
this Agreement without Cause by written notice to the Executive. The Executive’s
employment hereunder shall terminate immediately upon the receipt of such
notice
unless the Company specifies a later effective date of termination therein.
If
the Company terminates the Executive’s employment without Cause, subject to
Sections 4(a)(2)(D) and 4(a)(2)(E) below:
(A) The
Company shall pay the Executive, or his estate, as applicable, a base severance
equal to eighteen (18) months of the Executive’s Base Compensation (as in effect
on the date of such termination), payable periodically (subject to Section
9(m)
below) in substantially equal installments over a twelve (12) month period
immediately following such termination (the “Severance
Payment Period”),
provided, however, that any amounts paid on or after the first day of the
seventh month of the Severance Payment Period shall be subject to offset
by any
earnings resulting from the Executive’s employment by another employer during
such period. For purposes of clarity, any amounts payable pursuant to this
paragraph during the first six months of the Severance Pay Period shall not
be
subject to offset by any earnings resulting from the Executive’s employment by
another employer during such period. Any amounts payable pursuant to this
paragraph shall be paid in accordance with the Company’s general policies and
procedures for payment of compensation to senior executive personnel of the
Company as implemented by the Board and subject to withholding for applicable
federal, state, local and foreign taxes.
(B) Subject
to the Company’s achievement of the applicable performance objectives and at the
time that the Company’s other senior executives receive their incentive bonus
payments for the fiscal year in which the Executive’s employment under this
Agreement was terminated, the Executive shall be eligible to receive an
additional severance payment equal to the amount of the Cash Incentive
Compensation, if any, that would have been paid to the Executive under the
provisions of Section
3(g)
hereof
for the fiscal year of the Executive’s termination, prorated based on the number
of days in such fiscal year during which the Executive served as the Company’s
Chief Executive Officer. Such amount shall be paid to the Executive in
accordance with the general policies and procedures for payment of compensation
to senior executive personnel of the Company as implemented by the Board,
subject to withholding for applicable federal, state, local and foreign taxes.
Notwithstanding the above, the amount paid pursuant to this paragraph (B)
shall
be no less than the Fiscal 2007 Incentive Guarantee if such termination occurs
prior to the Executive’s receipt of the Cash Incentive Compensation for the 2007
fiscal year.
(C) The
Company shall continue to provide for eighteen (18) months the same level
of
medical, vision and dental insurance benefits (collectively, the “Welfare
Benefits”)
for
the Executive and the Executive’s eligible dependents in the same manner as the
Company provided for them at the time of termination of the Executive’s
employment.
6
(D) The
Company shall pay and provide the Executive the Accrued
Obligations.
(E) Contemporaneously
with such termination, the unvested stock options for Common Stock and any
shares of restricted stock, restricted stock units and other equity incentives
previously granted to the Executive by the Company shall become vested,
nonforfeitable and exercisable in accordance with the provisions, if any,
concerning vesting and exercisability in any applicable plan or agreement
relating to such grants. The Executive or his estate (as applicable) may
continue to exercise all or any part of the vested stock options for Common
Stock held immediately following termination until the earlier of (i) the
date
that is six (6) months thereafter (or such longer period as is set forth
in any
applicable stock option agreement) or (ii) the last day of the original term
of
the option.
(F) Notwithstanding
anything contained herein to the contrary, if the Executive materially violates
and fails to timely cure the provisions of Sections 7 or 8 of this Agreement
(the “Restrictive
Covenants”)
at any
time while the Company is obligated to make severance payments or provide
severance benefits under this Section 4(a), the Company may send the Executive
written notice that specifies in reasonable detail the circumstances surrounding
the material violation. If the Executive does not cease the activities that
are
materially violating the Restrictive Covenants within ten (10) days following
the date of receipt of the Company’s written notice to the Executive, then, in
addition to any and all other rights that the Company may have at law or
in
equity, the Company may permanently cancel and terminate such severance payments
and benefits provided for in this Section 4(a)(2) that then remain to be
paid or
provided.
