EXECUTION COPY
RETENTION AGREEMENT
BETWEEN
TOYS "R" US, INC.
AND
XXXXX XXXXXX
DATED AS OF MAY 1, 1997
TABLE OF CONTENTS
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Page
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1. Employment Period..................................................
2. Terms of Employment................................................
(a) Position.....................................................
(b) Compensation.................................................
(i) Base Salary............................................
(ii) Incentive Bonus.......................................
(iii) Participation in Other Plans
Stock Units..................................................
3. Termination of Employment Upon Death, Disability or Retirement.....
4. Other Termination of Employment....................................
(a) Company Termination..........................................
(b) Good Reason..................................................
(c) Notice of Termination........................................
(d) Obligations of the Company Upon Termination Under Section 4..
(e) Cause........................................................
5. Release Agreement..................................................
6. Offset.............................................................
7. Compensation and Benefits Following Change of Control..............
8. Nonexclusivity of Rights...........................................
9. Full Settlement; Legal Fees........................................
(a) No Obligation to Mitigate....................................
(b) Expenses of Contests.........................................
10. Certain Additional Payments by the Company........................
11. Restrictions and Obligations of the Executive.....................
(a) Consideration for Restrictions and Covenants.................
(b) Confidentiality..............................................
(c) Non-Solicitation or Hire.....................................
(d) Non-Competition and Consulting...............................
(e) Definitions..................................................
(f) Relief.......................................................
12. Successors........................................................
13. Miscellaneous.....................................................
(a) Governing Law................................................
(b) Captions.....................................................
(c) Amendment....................................................
(d) Notices......................................................
(e) Assistance to Company........................................
(f) Severability of Provisions...................................
(g) Withholding..................................................
(h) Waiver.......................................................
(i) Arbitration..................................................
EXHIBIT A Separation and Release Agreement
EXHIBIT B Definitions
EXHIBIT C Change of Control and Tax Gross-Up
ANNEX A Stock Unit Agreement
TOYS "R" US, INC.
RETENTION AGREEMENT
AGREEMENT (this "Agreement"), by and between Toys "R" Us, Inc., a
Delaware corporation (the "Company"), and Xxxxx Xxxxxx (the "Executive"), dated
as of May 1, 1997. 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 Executive and the Executive 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 Executive 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 Executive shall
continue to serve in the Executive's current position at the Company or such
other senior executive position to which the Executive may be appointed by the
Company. The Executive shall be based in Northeastern New Jersey.
(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote full time during normal business hours to the business and
affairs of the Company and to use the Executive's best efforts to perform
faithfully and efficiently such responsibilities. During the Employment
Period, the Executive may, so long as such activities do not interfere with the
performance of the Executive's responsibilities as an employee of the Company
in accordance with this Agreement, continue the corporate directorships on
which the Executive 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 Executive 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 Executive shall receive the Executive'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 Executive 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 Executive's current grants and the Executive's current position or any more
senior position(s) to which the Executive 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 Executive shall be eligible to participate in all other Plans at a
level commensurate with the Executive's position.
(iv) Stock Units. As further inducement for the Executive to
enter into this Agreement and to continue in the employ of the Company, the
Company has granted to the Executive 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 Executive's employment shall terminate upon the Executive'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 Company's 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 Executive's employment during the Employment Period
with or without Cause.
(b) Good Reason. The Executive's employment may be terminated
during the Employment Period by the Executive for Good Reason.
(c) Notice of Termination. Any termination by the Company for
Cause, or by the Executive 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 Executive 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 Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(d) Obligations of the Company Upon Termination Under Section 4.
If the Executive'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
Executive within 30 days after the Date of Termination in an amount equal to
the sum of (1) the Executive's pro rata Annual Base Salary payable through the
Date of Termination to the extent not theretofore paid, (2) the targeted amount
of the Executive'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 Executive'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 Executive'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 Executive 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 Executive'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
Executive 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 Executive 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 Executive would receive on an after-tax basis if the
Executive's employment had continued for two years after the Date of
Termination assuming for this purpose that the Executive's compensation for
each such year would have been one-half of the amount paid pursuant to clause
(ii) above, and the Executive 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 Executive an
amount equal to the Company's cost had such benefits been continued.
(iv) (1) all unvested options held by the Executive 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 Executive shall
vest on the two year anniversary date of the Date of Termination, (2) all
unvested profit shares held by the Executive or for the benefit of the
Executive 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 Executive, (3) any other unvested equity based award
(including, without limitation, restricted stock and stock units) held by the
Executive 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 Executive
entirely in the form of Common Stock, $.10 par value per share, of the Company,
(4) any options held by the Executive 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 Executive
shall not be entitled to any additional grants of any stock options, restricted
stock, other equity based or long-term awards; and
(v) the Executive will be entitled to continuation of health
benefits under the Plans at a level commensurate with the Executive's current
position or more senior position(s) to which the Executive may be appointed,
and if the Executive 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 Executive shall pay the premium charged
to former employees of the Company pursuant to Section 4980B of the Code until
the Executive is sixty-five years of age; provided, that the Company can amend
or otherwise alter the Plans to provide benefits to the Executive that are no
less than those commensurate with the Executive's current position or more
senior position(s) to which the Executive may be appointed; provided, that to
the extent such benefits cannot be provided to the Executive 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 Executive, on an after-tax basis, an amount
necessary for the Executive 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 Executive is employed by or is otherwise affiliated with a
party that offers comparable health benefits to the Executive.
. (e) Cause. If the Executive's employment shall be terminated for
Cause during the Employment Period or if the Executive 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 Executive other than the obligation to pay
to the Executive 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 Executive (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 Executive under this Agreement against any amounts
owed by the Executive to the Company, and nothing in this Agreement shall
prevent the Company from pursuing any other available remedies against the
Executive.
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
Executive would be entitled be less favorable for the two years following a
Change of Control than the Executive would have been entitled based upon the
most favorable of the Company's Plans in effect for the Executive at any time
during the 120-day period immediately preceding such Change of Control.
(b) In the event of termination of the Executive'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 Executive's continuing or future participation in any Plan
for which the Executive may qualify nor shall anything herein limit or
otherwise affect such rights as the Executive may have under any contract or
agreement with the Company. Amounts that are vested benefits or that the
Executive 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 Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to the Executive
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 Executive 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 Executive is successful with respect thereto, the Company agrees to pay all
reasonable legal and professional fees and expenses that the Executive may
reasonably incur as a result of any contest by the Executive, 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 Executive 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
Executive all reasonable legal and professional fees and expenses that the
Executive may reasonably incur as a result of any contest by the Executive, 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 Executive 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 Executive 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 Executive
against, or defenses by the Executive 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 Executive 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 Executive (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 Executive. (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 Executive
and the grant to the Executive of the stock units of the Company as set forth
in Section 2 hereof is the Executive's compliance with the undertakings set
forth in this Section 11. Specifically, Executive agrees to comply with the
provisions of this Section 11 irrespective of whether the Executive 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 Executive 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
Executive during the Executive's employment by the Company and which shall not
be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive 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 Executive's employment for
any reason, the Executive 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 Executive's employment for any reason, the Executive 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 Executive 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
Executive 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 Executive during any
period following the termination of the Executive'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 Executive 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
Executive (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 Executive (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:
(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 Executive further
acknowledges that the Company and its subsidiaries will be irrevocably damaged
if such covenants are not specifically enforced. Accordingly, the Executive
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 Executive 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 Executive set forth in
Section 11, except as required by law, the Executive shall not be entitled to
any payments set forth in Section 3 or 4 hereof if the Executive breaches any
of the covenants applicable to the Executive contained in this Section 11, the
Executive 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 Executive
and without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive'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 Executive, 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 Executive in connection
therewith, the Executive shall provide reasonable assistance to the Company in
the collection of information and documents and shall make the Executive
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 Executive'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 Executive 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 Executive'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 Executive 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.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive'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 XXXXXX
/s/ Xxxxx Xxxxxx
TOYS "R" US, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
Name: Xxxxxxx Xxxxxxxxx
Title: Chief Executive Officer
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 Xxxxxx
(the "Executive").
The Executive and the Company agree as follows:
1. The employment relationship between the Executive and the
Company terminated on (the "Termination
Date").
2. In accordance with the Executive's Retention Agreement, the
Company has agreed to pay the Executive certain payments and to make certain
benefits available after the Termination Date.
3. In consideration of the above, the sufficiency of which the
Executive hereby acknowledges, the Executive, on behalf of the Executive and
the Executive'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 Executive may have arising from
or relating to the Executive's employment or termination from employment with
the Company, including a release of any rights or claims the Executive 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 Executive of any
claims for wrongful discharge, breach of contract, torts or any other claims
in any way related to the Executive'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 Executive be advised to
consult with an attorney before the Executive waives any claim under ADEA. In
addition, the ADEA provides the Executive with at least 21 days to decide
whether to waive claims under ADEA and seven days after the Executive signs the
Agreement to revoke that waiver. This release does not release the Company
from any obligations due to the Executive under Section 4, 7, 9(b), 10, 11 or
13(e) of the Executive's Retention Agreement, the Executive's Indemnification
Agreement with the Company or under this Agreement.
Additionally, the Company agrees to discharge and release the
Executive and the Executive'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 Executive's employment and/or
affiliation with, or termination and separation from the Company; provided
that such release shall not release the Executive from any loan or advance by
the Company or any of its subsidiaries, any act that would constitute "Cause"
under the Executive's Retention Agreement or a breach under Section 9(b), 11
or 13(e) of the Executive's Retention Agreement.
4. This Agreement is not an admission by either the Executive or
the Company of any wrongdoing or liability.
5. The Executive waives any right to reinstatement or future
employment with the Company following the Executive's separation from the
Company on the Termination Date.
6. The Executive 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
Executive.
7. The Executive shall continue to be bound by Sections 11 and
13(e) of the Executive's Retention Agreement.
8. The Executive shall promptly return all the Company property in
the Executive'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 Executive shall return any leased or Company car at
the expiration of the Consulting Period (as defined in the Executive'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 Executive's Retention
Agreement.
10. This Agreement represents the complete agreement between the
Executive 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 Executive 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 Executive shall be effective unless the Company has received
within the 7-day revocation period, written notice of any revocation, all
monies received by the Executive 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 Executive acknowledges
that the Executive 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 Executive acknowledges that the Executive 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 XXXXXX
-----------------------------
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 the annual base salary of the Executive as
of the date of the Agreement as may be increased from time to time in the
discretion of the Committee.
"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
Executive at the expense of the Company or a subsidiary; (iv) any material
breach of the Executive'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 Executive to perform substantially the Executive'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 Executive by the Board, which specifically identifies the
manner in which the Board believes that the Executive has not substantially
performed the Executive's duties; (vii) the failure by the Executive to comply,
in any material respect, with the provisions of Section 11 of the Agreement; or
(viii) the failure by the Executive to comply with any other undertaking set
forth in the Agreement or any breach by the Executive 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 Executive, shall be considered "willful" unless it is done, or omitted
to be done, by the Executive in bad faith or without reasonable belief that the
Executive'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 Executive in good faith and in the best interests of the Company.
The cessation of employment of the Executive shall not be deemed to be for
Cause unless and until there shall have been delivered to the Executive 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 Executive and the
Executive is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the Executive
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 Executive's employment is
terminated by the Company for Cause, or by the Executive 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 Executive'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 Executive of such termination, (iii)
if the Executive's employment is terminated by reason of death or Disability,
the Date of Termination shall be the date of death of the Executive 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
Executive that the Employment Period shall not be extended.
