Employment Agreement - Toys R Us Inc.
EMPLOYMENT AGREEMENT
BETWEEN
TOYS "R" US, INC.
AND
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DATED AS OF
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TABLE OF CONTENTS
1. Employment Period.......................................................... 1
2. Terms of Employment........................................................ 1
(a) Position ......................................................... 1
(b) Compensation ..................................................... 1
(i) Base Salary.............................................. 1
(ii) Incentive Bonus.......................................... 1
(iii) Housing Allowance........................................ 2
(iv) Supplemental Executive Retirement Plan................... 2
(v) Stock Units.............................................. 2
(vi) Stock Options............................................ 2
(vii) Deferred Compensation Plan............................... 2
(viii) Participation in Other Plans............................. 2
(ix) Toys "R" Us Health Plan.................................. 2
(x) Life Insurance Plan...................................... 3
(xi) Long Term Disability Plan................................ 3
(xii) Savings and Profit Sharing Plan.......................... 3
(xiii) Stock Purchase Plan...................................... 3
(xiv) Vacation................................................. 3
(xv) Relocation............................................... 3
(xvi) Miscellaneous............................................ 3
3. Termination of Employment Upon Death, Disability or Retirement............. 4
4. Other Termination of Employment............................................ 4
(a) Company Termination............................................... 4
(b) Executive's Termination........................................... 4
(c) Notice of Termination............................................. 4
(d) Obligations of the Company Upon Termination Under Section 4....... 4
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(e) Contract Non-Renewal............................................. 6
(f) Cause............................................................ 7
5. Release Agreement......................................................... 7
6. Offset.................................................................... 7
7. Compensation and Benefits Following Change of Control..................... 7
8. Nonexclusivity of Rights.................................................. 8
9. Full Settlement; Legal Fees............................................... 8
(a) No Obligation to Mitigate........................................ 8
(b) Expenses of Contests............................................. 8
10. Certain Additional Payments by the Company.............................. 9
11. Restrictions and Obligations of the Executive........................... 9
(a) Consideration for Restrictions and Covenants..................... 9
(b) Confidentiality.................................................. 9
(c) Non-Solicitation or Hire......................................... 10
(d) Non-Competition and Consulting................................... 10
(e) Definitions For purposes of this Section 11...................... 11
(f) Relief........................................................... 11
12. Successors............................................................... 12
13. Miscellaneous............................................................ 12
(a) Governing Law.................................................... 12
(b) Captions......................................................... 12
(c) Amendment........................................................ 12
(d) Notices.......................................................... 12
(e) Assistance to Company............................................ 13
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(f) Severability of Provisions....................................... 13
(g) Withholding...................................................... 13
(h) Waiver........................................................... 13
(i) Arbitration...................................................... 13
EXHIBIT A Separation and Release Agreement
EXHIBIT B Definitions
EXHIBIT C Change of Control
EXHIBIT D Stock Unit Agreement
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TOYS "R" US, INC. EMPLOYMENT AGREEMENT
AGREEMENT (this "Agreement"), by and between Toys "R" Us, Inc., a Delaware
corporation (the "Company"), and ____________________ (the "Executive"), dated
as of __________________. 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 be employed by the Company subject to the terms
and conditions of this Agreement, for the Employment Period. The term
"Employment Period" means the period commencing on the date hereof and ending on
the second anniversary of such date as automatically extended for successive
additional one-year periods unless, at least six months prior to the scheduled
expiration of the Employment Period, the Company shall give notice to the
Executive that the Employment Period shall not be so extended.
2. Terms of Employment
(a) Position
(i) Commencing on the date hereof and for the remainder of the
Employment Period, the Executive shall serve as
__________________________ ("current position"), or such other
Executive position to which the Executive may be appointed by the
Company. The Executive shall be based in ------------------.
(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote full time during normal business hours to
the business and affairs of the Company and to use the Executive's
best efforts to perform faithfully and efficiently such
responsibilities.