(G) The
Executive agrees that the Company’s obligation to pay severance pay, if any,
will arise only after the Executive’s employment has terminated and only if the
Executive signs and returns a general release and waiver of all claims the
Executive may have against the Company and its directors, officers, subsidiaries
and affiliates, except as to (i) matters covered by provisions of this Agreement
that expressly survive the termination of the Employment Term and the
Executive’s employment (including rights to enforce this Agreement), (ii) rights
to indemnification and insurance under the Charter, By-Laws and directors
and
officers insurance policies maintained by the Company, and (iii) rights to
which
the Executive is entitled by virtue of his participation in the employee
benefit
plans, policies and arrangements of the Company. The Executive further
acknowledges and agrees that severance pay, if any, constitutes consideration
for the Executive’s release of claims at the time of termination. In the
event the Executive declines to sign the release, he shall not be entitled
to
any severance, and the Company will have no further liability or obligation
to
the Executive under this Agreement or in connection with his employment or
termination.
7
(3) Disability.
If due
to illness, physical or mental disability, or other incapacity which cannot
be
reasonably accommodated, the Executive shall fail, for a total of any ninety
(90) days or more within any period of twelve (12) consecutive months, to
perform the duties required by this Agreement, the Board may terminate the
Employment Term and Executive’s employment under this Agreement; provided,
however,
that
prior to any such termination, the Company shall have given the Executive
at
least thirty (30) days’ advance written notice that it is terminating the
Executive’s employment due to disability, and the Executive shall not have
returned to full-time employment by the thirtieth (30th)
day
after such notice. In such event, the Company shall provide the Executive
the
Accrued Obligations and the Executive shall not be entitled to any other
severance compensation or payments of this Agreement. The Executive or his
estate, as applicable, shall have until the date that is twelve (12) months
following such termination (or such later date as is set forth in any applicable
stock option agreement) or, if earlier, the last day of the original term
of the
option, to exercise all or any part of vested stock options for Common Stock
that are held by the Executive on the date of termination.
(b) Termination
by the Executive.
(1) Resignation
Without Company Breach.
The
Executive may voluntarily terminate the Employment Term and his employment
hereunder upon ninety (90) days’ prior written notice to the Company. Such a
termination shall be effective ninety (90) days after the delivery of such
notice unless the Executive and the Company agree in writing to another
effective date; provided,
that
the Company may immediately terminate the Executive’s service upon payment of
the Base Compensation for any remainder of such notice period. In the event
of
such a termination, the Company shall pay and provide to the Executive the
Accrued Obligations, and the Company shall thereafter have no further obligation
or liability to the Executive under this Agreement (other than with respect
to
options for Common Stock which have vested in favor of the Executive prior
to
the date of termination, which shall remain exercisable by the Executive
or his
estate, as applicable, in whole or in part until the earlier of (i) the date
that is ninety (90) days after termination of employment (or such later date
as
is set forth in any applicable stock option agreement) or (ii) the last day
of
the original term of the option.
(2) Resignation
Upon Company Breach.
Upon
the occurrence of a Company Breach (defined below), the Executive may provide
the Company with a written notice that specifies in reasonable detail the
circumstances surrounding the alleged Company Breach. If such Company Breach
is
not cured within thirty (30) days of the Company’s receipt of such notice, then
the Executive may terminate his employment hereunder by written notice to
the
Company. The Executive’s employment hereunder shall terminate immediately upon
the delivery of such termination notice unless the Executive specifies a
later
effective date of termination therein. Upon such termination, the Executive
shall, subject to the provisions of Sections 4(a)(2)(F) and (G) hereof, be
entitled to receive the payments and benefits specified in Sections
4(a)(2)(A)-(D) hereof.