"Disability" means the determination that the Executive 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 Executive's prior written consent,
the occurrence of any of the following, provided that the Executive delivers a
Notice of Termination specifying such occurrence within 30 days thereof:
(i) the assignment of the Executive 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 Executive;
provided, however, that the foregoing shall not constitute "Good Reason" if it
is not attendant to a reduction in the Executive's Annual Base Salary or total
target compensation, except that a request by the Company for the Executive 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 Executive;
(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 Executive'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
executive 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 Executive.
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 Executive 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 Executive 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 Executive
an amount (the "Gross-up") such that the net amount retained by the Executive,
after deduction of any Excise Tax and any Federal, state and local income
taxes, equals the amount of such payments that the Executive would have
retained had such Excise Tax not been imposed. In addition, the Company shall
indemnify and hold the Executive 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 Executive 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 Executive and reasonably acceptable to the Company.
(c) The Executive 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 Executive 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
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive 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 Executive
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 Executive from and against all costs and expenses incurred in connection
with such contest; provided further, however, that if the Company directs the
Executive to pay such claim and xxx for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free basis and at no net
after-tax cost to the Executive. If the Executive 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 Executive 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 Executive as a result of making such payment (any
such benefit calculated based on the assumption that any deduction available to
the Executive 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 May 1, 1997 (the "Unit
Agreement"), between TOYS "R" US, INC., a Delaware corporation (the
"Company"), and Xxxxx Xxxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company has 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");
WHEREAS, concurrently herewith, the Executive and the Company are
entering into a Retention Agreement, dated as of even date herewith (the
"Retention Agreement");
WHEREAS, as further inducement for the Executive to execute the
Retention Agreement and continue in the employ of the Company, the Committee
has determined to grant the Executive the Stock Units as described in this
Unit Agreement, subject to the approval of the Amendment by the stockholders
of the Company at the 1997 Annual Meeting of Stockholders; 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 approval of the Amendment by
the stockholders of the Company at the 1997 Annual Meeting of Stockholders and
subject to the terms and conditions set forth in this Unit Agreement and in
Section 10 of the Plan, the Executive is hereby granted 23,000 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 Executive's account in the Trust (as defined below) in respect
of the Stock Units, the "Shares"). The 23,000 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 Executive'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 Executive's account therein subject to the forfeiture conditions of
Section 3 below.
3. Forfeiture Conditions. The Stock Units granted to the
Executive hereunder shall be forfeited in their entirety, subject to the terms
of the Retention Agreement, if:
(i) the Executive'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 May 1, 2002, 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
Executive promptly following May 1, 2002 unless the Executive 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
Executive under this Unit Agreement will be acquired for the Executive's
account and not with a view to the distribution thereof, and the Executive
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
Executive 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 Executive, 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 Executive.
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:
------------------------
Title: ------------------------
I hereby acknowledge receipt of the Stock Units and agree to the
provisions set forth in this Agreement.
---------------------------------
Xxxxx Xxxxxx
EXHIBIT A
Performance Objective Under Section 3(ii)
of the Stock Unit Agreement
The consolidated net earnings of the Company in any fiscal quarter (beginning
with the second fiscal quarter in 1997) of the Company's 1997, 1998, 1999 or
2000 fiscal year is at least equal to the amount of any corresponding quarter
in 1996. For these purposes, "consolidated net earnings" shall exclude
extraordinary or unusual items reported by the Company as such.
EXECUTION COPY
RETENTION AGREEMENT
BETWEEN
TOYS "R" US, INC.
AND
XXXXX XXXXXXXXX
DATED AS OF
MAY 1, 1997
TABLE OF CONTENTS
Page
1. Employment Period..................................................... 4
2. Terms of Employment....................................................4
(a) Position.........................................................4
(b) Compensation.....................................................4
(i) Base Salary................................................4
(ii) Incentive Bonus...........................................4
(iii) Participation in Other Plans.............................5
Stock Units......................................................5
3. Termination of Employment Upon Death, Disability or Retirement.........5
4. Other Termination of Employment........................................5
(a) Company Termination..............................................5
(b) Good Reason......................................................5
(c) Notice of Termination............................................5
(d) Obligations of the Company Upon Termination Under Section 4......5
(e) Cause............................................................7
5. Release Agreement......................................................7
6. Offset.................................................................7
7. Compensation and Benefits Following Change of Control..................7
8. Nonexclusivity of Rights...............................................8
9. Full Settlement; Legal Fees............................................8
(a) No Obligation to Mitigate........................................8
(b) Expenses of Contests.............................................8
10. Certain Additional Payments by the Company............................9
11. Restrictions and Obligations of the Executive.........................9
(a) Consideration for Restrictions and Covenants.....................9
(b) Confidentiality..................................................9
(c) Non-Solicitation or Hire.........................................9
(d) Non-Competition and Consulting..................................10
(e) Definitions.....................................................11
(f) Relief..........................................................11
12. Successors...........................................................11
13. Miscellaneous........................................................12
(a) Governing Law...................................................12
(b) Captions........................................................12
(c) Amendment.......................................................12
(d) Notices.........................................................12
(e) Assistance to Company...........................................12
(f) Severability of Provisions......................................12
(g) Withholding.....................................................13
(h) Waiver..........................................................13
(i) Arbitration.....................................................13
EXHIBIT A Separation and Release Agreement
EXHIBIT B Definitions
EXHIBIT C Change of Control and Tax Gross-Up
ANNEX A Stock Unit Agreement
TOYS "R" US, INC.
RETENTION AGREEMENT
AGREEMENT (this "Agreement"), by and between Toys "R" Us, Inc., a
Delaware corporation (the "Company"), and Xxxxx Xxxxxxxxx (the "Executive"),
dated as of May 1, 1997. 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 Executive and the Executive 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 Executive 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 Executive shall
continue to serve in the Executive's current position at the Company or such
other senior executive position to which the Executive may be appointed by the
Company. The Executive shall be based in Northeastern New Jersey.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote full time during normal business hours to the
business and affairs of the Company and to use the Executive's best efforts to
perform faithfully and efficiently such responsibilities. During the
Employment Period, the Executive may, so long as such activities do not
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement, continue the
corporate directorships on which the Executive 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 Executive 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 Executive shall receive the Executive'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 Executive 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 Executive's current grants and the Executive's current
position or any more senior position(s) to which the Executive 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 Executive shall be eligible to participate in all other Plans at a
level commensurate with the Executive's position.
(iv) Stock Units. As further inducement for the Executive
to enter into this Agreement and to continue in the employ of the Company, the
Company has granted to the Executive 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 Executive's employment shall terminate upon the Executive'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 Company's 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 Executive's employment during the Employment
Period with or without Cause.
(b) Good Reason. The Executive's employment may be terminated
during the Employment Period by the Executive for Good Reason.
(c) Notice of Termination. Any termination by the Company for
Cause, or by the Executive 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 Executive 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 Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(d) Obligations of the Company Upon Termination Under Section 4.
If the Executive'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
Executive within 30 days after the Date of Termination in an amount equal to
the sum of (1) the Executive's pro rata Annual Base Salary payable through the
Date of Termination to the extent not theretofore paid, (2) the targeted amount
of the Executive'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 Executive'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 Executive'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 Executive 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 Executive'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
Executive 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 Executive 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 Executive would receive on an after-tax basis if the
Executive's employment had continued for two years after the Date of
Termination assuming for this purpose that the Executive's compensation for
each such year would have been one-half of the amount paid pursuant to clause
(ii) above, and the Executive 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 Executive an
amount equal to the Company's cost had such benefits been continued.
(iv) (1) all unvested options held by the Executive 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 Executive shall
vest on the two year anniversary date of the Date of Termination, (2) all
unvested profit shares held by the Executive or for the benefit of the
Executive 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 Executive, (3) any other unvested equity based award
(including, without limitation, restricted stock and stock units) held by the
Executive 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 Executive
entirely in the form of Common Stock, $.10 par value per share, of the Company,
(4) any options held by the Executive 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 Executive
shall not be entitled to any additional grants of any stock options, restricted
stock, other equity based or long-term awards; and
(v) the Executive will be entitled to continuation of
health benefits under the Plans at a level commensurate with the Executive's
current position or more senior position(s) to which the Executive may be
appointed, and if the Executive 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 Executive shall pay
the premium charged to former employees of the Company pursuant to Section
4980B of the Code until the Executive is sixty-five years of age; provided,
that the Company can amend or otherwise alter the Plans to provide benefits to
the Executive that are no less than those commensurate with the Executive's
current position or more senior position(s) to which the Executive may be
appointed; provided, that to the extent such benefits cannot be provided to the
Executive 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 Executive, on an
after-tax basis, an amount necessary for the Executive 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 Executive is employed by or is
otherwise affiliated with a party that offers comparable health benefits to the
Executive.
(e) Cause. If the Executive's employment shall be terminated
for Cause during the Employment Period or if the Executive 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 Executive other than the
obligation to pay to the Executive 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 Executive (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 Executive under this Agreement against any
amounts owed by the Executive to the Company, and nothing in this Agreement
shall prevent the Company from pursuing any other available remedies against
the Executive.
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
Executive would be entitled be less favorable for the two years following a
Change of Control than the Executive would have been entitled based upon the
most favorable of the Company's Plans in effect for the Executive at any time
during the 120-day period immediately preceding such Change of Control.
(b) In the event of termination of the Executive'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 Executive's continuing or future participation in any Plan
for which the Executive may qualify nor shall anything herein limit or
otherwise affect such rights as the Executive may have under any contract or
agreement with the Company. Amounts that are vested benefits or that the
Executive 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 Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to the Executive
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 Executive 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 Executive is successful with respect thereto, the Company agrees to pay all
reasonable legal and professional fees and expenses that the Executive may
reasonably incur as a result of any contest by the Executive, 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 Executive 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
Executive all reasonable legal and professional fees and expenses that the
Executive may reasonably incur as a result of any contest by the Executive, 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 Executive 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 Executive 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 Executive
against, or defenses by the Executive 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 Executive 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 Executive (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 Executive. (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 Executive
and the grant to the Executive of the stock units of the Company as set forth
in Section 2 hereof is the Executive's compliance with the undertakings set
forth in this Section 11. Specifically, Executive agrees to comply with the
provisions of this Section 11 irrespective of whether the Executive 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
Executive 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 Executive during the Executive's employment by the
Company and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive 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 Executive's employment
for any reason, the Executive 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 Executive's employment for any reason, the Executive 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 Executive 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
Executive 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 Executive during
any period following the termination of the Executive'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 Executive 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
Executive (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 Executive (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:
(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 Executive further
acknowledges that the Company and its subsidiaries will be irrevocably damaged
if such covenants are not specifically enforced. Accordingly, the Executive
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 Executive 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 Executive set forth in
Section 11, except as required by law, the Executive shall not be entitled to
any payments set forth in Section 3 or 4 hereof if the Executive breaches any
of the covenants applicable to the Executive contained in this Section 11, the
Executive 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
Executive and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive'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 Executive, 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 Executive in connection
therewith, the Executive shall provide reasonable assistance to the Company in
the collection of information and documents and shall make the Executive
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 Executive'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 Executive 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 Executive'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 Executive 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.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive'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 XXXXXXXXX
/S/ Xxxxx Xxxxxxxxx
TOYS "R" US, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
Name: Xxxxxxx Xxxxxxxxx
Title: Chief Executive Officer
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
Xxxxxxxxx (the "Executive").
The Executive and the Company agree as follows:
1. The employment relationship between the Executive and the
Company terminated on __________________________________ (the "Termination
Date").
2. In accordance with the Executive's Retention Agreement, the
Company has agreed to pay the Executive certain payments and to make certain
benefits available after the Termination Date.
