Exhibit 10BB
RETENTION AGREEMENT
BETWEEN
TOYS "R" US, INC.
AND
XXXX X. XXXXX, XX.
DATED AS OF
January 6, 2000
TOYS "R" US, INC.
RETENTION AGREEMENT
AGREEMENT (this "Agreement"), by and between Toys "R" Us, Inc., a Delaware
corporation (the "Company"), and Xxxx X. Xxxxx, Xx. (the "Executive"), dated as
of January 6, 2000. 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 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 January 17, 2000 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, based upon a
determination by the Board, shall give notice to the Executive that the
Employment Period shall not be so extended.
2. Terms of Employment.
(a) Position. (i) Commencing on January 17, 2000 and for the remainder of
the Employment Period, the Executive shall serve as President and Chief
Executive Officer of the Company. The Executive shall be based in Paramus, 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 his full time during normal business hours to the
business and affairs of the Company and to use his best efforts to perform
faithfully and efficiently such responsibilities. The Executive shall be
entitled to not less than four weeks of paid vacation during each calendar
year of the Employment Period.
(iii) During the Employment Period, the Executive may, so long as
such activities do not materially interfere with the performance of his
responsibilities to 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 Committee. 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.
(iv) The Board shall appoint or nominate and recommend Executive for
election, and shall use its best efforts to cause Executive to be elected
and reelected to (1) membership on the Board effective from and after
January 17, 2000 through the remainder of the Employment Period and (2)
the position of Chairman of the Board effective from and after not later
than June 30, 2001, through the remainder of the
Employment thereafter. Executive shall also be a member of the Board's
Executive Committee and a member ex-officio of the Board's Nominating
Committee.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive his 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 Incentive
Bonus, in accordance with guidelines established by the Committee. Each
such Incentive Bonus shall be paid in accordance with the Company's
Incentive Bonus plan.
(iii) Participation in Plans. During the Employment Period, the
Executive shall be eligible to participate in all Plans (including,
without limitation, stock option and other equity-based award programs) at
a level not less than that which is commensurate with other senior
executives of the Company.
(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 agrees to grant to the Executive 200,000 stock units contingent on
performance and future service, pursuant to the Stock Unit Agreement to be
executed and delivered by the Company in the form attached as Annex A
hereto.
(v) Internet Subsidiary Stock Options. As further inducement to
enter into this Agreement and to continue in the employ of the Company,
the Company agrees to cause the Internet Subsidiary to grant to the
Executive options to acquire 300,000 shares of the Internet Subsidiary's
common stock pursuant the Stock Option Agreement to be executed and
delivered by the Internet Subsidiary (the "Internet Subsidiary Stock
Option Agreement"). Notwithstanding any provision of the Internet
Subsidiary Stock Option Agreement, the options granted to the Executive in
the Internet Subsidiary shall be governed by this Agreement.
(vi) TRU Stock Options. As further inducement for the Executive to
enter into this Agreement and to continue in the employ of the Company,
the Company agrees to grant to the Executive stock options to acquire (A)
700,000 shares of common stock of the Company, pursuant to the Partnership
Option Agreement to be executed and delivered by the Company (the
"Partnership Option Agreement") and (B) subject to approval by the
Company's stockholders of a new employee stock option plan at the
Company's next annual meeting of stockholders, 300,000 shares of common
stock of the Company, pursuant to the Stock Option Agreement to be
executed and delivered by the Company (the "Stock Option Agreement" and
together the Partnership Option Agreement, the "TRU Stock Option
Agreements"). As of April 1 of each year during the Employment Period,
commencing with April 1, 2001, the Company shall grant to the Executive
additional stock options to acquire shares of common stock of the Company.
Each such annual grant shall consist of options to acquire not less than
300,000 shares of common stock of the Company.
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(vii) Supplemental Executive Retirement Plans. All contributions to
the Executive's Supplemental Executive Retirement Plan account shall be
fully vested immediately upon contribution.
(viii) Company's Long-Term Incentive Performance Awards. The
Executive acknowledges that the Company may issue restricted stock as an
award to employees in connection with the elimination of the Company's
outstanding long-term incentive performance awards and that the Executive
will not be eligible to receive any shares of restricted stock in the
Company in connection with the elimination of such awards; provided,
however, that Executive shall be eligible to participate in any incentive
compensation program that replaces or is otherwise established following
elimination of the current long-term incentive award program.
3. Termination of Employment.
(a) 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. Notice of
Termination by the Company for Cause shall be subject to, and may be given only
in full compliance with the substantive and procedural requirements set forth in
clauses (a), (b) and (c) of the definition of "Cause" appearing in Exhibit B to
this Agreement.