For
the
purposes of this Agreement, “Company
Breach”
means:
(i) a change in the Executive’s duties or responsibilities as an officer of the
Company that represents a reduction of the duties or responsibilities as
in
effect immediately prior thereto; (ii) a change by the Board in the duties
or
responsibilities of other senior executive officers of the Company that have
the
effect of precluding the Executive from effectively performing his duties
and
responsibilities; (iii) a material reduction in the Executive’s Base
Compensation without the Executive’s consent (other than a reduction that is
proportionately comparable to reductions implemented by the Board, and approved
or recommended by the Executive, for substantially all the senior executives
of
the Company); (iv) the Company requiring the Executive to be based at any
place
which either (A) is outside a fifty (50) mile radius of the Company’s Fort
Worth, Texas headquarters location as in use on the date of this Agreement,
except for reasonable travel on behalf of the Company or (B) increases the
Executive’s commute by more than thirty-five (35) miles; (iv) the failure of the
Company to nominate the Executive to serve as a director on the Board; or
(v)
any material breach by the Company of any provision of this Agreement. An
action
or inaction by the Company shall constitute a Company Breach only if the
Company
does not cure such alleged Company Breach within thirty (30) days after the
Executive delivers written notice to the Company declaring that an action
or
inaction of the Company, if not so cured, will constitute a Company Breach
hereunder.
8
(c) Additional
Effects of Termination.
The
Executive’s obligations and liabilities to the Company under this Agreement
shall cease as of the effective date of any termination pursuant to Sections
4(a) or 4(b), except that his obligations under the Restrictive Covenants
shall
survive and continue following any such termination.
(d) Death.
Notwithstanding any other provision of this Agreement, this Agreement shall
terminate on the date of the Executive’s death. In such event, the Executive’s
estate shall be paid the Executive’s Base Compensation earned but not paid prior
to the date of his death, plus any Cash Incentive Compensation earned but
not
paid prior to his death. In addition, upon the death of the Executive, the
Company shall (A) pay and provide the Executive’s estate the Accrued Obligations
and (B) continue to provide for 90 days, at the Company’s expense, the same
level of health insurance benefits for the Executive’s eligible dependents as
the Company provided for them at the time of the Executive’s death.
(e) Expiration.
Expiration of this Agreement in accordance with its terms on the three year
anniversary shall not be, and shall not be deemed to be, a termination by
the
Company.
(f) No
Duty to Mitigate.
In the
event of any termination of the Executive’s employment hereunder, the Executive
shall be under no obligation to seek other employment or otherwise mitigate
the
obligations of the Company under this Agreement.
(g) Board
Seat.
Upon
the termination of the Executive’s employment for any reason, if the Executive
serves on the Board of the Company or any “Affiliate” (as defined below), or
holds a position as an officer or committee member of the Company or any
Affiliate, at the time of such termination, the Executive shall promptly
resign
from all such positions by delivery of written notice to such
effect.
5. Change
of Control.
(a) Definitions.
For the
purposes of this Agreement:
“Affiliate”
shall
have the meaning given in Rule 405 promulgated under the Securities Act of
1933,
as amended.
“Change
of Control”
shall
mean any of the following:
(i) the
acquisition, other than from the Company, 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 (the “Exchange
Act”))
of
beneficial ownership of 20% or more of either the then outstanding shares
of
Common Stock of the Company or the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally either in the
election of directors of the Company or for the termination of the chief
executive officer of the Company; provided,
however,
that
any acquisition by the Company or any of its subsidiaries, or any employee
benefit plan (or related trust) of the Company or its subsidiaries, or any
corporation with respect to which following such acquisition, more than fifty
percent (50%) of, respectively, the then outstanding shares of common stock
of
such corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Common Stock and voting securities of the Company
immediately prior to such acquisition in substantially the same proportion
as
their ownership, immediately prior to such acquisition, of the then outstanding
shares of Common Stock of the Company or the combined voting power of the
then
outstanding voting securities of the Company entitled to vote generally in
the
election of directors, as the case may be, shall not constitute a Change
of
Control;
9
(ii) individuals
who, as of the Effective Date, constitute the Board (the “Incumbent
Board”)
cease
for any reason to constitute at least a majority of the Board, provided that
any
individual becoming a director subsequent to such date 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 is in connection with an actual or threatened election contest relating
to the election of the directors of the Company; or
(iii) approval
by the shareholders of the Company of a reorganization, merger or consolidation
of the Company, in each case, with respect to which the individuals and entities
who were the respective beneficial owners of the Common Stock and voting
securities of the Company immediately prior to such reorganization, merger
or
consolidation do not, following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than fifty percent (50%) 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 reorganization, merger or consolidation, or a complete
liquidation or dissolution of the Company or of the sale or other disposition
of
all or substantially all of the assets of the Company.