(b) Compensation
(i) Base Salary The Executive will be paid an annual base
salary of $_______________ per annum, which will be paid in
accordance with the Company's regular payroll policies. The
Executive will receive a performance and compensation evaluation
annually, effective on or about April 1st of each year, the first of
which will occur on or about ____________________.
(ii) Incentive Bonus The Executive shall also be eligible, for
each fiscal year ending during the Employment Period, to receive an
annual incentive bonus and incentive awards pursuant to the
Company's Incentive Plans and subject to the terms thereof at a
level commensurate with the Executive's current grants and the
Executive's current position or any more senior position(s) to which
the Executive may be appointed. Each such incentive bonus shall be
paid in accordance with the Company's incentive
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Plans, prorated for the number of months the Executive is employed
during each such fiscal year. For the period ending January 31,
2002, the Executive will be eligible for an annual incentive
guaranteed to be no less than _____% of base salary regardless of
performance with a target of ______% of base salary. Thereafter,
there will be no guarantee. Instead, the Executive will be eligible
for the incentive, as are other Company executives, based upon the
following formula: two-thirds (2/3) of the annual incentive will be
based on improvement on Economic Value Added (EVA) or such other
financial measurement as determined by the Company, and one-third
(1/3) will be based on individual strategic, non-financial goals.
The Executive shall receive the first award under this plan on or
about ___________________.
[(iii) Housing Allowance The Executive shall receive, in lieu
of a $___________ sign on bonus, a temporary monthly housing
allowance for mutually acceptable accommodations in the
___________________ area for a period not exceeding ___________
months.]
(iv) Supplemental Executive Retirement Plan Each year as of
January 31st, a contribution will be made on the Executive's behalf
equal to 11% of that portion of the Executive's actual cash
compensation in the prior calendar year that exceeds the IRS limit
(currently $170,000). The first contribution on the Executive's
behalf will be made as of ___________________, based on _______
income. This is a non-qualified plan, which has been secured to the
extent allowed by law through the use of a rabbi trust. In addition,
this Plan includes a pre-retirement death benefit equal to five (5)
times Executive's annual target cash compensation. The Executive
insurance coverage will become effective as soon as the required
underwriting can be completed.
(v) Stock Units As further inducement for the Executive to
enter into this Agreement and to continue in the employ of the
Company, the Company has granted to the Executive ______________
shares of Restricted Stock, pursuant to the Stock Unit Agreement
executed and delivered by the Company on the date hereof in the form
attached as Exhibit D hereto. The Restricted Stock will become
vested at the rate of fifty (50) percent after (2) years following
the award date and one hundred (100) percent after (3) three years
following the award date.
(vi) Stock Options The Executive will receive a sign-on grant
of ______________ stock options, which pending Board of Directors
approval, will be effective as of the date of this agreement. The
option price will be the average of the high and low trading prices
on the date of the grant. Executive options are exercisable
beginning 6 months following the grant date. These options will
become vested at the rate of fifty (50) percent after two (2) years
following the grant date, and one hundred (100) percent after three
(3) years following the grant date. The Executive will also be
eligible for an annual stock option grant of ____________ shares in
_______________.
(vii) Deferred Compensation Plan A variety of investment funds
are available for deferral.
(viii) Participation in Other Plans During the Employment
Period, the
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Executive shall be eligible to participate in all other Plans at a
level commensurate with the Executive's position.
(ix) Toys "R" Us Health Plan The Executive will be eligible to
enroll in the Toys "R" Us Health Plan as of the Executive's
employment date. In addition, the Executive will participate in the
Company's Executive Medical Plan, which will reimburse the Executive
for deductibles and co-payments required under the basic health
plan. The Company's health plans include a pre-existing conditions
limitation. Any health condition for which the Executive or a
dependent has been diagnosed, received treatment or incurred
expenses during the 90 days prior to the Executive's employment date
may be excluded for a one-year period.