3. In consideration of the above, the sufficiency of which the
Executive hereby acknowledges, the Executive, on behalf of the Executive and
the Executive'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 Executive may have arising from
or relating to the Executive's employment or termination from employment with
the Company, including a release of any rights or claims the Executive 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 Executive of any
claims for wrongful discharge, breach of contract, torts or any other claims
in any way related to the Executive'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 Executive be advised to
consult with an attorney before the Executive waives any claim under ADEA. In
addition, the ADEA provides the Executive with at least 21 days to decide
whether to waive claims under ADEA and seven days after the Executive signs the
Agreement to revoke that waiver. This release does not release the Company
from any obligations due to the Executive under Section 4, 7, 9(b), 10, 11 or
13(e) of the Executive's Retention Agreement, the Executive's Indemnification
Agreement with the Company or under this Agreement.
Additionally, the Company agrees to discharge and release the
Executive and the Executive'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 Executive's employment and/or
affiliation with, or termination and separation from the Company; provided
that such release shall not release the Executive from any loan or advance by
the Company or any of its subsidiaries, any act that would constitute "Cause"
under the Executive's Retention Agreement or a breach under Section 9(b), 11
or 13(e) of the Executive's Retention Agreement.
4. This Agreement is not an admission by either the Executive
or the Company of any wrongdoing or liability.
5. The Executive waives any right to reinstatement or future
employment with the Company following the Executive's separation from the
Company on the Termination Date.
6. The Executive 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 Executive.
7. The Executive shall continue to be bound by Sections 11 and
13(e) of the Executive's Retention Agreement.
8. The Executive shall promptly return all the Company property
in the Executive'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 Executive shall return any leased or
Company car at the expiration of the Consulting Period (as defined in the
Executive'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 Executive's
Retention Agreement.
10. This Agreement represents the complete agreement between
the Executive 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
Executive 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 Executive shall be effective unless the
Company has received within the 7-day revocation period, written notice of any
revocation, all monies received by the Executive 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 Executive acknowledges
that the Executive 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 Executive acknowledges that the Executive 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 XXXXXXXXX
-------------------------
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 the annual base salary of the Executive
as of the date of the Agreement as may be increased from time to time in the
discretion of the Committee.
"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
Executive at the expense of the Company or a subsidiary; (iv) any material
breach of the Executive'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 Executive to perform substantially the Executive'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 Executive by the Board, which specifically identifies the
manner in which the Board believes that the Executive has not substantially
performed the Executive's duties; (vii) the failure by the Executive to comply,
in any material respect, with the provisions of Section 11 of the Agreement; or
(viii) the failure by the Executive to comply with any other undertaking set
forth in the Agreement or any breach by the Executive 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 Executive, shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive'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 Executive in good faith and in the best interests of
the Company. The cessation of employment of the Executive shall not be deemed
to be for Cause unless and until there shall have been delivered to the
Executive 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 Executive
and the Executive is given an opportunity, together with counsel, to be heard
before the Board), finding that, in the good faith opinion of the Board, the
Executive 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 Executive's employment is
terminated by the Company for Cause, or by the Executive 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 Executive'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 Executive of such termination, (iii)
if the Executive's employment is terminated by reason of death or Disability,
the Date of Termination shall be the date of death of the Executive 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
Executive that the Employment Period shall not be extended.
"Disability" means the determination that the Executive 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 Executive's prior written consent,
the occurrence of any of the following, provided that the Executive delivers a
Notice of Termination specifying such occurrence within 30 days thereof:
(i) the assignment of the Executive 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 Executive;
provided, however, that the foregoing shall not constitute "Good Reason" if it
is not attendant to a reduction in the Executive's Annual Base Salary or total
target compensation, except that a request by the Company for the Executive to
relocate outside Northeastern New Jersey shall constitute "Good Reason"; and
provided, further, that notwithstanding the foregoing, the appointment of
another person as Chief Financial Officer of the Company 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 Executive;
(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 Executive'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
executive 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 Executive.
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
Executive 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 Executive 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 Executive
an amount (the "Gross-up") such that the net amount retained by the Executive,
after deduction of any Excise Tax and any Federal, state and local income
taxes, equals the amount of such payments that the Executive would have
retained had such Excise Tax not been imposed. In addition, the Company shall
indemnify and hold the Executive 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 Executive 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 Executive and reasonably acceptable to the Company.
(c) The Executive 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 Executive
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 Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive 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 Executive
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 Executive from and against all costs and expenses incurred in connection
with such contest; provided further, however, that if the Company directs the
Executive to pay such claim and xxx for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free basis and at no net
after-tax cost to the Executive. If the Executive 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 Executive 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 Executive as a result of making such payment (any
such benefit calculated based on the assumption that any deduction available to
the Executive 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 May 1, 1997 (the "Unit
Agreement"), between TOYS "R" US, INC., a Delaware corporation (the
"Company"), and Xxxxx Xxxxxxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company has 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");
WHEREAS, concurrently herewith, the Executive and the Company are
entering into a Retention Agreement, dated as of even date herewith (the
"Retention Agreement");
WHEREAS, as further inducement for the Executive to execute the
Retention Agreement and continue in the employ of the Company, the Committee
has determined to grant the Executive the Stock Units as described in this
Unit Agreement, subject to the approval of the Amendment by the stockholders
of the Company at the 1997 Annual Meeting of Stockholders; 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 approval of the Amendment
by the stockholders of the Company at the 1997 Annual Meeting of Stockholders
and subject to the terms and conditions set forth in this Unit Agreement and
in Section 10 of the Plan, the Executive is hereby granted 29,000 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 Executive's account in the Trust (as defined below) in respect
of the Stock Units, the "Shares"). The 29,000 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 Executive'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 Executive's account therein subject to the forfeiture conditions of
Section 3 below.
3. Forfeiture Conditions. The Stock Units granted to the
Executive hereunder shall be forfeited in their entirety, subject to the terms
of the Retention Agreement, if:
(i) the Executive'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 May 1, 2002, 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
Executive promptly following May 1, 2002 unless the Executive 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
Executive under this Unit Agreement will be acquired for the Executive's
account and not with a view to the distribution thereof, and the Executive
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
Executive 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 Executive, 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
Executive.
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:
---------------------------------
Title:
------------------------------
I hereby acknowledge receipt of the Stock Units and agree to the
provisions set forth in this Agreement.
------------------------------------
Xxxxx Xxxxxxxxx
EXHIBIT A
Performance Objective Under Section 3(ii)
of the Stock Unit Agreement
The consolidated net earnings of the Company in any fiscal quarter (beginning
with the second fiscal quarter in 1997) of the Company's 1997, 1998, 1999 or
2000 fiscal year is at least equal to the amount of any corresponding quarter
in 1996. For these purposes, "consolidated net earnings" shall exclude
extraordinary or unusual items reported by the Company as such.
EXECUTION COPY
RETENTION AGREEMENT
BETWEEN
TOYS "R" US, INC.
AND
XXXXXXX X. XXXXXX
DATED AS OF
MAY 1, 1997
TABLE OF CONTENTS
Page
1. Employment Period.......................................................1
2. Terms of Employment.....................................................1
(a) Position..........................................................1
(b) Compensation......................................................1
(i) Base Salary..................................................1
(ii) Incentive Bonus.............................................1
(iii) Participation in Other Plans...............................2
Stock Units........................................................2
3. Termination of Employment Upon Death, Disability or Retirement..........2
4. Other Termination of Employment.........................................2
(a) Company Termination...............................................2
(b) Good Reason.......................................................2
(c) Notice of Termination.............................................2
(d) Obligations of the Company Upon Termination Under Section 4.......2
(e) Cause.............................................................4
5. Release Agreement.......................................................4
6. Offset..................................................................4
7. Compensation and Benefits Following Change of Control...................4
8. Nonexclusivity of Rights................................................5
9. Full Settlement; Legal Fees.............................................5
(a) No Obligation to Mitigate.........................................5
(b) Expenses of Contests..............................................5
10. Certain Additional Payments by the Company.............................6
11. Restrictions and Obligations of the Executive..........................6
(a) Consideration for Restrictions and Covenants......................6
(b) Confidentiality...................................................6
(c) Non-Solicitation or Hire..........................................6
(d) Non-Competition and Consulting....................................7
(e) Definitions.......................................................8
(f) Relief............................................................8
12. Successors.............................................................8
13. Miscellaneous..........................................................9
(a) Governing Law.....................................................9
(b) Captions..........................................................9
(c) Amendment.........................................................9
(d) Notices...........................................................9
(e) Assistance to Company.............................................9
(f) Severability of Provisions........................................9
(g) Withholding......................................................10
(h) Waiver...........................................................10
(i) Arbitration......................................................10
EXHIBIT A........Separation and Release Agreement
EXHIBIT B........Definitions
EXHIBIT C........Change of Control and Tax Gross-Up
ANNEX A..........Stock Unit Agreement
TOYS "R" US
RETENTION AGREEMENT
AGREEMENT (this "Agreement"), by and between Toys "R" Us, Inc., a
Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxxx (the "Executive"),
dated as of May 1, 1997. 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 Executive and the Executive 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 Executive 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 Executive
shall continue to serve in the Executive's current position at the Company or
such other senior executive position to which the Executive may be appointed
by the Company. The Executive shall be based in Northeastern New Jersey.
(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote full time during normal business hours to the business and
affairs of the Company and to use the Executive's best efforts to perform
faithfully and efficiently such responsibilities. During the Employment
Period, the Executive may, so long as such activities do not interfere with
the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement, continue the corporate
directorships on which the Executive 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 Executive 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 Executive shall receive the Executive'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 Executive 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 Executive's current grants and the Executive's current position or any
more senior position(s) to which the Executive 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 Executive shall be eligible to participate in all other Plans at a
level commensurate with the Executive's position.
(iv) Stock Units. As further inducement for the Executive to
enter into this Agreement and to continue in the employ of the Company, the
Company has granted to the Executive 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 Executive's employment shall terminate upon the Executive'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 Company's 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 Executive's employment during the Employment
Period with or without Cause.
(b) Good Reason. The Executive's employment may be terminated
during the Employment Period by the Executive for Good Reason.
(c) Notice of Termination. Any termination by the Company for
Cause, or by the Executive 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 Executive 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 Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(d) Obligations of the Company Upon Termination Under Section 4.
If the Executive'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
Executive within 30 days after the Date of Termination in an amount equal to
the sum of (1) the Executive's pro rata Annual Base Salary payable through the
Date of Termination to the extent not theretofore paid, (2) the targeted
amount of the Executive'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 Executive'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 Executive'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 Executive 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 Executive'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
Executive 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 Executive 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 Executive would receive on an after-tax basis if the
Executive's employment had continued for two years after the Date of
Termination assuming for this purpose that the Executive's compensation for
each such year would have been one-half of the amount paid pursuant to clause
(ii) above, and the Executive 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 Executive an
amount equal to the Company's cost had such benefits been continued.
(iv) (1) all unvested options held by the Executive 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 Executive shall
vest on the two year anniversary date of the Date of Termination, (2) all
unvested profit shares held by the Executive or for the benefit of the
Executive 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 Executive, (3) any other unvested equity based award
(including, without limitation, restricted stock and stock units) held by the
Executive 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 Executive
entirely in the form of Common Stock, $.10 par value per share, of the
Company, (4) any options held by the Executive 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 Executive
shall not be entitled to any additional grants of any stock options,
restricted stock, other equity based or long-term awards; and
(v) the Executive will be entitled to continuation of health
benefits under the Plans at a level commensurate with the Executive's current
position or more senior position(s) to which the Executive may be appointed,
and if the Executive 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 Executive shall pay the premium
charged to former employees of the Company pursuant to Section 4980B of the
Code until the Executive is sixty-five years of age; provided, that the
Company can amend or otherwise alter the Plans to provide benefits to the
Executive that are no less than those commensurate with the Executive's
current position or more senior position(s) to which the Executive may be
appointed; provided, that to the extent such benefits cannot be provided to
the Executive 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 Executive,
on an after-tax basis, an amount necessary for the Executive 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 Executive is employed by or is
otherwise affiliated with a party that offers comparable health benefits to
the Executive.