“Change
of Control Amount”
shall
mean an amount equal to two (2) times the sum of (i) the Base Compensation
in
effect immediately prior to a Change of Control plus (ii) the average of
the
Cash Incentive Compensation payment for the two (2) years prior to a Change
of
Control, or, if the Executive has been employed by the Company for less than
two
(2) years at the time of the Change of Control, (A) the amount of the
Executive’s last Cash Incentive Compensation payment, if at least one such
payment has been made, or (B) the target Cash Incentive Compensation for
the
year in which the Change of Control occurs (without regard to the second
paragraph of Section 3(b)), if at least one such payment has not been
made.
(b) Change
of Control Benefit.
If (i)
a Change of Control has occurred and (ii) within two (2) years thereafter,
the
Executive’s employment with the Company terminates for any reason other than (1)
termination by the Company for Cause or (2) termination by the Executive
for other than Company Breach, then the Company shall pay to the Executive
within seven (7) days following such termination a lump sum cash payment
equal
to the Change of Control Amount. The receipt of such Change of Control Amount
shall be in lieu of any right of payment that the Executive may have in
connection with such termination of employment whether pursuant to Section
4(a)(2)(A) (whether in connection with the Executive’s termination of employment
by the Company without Cause or his resignation due to Company Breach).
Additionally, if the Company becomes obligated to pay the Change of Control
Amount as specified herein, then (A) all unvested options for Common Stock
held
by the Executive shall immediately vest, and all previously vested and newly
vested stock options then held by the Executive shall remain exercisable
by the
Executive or his estate (in whole or part) at any time and from time to time
for
a period of one (1) year thereafter (or, if earlier, until the last day of
the
original term of the option), (B) all shares of restricted stock, restricted
stock units and other equity incentives shall become fully vested,
nonforfeitable and immediately paid and (C) the surviving corporation (or
its
successor) shall continue to provide, for a period of twenty-four (24) months,
the Executive (and his dependents as in effect on the date of the Change
of
Control) with the Welfare Benefits. Notwithstanding the foregoing provisions
of
this Section 5(b), if, within the six (6) month period immediately prior
to the
Change of Control, the Executive’s employment with the Company is terminated by
the Company for any reason other than (x) termination by the Company for
Cause
or (y) termination by the Executive for other than Company Breach, then for
purposes of this Agreement, such termination shall be deemed to have occurred
immediately following a Change of Control and the Executive shall be entitled
to
the payments and benefits described in this Section 5(b).
6. Certain
Change of Control Benefit Adjustments.
Notwithstanding anything in this Agreement to the contrary, in the event
it
shall be determined that any payment or distribution made, or benefit provided,
by the Company to or for the benefit of the Executive (whether paid or payable
or distributed or distributable or provided pursuant to the terms hereof
or
otherwise) would constitute a “parachute payment” as defined in Section 280G of
the Internal Revenue Code of 1986, as amended (the “Code”), then the severance
payment payable pursuant to this Agreement, at the election of the Executive,
may be reduced so that the aggregate present value of all payments in the
nature
of compensation to (or for the benefit of) the Executive which are contingent
on
a change of control (as defined in Code Section 280G(b)(2)(A)) is One Dollar
($1.00) less than the amount which the Executive could receive without being
considered to have received any parachute payment (the amount of this reduction
in the severance payment is referred to herein as the “Excess Amount”). The
determination of the amount of any reduction required to meet the dollar
threshold described in the preceding sentence shall be made by an independent
accounting firm (other than the Company’s independent accounting firm) selected
by the Company and acceptable to the Executive, and such determination shall
be
conclusive and binding on the parties hereto.