(b) Termination for Death, Disability or Retirement. The Executive's
employment shall terminate upon his death, Disability or Retirement during the
Employment Period. In the event of such termination:
(i) the Company shall make a lump sum cash payment to the Executive
(or, in the event that termination results from the death of the
Executive, to his estate) within 30 days after the Date of Termination in
an amount equal to the sum of:
(A) the Executive's pro rata Annual Base Salary payable
through the Date of Termination to the extent not already paid;
(B) the targeted amount of the Executive's Incentive Bonus
that would have been payable with respect to the fiscal year in
which the Date of Termination occurs, 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;
(C) the Executive's actual earned Incentive Bonus for any
completed fiscal year or period not theretofore paid; and
(D) the account balances provided for under the Plans subject
to the terms and conditions of the Plans; and
(ii) (1) all unvested options to acquire stock of the Company or of
the Internet Subsidiary held by the Executive shall vest on the Date of
Termination, (2) all unvested
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profit shares held by the Executive or for the benefit of the Executive by
a grantor trust established by the Company shall vest on the Date of
Termination and shall be promptly delivered to the Executive or his
estate, (3) all other unvested equity-based awards (including, without
limitation, restricted stock and stock units together with all property
attributable thereto) held by the Executive or for the benefit of the
Executive by a grantor trust established by the Company shall vest on the
Date of Termination and shall be promptly delivered to the Executive, or
in the event of termination due to his death, the Executive's estate,
entirely in the form of Common Stock, $.10 par value per share ("Common
Stock") of the Company, (4) all options to acquire stock of the Company or
of the Internet Subsidiary (including, without limitation, options that
vest pursuant to this clause (ii)) held by the Executive shall remain
exercisable in whole or in part at all times, and from time to time,
following the Date of Termination through the expiration date of such
options, and (5) the Executive shall not be entitled to any additional
grants of any stock options, restricted stock, or other equity-based or
long-term awards following the Date of Termination; and
(iii) the Executive (and his spouse and dependent children) will be
entitled to continuation of health benefits under the Plans at a level
commensurate with the Executive's current position and if the Executive
(or his spouse and dependent children upon his death) elects to receive
such health benefits, the Executive shall pay the premium charged to
former employees of the Company pursuant to Section 4980B of the Code;
provided, that the Executive and his spouse will only be entitled to
receive such health benefits until attaining the age of sixty-five (65)
and dependent children will only be entitled to receive such health
benefits as long as such children qualify as dependent children for
federal income tax purposes. The Company can amend or otherwise alter the
Plans to provide health benefits to the Executive that are no less than
those commensurate with the Executive's current position. To the extent
such health 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. The obligations of the Company under
this clause (iii) 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 and his
spouse and dependent children.
(c) Termination by the Company for Cause. If the Executive's employment
shall be terminated for Cause during the Employment Period as provided in this
Agreement, the Employment Period shall terminate without further obligations to
the Executive other than (i) the obligation to pay him (x) the Executive's pro
rata Annual Base Salary payable through the Date of Termination to the extent
not theretofore paid, (y) the Executive's actual earned Incentive Bonus for any
completed fiscal year or period not theretofore paid, and (z) all payments and
benefits due, in accordance with the Company's Plans through the Date of
Termination and (ii) the obligations of the Company and Internet Subsidiary
under all stock options, stock units and other equity-based awards that are
vested as of the date of Termination.