(e) Cause. If the Executive's employment shall be terminated for
Cause during the Employment Period or if the Executive 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 Executive other than the obligation to pay
to the Executive 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 Executive (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 Executive under this Agreement against any amounts
owed by the Executive to the Company, and nothing in this Agreement shall
prevent the Company from pursuing any other available remedies against the
Executive.
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
Executive would be entitled be less favorable for the two years following a
Change of Control than the Executive would have been entitled based upon the
most favorable of the Company's Plans in effect for the Executive at any time
during the 120-day period immediately preceding such Change of Control.
(b) In the event of termination of the Executive'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 Executive's continuing or future participation in any
Plan for which the Executive may qualify nor shall anything herein limit or
otherwise affect such rights as the Executive may have under any contract or
agreement with the Company. Amounts that are vested benefits or that the
Executive 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 Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to the Executive
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 Executive 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 Executive is successful with respect thereto, the Company agrees to
pay all reasonable legal and professional fees and expenses that the Executive
may reasonably incur as a result of any contest by the Executive, 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 Executive 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
Executive all reasonable legal and professional fees and expenses that the
Executive may reasonably incur as a result of any contest by the Executive, 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 Executive 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 Executive 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 Executive
against, or defenses by the Executive 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 Executive 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 Executive (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 Executive. (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 Executive
and the grant to the Executive of the stock units of the Company as set forth
in Section 2 hereof is the Executive's compliance with the undertakings set
forth in this Section 11. Specifically, Executive agrees to comply with the
provisions of this Section 11 irrespective of whether the Executive 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 Executive 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 Executive during the Executive's employment by the Company and which shall
not be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive
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 Executive's employment
for any reason, the Executive 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 Executive's employment for any reason, the Executive 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 Executive 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
Executive 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 Executive during any
period following the termination of the Executive'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 Executive 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
Executive (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 Executive (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:
(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 Executive further
acknowledges that the Company and its subsidiaries will be irrevocably damaged
if such covenants are not specifically enforced. Accordingly, the Executive
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 Executive 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 Executive set forth in
Section 11, except as required by law, the Executive shall not be entitled to
any payments set forth in Section 3 or 4 hereof if the Executive breaches any
of the covenants applicable to the Executive contained in this Section 11, the
Executive 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 Executive
and without the prior written consent of the Company shall not be assignable
by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive'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 Executive, 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 Executive in connection
therewith, the Executive shall provide reasonable assistance to the Company in
the collection of information and documents and shall make the Executive
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
Executive'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 Executive 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 Executive'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 Executive 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.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive'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.
XXXXXXX X. XXXXXX
/s/ Xxxxxxx X. Xxxxxx
TOYS "R" US, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
Name: Xxxxxxx Xxxxxxxxx
Title: Chief Executive Officer
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 Xxxxxxx X. Xxxxxx
(the "Executive").
The Executive and the Company agree as follows:
1. The employment relationship between the Executive and the Company
terminated on __________________________________ (the "Termination Date").
2. In accordance with the Executive's Retention Agreement, the Company
has agreed to pay the Executive certain payments and to make certain benefits
available after the Termination Date.
3. In consideration of the above, the sufficiency of which the
Executive hereby acknowledges, the Executive, on behalf of the Executive and
the Executive'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 Executive may have arising from
or relating to the Executive's employment or termination from employment with
the Company, including a release of any rights or claims the Executive 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 Executive of any
claims for wrongful discharge, breach of contract, torts or any other claims
in any way related to the Executive'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 Executive be advised to
consult with an attorney before the Executive waives any claim under ADEA. In
addition, the ADEA provides the Executive with at least 21 days to decide
whether to waive claims under ADEA and seven days after the Executive signs
the Agreement to revoke that waiver. This release does not release the
Company from any obligations due to the Executive under Section 4, 7, 9(b),
10, 11 or 13(e) of the Executive's Retention Agreement, the Executive's
Indemnification Agreement with the Company or under this Agreement.
Additionally, the Company agrees to discharge and release the Executive
and the Executive'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 Executive's employment and/or affiliation
with, or termination and separation from the Company; provided that such
release shall not release the Executive from any loan or advance by the
Company or any of its subsidiaries, any act that would constitute "Cause"
under the Executive's Retention Agreement or a breach under Section 9(b), 11
or 13(e) of the Executive's Retention Agreement.
4. This Agreement is not an admission by either the Executive or the
Company of any wrongdoing or liability.
5. The Executive waives any right to reinstatement or future employment
with the Company following the Executive's separation from the Company on the
Termination Date.
6. The Executive 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
Executive.
7. The Executive shall continue to be bound by Sections 11 and 13(e) of
the Executive's Retention Agreement.
8. The Executive shall promptly return all the Company property in the
Executive'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 Executive shall return any leased or Company car at
the expiration of the Consulting Period (as defined in the Executive'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 Executive's Retention Agreement.
10. This Agreement represents the complete agreement between the
Executive 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 Executive 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 Executive shall be effective unless the Company has received within the 7-
day revocation period, written notice of any revocation, all monies received
by the Executive 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 Executive acknowledges
that the Executive 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 Executive acknowledges that the Executive 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:
XXXXXXX X. XXXXXX
____________________________________
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 the annual base salary of the Executive
as of the date of the Agreement as may be increased from time to time in the
discretion of the Committee.
"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
Executive at the expense of the Company or a subsidiary; (iv) any material
breach of the Executive'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 Executive to perform substantially the Executive'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 Executive by the Board, which specifically identifies the
manner in which the Board believes that the Executive has not substantially
performed the Executive's duties; (vii) the failure by the Executive to
comply, in any material respect, with the provisions of Section 11 of the
Agreement; or (viii) the failure by the Executive to comply with any other
undertaking set forth in the Agreement or any breach by the Executive 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 Executive, shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive'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 Executive in good faith and in the best interests
of the Company. The cessation of employment of the Executive shall not be
deemed to be for Cause unless and until there shall have been delivered to the
Executive 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
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive 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 Executive's employment is
terminated by the Company for Cause, or by the Executive 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 Executive'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 Executive of such termination, (iii)
if the Executive's employment is terminated by reason of death or Disability,
the Date of Termination shall be the date of death of the Executive 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
Executive that the Employment Period shall not be extended.
"Disability" means the determination that the Executive 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 Executive's prior written consent,
the occurrence of any of the following, provided that the Executive delivers a
Notice of Termination specifying such occurrence within 30 days thereof:
(i) the assignment of the Executive 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 Executive;
provided, however, that the foregoing shall not constitute "Good Reason" if it
is not attendant to a reduction in the Executive's Annual Base Salary or total
target compensation, except that a request by the Company for the Executive 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
Executive;
(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 Executive'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
executive 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 Executive.
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
Executive 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 Executive 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 Executive
an amount (the "Gross-up") such that the net amount retained by the Executive,
after deduction of any Excise Tax and any Federal, state and local income
taxes, equals the amount of such payments that the Executive would have
retained had such Excise Tax not been imposed. In addition, the Company shall
indemnify and hold the Executive 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 Executive 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 Executive and reasonably acceptable to the Company.
(c) The Executive 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 Executive 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
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive 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 Executive
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 Executive from and against all costs and expenses incurred in
connection with such contest; provided further, however, that if the Company
directs the Executive to pay such claim and xxx for a refund, the Company
shall advance the amount of such payment to the Executive on an interest-free
basis and at no net after-tax cost to the Executive. If the Executive 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 Executive 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 Executive as a result of
making such payment (any such benefit calculated based on the assumption that
any deduction available to the Executive 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 May 1, 1997 (the "Unit
Agreement"), between TOYS "R" US, INC., a Delaware corporation (the
"Company"), and Xxxxxxx X. Xxxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company has 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");
WHEREAS, concurrently herewith, the Executive and the Company are
entering into a Retention Agreement, dated as of even date herewith (the
"Retention Agreement");
WHEREAS, as further inducement for the Executive to execute the
Retention Agreement and continue in the employ of the Company, the Committee
has determined to grant the Executive the Stock Units as described in this
Unit Agreement, subject to the approval of the Amendment by the stockholders
of the Company at the 1997 Annual Meeting of Stockholders; 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 approval of the Amendment by
the stockholders of the Company at the 1997 Annual Meeting of Stockholders and
subject to the terms and conditions set forth in this Unit Agreement and in
Section 10 of the Plan, the Executive is hereby granted 28,000 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 Executive's account in the Trust (as defined below) in respect
of the Stock Units, the "Shares"). The 28,000 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 Executive'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 Executive's account therein subject to the forfeiture conditions of
Section 3 below.
3. Forfeiture Conditions. The Stock Units granted to the
Executive hereunder shall be forfeited in their entirety, subject to the terms
of the Retention Agreement, if:
(i) the Executive'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 May 1, 2002, 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
Executive promptly following May 1, 2002 unless the Executive 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
Executive under this Unit Agreement will be acquired for the Executive's
account and not with a view to the distribution thereof, and the Executive
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
Executive 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 Executive, 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 Executive.
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: _________________________
Title: _________________________
I hereby acknowledge receipt of the Stock Units and agree to the
provisions set forth in this Agreement.
_________________________________
Xxxxxxx X. Xxxxxx
EXHIBIT A
Performance Objective Under Section 3(ii)
of the Stock Unit Agreement
---------------------------
The consolidated net earnings of the Company in any fiscal quarter (beginning
with the second fiscal quarter in 1997) of the Company's 1997, 1998, 1999 or
2000 fiscal year is at least equal to the amount of any corresponding quarter
in 1996. For these purposes, "consolidated net earnings" shall exclude
extraordinary or unusual items reported by the Company as such.
EXECUTION COPY
RETENTION AGREEMENT
BETWEEN
TOYS "R" US, INC.
AND
XXXXXXX X. XXXXXX
DATED AS OF MAY 1, 1997
TABLE OF CONTENTS
Page
1. Employment Period.......................................................1
2. Terms of Employment.....................................................1
(a) Position..........................................................1
(b) Compensation......................................................1
(i) Base Salary..................................................1
(ii) Incentive Bonus.............................................1
(iii) Participation in Other Plans...............................2
Stock Units........................................................2
3. Termination of Employment Upon Death, Disability or Retirement..........2
4. Other Termination of Employment.........................................2
(a) Company Termination...............................................2
(b) Good Reason.......................................................2
(c) Notice of Termination.............................................2
(d) Obligations of the Company Upon Termination Under Section 4.......2
(e) Cause.............................................................4
5. Release Agreement.......................................................4
6. Offset..................................................................4
7. Compensation and Benefits Following Change of Control...................4
8. Nonexclusivity of Rights................................................5
9. Full Settlement; Legal Fees.............................................5
(a) No Obligation to Mitigate.........................................5
(b) Expenses of Contests..............................................5
10. Certain Additional Payments by the Company.............................6
11. Restrictions and Obligations of the Executive..........................6
(a) Consideration for Restrictions and Covenants......................6
(b) Confidentiality...................................................6
(c) Non-Solicitation or Hire..........................................6
(d) Non-Competition and Consulting....................................7
(e) Definitions.......................................................8
(f) Relief............................................................8
12. Successors.............................................................8
13. Miscellaneous..........................................................9
(a) Governing Law.....................................................9
(b) Captions..........................................................9
(c) Amendment.........................................................9
(d) Notices...........................................................9
(e) Assistance to Company.............................................9
(f) Severability of Provisions........................................9
(g) Withholding......................................................10
(h) Waiver...........................................................10
(i) Arbitration......................................................10
EXHIBIT A Separation and Release Agreement
EXHIBIT B Definitions
EXHIBIT C Change of Control and Tax Gross-Up
ANNEX A Stock Unit Agreement
TOYS "R" US, INC.