10
7. Confidential
Information.
(a) Acknowledgment.
The
Company shall provide the Executive with confidential proprietary information
of
the Company, including information regarding costs, profits, markets, sales,
products, key personnel, pricing policies, operational methods, other business
methods, plans for future developments, and other information not readily
available to the public, the disclosure of which to third parties would in
each
case have a material adverse effect on the Company’s Business operations
(“Confidential
Information”).
(b) Agreement
Regarding Confidentiality.
The
Executive will keep secret, during and after the termination of his employment,
all Confidential Information and will not use or disclose Confidential
Information to anyone outside of the Company other than in the course of
performance of his duties under this Agreement, except that (i) the Executive
shall have no such obligation to the extent Confidential Information is or
becomes publicly known other than as a result of the Executive’s breach of his
obligations hereunder, and (ii) the Executive may disclose such matters (A)
to
his counsel to the extent reasonably related to, and in the course of, their
representation of him and (B) to the extent required by applicable laws,
governmental regulations or judicial or regulatory processes.
(c) Return
of Records.
The
Executive will deliver promptly to the Company on termination of his employment
by the Company, or at any other time the Board may so request, all memoranda,
notes, records, reports and other documents (and all copies thereof) relating
to
the Company’s Business that he obtained while employed by, or otherwise serving
or acting on behalf of, the Company and that he may then possess or have
under
his control; provided that the Executive may retain a copy of his personal
contact list. In the event the Executive fails to comply with his obligations
under this Section 7(c), the Company shall be entitled to injunctive relief
enforcing such obligations to the extent reasonably necessary to protect
the
Company’s interests.
8. Noncompetition.
(a) In
exchange for the Company’s agreement to provide Confidential Information to the
Executive, during the Executive’s employment under this Agreement and for a
period of eighteen (18) months after the Executive’s termination, the
Executive will not, without the prior written approval of a majority of the
members of the Board (not including the Executive), (i) engage directly or
indirectly in, or become employed by, serve as an agent or consultant to
or
become an officer, director, partner, principal or stockholder of any
association, group, partnership, person, corporation or other entity which
is
engaged in a business in the United States or Canada that (A) is located
in a
region of the United States or Canada in which the Company conducts its Business
and (B) competes with the Business, or (ii) directly or indirectly seek,
solicit
or accept for employment or retention as an independent contractor any person
who (X) was, at the time of the Executive’s termination of employment or
during the three (3) month period prior thereto, employed by the Company
or
retained by the Company as an independent contractor who performed a substantial
majority of his, her or its services for the Company, and (Y) had a level
of seniority equivalent to at least the seniority held by a district sales
manager of the Company or (iii) directly or indirectly seek, solicit or accept
the business of any person, partnership, corporation, entity, association
or
group of any kind that was (1) a customer of the Company (other than a retail
customer), (2) a supplier of a type of product sold by the Company, (3) an
actively solicited prospective customer of the Company (other than a retail
customer) or (4) an actively solicited prospective supplier of a type of
product
sold by the Company, in each case, at the time of the Executive’s termination of
employment or during the six (6) month period prior thereto. As long as the
Executive does not engage in any other activity prohibited by this
Section 8(a), the Executive’s ownership of less than 2% of the issued and
outstanding stock of any corporation whose stock is traded on an established
national securities market shall not constitute an activity prohibited under
this Section 8(a).
(b) Specific
Performance.
