THE BOMBAY COMPANY, INC. CHANGE OF CONTROL SEVERANCE AGREEMENT
EXHIBIT
99.2
THE
BOMBAY COMPANY, INC.
This
Change of Control Severance Agreement (the “Agreement”)
is
made and entered into effective as of February 28, 2006 (the “Effective
Date”),
by
and between _____________ (the “Employee”)
and
The Bombay Company, Inc., a Delaware corporation (the “Company”).
Certain capitalized terms used in this Agreement are defined in Section 1
below.
RECITALS
A. It
is
expected that the Company from time to time will consider the
possibility
of a
Change of Control. The Board of Directors of the Company (the “Board”)
recognizes that such consideration can be a distraction to the Employee and
can
cause the Employee to consider alternative employment
opportunities.
B. The
Board
believes that it is in the best interests of the Company and its shareholders
to
provide the Employee with an incentive to continue his employment and to
maximize the value of the Company upon a Change of Control for the benefit
of
its shareholders.
C. In
order
to provide the Employee with enhanced financial security and sufficient
encouragement to remain with the Company notwithstanding the possibility of
a
Change of Control, the Board believes that it is imperative to provide the
Employee with certain severance benefits
upon
the Employee’s termination of employment following a Change of
Control.
AGREEMENT
In
consideration of the mutual covenants herein contained and the continued
employment of Employee by the Company, the parties agree as
follows:
1. Definition
of Terms. The following terms referred to in this Agreement shall have the
following meanings:
(a) Annual
Bonus. “Annual
Bonus”
shall
mean the greater of the amount equal to the average of the three (3) most recent
annual bonuses awarded to the Employee by the
Company or the current targeted annual bonus for the fiscal year in which the
Change of Control occurs.
(b) Cause.
“Cause”
shall
mean (i) any act of personal dishonesty taken by the Employee in connection
with
his responsibilities as an employee which is intended to result in substantial
personal enrichment of the Employee, (ii) the Employee’s conviction of a felony
which the Board reasonably believes has had or will have a material detrimental
effect on the Company’s reputation or business, (iii) a willful act by the
Employee which constitutes misconduct and is injurious to the Company, and
(iv)
continued willful violations by the Employee of the Employee’s obligations to
the Company after there has been delivered to the Employee a written demand
for
performance from the Company which describes the basis for the Company’s belief
that the Employee has not substantially performed his duties.
(c) Change
of
Control. “Change
of Control”
of
the
Company, unless otherwise determined by the Board, shall mean the
happening of any of the following events:
(i) the
acquisition, other than from the Company, by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of
beneficial ownership of 20% or more of either the then outstanding shares of
common stock of the Company or the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election
of
directors; provided,
however,
that
any acquisition by (i) the Company or any of its subsidiaries, (ii) any employee
benefit plan (or related trust) of the Company or its subsidiaries, or (iii)
any
corporation with respect to which following such acquisition, more than 50%
of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of
such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of
the
individuals and entities who were the beneficial owners, respectively, of the
common stock and voting securities of the Company immediately prior to such
acquisition in substantially the same proportion as their ownership, immediately
prior to such acquisition, of the then outstanding shares of common stock of
the
Company or the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of directors, as
the
case may be, shall not constitute a Change of Control;
(ii) individuals
who, as of the Effective Date, constituted the Board (the “Incumbent
Board”)
cease
for any reason to constitute at least a majority of the Board; provided,
however
that any
individual becoming a director subsequent
to
such date whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the
Incumbent Board. Notwithstanding the foregoing, any such individual whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of the directors of the Company shall
not be considered as though such individual were a member of the Incumbent
Board; or
(iii) approval
by the shareholders of the Company of (i) a reorganization, merger or
consolidation of the Company, in each case, with respect to which the
individuals and entities who were the respective beneficial owners of the common
stock and voting securities of the Company immediately prior to such
reorganization, merger or consolidation do not, following such reorganization,
merger or consolidation, beneficially own, directly or indirectly, more than
50%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such reorganization, merger or consolidation or (ii) a complete
liquidation or dissolution of the Company or of the sale or other disposition
of
all or substantially all of the assets of the Company.
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(d) Code.
“Code”
shall
mean the Internal Revenue Code
of
1986, as amended.
(e) Exchange
Act. “Exchange
Act”
shall
mean the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
(f) Protection
Period. “Protection
Period”
shall
mean the time beginning six (6) months
prior to a Change of Control and continuing for twenty-four (24) months after
the Change of Control.
(g) Termination
Date. “Termination
Date”
shall
mean the effective date of any notice of termination or resignation delivered
by
one party to the other
hereunder.