RETENTION AGREEMENT
AGREEMENT (this "Agreement"), by and between Toys "R" Us, Inc., a
Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxxx (the "Executive"),
dated as of May 1, 1997. 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 Executive and the Executive 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 Executive 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 Executive
shall continue to serve in the Executive's current position at the Company or
such other senior executive position to which the Executive may be appointed
by the Company. The Executive shall be based in Northeastern New Jersey.
(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote full time during normal business hours to the business and
affairs of the Company and to use the Executive's best efforts to perform
faithfully and efficiently such responsibilities. During the Employment
Period, the Executive may, so long as such activities do not interfere with
the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement, continue the corporate
directorships on which the Executive 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 Executive 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 Executive shall receive the Executive'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 Executive 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 Executive's current grants and the Executive's current position or any
more senior position(s) to which the Executive 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 Executive shall be eligible to participate in all other Plans at a
level commensurate with the Executive's position.
(iv) Stock Units. As further inducement for the Executive
to enter into this Agreement and to continue in the employ of the Company, the
Company has granted to the Executive 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 Executive's employment shall terminate upon the Executive'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 Company's 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 Executive's employment during the Employment
Period with or without Cause.
(b) Good Reason. The Executive's employment may be terminated
during the Employment Period by the Executive for Good Reason.
(c) Notice of Termination. Any termination by the Company for
Cause, or by the Executive 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 Executive 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 Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(d) Obligations of the Company Upon Termination Under Section 4.
If the Executive'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
Executive within 30 days after the Date of Termination in an amount equal to
the sum of (1) the Executive's pro rata Annual Base Salary payable through the
Date of Termination to the extent not theretofore paid, (2) the targeted
amount of the Executive'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 Executive'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 Executive'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 Executive 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 Executive'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
Executive 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 Executive 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 Executive would receive on an after-tax basis if the
Executive's employment had continued for two years after the Date of
Termination assuming for this purpose that the Executive's compensation for
each such year would have been one-half of the amount paid pursuant to clause
(ii) above, and the Executive 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 Executive an
amount equal to the Company's cost had such benefits been continued.
(iv) (1) all unvested options held by the Executive 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 Executive shall
vest on the two year anniversary date of the Date of Termination, (2) all
unvested profit shares held by the Executive or for the benefit of the
Executive 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 Executive, (3) any other unvested equity based award
(including, without limitation, restricted stock and stock units) held by the
Executive 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 Executive
entirely in the form of Common Stock, $.10 par value per share, of the
Company, (4) any options held by the Executive 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 Executive
shall not be entitled to any additional grants of any stock options,
restricted stock, other equity based or long-term awards; and
(v) the Executive will be entitled to continuation of health
benefits under the Plans at a level commensurate with the Executive's current
position or more senior position(s) to which the Executive may be appointed,
and if the Executive 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 Executive shall pay the premium
charged to former employees of the Company pursuant to Section 4980B of the
Code until the Executive is sixty-five years of age; provided, that the
Company can amend or otherwise alter the Plans to provide benefits to the
Executive that are no less than those commensurate with the Executive's
current position or more senior position(s) to which the Executive may be
appointed; provided, that to the extent such benefits cannot be provided to
the Executive 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 Executive,
on an after-tax basis, an amount necessary for the Executive 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 Executive is employed by or is
otherwise affiliated with a party that offers comparable health benefits to
the Executive.
(e) Cause. If the Executive's employment shall be terminated for
Cause during the Employment Period or if the Executive 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 Executive other than the obligation to pay
to the Executive 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 Executive (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 Executive under this Agreement against any amounts
owed by the Executive to the Company, and nothing in this Agreement shall
prevent the Company from pursuing any other available remedies against the
Executive.
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
Executive would be entitled be less favorable for the two years following a
Change of Control than the Executive would have been entitled based upon the
most favorable of the Company's Plans in effect for the Executive at any time
during the 120-day period immediately preceding such Change of Control.
(b) In the event of termination of the Executive'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 Executive's continuing or future participation in any
Plan for which the Executive may qualify nor shall anything herein limit or
otherwise affect such rights as the Executive may have under any contract or
agreement with the Company. Amounts that are vested benefits or that the
Executive 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 Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to the Executive
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 Executive 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 Executive is successful with respect thereto, the Company agrees to
pay all reasonable legal and professional fees and expenses that the Executive
may reasonably incur as a result of any contest by the Executive, 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 Executive 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
Executive all reasonable legal and professional fees and expenses that the
Executive may reasonably incur as a result of any contest by the Executive, 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 Executive 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 Executive 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 Executive
against, or defenses by the Executive 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 Executive 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 Executive (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 Executive. (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 Executive
and the grant to the Executive of the stock units of the Company as set forth
in Section 2 hereof is the Executive's compliance with the undertakings set
forth in this Section 11. Specifically, Executive agrees to comply with the
provisions of this Section 11 irrespective of whether the Executive 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 Executive 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 Executive during the Executive's employment by the Company and which shall
not be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive
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 Executive's employment
for any reason, the Executive 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 Executive's employment for any reason, the Executive 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 Executive 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
Executive 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 Executive during any
period following the termination of the Executive'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 Executive 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
Executive (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 Executive (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:
(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 Executive further
acknowledges that the Company and its subsidiaries will be irrevocably damaged
if such covenants are not specifically enforced. Accordingly, the Executive
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 Executive 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 Executive set forth in
Section 11, except as required by law, the Executive shall not be entitled to
any payments set forth in Section 3 or 4 hereof if the Executive breaches any
of the covenants applicable to the Executive contained in this Section 11, the
Executive 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 Executive
and without the prior written consent of the Company shall not be assignable
by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Executive'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 Executive, 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 Executive in connection
therewith, the Executive shall provide reasonable assistance to the Company in
the collection of information and documents and shall make the Executive
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
Executive'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 Executive 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 Executive'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 Executive 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.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive'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.
XXXXXXX X. XXXXXX
/s/ Xxxxxxx X. Xxxxxx
TOYS "R" US, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
Name: Xxxxxxx Xxxxxxxxx
Title: Chief Executive Officer
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 Xxxxxxx X. Xxxxxx
(the "Executive").
The Executive and the Company agree as follows:
1. The employment relationship between the Executive and the Company
terminated on __________________________________ (the "Termination Date").
2. In accordance with the Executive's Retention Agreement, the Company
has agreed to pay the Executive certain payments and to make certain benefits
available after the Termination Date.
3. In consideration of the above, the sufficiency of which the
Executive hereby acknowledges, the Executive, on behalf of the Executive and
the Executive'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 Executive may have arising from
or relating to the Executive's employment or termination from employment with
the Company, including a release of any rights or claims the Executive 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 Executive of any
claims for wrongful discharge, breach of contract, torts or any other claims
in any way related to the Executive'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 Executive be advised to
consult with an attorney before the Executive waives any claim under ADEA. In
addition, the ADEA provides the Executive with at least 21 days to decide
whether to waive claims under ADEA and seven days after the Executive signs
the Agreement to revoke that waiver. This release does not release the
Company from any obligations due to the Executive under Section 4, 7, 9(b),
10, 11 or 13(e) of the Executive's Retention Agreement, the Executive's
Indemnification Agreement with the Company or under this Agreement.
Additionally, the Company agrees to discharge and release the Executive
and the Executive'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 Executive's employment and/or affiliation
with, or termination and separation from the Company; provided that such
release shall not release the Executive from any loan or advance by the
Company or any of its subsidiaries, any act that would constitute "Cause"
under the Executive's Retention Agreement or a breach under Section 9(b), 11
or 13(e) of the Executive's Retention Agreement.
4. This Agreement is not an admission by either the Executive or the
Company of any wrongdoing or liability.
5. The Executive waives any right to reinstatement or future employment
with the Company following the Executive's separation from the Company on the
Termination Date.
6. The Executive 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
Executive.
7. The Executive shall continue to be bound by Sections 11 and 13(e) of
the Executive's Retention Agreement.
8. The Executive shall promptly return all the Company property in the
Executive'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 Executive shall return any leased or Company car at
the expiration of the Consulting Period (as defined in the Executive'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 Executive's Retention Agreement.
10. This Agreement represents the complete agreement between the
Executive 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 Executive 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 Executive shall be effective unless the Company has received within the 7-
day revocation period, written notice of any revocation, all monies received
by the Executive 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 Executive acknowledges that the
Executive 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 Executive acknowledges that the Executive 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:
XXXXXXX X. XXXXXX
____________________________________
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 the annual base salary of the Executive
as of the date of the Agreement as may be increased from time to time in the
discretion of the Committee.
"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
Executive at the expense of the Company or a subsidiary; (iv) any material
breach of the Executive'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 Executive to perform substantially the Executive'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 Executive by the Board, which specifically identifies the
manner in which the Board believes that the Executive has not substantially
performed the Executive's duties; (vii) the failure by the Executive to
comply, in any material respect, with the provisions of Section 11 of the
Agreement; or (viii) the failure by the Executive to comply with any other
undertaking set forth in the Agreement or any breach by the Executive 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 Executive, shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive'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 Executive in good faith and in the best interests
of the Company. The cessation of employment of the Executive shall not be
deemed to be for Cause unless and until there shall have been delivered to the
Executive 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
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive 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 Executive's employment is
terminated by the Company for Cause, or by the Executive 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 Executive'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 Executive of such termination, (iii)
if the Executive's employment is terminated by reason of death or Disability,
the Date of Termination shall be the date of death of the Executive 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
Executive that the Employment Period shall not be extended.
"Disability" means the determination that the Executive 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 Executive's prior written consent,
the occurrence of any of the following, provided that the Executive delivers a
Notice of Termination specifying such occurrence within 30 days thereof:
(i) the assignment of the Executive 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 Executive;
provided, however, that the foregoing shall not constitute "Good Reason" if it
is not attendant to a reduction in the Executive's Annual Base Salary or total
target compensation, except that a request by the Company for the Executive 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 Executive;
(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 Executive'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
executive 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 Executive.
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
Executive 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 Executive 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 Executive
an amount (the "Gross-up") such that the net amount retained by the Executive,
after deduction of any Excise Tax and any Federal, state and local income
taxes, equals the amount of such payments that the Executive would have
retained had such Excise Tax not been imposed. In addition, the Company shall
indemnify and hold the Executive 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 Executive 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 Executive and reasonably acceptable to the Company.
(c) The Executive 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 Executive 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
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive 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 Executive
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 Executive from and against all costs and expenses incurred in
connection with such contest; provided further, however, that if the Company
directs the Executive to pay such claim and xxx for a refund, the Company
shall advance the amount of such payment to the Executive on an interest-free
basis and at no net after-tax cost to the Executive. If the Executive 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 Executive 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 Executive as a result of
making such payment (any such benefit calculated based on the assumption that
any deduction available to the Executive 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 May 1, 1997 (the "Unit
Agreement"), between TOYS "R" US, INC., a Delaware corporation (the
"Company"), and Xxxxxxx X. Xxxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company has 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");
WHEREAS, concurrently herewith, the Executive and the Company are
entering into a Retention Agreement, dated as of even date herewith (the
"Retention Agreement");
WHEREAS, as further inducement for the Executive to execute the
Retention Agreement and continue in the employ of the Company, the Committee
has determined to grant the Executive the Stock Units as described in this
Unit Agreement, subject to the approval of the Amendment by the stockholders
of the Company at the 1997 Annual Meeting of Stockholders; 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 approval of the Amendment by
the stockholders of the Company at the 1997 Annual Meeting of Stockholders and
subject to the terms and conditions set forth in this Unit Agreement and in
Section 10 of the Plan, the Executive is hereby granted 34,000 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 Executive's account in the Trust (as defined below) in respect
of the Stock Units, the "Shares"). The 34,000 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 Executive'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 Executive's account therein subject to the forfeiture conditions of
Section 3 below.