(x) Life Insurance Plan The Company will provide life
insurance and accidental death and dismemberment insurance equal to
two times the Executive's total annual target cash compensation. The
Executive will be covered from the Executive's employment date. The
Company pays the full cost of this plan. Please note that this
insurance is in addition to the 5x total cash benefit under the
SERP.
(xi) Long Term Disability Plan The Company will pay 60% of the
Executive's base salary if the Executive becomes totally disabled
for more than 90 days. The long term disability coverage will begin
90 days following the Executive's employment date. The Company pays
the full cost of this plan. The Executive will also be able to
purchase supplemental long term disability insurance to protect the
Executive's bonus income.
(xii) Savings and Profit Sharing Plan This Plan, which
includes both a Company funded profit sharing contribution and
voluntary 401(k) savings vehicle with Company matching
contributions, is available one year following the Executive's
employment date.
(xiii) Stock Purchase Plan This Plan enables the Executive to
purchase Toys "R" Us stock deductions through payroll. The Company
will match 10% of your contributions and pay all commissions and
fees on the purchase of Company stock. This Plan is available 90
days following your employment date.
(xiv) Vacation The Executive will be eligible for four (4)
weeks vacation beginning with the Executive's first year of
employment.
(xv) Relocation The Executive will be provided with a
relocation package upon request from the date of this agreement
until ________________ consisting of direct expenses for movement of
Executive's household goods from ____________ to the
______________________ area, closing costs on the purchase of a new
home and third party home purchase of Executive's existing home.
(xvi) Miscellaneous The Executive will be provided with a
leased automobile equal in value to a _____________. In addition,
all insurance, gas, repairs, parking and
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tolls are paid by the Company. The Executive will be responsible for
all other costs associated with the use of the Company car. The
Company will be responsible for _____________monthly parking garage
fees incurred by the Executive for the duration of Executive's
current position.
3. Termination of Employment Upon Death, Disability or Retirement The
Executive's employment shall terminate upon the Executive's death, Disability or
Retirement during the Employment Period and the obligations of the Company upon
such termination shall be limited to those benefits provided by the Company's
Plans on the Date of Termination, except as specifically set forth herein or in
the Stock Unit Agreement.
4. Other Termination of Employment
(a) Company's Termination The Company may terminate the Executive's
employment during the Employment Period with or without Cause.
(b) Executive's Termination The Executive's employment may be
terminated during the Employment Period by the Executive for Good Reason.
(c) Notice of Termination
(i) Any termination by the Company for Cause, or by the
Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with this
Agreement. The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that
contributes to a showing of Good Reason or Cause shall not waive any
right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting
such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
(ii) Resignation Without limiting the obligations of the
Executive, or the rights of the Company, in connection with, or
relating to, this Agreement, the Executive agrees that in order for
the Executive to resign his employment without Good Reason with the
Company or any of its Subsidiaries, the Executive shall provide the
Company with six (6) months notice of resignation (the "Mandatory
Notice Period") prior to the effective date of such resignation.
During the Mandatory Notice Period, the Executive shall continue to
perform all of his duties in accordance, and in compliance, with the
terms of this Agreement. Prior to and during the Mandatory Notice
Period, the Executive shall not disclose to any third parties, other
than executive search firms, prospective employers (collectively,
the "Permitted Third Parties") and the Executive's spouse, his
intention and/or decision to terminate employment with the Company.
The Executive shall, prior to any disclosure of such information to
any Permitted Third Party, secure such Permitted Third Party's
written agreement not to disclose such information until after the
Mandatory Notice Period to anyone other than Executives and
directors of such Permitted Third Party who need to
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know such information.