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(d) Termination by the Company Without Cause or By the Executive for Good
Reason. If the Executive's employment shall be terminated during the Employment
Period by the Company without Cause, or by the Executive for Good Reason, then:
(i) the Company shall make a lump sum cash payment to the Executive
within 30 days after the Date of Termination of (x) the Executive's pro
rata Annual Base Salary payable through the Date of Termination to the
extent not theretofore paid, (y) the targeted amount of the Executive's
Incentive Bonus that would have been payable with respect to the fiscal
year in which the Date of Termination occurs, 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 (z) the
Executive's actual earned Incentive Bonus for any completed fiscal year or
period not theretofore paid; and
(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 and (2) two times
the targeted amount of the Incentive Bonus that would have been paid or
accrued to the Executive with respect to the Company's fiscal year in
which such Date of Termination occurs; and
(iii) the Company shall continue to provide, in the manner and
timing provided for in the Plans (other than as provided in clauses (i),
(ii), (iv) and (v) of this Section 3(d)), the benefits provided under the
Plans that the Executive would receive if the Executive's employment
continued for two years after the Date of Termination, assuming for this
purpose that the Executive's compensation during such two-year period is
the amount paid pursuant to clause (ii) above, and the Executive shall be
fully vested in any account balance and all other benefits under the
Plans; provided, however, that the benefits provided under the Plans under
this clause (iii) shall be limited to the amounts permitted by law or as
would otherwise not potentially adversely impact on the tax qualification
of any Plans; and provided, further, that if any such benefits may not be
continued under the Plans, the Company shall pay to the Executive an
amount equal to the amount that the Executive would have received had such
benefits been continued under the Plans; and
(iv) (1) all unvested options to acquire stock of the Company or of
the Internet Subsidiary held by the Executive shall vest on 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 vest on the Date of Termination and 50% of such vested profit shares
shall be delivered to the Executive promptly following the Date of
Termination and 50% of such vested profit shares shall be delivered to the
Executive on the first anniversary of the Date of Termination, (3) all
other unvested equity-based awards (including, without limitation,
restricted stock and stock units together with all property attributable
thereto) held by the Executive or for the benefit of the Executive by a
grantor trust established by the Company shall vest on the Date of
Termination and 50% of such vested awards shall be delivered to the
Executive promptly following the Date of Termination and 50% of such
vested awards shall be delivered to
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the Executive on the first anniversary of the Date of Termination, (4) all
options to acquire stock of the Company or of the Internet Subsidiary
(including, without limitation, options that vest pursuant to this clause
(iv)) held by the Executive shall remain exercisable in whole or in part
at all times, and from time to time, following the Date of Termination
through the expiration date of such options and (5) the Executive shall
not be entitled to any additional grants of any stock options, restricted
stock, or other equity-based or long-term awards following the Date of
Termination; and
(v) the Executive, his spouse and dependent children shall be
entitled to the benefits set forth under Section 3(b)(iii).
4. Obligations of the Company Relating to a Change of Control.
(a) Notwithstanding any provision of this Agreement or any Plan, in no
event shall the compensation or benefits, individually or in the aggregate, to
which the Executive shall be entitled for the three years following a Change of
Control be less favorable than that to which 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) If the Executive's employment shall have been terminated by the
Company (other than for Cause) or by the Executive for Good Reason during a
Change of Control Period:
(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 the amounts provided by Sections 3(d)(i) and (ii) except that all
references in Section 3(d)(ii) therein to "two times" shall be "three
times"; and
(ii) 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
cumulative amounts that would have been provided by Section 3(d)(iii) if
the Executive's employment continued for three years after the Date of
Termination, assuming for this purpose that the Executive's compensation
during such three-year period is the amount payable pursuant to clause (i)
above; and
(iii) (1) all unvested options to acquire stock of the Company or of
the Internet Subsidiary held by the Executive shall vest on the Date of
Termination, (2) all unvested profit shares held by the Executive or for
his benefit by a grantor trust established by the Company shall vest on
the Date of Termination and shall be delivered to Executive promptly, (3)
all other unvested equity awards (including, without limitation,
restricted stock and stock units together with all property attributable
thereto) held by the Executive or for his benefit by a grantor trust
established by the Company shall vest on the Date of Termination and be
promptly delivered to the Executive entirely in the form of Common Stock,
(4) all options to acquire stock of the Company or of the Internet
Subsidiary (including, without limitation, options that vest pursuant to
this Section 4(c)) held by the Executive may be exercised until the
expiration date of the options, and (5) the Executive
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shall not be entitled to any additional grants of any stock options,
restricted stock, and other equity-based or long term awards following the
Date of Termination; and
(iv) the Executive, his spouse and dependent children shall be
entitled to the benefits set forth in Section 3(b)(iii).
5. Release Agreement. The benefits pursuant to Section 3 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. 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.
8. 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. The following shall apply for any dispute
arising hereunder, under the Release Agreement or under either the Stock Unit
Agreement or the TRU Stock Option Agreements:
(i) Other than with respect 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 either of the Stock
Unit Agreement or the TRU Stock Option Agreements that were determined to
have been made or asserted by the Executive in bad faith or frivolously,
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 either the Stock Unit Agreement or the TRU Stock
Option Agreements (including as a result of any contest by the Executive
about the amount of any payment pursuant to this Agreement), plus in each
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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 Executive shall reimburse the Company for its reasonable
legal and professional fees and expenses, to the extent there is a final
determination that such fees or expenses 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 either
the Stock Unit Agreement or the TRU Stock Option Agreements that were
determined to have been made or asserted by the Executive in bad faith or
frivolously.