3. Forfeiture Conditions. The Stock Units granted to the
Executive hereunder shall be forfeited in their entirety, subject to the terms
of the Retention Agreement, if:
(i) the Executive'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 May 1, 2002, 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
Executive promptly following May 1, 2002 unless the Executive 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
Executive under this Unit Agreement will be acquired for the Executive's
account and not with a view to the distribution thereof, and the Executive
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
Executive 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 Executive, 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 Executive.
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: __________________________
Title: __________________________
I hereby acknowledge receipt of the Stock Units and agree to the
provisions set forth in this Agreement.
______________________________
Xxxxxxx X. Xxxxxx
EXHIBIT A
Performance Objective Under Section 3(ii)
of the Stock Unit Agreement
---------------------------
The consolidated net earnings of the Company in any fiscal quarter (beginning
with the second fiscal quarter in 1997) of the Company's 1997, 1998, 1999 or
2000 fiscal year is at least equal to the amount of any corresponding quarter
in 1996. For these purposes, "consolidated net earnings" shall exclude
extraordinary or unusual items reported by the Company as such.
EXECUTION COPY
RETENTION AGREEMENT
BETWEEN
TOYS "R" US, INC.
AND
XXXXXXX X. XXXXXX
DATED AS OF
May 1, 1997
XXXXXX
TABLE OF CONTENTS
Page
1. Employment Period.....................................................1
2. Terms of Employment...................................................1
(a) Position........................................................1
(b) Compensation....................................................1
(i) Base Salary...............................................1
(ii) Incentive Bonus...........................................1
(iii) Participation in Other Plans............................2
Stock Units....................................................2
3. Termination of Employment Upon Death, Disability or Retirement........2
4. Other Termination of Employment.......................................2
(a) Company Termination.............................................2
(b) Good Reason; Change of Reporting Requirement....................2
(c) Notice of Termination...........................................2
(d) Obligations of the Company Upon Termination Under Section 4.....3
(e) Cause...........................................................4
(f) Reporting Requirements..........................................4
5. Release Agreement.....................................................4
6. Offset................................................................5
7. Compensation and Benefits Following Change of Control.................5
8. Nonexclusivity of Rights..............................................5
9. Full Settlement; Legal Fees...........................................5
(a) No Obligation to Mitigate.......................................5
(b) Expenses of Contests............................................5
10. Certain Additional Payments by the Company...........................6
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11. Restrictions and Obligations of the Executive........................6
(a) Consideration for Restrictions and Covenants...................6
(b) Confidentiality................................................6
(c) Non-Solicitation or Hire ......................................7
(d) Non-Competition and Consulting.................................7
(e) Definitions....................................................8
(f) Relief.........................................................8
12. Successors...........................................................9
13. Miscellaneous........................................................9
(a) Governing Law..................................................9
(b) Captions.......................................................9
(c) Amendment......................................................9
(d) Notices........................................................9
(e) Assistance to Company..........................................9
(f) Severability of Provisions.....................................10
(g) Withholding....................................................10
(h) Waiver.........................................................10
(i) Arbitration....................................................10
EXHIBIT A Separation and Release Agreement
EXHIBIT B Definitions
EXHIBIT C Change of Control and Tax Gross-Up
ANNEX A Stock Unit Agreement
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TOYS "R" US, INC.
RETENTION AGREEMENT
AGREEMENT (this "Agreement"), by and between Toys "R" Us, Inc., a
Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxxx (the "Executive"),
dated as of May 1, 1997. 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 Executive and the Executive 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 , at least
six months prior to the scheduled expiration of the Employment Period, the
Company shall give notice to the Executive 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 Executive shall
continue to serve in the Executive's current position at the Company or such
other senior executive position to which the Executive may be appointed by the
Company. The Executive shall be based in Northeastern New Jersey.
(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote full time during normal business hours to the business and
affairs of the Company and to use the Executive's best efforts to perform
faithfully and efficiently such responsibilities. During the Employment
Period, the Executive may, so long as such activities do not interfere with the
performance of the Executive's responsibilities as an employee of the Company
in accordance with this Agreement, continue the corporate directorships on
which the Executive 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 Executive 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 Executive shall receive the Executive'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 Executive 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
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incentive Plans and subject to the terms thereof at a level commensurate with
the Executive's current grants and the Executive's current position or any more
senior position(s) to which the Executive 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 Executive shall be eligible to participate in all other Plans at a
level commensurate with the Executive's position.
(iv) Stock Units. As further inducement for the Executive to
enter into this Agreement and to continue in the employ of the Company, the
Company has granted to the Executive 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 Executive's employment shall terminate upon the Executive'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 Company's 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 Executive's employment during the Employment
Period with or without Cause.
(b) Good Reason; Change of Reporting Requirements. (i) The
Executive's employment may be terminated during the Employment Period by the
Executive for Good Reason.
(ii) Due to the unique nature of the Company's International
Division and the resulting burdens imposed on the Executive thereby,
notwithstanding anything to the contrary contained herein, the Executive's
employment may be terminated during the Employment Period by the Executive by
providing written notice to the Company within 30 days of the first day on
which the Executive no longer reports directly to either Xxxxxxx Xxxxxxxxx or
Xxxxxx X. Xxxxxxxx, in which event the "Date of Termination" for purposes
hereof shall be the date set forth in such notice (which shall not be less than
60 days from the date of such notice unless the Company consents thereto in
writing).
(c) Notice of Termination. Any termination by the Company for
Cause, or by the Executive 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 Executive 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 Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
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(d) Obligations of the Company Upon Termination Under Section 4.
If the Executive's employment shall have been terminated under Section 4(a)
(other than for Cause) or 4(b)(i):
(i) the Company shall make a lump sum cash payment to the
Executive within 30 days after the Date of Termination in an amount equal to
the sum of (1) the Executive's pro rata Annual Base Salary payable through the
Date of Termination to the extent not theretofore paid, (2) the targeted amount
of the Executive'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 Executive'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 Executive'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 Executive 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 Executive'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
Executive 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 Executive 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 Executive would receive on an after-tax basis if the
Executive's employment had continued for two years after the Date of
Termination assuming for this purpose that the Executive's compensation for
each such year would have been one-half of the amount paid pursuant to clause
(ii) above, and the Executive 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 Executive an amount
equal to the Company's cost had such benefits been continued.
(iv) (1) all unvested options held by the Executive 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 Executive shall
vest on the two year anniversary date of the Date of Termination, (2) all
unvested profit shares held by the Executive or for the benefit of the
Executive 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
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Date of Termination, 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 Executive, (3) any other unvested equity based award
(including, without limitation, restricted stock and stock units) held by the
Executive 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 Executive
entirely in the form of Common Stock, $.10 par value per share, of the Company,
(4) any options held by the Executive 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 Executive
shall not be entitled to any additional grants of any stock options, restricted
stock, other equity based or long-term awards; and
(v) the Executive will be entitled to continuation of health
benefits under the Plans at a level commensurate with the Executive's current
position or more senior position(s) to which the Executive may be appointed,
and if the Executive 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 Executive shall pay the premium charged
to former employees of the Company pursuant to Section 4980B of the Code until
the Executive is sixty-five years of age; provided, that the Company can amend
or otherwise alter the Plans to provide benefits to the Executive that are no
less than those commensurate with the Executive's current position or more
senior position(s) to which the Executive may be appointed; provided, that to
the extent such benefits cannot be provided to the Executive 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 Executive, on an after-tax basis, an amount
necessary for the Executive 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 Executive is employed by or is otherwise affiliated with a
party that offers comparable health benefits to the Executive.
(e) Cause. If the Executive's employment shall be terminated for
Cause during the Employment Period or if the Executive 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 Executive other than the obligation to pay
to the Executive all payments and benefits due, in accordance with the
Company's Plans through the Date of Termination.
(f) Reporting Requirements. If the Executive's employment shall be
terminated by the Executive pursuant to Section 4(b)(ii), the Company shall
not make the payment described in Section 4(d) hereof, and the Employment
-4- XXXXXX
Period shall terminate without further obligations to the Executive other than
the obligation to pay to the Executive 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 Executive (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 Executive under this Agreement against any amounts
owed by the Executive to the Company, and nothing in this Agreement shall
prevent the Company from pursuing any other available remedies against the
Executive.
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
Executive would be entitled be less favorable for the two years following a
Change of Control than the Executive would have been entitled based upon the
most favorable of the Company's Plans in effect for the Executive at any time
during the 120-day period immediately preceding such Change of Control.
(b) In the event of termination of the Executive's employment under
Section 4(a) (other than for Cause) or 4(b)(i) (but not 4(b)(ii)), 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 Executive's continuing or future participation in any Plan
for which the Executive may qualify nor shall anything herein limit or
otherwise affect such rights as the Executive may have under any contract or
agreement with the Company. Amounts that are vested benefits or that the
Executive 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 Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive 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
Executive obtains other employment.
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(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 Executive is successful with respect thereto, the Company agrees to pay all
reasonable legal and professional fees and expenses that the Executive may
reasonably incur as a result of any contest by the Executive, 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 Executive about the amount of any payment
pursuant to this Agreement), 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
Executive all reasonable legal and professional fees and expenses that the
Executive may reasonably incur as a result of any contest by the Executive, 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 Executive about the
amount of any payment pursuant to this Agreement), 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 Executive 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 Executive
against, or defenses by the Executive 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 Executive 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 Executive (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 Executive. (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 Executive
and the grant to the Executive of the stock units of the Company as set forth
in Section 2 hereof is the Executive's compliance with the undertakings set
forth in this Section 11. Specifically, Executive agrees to comply with the
-6- XXXXXX
provisions of this Section 11 irrespective of whether the Executive is entitled
to receive any payments under Section 3 or 4 of this Agreement; , r, that,
notwithstanding anything to the contrary contained herein or in the Release
Agreement, the Executive shall not be bound by the provisions of Section 11(d)
if the Executive's employment is terminated pursuant to Section 4(b)(ii).
(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 Executive 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
Executive during the Executive's employment by the Company and which shall not
be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive 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 Executive's employment for
any reason, the Executive 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 Executive's employment for any reason, the Executive shall
not, directly or indirectly:
-7- XXXXXX
(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 Executive 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; that such duties shall not conflict with the duties of
the Executive 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 Executive during any period
following the termination of the Executive'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 Executive 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
Executive (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 Executive (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:
(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.
-8- XXXXXX
(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 Executive further
acknowledges that the Company and its subsidiaries will be irrevocably damaged
if such covenants are not specifically enforced. Accordingly, the Executive
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 Executive 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 Executive set forth in
Section 11, except as required by law, the Executive shall not be entitled to
any payments set forth in Section 3 or 4 hereof if the Executive breaches any
of the covenants applicable to the Executive contained in this Section 11, the
Executive 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 Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive'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.
-9- XXXXXX
(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 Executive, 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 Executive in connection
therewith, the Executive shall provide reasonable assistance to the Company in
the collection of information and documents and shall make the Executive
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 Executive'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 Executive 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 Executive'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 Executive 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.
-10- XXXXXX
(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.
-11- XXXXXX
IN WITNESS WHEREOF, the Executive has hereunto set the Executive'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.
XXXXXXX X. XXXXXX
/s/ Xxxxxxx X. Xxxxxx
TOYS "R" US, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
Name: Xxxxxxx Xxxxxxxxx
Title: Chief Executive Officer
-12- XXXXXX
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 Xxxxxxx X. Xxxxxx
(the "Executive").
The Executive and the Company agree as follows:
1. The employment relationship between the Executive and the Company
terminated on __________________________________ (the "Termination Date").