(d) Obligations of the Company Upon Termination Under Section 4 If
the Executive's employment shall have been terminated under Section 4(a),
other than for Cause, or 4(b):
(i) The Company shall make a lump sum cash payment to the
Executive within 30 days after the Date of Termination in an amount
equal to the sum of: (l) the Executive's pro rata Annual Base Salary
payable through the Date of Termination to the extent not
theretofore paid; (2) the targeted amount of the Executive's annual
bonus and long-term incentive awards that would have been payable
with respect to the fiscal year in which the Date of Termination
occurs in each case absent the termination of the Executive's
employment prorated for the portion of such fiscal year through the
Date of Termination taking into account the number of complete
months during such fiscal year through the Date of Termination, and;
(3) the Executive's actual earned annual or incentive awards for any
completed fiscal year or period not theretofore paid or deferred;
(ii) The Company shall pay to the Executive in equal installments,
made at least monthly, over the twenty-four months following the Date of
Termination an aggregate amount equal to: (1) two times the Executive's
Annual Base Salary in effect on the Date of Termination; and (2) two times
the targeted amount of the annual incentive bonus that would have been
paid to the Executive with respect to the Company's fiscal year in which
such Date of Termination occurred;
(iii) The Company shall continue to provide, in the manner and
timing provided for in the Plans (other than stock options and
except as set forth in this Section 4(d) and in Section 7(b)), the
benefits provided under the Plans that the Executive would receive
on an after-tax basis if the Executive's employment had continued
for two years after the Date of Termination assuming for this
purpose that the Executive's compensation for each such year would
have been one-half of the amount paid pursuant to clause (ii) above,
and the Executive shall be fully vested in any account balance and
all other benefits continuation under such Plans; provided, however
that the benefits provided under this clause (iii) shall be limited
to the coverage permitted by law or as would otherwise not
potentially adversely impact on the tax qualification of any Plans;
provided, further, that if such benefits may not be continued under
the Plans, the Company shall pay to the Executive an amount equal to
the Company's cost had such benefits been continued;
(iv) (1) All unvested options held by the Executive shall
continue to vest in accordance with their terms for two years after
the Date of Termination, and all remaining unvested options held by
the Executive shall vest on the two year anniversary date of the
Date of Termination; (2) all unvested profit shares held by the
Executive or for the benefit of the Executive by a grantor trust
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established by the Company shall continue to vest in accordance with
their terms for two years after the Date of Termination and all
remaining profit shares shall vest on the two year anniversary date
of the Date of Termination, provided that, if permitted by the terms
of any such trust, any unvested profit shares shall continue to be
held by such grantor trust until such profit shares vest pursuant to
this clause (iv) and any such unvested profit share not permitted to
be so held shall vest immediately and be delivered to the Executive;
(3) any other unvested equity based award (including, without
limitation, restricted stock and stock units) held by the Executive
shall vest on the two year anniversary date of the Date of
Termination on a pro rata basis determined by a fraction, the
numerator of which is the number of months elapsed from the grant of
such equity award through the Date of Termination plus the
twenty-four months after the Date of Termination and the denominator
of which is the total number of months in the vesting period for
such award and shall be promptly delivered to the Executive entirely
in the form of Common Stock, $.10 par value per share, of the
Company; (4) any options held by the Executive that are vested on
the Date of Termination or vest thereafter pursuant to this clause
(iv) may be exercised until the earlier of (x) the thirty-month
anniversary date of the Date of Termination and (y) the expiration
date of such options, and; (5) the Executive shall not be entitled
to any additional grants of any stock options, restricted stock,
other equity based or incentive awards; and
(v) The Executive will be entitled to continuation of health
benefits under the Plans at a level commensurate with the
Executive's current position or more senior position(s) to which the
Executive may be appointed, and if the Executive elects to receive
such health benefits, the Company shall pay the medical premiums
therefore for the first twenty-four months after the Date of
Termination, and thereafter the Executive shall pay the premium
charged to former employees of the Company pursuant to Section 4980B
of the Code for the twenty-fifth through forty-second months
following the Date of Termination, after which such health benefits
shall terminate; provided, that the Company can amend or otherwise
alter the Plans to provide benefits to the Executive that are no
less than those commensurate with the Executive's current position
or more senior position(s) to which the Executive may be appointed;
provided, that to the extent such benefits cannot be provided to the
Executive under the terms of the Plans or the Plans cannot be so
amended in any manner not adverse to the Company, the Company shall
pay the Executive, on an after-tax basis, an amount necessary for
the Executive to acquire such benefits from an independent insurance
carrier; and provided, further, that the obligations of the Company
under this clause (v) shall be terminated if, at any time after the
Date of Termination, the Executive is employed by or is otherwise
affiliated with a party that offers comparable health benefits to
the Executive.