9. 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, either the Stock Unit Agreement or the TRU Stock Option
Agreements 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.
10. 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 options and 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 10. Specifically, the Executive
agrees to comply with the provisions of this Section 10 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
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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
three-year period following the Date of Termination, 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; provided, however,
that if the Executive terminates the Agreement for "Good Reason" or the Company
terminates the Executive's employment hereunder without Cause, the obligations
under this Section 10(c) shall survive for only a two-year period following the
Date of Termination.
(d) Non-Competition and Consulting. (i) During the Employment Period and
for a two-year period following the Date of Termination, 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
(z) interfere with, disrupt or attempt to disrupt the relationship,
contractual or otherwise, between the Company and any customer, supplier,
lessor, lessee, employee, consultant, research partner or investor of the
Company.
(e) Litigation Assistance. The Executive agrees to cooperate with the
Company and its counsel in regard to any litigation presently pending or
subsequently initiated involving matters of which the Executive has particular
knowledge as a result of your employment with the Company. Such cooperation
shall consist of the Executive making himself available at reasonable times for
consultation with officers of the Company and its counsel and for depositions or
other similar activity should the occasion arise. Reasonable travel costs and
out-of-pocket expenses in connection with such cooperation shall be reimbursed
by the Company. The Executive shall not receive any additional compensation for
providing assistance pursuant to this Section 10(e) following the Date of
Termination; provided that such assistance, together with any assistance
provided by the Executive pursuant to Section 12(e), does not
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require an aggregate of more than 10 days during the entire period following the
Date of Termination. If such assistance requires more than 10 days during the
entire period following the Date of Termination, the Company will pay Executive
an amount per day equal to the Executive's Annual Base Salary on the Date of
Termination divided by 250, for each day on which assistance is provided that
exceeds the foregoing limits. The obligations under this Section 10(e) shall
survive for a five-year period following the Date of Termination.
(f) Exceptions. Sections 10(c) and (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.
(g) Permitted Investments. Nothing contained in Section 10(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 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.
(h) Definitions. For purposes of this Section 10:
(i) "Restricted Business" means any retail store, mail order, electronic
commerce or Internet business or any business, in each case if it is involved in
the manufacture, sale or marketing of toys, juvenile or baby products (other
than children's clothing), juvenile furniture or any other business in which the
Company may be engaged on the Date of Termination, provided that such entity
derives at least 10% or more of its revenues in the aggregate from such products
and/or business in its most recent fiscal year. Notwithstanding the foregoing, a
Restricted Business shall not include non-discount department stores, such as
Federated Department Stores (whether or not such a non-discount department store
would otherwise meet the definition set forth in the preceding sentence), but
shall include discount stores, such as Wal-Mart, K-Mart and Target to the extent
such a discount department store meets the definition set forth in the preceding
sentence.
(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.
(i) Relief. The parties hereto hereby acknowledge that the
provisions of this Section 10 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
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the purposes of restraining the Executive from any actual or threatened
breach of such covenants.
11. 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.
12. 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.
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(e) Assistance to Company. At all times during and after the Employment
Period and at the Company's expense for 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. The Executive shall not receive any
additional compensation for providing assistance pursuant to this Section 12(e)
following the Date of Termination; provided that such assistance, together with
any assistance provided by the Executive pursuant to Section 10(e) does not
require an aggregate of more than 10 days during the entire period following the
Date of Termination. If such assistance requires more than 10 days during the
entire period following the Date of Termination, the Company will pay Executive
an amount per day equal to the Executive's Annual Base Salary on the Date of
Termination divided by 250, for each day on which assistance is provided that
exceeds the foregoing limits.
(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 10 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 10, 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
12
all of the parties thereto and their personal representatives, and judgment may
be entered thereon in any court having jurisdiction thereof.
13. Indemnification; Directors and Officers Liability Coverage.
(a) Indemnification. The Executive shall be indemnified and held harmless
by the Company to the greatest extent permitted under applicable Delaware law as
the same now exists or may hereafter be amended if Executive was, is or is
threatened to be made, a party to any pending, completed or threatened action,
suit, arbitration, alternate dispute resolution mechanism, investigation,
administrative hearing or any other proceeding whether civil, criminal,
administrative or investigative, and whether formal or informal, by reason of
the fact that Executive is or was, or had agreed to become, a director, officer,
employee, agent or fiduciary of the Company or any other entity which Executive
is or was serving at the request of the Company ("Proceeding"), against all
expenses (including, without limitation, all reasonable attorneys' fees,
retainers, court costs, transcripts, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other reasonable disbursements or
expenses customarily required in connection with asserting or defending claims)
("Expenses") and all claim, damages, liabilities and losses (including, without
limitation, judgments; fines; liabilities under the Code or the Employee
Retirement Income Security Act of 1974, as amended, for damages, excise taxes or
penalties; damages, fines or penalties arising out of violation of any law
related to the protection of the public health, welfare or the environment; and
amounts paid or to be paid in settlement) incurred or suffered by any person or
to which the Executive may become subject for any reason.