2. In accordance with the Executive's Retention Agreement, the Company
has agreed to pay the Executive certain payments and to make certain benefits
available after the Termination Date.
3. In consideration of the above, the sufficiency of which the Executive
hereby acknowledges, the Executive, on behalf of the Executive and the
Executive'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 Executive may have arising from
or relating to the Executive's employment or termination from employment with
the Company, including a release of any rights or claims the Executive 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 Executive of any
claims for wrongful discharge, breach of contract, torts or any other claims
in any way related to the Executive's employment with or resignation or
termination from the Company. This release also includes a release of any
A-1 XXXXXX
claims for age discrimination under the Age Discrimination in Employment Act,
as amended ("ADEA"). The ADEA requires that the Executive be advised to
consult with an attorney before the Executive waives any claim under ADEA. In
addition, the ADEA provides the Executive with at least 21 days to decide
whether to waive claims under ADEA and seven days after the Executive signs the
Agreement to revoke that waiver. This release does not release the Company
from any obligations due to the Executive under Section 4, 7, 9(b), 10, 11 or
13(e) of the Executive's Retention Agreement, the Executive's Indemnification
Agreement with the Company or under this Agreement.
Additionally, the Company agrees to discharge and release the Executive
and the Executive'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 Executive's employment and/or affiliation
with, or termination and separation from the Company; provided that such
release shall not release the Executive from any loan or advance by the
Company or any of its subsidiaries, any act that would constitute "Cause"
under the Executive's Retention Agreement or a breach under Section 9(b), 11
or 13(e) of the Executive's Retention Agreement.
4. This Agreement is not an admission by either the Executive or the
Company of any wrongdoing or liability.
5. The Executive waives any right to reinstatement or future employment
with the Company following the Executive's separation from the Company on the
Termination Date.
6. The Executive 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
Executive.
7. The Executive shall continue to be bound by Sections 11 and 13(e) of
the Executive's Retention Agreement.
8. The Executive shall promptly return all the Company property in the
Executive'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 Executive shall return any leased or Company car at
the expiration of the Consulting Period (as defined in the Executive'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 Executive's Retention Agreement.
A-2 XXXXXX
10. This Agreement represents the complete agreement between the
Executive 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 Executive 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 Executive shall be effective unless the Company has received within the 7-
day revocation period, written notice of any revocation, all monies received
by the Executive 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 Executive acknowledges that the
Executive 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 Executive acknowledges that the Executive 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:
XXXXXXX X. XXXXXX
__________________________
A-3 XXXXXX
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 the annual base salary of the Executive as of the
date of the Agreement as may be increased from time to time in the discretion
of the Committee.
"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
Executive at the expense of the Company or a subsidiary; (iv) any material
breach of the Executive'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 Executive to perform substantially the Executive'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 Executive by the Board, which specifically identifies the
manner in which the Board believes that the Executive has not substantially
performed the Executive's duties; (vii) the failure by the Executive to comply,
in any material respect, with the provisions of Section 11 of the Agreement; or
(viii) the failure by the Executive to comply with any other undertaking set
forth in the Agreement or any breach by the Executive 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 Executive, shall be considered "willful" unless it is done, or omitted
to be done, by the Executive in bad faith or without reasonable belief that the
Executive'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 Executive in good faith and in the best interests of the Company.
The cessation of employment of the Executive shall not be deemed to be for
Cause unless and until there shall have been delivered to the Executive 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 Executive and the
Executive is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the Executive
is guilty of the conduct described, and specifying the particulars thereof in
detail.
"Change of Control" - See Exhibit C.
B-1 XXXXXX
"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 Executive's employment is
terminated by the Company for Cause, or by the Executive 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 Executive'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 Executive of such termination, (iii)
if the Executive's employment is terminated by reason of death or Disability,
the Date of Termination shall be the date of death of the Executive 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
Executive that the Employment Period shall not be extended.
"Disability" means the determination that the Executive 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 Executive's prior written consent,
the occurrence of any of the following, provided that the Executive delivers a
Notice of Termination specifying such occurrence within 30 days thereof:
(i) the assignment of the Executive 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 Executive; provided, however, that the foregoing shall not constitute
"Good Reason" if it is not attendant to a reduction in the Executive's
Annual Base Salary or total target compensation, except that a request by
the Company for the Executive 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
Executive;
(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.
B-2 XXXXXX
"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 Executive'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
executive 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 Executive.
B-3 XXXXXX
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 notconstitute a Change of Control: (i) any acquisition by the
Company or any ofits subsidiaries, (ii) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any subsidiary
of theCompany, (iii) any acquisition by any Person pursuant to a transaction
thatcomplies with clauses (i), (ii) and (iii) of subsection (c) below, or (iv)
any acquisition by any entity in which the Executive 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
C-1 XXXXXX
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
Executive 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 Executive
an amount (the "Gross-up") such that the net amount retained by the Executive,
after deduction of any Excise Tax and any Federal, state and local income
taxes, equals the amount of such payments that the Executive would have
retained had such Excise Tax not been imposed. In addition, the Company shall
indemnify and hold the Executive 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 Executive 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 (, 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
C-2 XXXXXX
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 Executive and reasonably acceptable to the Company.
(c) The Executive 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 Executive 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 Executive in
writing prior to the expiration of such period that it desires to contest such
claim, the Executive 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 Executive to pay the
tax claimed and xxx for a refund or contest the claim in any permissible
manner; provided, further, however that the Company shall pay and indemnify
the Executive from and against all costs and expenses incurred in connection
with such contest; provided, however, that if the Company directs the Executive
to pay such claim and xxx for a refund, the Company shall advance the amount of
such payment to the Executive on an interest-free basis and at no net after-tax
cost to the Executive. If the Executive 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 Executive 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 Executive as a result of making such payment (any such benefit calculated
based on the assumption that any deduction available to the Executive offsets
income that would otherwise be taxed at the highest marginal statutory rates of
Federal, state and local income tax for the relevant periods).
C-3 XXXXXX
ANNEX A
STOCK UNIT AGREEMENT
STOCK UNIT AGREEMENT, dated as of May 1, 1997 (the "Unit
Agreement"), between TOYS "R" US, INC., a Delaware corporation (the
"Company"), and Xxxxxxx X. Xxxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company has 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");
WHEREAS, concurrently herewith, the Executive and the Company are
entering into a Retention Agreement, dated as of even date herewith (the
"Retention Agreement");
WHEREAS, as further inducement for the Executive to execute the
Retention Agreement and continue in the employ of the Company, the Committee
has determined to grant the Executive the Stock Units as described in this
Unit Agreement, subject to the approval of the Amendment by the stockholders
of the Company at the 1997 Annual Meeting of Stockholders; 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 approval of the Amendment by
the stockholders of the Company at the 1997 Annual Meeting of Stockholders and
subject to the terms and conditions set forth in this Unit Agreement and in
Section 10 of the Plan, the Executive is hereby granted 33,000 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 Executive's account in the Trust (as defined below) in respect
of the Stock Units, the "Shares"). The 33,000 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
XXXXXX
grantor trust subsequently established by the Company, the "Trust") and shall
be allocated by the Trust to the Executive'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 Executive's account therein subject to the forfeiture conditions of
Section 3 below.
3. Forfeiture Conditions. The Stock Units granted to the Executive
hereunder shall be forfeited in their entirety, subject to the terms of the
Retention Agreement, if:
(i) the Executive'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 May 1, 2002, 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
Executive promptly following May 1, 2002 unless the Executive 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 Executive
under this Unit Agreement will be acquired for the Executive's account and not
with a view to the distribution thereof, and the Executive 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 Executive 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.
-2- XXXXXX
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 Executive, 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 Executive.
13. Successors. This Unit Agreement shall be binding upon the
Company and its successors and assigns.
-3- XXXXXX
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:________________________
Title:_____________________
I hereby acknowledge receipt of the Stock Units and agree to the
provisions set forth in this Agreement.
___________________________
Xxxxxxx X. Xxxxxx
-4- XXXXXX
EXHIBIT A
Performance Objective Under Section 3(ii)
of the Stock Unit Agreement
The consolidated net earnings of the Company in any fiscal quarter (beginning
with the second fiscal quarter in 1997) of the Company's 1997, 1998, 1999 or
2000 fiscal year is at least equal to the amount of any corresponding quarter
in 1996. For these purposes, "consolidated net earnings" shall exclude
extraordinary or unusual items reported by the Company as such.
EXECUTION COPY
RETENTION AGREEMENT
BETWEEN
TOYS "R" US, INC.
AND
XXXXXX X. XXXXXXXX
DATED AS OF
MAY 1, 1997
TABLE OF CONTENTS
Page
1. Employment Period.................................................4
2. Terms of Employment...............................................4
(a) Position....................................................4
(b) Compensation................................................4
(i) Base Salary............................................4
(ii) Incentive Bonus........................................4
(iii) Participation in Other Plans...........................5
Stock Units....................................................5
3. Termination of Employment Upon Death, Disability or Retirement....5
4. Other Termination of Employment...................................5
(a) Company Termination..........................................5
(b) Good Reason..................................................5
(c) Notice of Termination........................................5
(d) Obligations of the Company Upon Termination Under Section 4..5
(e) Cause........................................................7
5. Release Agreement.................................................7
6. Offset............................................................7
7. Compensation and Benefits Following Change of Control.............7
8. Nonexclusivity of Rights..........................................8
9. Full Settlement; Legal Fees.......................................8
(a) No Obligation to Mitigate....................................8
(b) Expenses of Contests.........................................8
10. Certain Additional Payments by the Company.......................9
11. Restrictions and Obligations of the Executive....................9
(a) Consideration for Restrictions and Covenants................9
(b) Confidentiality.............................................9
(c) Non-Solicitation or Hire....................................9
(d) Non-Competition and Consulting.............................10
(e) Definitions................................................11
(f) Relief.....................................................11
12. Successors......................................................11
13. Miscellaneous...................................................12
(a) Governing Law..............................................12
(b) Captions...................................................12
(c) Amendment..................................................12
(d) Notices....................................................12
(e) Assistance to Company......................................12
(f) Severability of Provisions.................................12
(g) Withholding................................................13
(h) Waiver.....................................................13
(i) Arbitration................................................13
EXHIBIT A Separation and Release Agreement
EXHIBIT B Definitions
EXHIBIT C Change of Control and Tax Gross-Up
ANNEX A Stock Unit Agreement
TOYS "R" US, INC.
RETENTION AGREEMENT
AGREEMENT (this "Agreement"), by and between Toys "R" Us, Inc., a
Delaware corporation (the "Company"), and Xxxxxx X. Xxxxxxxx (the "Executive"),
dated as of May 1, 1997. 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 Executive and the Executive 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 Executive 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 Executive shall
continue to serve in the Executive's current position at the Company or such
other senior executive position to which the Executive may be appointed by the
Company. The Executive shall be based in Northeastern New Jersey.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote full time during normal business hours to the
business and affairs of the Company and to use the Executive's best efforts to
perform faithfully and efficiently such responsibilities. During the
Employment Period, the Executive may, so long as such activities do not
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement, continue the
corporate directorships on which the Executive 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 Executive 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 Executive shall receive the Executive'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 Executive 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 Executive's current grants and the Executive's current
position or any more senior position(s) to which the Executive 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 Executive shall be eligible to participate in all other
Plans at a level commensurate with the Executive's position.
(iv) Stock Units. As further inducement for the
Executive to enter into this Agreement and to continue in the employ of the
Company, the Company has granted to the Executive 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 Executive's employment shall terminate upon the Executive'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 Company's 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 Executive's employment during the Employment
Period with or without Cause.
(b) Good Reason. The Executive's employment may be terminated
during the Employment Period by the Executive for Good Reason.