(e) Contract Non-Renewal If the Executive's employment terminates
upon the expiration of the initial two-year Employment Period due to the
decision not to renew or extend the Employment Period other than for Cause
(as to the Company's decision) or
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Good Reason (as to the Executive's decision):
(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 (l) the Executive's pro rata Annual Base Salary
payable through the Date of Termination to the extent not
theretofore paid; (2) the targeted amount of the Executive's annual
bonus and incentive awards that would have been payable with respect
to the fiscal year in which the Date of Termination occurs in each
case absent the termination of the Executive's employment prorated
for the portion of such fiscal year through the Date of Termination
taking into account the number of complete months during such fiscal
year through the Date of Termination and (3) the Executive's actual
earned annual or incentive awards for any completed fiscal year or
period not theretofore paid or deferred; and
(ii) (1) All unvested options 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
be delivered to the Executive; (3) any other unvested equity based
award (including, without limitation, restricted stock and stock
units) held by the Executive shall vest on the Date of Termination;
and (4) any options held by the Executive that are vested on the
Date of Termination or vest thereupon pursuant to this clause (ii)
may be exercised until the earlier of (x) the thirty-month
anniversary date of the Date of Termination and the expiration date
of such options.
(f) Cause If the Executive's employment shall be terminated for
Cause during the Employment Period or if the Executive voluntarily
terminates employment during the Employment Period, excluding a
termination for Good Reason, death, Disability or Retirement, the
Employment Period shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive all payments
and benefits due, in accordance with the Company's Plans through the Date
of Termination.
5. Release Agreement The benefits pursuant to Section 4 are contingent
upon the Executive (i) executing a Separation and Release Agreement (the
"Release Agreement") upon or after any Date of Termination, a copy of which is
attached as Exhibit A to this Agreement and (ii) not revoking or challenging the
enforceability of the Release Agreement or this Agreement.
6. Offset The Company shall have the right to offset the amounts required
to be paid to the Executive under this Agreement against any amounts owed by the
Executive to the Company, and nothing in this Agreement shall prevent the
Company from pursuing any other available remedies against the Executive.
7. Compensation and Benefits Following Change of Control
(a) Notwithstanding any provision of this Agreement or any I Plan,
in no
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event shall any compensation or benefits, individually or in the
aggregate, to which the Executive would be entitled be less favorable for
the two years following a Change of Control than the Executive would have
been entitled based upon the most favorable of the Company's Plans in
effect for the Executive at any time during the 120-day period immediately
preceding such Change of Control.
(b) In the event of termination of the Executive's employment under
Section 4(a) (other than for Cause) or 4(b), whether before or after a
Change of Control, following a Change of Control: (i) any remaining
amounts payable under Sections 4(d)(i), (ii) and (iii) shall be payable in
a lump sum within 30 days after the later of the Date of Termination or
the Change of Control; and (ii) in lieu of the Company's obligations under
Section 4(d)(iv), all unvested options and equity based awards shall vest
immediately on the later of the Date of Termination or the Change of
Control and all such options may be exercised until the earlier of the
thirty-month anniversary date of the Date of Termination and the
expiration date of such options.
8. Nonexclusivity of Rights Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any Plan for which
the Executive may qualify nor shall anything herein limit or otherwise affect
such rights as the Executive may have under any contract or agreement with the
Company. Amounts that are vested benefits or that the Executive is otherwise
entitled to receive under any Plan, contract or agreement with the Company at or
subsequent to the Date of Termination shall be payable in accordance with such
Plan, or contract or agreement except as explicitly modified by this Agreement.