(b) Advancement of Expenses and Costs. All Expenses incurred by or on
behalf of the Executive in defending or otherwise being involved in a Proceeding
shall be paid by the Company in advance of the final disposition of a
Proceeding, including any appeal therefrom, within ten (10) days after the
receipt by the Company of a statement or statements from the Executive
requesting such advance or advances from time to time. Such statement or
statements shall reasonably evidence the Expenses incurred by the Executive in
connection therewith.
(c) Effect of Certain Proceedings. The termination of any Proceeding by
judgment, order, settlement or conviction, or upon a plea of nolo contendre or
its equivalent, except, in each case, to the extent that the terms thereof
expressly so provide, shall not, of itself (1) adversely affect the rights of
the Executive to indemnification, or (2) create a presumption that the Executive
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification or contribution is not
permitted by applicable law.
(d) Other Rights to Indemnification. The Executive's rights of
indemnification and advancement of Expenses provided by this Section shall not
be deemed exclusive of any other rights to which the Executive may now or in the
future be entitled under applicable law, the certificate of incorporation,
by-laws, agreement, vote of stockholders, or resolution of the Board of the
Company, or other provisions of this Agreement or any other agreement, or
otherwise.
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(e) Expenses Incurred By the Executive to Enforce This Agreement. Expenses
incurred by the Executive in connection with the Executive's request for, or
efforts to secure, preserve, establish entitlement to or obtain indemnification
or advances hereunder shall be reimbursed by the Company on a current basis in
accordance with the provisions of Section 13(b).
(f) Representations. The Company represents and warrants that this Section
does not conflict with or violate its certificate of incorporation or by-laws,
and agrees that it will not amend its certificate of incorporation or by-laws in
a manner that would limit the rights of the Executive hereunder. The Company
represents that the execution, delivery and performance of this Agreement by the
Company has been duly and validly authorized by its Board.
(g) Survival of Indemnity. This Section shall survive any termination of
the relationship of the Executive with the Company and shall be binding on, and
inure to the benefit of the successors and assigns of the Company and the
successors, assigns, heirs and personal representatives of the Executive.
(h) Directors and Officers Liability Coverage. The Company shall at all
time maintain directors and officers liability insurance coverage for the
benefit of Executive in a form that is no less broad than that which is
currently in effect, a copy of which is set forth as Exhibit D hereto.
14
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.
XXXX X. XXXXX, XX.
/s/ Xxxx X. Xxxxx, Xx.
-------------------------------
TOYS "R" US, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
---------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Chairman of the Board
Accepted and Agreed:
XXXXXXXX.XXX, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
-----------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Chairman of the Board
EXHIBIT A
SEPARATION AND RELEASE AGREEMENT
This Separation and Release Agreement ("Agreement") is entered into as of
this __ day of __________________, ____, among TOYS "R" US, INC., a Delaware
corporation, and any successor thereto ("TRU"), XXXXXXX.XXX, INC. and any
successor thereto (.COM and collectively with TRU, the "Company") and Xxxx X.
Xxxxx, Xx. (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 "Retention
Agreement"), the Company has agreed to pay the Executive certain payments and to
make certain benefits available after the Date of Termination as set forth in
Section 3 of the Retention Agreement. No payments shall be made under this
Agreement or the Retention Agreement until the seven (7) day revocation period
set forth in Section 12 hereof has expired.
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
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("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. Notwithstanding the foregoing provisions of this Section 3, the release
given by Executive hereunder shall not apply to, and the Executive shall retain
and shall be entitled to enforce by arbitration as provided in the Retention
Agreement, all rights arising under or with respect to (i) the obligations of
the Company to indemnify and hold harmless the Executive whether pursuant to the
provisions of Section 13 of the Retention Agreement, the certificate of
incorporation or by-laws of the Company, or otherwise; (ii) any and all
directors and officers liability insurance coverage applicable to the Executive,
and (iii) any and all benefits under the Plans to which the Executive shall be
entitled in the ordinary course.