(c) Notice of Termination. Any termination by the Company for
Cause, or by the Executive 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 Executive 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 Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(d) Obligations of the Company Upon Termination Under Section 4.
If the Executive'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 Executive within 30 days after the Date of Termination in an amount equal
to the sum of (1) the Executive's pro rata Annual Base Salary payable through
the Date of Termination to the extent not theretofore paid, (2) the targeted
amount of the Executive'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 Executive'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 Executive'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 Executive 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 Executive'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
Executive 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 Executive 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 Executive would receive on an after-tax basis
if the Executive's employment had continued for two years after the Date of
Termination assuming for this purpose that the Executive's compensation for
each such year would have been one-half of the amount paid pursuant to clause
(ii) above, and the Executive 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 Executive an
amount equal to the Company's cost had such benefits been continued.
(iv) (1) all unvested options held by the Executive
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 Executive
shall vest on the two year anniversary date of the Date of Termination, (2) all
unvested profit shares held by the Executive or for the benefit of the
Executive 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 Executive, (3) any other unvested equity based award
(including, without limitation, restricted stock and stock units) held by the
Executive 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 Executive
entirely in the form of Common Stock, $.10 par value per share, of the Company,
(4) any options held by the Executive 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 Executive
shall not be entitled to any additional grants of any stock options, restricted
stock, other equity based or long-term awards; and
(v) the Executive will be entitled to continuation of
health benefits under the Plans at a level commensurate with the Executive's
current position or more senior position(s) to which the Executive may be
appointed, and if the Executive 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 Executive shall pay
the premium charged to former employees of the Company pursuant to Section
4980B of the Code until the Executive is sixty-five years of age; provided,
that the Company can amend or otherwise alter the Plans to provide benefits to
the Executive that are no less than those commensurate with the Executive's
current position or more senior position(s) to which the Executive may be
appointed; provided, that to the extent such benefits cannot be provided to the
Executive 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 Executive, on an
after-tax basis, an amount necessary for the Executive 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 Executive is employed by or is
otherwise affiliated with a party that offers comparable health benefits to the
Executive.
(e) Cause. If the Executive's employment shall be terminated for
Cause during the Employment Period or if the Executive 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 Executive other than the obligation to pay
to the Executive 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 Executive (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 Executive under this Agreement against any
amounts owed by the Executive to the Company, and nothing in this Agreement
shall prevent the Company from pursuing any other available remedies against
the Executive.
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
Executive would be entitled be less favorable for the two years following a
Change of Control than the Executive would have been entitled based upon the
most favorable of the Company's Plans in effect for the Executive at any time
during the 120-day period immediately preceding such Change of Control.
(b) In the event of termination of the Executive'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 Executive's continuing or future participation in any Plan
for which the Executive may qualify nor shall anything herein limit or
otherwise affect such rights as the Executive may have under any contract or
agreement with the Company. Amounts that are vested benefits or that the
Executive 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 Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to the Executive
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 Executive 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 Executive is successful with respect thereto, the Company agrees to pay all
reasonable legal and professional fees and expenses that the Executive may
reasonably incur as a result of any contest by the Executive, 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 Executive 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
Executive all reasonable legal and professional fees and expenses that the
Executive may reasonably incur as a result of any contest by the Executive, 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 Executive 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 Executive 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 Executive
against, or defenses by the Executive 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 Executive 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 Executive (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 Executive. (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 Executive
and the grant to the Executive of the stock units of the Company as set forth
in Section 2 hereof is the Executive's compliance with the undertakings set
forth in this Section 11. Specifically, Executive agrees to comply with the
provisions of this Section 11 irrespective of whether the Executive 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
Executive 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 Executive during the Executive's employment by the
Company and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive 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 Executive's employment
for any reason, the Executive 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 Executive's employment for any reason, the Executive 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 Executive 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 Executive 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 Executive during
any period following the termination of the Executive'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 Executive 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
Executive (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 Executive (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:
(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 Executive further
acknowledges that the Company and its subsidiaries will be irrevocably damaged
if such covenants are not specifically enforced. Accordingly, the Executive
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 Executive 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 Executive set forth in
Section 11, except as required by law, the Executive shall not be entitled to
any payments set forth in Section 3 or 4 hereof if the Executive breaches any
of the covenants applicable to the Executive contained in this Section 11, the
Executive 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 Executive
and without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive'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 Executive, 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 Executive in connection
therewith, the Executive shall provide reasonable assistance to the Company in
the collection of information and documents and shall make the Executive
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 Executive'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 Executive 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 Executive'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 Executive 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.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive'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.
XXXXXX X. XXXXXXXX
/s/ Xxxxxx X. Xxxxxxxx
TOYS "R" US, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
Name: Xxxxxxx Xxxxxxxxx
Title: Chief Executive Officer
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 Xxxxxx X. Xxxxxxxx
(the "Executive").
The Executive and the Company agree as follows:
1. The employment relationship between the Executive and the Company
terminated on __________________________________ (the "Termination Date").
2. In accordance with the Executive's Retention Agreement, the
Company has agreed to pay the Executive certain payments and to make certain
benefits available after the Termination Date.
3. In consideration of the above, the sufficiency of which the
Executive hereby acknowledges, the Executive, on behalf of the Executive and
the Executive'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 Executive may have arising from
or relating to the Executive's employment or termination from employment with
the Company, including a release of any rights or claims the Executive 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 Executive of any
claims for wrongful discharge, breach of contract, torts or any other claims
in any way related to the Executive'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 Executive be advised to
consult with an attorney before the Executive waives any claim under ADEA. In
addition, the ADEA provides the Executive with at least 21 days to decide
whether to waive claims under ADEA and seven days after the Executive signs the
Agreement to revoke that waiver. This release does not release the Company
from any obligations due to the Executive under Section 4, 7, 9(b), 10, 11 or
13(e) of the Executive's Retention Agreement, the Executive's Indemnification
Agreement with the Company or under this Agreement.
Additionally, the Company agrees to discharge and release the Executive
and the Executive'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 Executive's employment and/or affiliation
with, or termination and separation from the Company; provided that such
release shall not release the Executive from any loan or advance by the
Company or any of its subsidiaries, any act that would constitute "Cause"
under the Executive's Retention Agreement or a breach under Section 9(b), 11
or 13(e) of the Executive's Retention Agreement.
4. This Agreement is not an admission by either the Executive or the
Company of any wrongdoing or liability.
5. The Executive waives any right to reinstatement or future
employment with the Company following the Executive's separation from the
Company on the Termination Date.
6. The Executive 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
Executive.
7. The Executive shall continue to be bound by Sections 11 and 13(e)
of the Executive's Retention Agreement.
8. The Executive shall promptly return all the Company property in
the Executive'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 Executive shall return any leased or Company car at
the expiration of the Consulting Period (as defined in the Executive'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 Executive's Retention
Agreement.
10. This Agreement represents the complete agreement between the
Executive 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 Executive 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 Executive shall be effective unless the Company has received
within the 7-day revocation period, written notice of any revocation, all
monies received by the Executive 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 Executive acknowledges
that the Executive 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 Executive acknowledges that the Executive 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:
XXXXXX X. XXXXXXXX
------------------------------
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 the annual base salary of the Executive as
of the date of the Agreement as may be increased from time to time in the
discretion of the Committee.
"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
Executive at the expense of the Company or a subsidiary; (iv) any material
breach of the Executive'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 Executive to perform substantially the Executive'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 Executive by the Board, which specifically identifies the
manner in which the Board believes that the Executive has not substantially
performed the Executive's duties; (vii) the failure by the Executive to comply,
in any material respect, with the provisions of Section 11 of the Agreement; or
(viii) the failure by the Executive to comply with any other undertaking set
forth in the Agreement or any breach by the Executive 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 Executive, shall be considered "willful" unless it is done, or omitted
to be done, by the Executive in bad faith or without reasonable belief that the
Executive'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 Executive in good faith and in the best interests of the Company.
The cessation of employment of the Executive shall not be deemed to be for
Cause unless and until there shall have been delivered to the Executive 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 Executive and the
Executive is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the Executive
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 Executive's employment is
terminated by the Company for Cause, or by the Executive 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 Executive'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 Executive of such termination, (iii)
if the Executive's employment is terminated by reason of death or Disability,
the Date of Termination shall be the date of death of the Executive 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
Executive that the Employment Period shall not be extended.
"Disability" means the determination that the Executive 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 Executive's prior written consent,
the occurrence of any of the following, provided that the Executive delivers a
Notice of Termination specifying such occurrence within 30 days thereof:
(i) the assignment of the Executive 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 Executive;
provided, however, that the foregoing shall not constitute "Good Reason" if it
is not attendant to a reduction in the Executive's Annual Base Salary or total
target compensation, except that a request by the Company for the Executive 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 Executive;
(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 Executive'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
executive 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 Executive.
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
Executive 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 Executive 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 Executive
an amount (the "Gross-up") such that the net amount retained by the Executive,
after deduction of any Excise Tax and any Federal, state and local income
taxes, equals the amount of such payments that the Executive would have
retained had such Excise Tax not been imposed. In addition, the Company shall
indemnify and hold the Executive 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 Executive 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 Executive and reasonably acceptable to the Company.
(c) The Executive 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 Executive 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
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive 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 Executive
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 Executive from and against all costs and expenses incurred in connection
with such contest; provided further, however, that if the Company directs the
Executive to pay such claim and xxx for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free basis and at no net
after-tax cost to the Executive. If the Executive 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 Executive 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 Executive as a result of making such payment (any
such benefit calculated based on the assumption that any deduction available to
the Executive 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 May 1, 1997 (the "Unit
Agreement"), between TOYS "R" US, INC., a Delaware corporation (the
"Company"), and Xxxxxx X. Xxxxxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company has 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");
WHEREAS, concurrently herewith, the Executive and the Company are
entering into a Retention Agreement, dated as of even date herewith (the
"Retention Agreement");
WHEREAS, as further inducement for the Executive to execute the
Retention Agreement and continue in the employ of the Company, the Committee
has determined to grant the Executive the Stock Units as described in this
Unit Agreement, subject to the approval of the Amendment by the stockholders
of the Company at the 1997 Annual Meeting of Stockholders; 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 approval of the Amendment
by the stockholders of the Company at the 1997 Annual Meeting of Stockholders
and subject to the terms and conditions set forth in this Unit Agreement and
in Section 10 of the Plan, the Executive is hereby granted 23,000 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 Executive's account in the Trust (as defined below) in respect
of the Stock Units, the "Shares"). The 23,000 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 Executive'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 Executive's account therein subject to the forfeiture conditions of
Section 3 below.
3. Forfeiture Conditions. The Stock Units granted to the
Executive hereunder shall be forfeited in their entirety, subject to the terms
of the Retention Agreement, if:
(i) the Executive'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 May 1, 2002, 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 Executive
promptly following May 1, 2002 unless the Executive 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 conditions set forth in Section 3(i) hereof.
5. Investment Representation. The Shares acquired by the
Executive under this Unit Agreement will be acquired for the Executive's
account and not with a view to the distribution thereof, and the Executive
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
Executive 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 Executive, 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 Executive.
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:
------------------------------
Title:
---------------------------
I hereby acknowledge receipt of the Stock Units and agree to the
provisions set forth in this Agreement.
--------------------------------
Xxxxxx X. Xxxxxxxx
EXHIBIT A
Performance Objective Under Section 3(ii)
of the Stock Unit Agreement
The consolidated net earnings of the Company in any fiscal quarter (beginning
with the second fiscal quarter in 1997) of the Company's 1997, 1998, 1999 or
2000 fiscal year is at least equal to the amount of any corresponding quarter
in 1996. For these purposes, "consolidated net earnings" shall exclude
extraordinary or unusual items reported by the Company as such.