2. Term
of
Agreement; Termination. This Agreement shall be effective as of the Effective
Date, however, anything in this Agreement to the contrary notwithstanding,
neither this Agreement nor any of its provisions shall be operative unless
and
until
there has been a Change of Control. The term of this Agreement shall be for
a
period of three (3) years beginning on the Effective Date (“Initial
Term”)
and
shall automatically renew thereafter for successive one (1) year periods
(“Renewal
Term”)
unless
or until:
(a) terminated
by the Company with no less than six months advance written notice to the
Employee prior to the end of the then current Initial or Renewal Term;
(b) the
date
that all obligations of the parties hereto under this Agreement have been
satisfied; or
(c) if
earlier, on the date, prior the Protection Period, the Employee is no longer
employed by the Company.
3. At-Will
Employment. The Company and the Employee acknowledge that the Employee’s
employment is and shall continue to be at-will, as defined under applicable
law.
If the Employee’s employment terminates for any reason, the Employee shall not
be entitled to any payments, benefits, damages, awards or compensation other
than as provided by this Agreement, or as may otherwise be established under
the
Company’s then existing employee benefit plans or policies at the time of
termination.
4. Severance
Benefits.
(a) Termination
Following A Change of Control. If the Employee’s employment with the Company is
terminated by the
Company
without Cause at any time within the Protection Period, the Employee shall
be
entitled to the following severance benefits:
(i) [ENTER
NUMBER]
(__)
months of the Employee’s base salary as in effect as of the date of such
termination, less applicable
withholding, payable in a lump sum within thirty (30) days of the Termination
Date;
(ii) [ENTER
PERCENTAGE]
(___%)
of the Employee’s Annual Bonus plus a prorated amount of the Employee’s current
targeted annual bonus for the fiscal year in which the
Change
of Control occurs, less applicable withholding, payable in a lump sum within
thirty (30) days of the Termination Date;
(iii) all
stock
options granted by the Company to the Employee prior to the Change of Control
shall become fully vested and exercisable as of the Termination Date to the
extent such stock options are outstanding and unvested as of the Termination
Date, and all restricted stock granted by the Company to the Employee prior
to
the Termination Date shall become fully vested as of the Termination Date to
the
extent such restricted stock is outstanding and unvested as of the Termination
Date;
(iv) in
the
event the Employee elects continuation of health (i.e., medical, vision and
dental) coverage in accordance with the terms of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company
shall pay the same portion of the premiums for such coverage as it pays for
similarly situated active employees of the Company until the earlier of the
date
(i) [ENTER
NUMBER]
(__)
months from the Termination Date or (ii) the date the Employee’s COBRA
continuation coverage under the Company’s benefit plans terminates for any
reason;
(v) to
the
extent permitted by the terms of the applicable plans, the same level of welfare
benefits other than health coverage (i.e. life insurance, long-term disability
insurance) as in effect for the Employee on the day immediately preceding the
Termination Date shall continue until the earlier of the date that the Employee
obtains similar benefits from a subsequent employer or the date [ENTER
NUMBER]
(__)
months from the Termination Date; and
(b) Other
Termination. If the Employee’s employment with the Company is terminated other
than by the Company without Cause, in each case within the Protection Period,
then the Employee shall not be entitled to receive severance or other benefits
hereunder, but may be eligible for those benefits (if any) as may then be
established under the Company’s then existing severance and benefits plans and
policies
at
the time of termination.
(c) Termination
Apart from a Change of Control. If the Employee’s employment with Company
terminates for any reason or for no reason other than during the Protection
Period, then the Employee shall not be entitled to receive severance or other
benefits pursuant to this Agreement, but may be eligible for those benefits
(if
any) as may then be established under the Company’s then existing severance and
benefits plans and policies at the time of termination.
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5. Taxes.
(a) The
Employee shall be responsible for payment of all federal, state, and local
income and employment taxes, any applicable excise taxes, and any other
government assessments owing by the Employee for all benefits received pursuant
to this Agreement. All payments required to be made by the Company hereunder
and
all other benefits provide to the Employee hereunder shall be subject to the
withholding of such amounts relating to taxes and other government assessments
as the Company may
reasonably determine it should withhold pursuant to any applicable law, rule,
or
regulation.
(b) Notwithstanding
anything in this Agreement to the contrary, in the event it shall be determined
that any payment or distribution made, or benefit provided, by the Company
to or
for
the
benefit of the Employee (whether paid or payable or distributed or distributable
or provided pursuant to the terms hereof or otherwise) would not exceed the
amount that would constitute a “parachute payment” as defined in Code Section
280G by more than
ten
percent (10%), then the severance payment payable pursuant to this Agreement
shall be reduced so that the aggregate present value of all payments in the
nature of compensation to (or for the benefit of) the Employee which are
contingent on a change of control (as defined in Code Section 280G(b)(2)(A))
is
One Dollar ($1.00) less than the amount which the Employee could receive without
being considered to have received any parachute payment (the amount of this
reduction in the severance payment is referred
to
herein as the “Excess
Amount”).
The
determination of the amount of any reduction required by this Section 5(b)
shall
be made by an independent accounting firm (other than the Company’s independent
accounting firm) selected by the Company and acceptable
to
the Employee, and such determination shall be conclusive and binding on the
parties hereto.