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 Sections 8(b), 10 or 12(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. Executive is
required to request and receive approval of the Company of the content of any
voluntary statements, whether oral or written, to be made by Executive to any
media-third party regarding Executive's employment with the Company, termination
of employment with the Company, or the reputation, goodwill, business, business
relationships, prospects or operations of the Company, its past and present
divisions, affiliates, officers, directors, stockholders, employees or agents.
The Company is required to request and receive approval of the Executive of the
content of any voluntary statements, whether oral or written, to be made by the
Company or any representative thereof to any media-third party regarding
Executive's employment with the Company, termination of employment with the
Company, or the reputation, business or prospects of the Executive. Executive
and the Company each hereby covenants and agrees not to make any public
statements to any media-third party, including, without limitation, to any
representative of any news organization, which is inconsistent in any material
respect with the
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agreed upon statements to the public. "Media-Third Party" refers to the press,
news organizations, public relations firms and research analysts for securities
firms.
7. The Executive shall continue to be bound by Sections 8(b), 10 and 12(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 automobile at
the expiration of the restrictions under Section 10(d) of 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.
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.
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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.XXX, INC.
By:
-------------------------------
Name:
Title:
-----------------------------
XXXX X. XXXXX, XX.
A-4
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 $1,000,000 per annum or such greater amount as
may be determined from time to time in the discretion of either the Board, the
Committee or any appropriate committee of the Board. After any such increase,
Annual Base Salary shall not be reduced and the term "Annual Base Salary" shall
thereafter refer to the increased amount.
"Board" means the Board of Directors of the Company.
"Cause" means:
(a) (i) the conviction of, or pleading guilty or nolo contendere to, a
felony involving moral turpitude which conviction is non-appealable or for which
the period for filing an appeal has expired; (ii) the willful commission of any
fraud, misappropriation or misconduct which causes demonstrable injury to the
Company and its affiliates taken as a whole; (iii) a willful 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 and its
affiliates taken as a whole; (iv) any willful and material breach of the
Executive's fiduciary duties to the Company as an employee or director; (v) a
serious and willful violation of the Toys "R" Us Ethics Agreement or any other
serious and willful violation of a Company policy which causes demonstrable
injury to the Company and its affiliates taken as a whole; (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 willful failure by the
Executive to comply, in any material respect, with the provisions of Section 10
of the Agreement; or (viii) the willful failure by the Executive to comply with
any other undertaking set forth in the Agreement which causes demonstrable
injury to the Company and its affiliates taken as a whole. 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 or not opposed to the 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 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.
(b) Notwithstanding the foregoing, Cause shall not include any or more of
the following: (i) an error in judgment or negligence; (ii) any act or omission
believed by the Executive in good faith to have been in or not opposed to the
interests of the Company; (iii) any act or omission with respect to which a
determination could properly have been made by the Board that the Executive met
the applicable standard of conduct for indemnification or reimbursement under
the Company's by-laws, any applicable indemnification agreement, or
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applicable law, in each case in effect at the time of such act or omission or
(iv) any act or omission with respect to which notice of termination of
employment of the Executive is given more than six months after the earliest
date on which any member of the Board, not a party to the act or omission, knew
or should have known of such act or omission.
(c) The Company may not terminate the Executive's employment for Cause
unless: (i) no fewer than 60 days prior to the Date of Termination, the Company
provides Executive with written notice (the "Notice of Consideration") of its
intent to consider termination of Executive's employment for Cause, including a
detailed description of the specific reasons which form the basis for such
consideration; (ii) Executive shall have the opportunity to appear before the
Board, with or without legal representation, at Executive's election, to present
arguments and evidence on his own behalf; and (iii) following the presentation
to the Board provided in (ii) above or following Executive's failure to appear
before the Board at a date and time specified in the Notice of Consideration
(which date shall not be less than 30 days after the date the Notice of
Consideration is provided), Executive may be terminated for Cause only if (x)
the Board, by the affirmative vote of not less than a majority of all of its
members (excluding Executive and any other member of the Board reasonably
believed by the Board to be involved in the events leading the Board to
terminate Executive for Cause), determines that the actions or inactions of the
Executive specified in the Notice of Consideration occurred, that such actions
or inactions constitute Cause, and that Executive's employment should
accordingly be terminated for Cause; and (y) the Board provides Executive with a
Notice of Termination together with a written determination (a "Determination of
Cause") setting forth in specific detail the basis of such termination of
employment for Cause, which Determination of Cause shall be consistent with the
reasons set forth in the Notice of Consideration.