If the
Executive breaches or threatens to commit a breach of the provisions of Sections
7 or 8 hereof, the Company shall have the right to have such Restrictive
Covenants specifically enforced by any court of competent jurisdiction, it
being
agreed that any breach or threatened breach (if carried out) of the Restrictive
Covenants would cause irreparable injury to the Company and that money damages
would not provide an adequate remedy for such injury. Accordingly, the Company
shall be entitled to injunctive relief to enforce the terms of the Restrictive
Covenants and to restrain the Executive from any violation thereof, without
the
need to post any type of bond or other form of security in connection with
such
relief and enforcement. The rights and remedies set forth in this Section
8(b)
shall be independent of all other others rights and remedies available to
the
Company for a breach of the Restrictive Covenants, and shall be severally
enforceable from, in addition to, and not in lieu of, any other rights and
remedies available at law or in equity. Notwithstanding the foregoing, if
the
breach or threatened breach by the Executive of the Restrictive Covenants
is of
the type that can be cured by the Executive, the Company shall provide the
Executive with ten (10) days’ prior written notice before seeking such specific
performance, and the Company shall not seek such relief if the Executive,
within
such ten (10) day period, fully cures any such breach or delivers a sworn
written affidavit to the Company stating that he will not commit such threatened
breach, as applicable.
11
(c) Tolling.
If
Executive violates any of the restrictions contained in this Section 8, the
restrictive period will be suspended and will not run in favor of Executive
from
the time of the commencement of any violation until the time when Executive
cures the violation to the satisfaction of the Company.
(d) Reformation.
The
courts enforcing this Agreement shall be entitled to modify the duration
and
scope of any restriction contained herein to the extent such restriction
would
otherwise be unenforceable, and such restriction as modified shall be enforced.
Executive acknowledges that the restrictions imposed by this Agreement are
legitimate, reasonable and necessary to protect the Company’s investment in its
businesses and the goodwill thereof. Executive acknowledges that the scope
and
duration of the restrictions contained herein are reasonable in light of
the
time that Executive has been engaged in the business of the Company, Executive’s
reputation in the markets for the Company’s business and Executive’s
relationship with the suppliers, customers and clients of the
Company.
9. Miscellaneous.
(a) Integration;
Amendment.
This
Agreement constitutes the entire agreement among the parties hereto with
respect
to the matters set forth herein and supersedes and renders of no force and
effect all prior understandings and agreements among the parties with respect
to
the matters set forth herein. No amendments or additions to this Agreement
shall
be binding unless in writing and signed by the Executive and the
Company.
(b) Assignment.
The
Company may assign this Agreement to any successor by operation of law or
purchaser of all or substantially all of the assets of the Company. The Company
shall, following any permitted assignment, remain liable and responsible
for all
obligations of the Company hereunder. The Executive may not assign this
Agreement or any right or interest therein, whether by operation of law or
otherwise, without the prior written consent of the Company.
(c) Severability.
If any
part of this Agreement is contrary to, prohibited by, or deemed invalid under
applicable law or regulations, such provision shall be inapplicable and deemed
omitted to the extent so contrary, prohibited, or invalid, but the remainder
of
this Agreement shall not be invalid and shall be given full force and effect
so
far as possible.
(d) Waivers.
The
failure or delay of any party at any time to require performance by any other
party of any provision of this Agreement, even if known, shall not affect
the
right of such party to require performance of that provision or to exercise
any
right, power, or remedy hereunder, and any waiver by any party of any breach
of
any provision of this Agreement shall not be construed as a waiver of any
continuing or succeeding breach of such provision, a waiver of the provision
itself, or a waiver of any right, power, or remedy under this Agreement.
No
notice to or demand on any party in any case shall, of itself, entitle such
party to any other or further notice or demand in similar or other
circumstances.
(e) Power
and Authority.
The
Company represents and warrants to the Executive that it has the requisite
corporate power to enter into this Agreement and perform the terms hereof,
and
that the execution, delivery and performance of this Agreement by it has
been
duly authorized by all appropriate corporate action.
12
(f) Burden
and Benefit.