6. Successors.
(a) Company’s
Successors. Any successor to the Company (whether direct or indirect and whether
by purchase, merger, consolidation, liquidation or otherwise) to all or
substantially all of the Company’s business and/or assets shall, in a written
agreement, assume the Company’s obligations under this Agreement and agree
expressly to perform the Company’s obligations under this Agreement in the same
manner and to the same extent as the Company would be required to perform such
obligations in the absence of a succession. For all purposes under this
Agreement, the term “Company” shall include any successor to the Company’s
business and/or assets which
executes and delivers the assumption agreement described in this subsection
(a)
or which becomes bound by the terms of this Agreement by operation of
law.
(b) Employee’s
Successors. Without the written consent of the Company, Employee shall not
assign
or
transfer this Agreement or any right or obligation under this Agreement to
any
other person or entity. Notwithstanding the foregoing, the terms of this
Agreement and all rights of Employee hereunder shall inure to the benefit of,
and be enforceable by,
Employee’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
7. Notices.
(a) General.
Notices and all other communications contemplated by this Agreement shall be
in
writing and shall
be
deemed to have been duly given when personally delivered or when mailed by
U.S.
registered or certified mail, return receipt requested and postage prepaid.
In
the case of the Employee, mailed notices shall be addressed to the Employee’s
home address as reflected in the Company’s records or as most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to 000 Xxxxxx Xxxxxx, Xxxx Xxxxx, Xxxxx 00000, and
all notices shall be directed to the attention
of
its General Counsel.
(b) Notice
of
Termination. Any termination by the Company for Cause shall be communicated
by a
notice of termination to the other party hereto given in accordance with this
Section. Such notice shall indicate the specific termination provision in this
Agreement relied upon, shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination under the provision
so
indicated, and shall specify the Termination Date (which shall be not more
than
30 days after the giving of such notice).
8. Arbitration.
(a) Any
dispute or controversy arising out of, relating to, or in connection with this
Agreement, or the interpretation, validity, construction, performance, breach,
or termination thereof,
shall be
settled by binding arbitration to be held in Tarrant County, Texas, in
accordance with the National Rules for the Resolution of Employment Disputes
then in effect of the American Arbitration Association (the “Rules”).
The
arbitrator may grant injunctions or other relief in such dispute or controversy.
The decision of the arbitrator shall be final, conclusive and binding on the
parties to the arbitration. Judgment may be entered on the arbitrator’s decision
in any court having jurisdiction.
(b) The
arbitrator(s) shall apply Texas law to the merits of any dispute or claim,
without reference to conflicts of law rules. The arbitration proceedings shall
be governed by federal arbitration law and by the Rules, without reference
to
state arbitration law. The Employee hereby consents to the personal jurisdiction
of the state and federal courts located in Texas for any action or proceeding
arising from or relating to this Agreement or relating to any arbitration in
which the parties are participants.
(c)
The
Employee understands that nothing in this Section modifies the Employee’s
at-will employment status. Either the Employee or the Company can terminate
the
employment relationship at any time, with or without Cause.
(d) THE
EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION.
THE
EMPLOYEE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF, RELATING TO,
OR
IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION
THEREOF TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF EMPLOYEE’S RIGHT TO A
JURY TRIAL.
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9. Miscellaneous
Provisions.
(a) No
Duty
to Mitigate. The Employee shall not be required to mitigate the amount of any
payment contemplated by this Agreement, nor shall any earnings that the Employee
may receive from any other source reduce any such payment.
(b) Waiver.
No provision of this Agreement may be modified, waived or discharged unless
the
modification, waiver or discharge is agreed to in writing and signed by the
Employee and by an authorized officer of the Company (other than the Employee);
provided,
however,
that
the Company may change or modify this Agreement without the Employee’s consent
or signature if the Company determines, in its sole discretion,
that such change or modification is necessary for purposes of compliance with
or
exemption from the requirements of Code Section 409A or any regulations or
other
guidance issued thereunder. No waiver by either party of any breach of, or
of
compliance with, any condition or provision of this Agreement by the other
party
shall be considered a waiver of any other condition or provision or of the
same
condition or provision at another time.
(c) Integration.
This Agreement represents the entire agreement and understanding between the
parties as to the subject matter herein and supersedes all prior or
contemporaneous agreements, whether written or oral, with respect to this
Agreement.
(d) Choice
of
Law. The internal substantive laws, but not the conflict of laws rules, of
the
State of Texas, shall govern the validity, interpretation, construction and
performance of this Agreement.
(e) Severability.
The invalidity or unenforceability of any provision or provisions of this
Agreement shall not affect the validity or enforceability of any other provision
hereof, which shall remain in full force and effect.
(f) Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed
an
original, but all of which together will constitute one and the same
instrument.
*
* * *
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IN
WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of
the Company by its duly authorized officer, as of the Effective Date first
above
written.
COMPANY: THE
BOMBAY COMPANY, INC.
BY:
__________________________
TITLE:
_______________________
EMPLOYEE: ______________________________
BY:
__________________________
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