Unless the Company establishes by clear and convincing evidence, both (x)
its full compliance with the substantive and procedural requirements of clauses
(a), (b) and (c) of this provision prior to giving Notice of Termination, and
(y) that Executive's action or inaction specified in the Determination of Cause
did occur and constitutes Cause, any Notice of Termination and any termination
of employment thereby resulting shall, for all purposes of this Agreement, be
deemed to be other than for Cause, and the obligations of the Company to the
Executive shall be governed by Section 3(d) of the Retention Agreement.
"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
B-2
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, any 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
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(d) Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
"Change of Control Period" means the period commencing 120 days prior to a
Change of Control and expiring on the third anniversary date of a Change of
Control.
"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, (iv) if the Executive's Employment
is terminated by the Executive without Good Reason, the Date of Termination
shall be the last day on which the Executive is employed by the Company as a
regular employee, or (v) 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 six months after
Executive first has knowledge of such occurrence:
(i) the assignment of the Executive to a position other than
President and Chief Executive Officer; or
(ii) any failure by the Company to comply in any material respect
with any of the provisions of the Retention 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
11(c) of the Retention Agreement; or
(iv) notice by the Company that it is not extending the termination
date of the Employment Period; or
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(v) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including offices, titles,
reporting requirements or responsibilities), authority or duties as
contemplated by Section 2(a) of the Retention Agreement, or any other
action by the Company, which results in a diminution or other adverse
changes in such position, authority or duties or in the status,
responsibilities or perquisites of the Executive; or
(vi) failure of the Executive to be elected or reelected to
membership on the Board; or
(vii) from and after June 30, 2001, failure of the Executive to be
elected or reelected Chairman of the Board; or
(viii) the Company's requiring the Executive to be based at any
office or location that is more than 35 miles distance from Paramus, New
Jersey; or
(ix) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by the Retention
Agreement; or
(x) the delivery to Executive of a Notice of Consideration pursuant
to clause (c) of the definition of Cause if, within a period of 90 days
thereafter, the Board fails for any reason to terminate the Executive for
Cause in compliance with all of the substantive and procedural
requirements set forth in clauses (a), (b) and (c) of the definition of
Cause.
Any termination of employment by the Executive for Good Reason shall be
communicated to the Company by Notice of Termination.
"Incentive Bonus" means the sum of (i) an incentive payment, calculated
annually, targeted at 100% of the Executive's Annual Base Salary and based on
financial measurements approved by the Committee following consideration of the
Executive's recommendations with regard thereto, and (ii) (A) for the fiscal
year ending February 4, 2001 only, a strategic incentive payment, targeted at
50% of the Executive Annual Base Salary and (B) for the fiscal years ending
after February 4, 2001, an incentive payment that is of equivalent value to the
strategic incentive payment for the fiscal year ending February 4, 2001, in each
case based on qualitative criteria approved by the Committee following
consideration of the Executive's recommendations with regard thereto. The
Incentive Bonus may be modified from time to time in the discretion of the
Board, the Committee, or any appropriate Committee of the Board following
consideration of the Executive's recommendations with regard thereto, provided
the Incentive Bonus for the other senior executives of the Company is similarly
modified and any such modification does not reduce Executive's then current
total annual compensation.
"Internet Subsidiary" means Xxxxxxx.xxx, Inc., a Delaware corporation.
"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
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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.
"Partnership Plan" means the Partnership Group Deferred Compensation Plan
of the Company.
"Plans" means all employee compensation, benefit and welfare plans,
policies and programs of the Company, including, without limitation, incentive,
savings, retirement, stock option, restricted stock, supplemental executive
retirement, the Partnership Plan, medical, prescription, dental, disability,
salary continuance, 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 or, if such meaning is
inapplicable, the term shall mean a termination of employment with the Company
or a subsidiary on a voluntary basis after attaining the age of sixty (60). The
term "Retirement" shall also include "early" retirement prior to the age of
sixty (60) provided that the Committee, in its sole discretion, consents in
writing to accept such early retirement.
X-0
XXXXXXX X
XXX XXXXX-XX
(a) If required by Section 9 of the Agreement, in addition to the payments
described in Section 4 of the Agreement, the grants described in the Stock Unit
Agreement, and all other obligations of the Company to the Executive whether
under the Retention Agreement or otherwise, the Company shall pay to the
Executive an amount (the "Gross-up") equal to the product of (i) the amount of
Excise Taxes multiplied by (ii) the Gross-up Multiple (as hereinafter defined).