This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, executors, personal and legal representatives,
successors and, subject to Section 9(b) above, assigns. Any provision of
this
Agreement which by its terms requires performance beyond the term of this
Agreement shall survive the term of this Agreement in accordance with the
terms
of such provision.
(g) Time
Is of the Essence.
Time is
of the essence for all purposes of this Agreement.
(h) Jurisdiction;
Venue; Legal Fees.
Jurisdiction and venue for any action arising out of this Agreement shall
be in
the appropriate State or Federal courts in Tarrant County, Texas.
(i) Governing
Law; Headings.
This
Agreement and its construction, performance, and enforceability shall be
governed by, and construed in accordance with, the laws of the State of Texas.
Headings and titles herein are included solely for convenience and shall
not
affect the interpretation of this Agreement.
(j) Notices.
All
notices called for under this Agreement shall be in writing and shall be
deemed
given upon receipt if delivered personally or by facsimile transmission and
followed promptly by mail, or mailed by registered or certified mail (return
receipt requested), postage prepaid, to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice;
provided that notices of a change of address shall be effective only upon
receipt thereof):
If
to the
Executive:
Xxxxx
X.
Xxxxxxx
0000
Xxxxx Xxxxxx X, Xxxx 000
Xxxxxxx,
Xxxxxxx X0X0X0
Telephone:
000-000-0000
With
a
copy to:
Xxxx,
Weiss, Rifkind, Xxxxxxx & Xxxxxxxx, LLP
0000
Xxxxxx xx xxx Xxxxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxx X. Xxxxx, Esq.
Facsimile:
212-757-3990
If
to the
Company:
The
Bombay Company, Inc.
000
Xxxxxx Xxxxxx
Xxxx
Xxxxx, Xxxxx 00000-0000
Attn:
General Counsel
Facsimile:
000-000-0000
13
Any
notice delivered to the party hereto to whom it is addressed shall be deemed
to
have been given and received on the day it was received; provided,
however,
that if
such day is not a business day then the notice shall be deemed to have been
given and received on the business day next following such day. Any notice
sent
by facsimile transmission shall be deemed to have been given and received
on the
next business day following the day of transmission.
(k) Counterparts.
This
Agreement may be executed in one or more counterparts, each of which
counterparts shall be deemed to be an original, and all such counterparts
shall
constitute one and the same agreement.
(l) No
Strict Construction.
The
parties hereto confirm that they have each participated in the negotiation
and
preparation of this Agreement and that this Agreement represents the joint
agreement and understanding of the parties. The language used in this Agreement
has been mutually chosen by the parties hereto, and no rule of strict
construction construing ambiguities against any party hereto shall be
applied.
(m) Delay
of Severance Benefits.
Notwithstanding anything to the contrary contained herein, in the event any
payments made upon termination of the Executive’s employment pursuant to Section
4 or Section 5 hereof are deemed to be subject to (and not otherwise exempt
from) the requirements of Code Section 409A, and the Executive is deemed
a
“specified employee” (as defined in Code Section 409A), then, if and to the
extent required to avoid tax penalties pursuant to Code Section 409A, the
Executive shall not be entitled to any such payments that are subject to
Code
Section 409A until the first day of the seventh month following the date
of his
termination; provided,
however,
that
the aggregate amount of any payments (plus interest at the prime interest
rate
in effect upon termination of employment) that would have otherwise been
paid
during such six month delay period shall be paid on the first day of the
seventh
month following the Executive’s termination of employment.
14
***************
IN
WITNESS WHEREOF, the parties have duly executed this Agreement, or caused
this
Agreement to be duly executed on their behalf, as of the date first above
written.
THE
BOMBAY COMPANY, INC.
By:
/s/XXXXXXX X. XXXXXXXXXXXX
Name:
Xxxxxxx X. Xxxxxxxxxxxx
Title:
Senior Vice President, Secretary
and General Counsel
Date:
June
5, 2006
/s/
XXXXX
X. XXXXXXX
Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx
15
EXHIBIT
A
16