The Gross-up is intended to compensate the Executive for the Excise Taxes and
any Federal, state, local or other income or excise taxes or other taxes payable
by the Executive with respect to the Gross-up. The "Gross-up Multiple" shall
equal a fraction, the numerator of which is one (1.0) and the denominator of
which is one (1.0) minus the sum, expressed as a decimal fraction, of the rates
of all Federal, state, local and other taxes and any Excise Taxes applicable to
the Gross-up after taking into account the deductibility of state, local and
other taxes. If different rates of tax are applicable to various portions of the
Gross-up, the weighted average of such rates shall be used. For purposes of
determining the amount of any Gross-up, it shall be assumed that (i) 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 (and any limitations on the use thereof) available in
respect of any such tax and (ii) the deduction available for state and local
income taxes in computing Federal income taxes is subject to the maximum
adjusted gross income limitations.
(b) Subject to the provisions of paragraph (c) of this Exhibit C, the
determination of whether a Gross-up is required and the amount of such Gross-up
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 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
C-1
(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 assumptions that (i) the Executive is subject to
the highest marginal statutory rates of Federal, state and local income tax for
the relevant periods after taking into account any deductions (and limitations
on the use thereof) available in respect to any such tax and (ii) any deduction
available for state and local taxes or other Form 1040 Schedule A amounts is
subject to the maximum adjusted gross income limitations).
C-2
ANNEX A
STOCK UNIT AGREEMENT
STOCK UNIT AGREEMENT, dated as of January 17, 2000 (the "Unit Agreement"),
between TOYS "R" US, INC., a Delaware corporation (the "Company"), and XXXX X.
XXXXX, XX. (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive and the Company have entered into a Retention
Agreement, dated as of January 6, 2000 (the "Retention Agreement");
WHEREAS, as further inducement for the Executive to execute the Retention
Agreement and continue in the employ of the Company and subject to the terms of
the Company's 1994 Stock Option and Performance Incentive Plan (the "Plan"), the
Management Compensation and Stock Option Committee (the "Committee") has
determined to grant the Executive Performance Shares (as defined in the Plan and
referred to herein as "Stock Units") as described in this Stock Unit Agreement
based on performance criteria that may be utilized by the Committee, 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.
WHEREAS, shares of the Company's common stock to be issued hereunder to
Executive will be issued pursuant to a registration statement on Form S-8 filed
with and declared effective by the Securities and Exchange Commission.
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 and in the Retention Agreement.
2. Stock Unit Grant. Subject to the terms and conditions set forth in this
Unit Agreement and in Section 10 of the Plan, the Executive is hereby granted
200,000 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 200,000 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 vesting
and payment provisions of Sections 3 and 4
Annex A-1
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 vesting
and payment provisions of Sections 3 and 4 below.
3. Vesting.
(a) Subject to earlier vesting, as provided in the Retention Agreement and
subject to Section 4(b), the Stock Units shall vest at the rate of thirty-three
and one-third percent (33 1/3 %) per annum on February 1 of each year, beginning
on February 1, 2002, throughout the Employment Period; provided that, the
Committee has determined that the Performance Objective set forth in Exhibit A
has been achieved.
(b) The Committee shall determine whether the Performance Objective set
forth on Exhibit A has been achieved as soon as practicable, but no later than
the earlier of (x) February 1, 2004 or (y) the Date of Termination.
4. Payment of Stock Units. (a) Subject to Executive's election to defer
receipt thereby, the Shares, together with any property attributable thereto
(including, without limitation, dividends and distributions thereon), shall be
delivered to the Executive immediately upon vesting as provided in Section 3 or
upon such earlier vesting as provided in the Retention Agreement.
(b) The provisions of Sections 8(b) and 9 of the Retention Agreement shall
apply to the Stock Units and related Shares, whether or not the Retention
Agreement is then in effect.
5. Registration Representation. The Company represents that the Shares
acquired by the Executive under this Unit Agreement are registered under the
Securities Act of 1933, as amended (the "Act").
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
Annex A-2
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 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
shall be made by the Committee.
13. Successors. This Unit Agreement shall be binding upon the Company and
its successors and assigns.
Annex A-3
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.
---------------------------------
Name:
Title:
I hereby acknowledge receipt of the Stock Units and agree to the
provisions set forth in this Agreement.
---------------------------------
Xxxx X. Xxxxx, Xx.
Annex A-4
EXHIBIT A
Performance Objective
Under Section 3(ii) of the Stock Unit Agreement
For any fiscal quarter in the Company's 2000, 2001, 2002 or 2003 fiscal year,
the consolidated net earnings of the Company is at least equal to the amount of
any corresponding quarter in the Company's fiscal year ending January 29, 2000.
For these purposes, "consolidated net earnings" shall exclude extraordinary or
unusual items reported by the Company as such.
Annex A-5