9. Full Settlement; Legal Fees
(a) No Obligation to Mitigate In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement, and, except as specifically provided in this
Agreement, such amounts shall not be reduced whether or not the Executive
obtains other employment.
(b) Expenses of Contests
(i) The following shall apply for any dispute arising
hereunder, under the Release Agreement or under the Stock Unit
Agreement prior to a Change of Control: In each case, solely to the
extent that the Executive is successful with respect thereto, the
Company agrees to pay all reasonable legal and professional fees and
expenses that the Executive may reasonably incur as a result of any
contest by the Executive, by the Company or others of the validity
or enforceability of, or liability under, any provision of this
Agreement, the Release Agreement or the Stock Unit Agreement
(including as a result of any contest by the Executive about the
amount of any payment pursuant to this Agreement), plus interest on
any delayed payment at the applicable Federal rate provided for in
Section 7872(f)(2)(A) of the Internal Revenue Code of 1986 ("Code"),
as amended, or any successor Section of the Code.
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(ii) The following shall apply for any dispute arising
hereunder, under the Release Agreement or under the Stock Unit
Agreement upon or following a Change of Control: The Company agrees
to advance to the Executive all reasonable legal and professional
fees and expenses that the Executive may reasonably incur as a
result of any contest by the Executive, by the Company or others of
the validity or enforceability of or liability under, any provision
of this Agreement, the Release Agreement or the Stock Unit Agreement
(including as a result of any contest by the Executive about the
amount of any payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Code or any successor
Section of the Code.
(iii) The Executive shall reimburse the Company for its
reasonable legal and professional fees and expenses, and in the case
of advances made pursuant to paragraph (ii) above, shall refund the
Company the amount of such advances, to the extent there is a final
determination that such fees, expenses or advances relate to claims
brought by the Executive against, or defenses by the Executive of
any claim of, the Company with respect to this Agreement, the
Release Agreement or the Stock Unit Agreement that were determined
to have been made or asserted by the Executive in bad faith or
frivolously.
10. Certain Additional Payments by the Company Anything in this Agreement
to the contrary notwithstanding, in the event that any actual or constructive
payment or distribution by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement, the Stock Unit Agreement or otherwise) is subject to the
excise tax imposed by Section 4999 of the Code or any successor provision of the
Code (the "Excise Tax"), then the Company shall make the payments described on
Exhibit C hereto.
11. Restrictions and Obligations of the Executive
(a) Consideration for Restrictions and Covenants The parties hereto
acknowledge and agree that the principal consideration for the agreement
to make the payments provided in Sections 3 and 4 hereof from the Company
to the Executive and the grant to the Executive of the stock units of the
Company as set forth in Section 2 hereof is the Executive's compliance
with the undertakings set forth in this Section 11. Specifically,
Executive agrees to comply with the provisions of this Section 11
irrespective of whether the Executive is entitled to receive any payments
under Section 3 or 4 of this Agreement.
(b) Confidentiality The confidential and proprietary information and
in any material respect trade secrets of the Company are among its most
valuable assets, including but not limited to, its customer and vendor
lists, database, computer programs, frameworks, models, its marketing
programs, its sales, financial, marketing, training and technical
information, and any other information, whether communicated orally,
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electronically, in writing or in other tangible forms concerning how the
Company creates, develops, acquires or maintains its products and
marketing plans, targets its potential customers and operates its retail
and other businesses. The Company has invested, and continues to invest,
considerable amounts of time and money in obtaining and developing the
goodwill of its customers, its other external relationships, its data
systems and data bases, and all the information described above
(hereinafter collectively referred to as "Confidential Information"), and
any misappropriation or unauthorized disclosure of Confidential
Information in any form would irreparably harm the Company. The Executive
shall hold in a fiduciary capacity for the benefit of the Company all
Confidential Information relating to the Company and its business, which
shall have been obtained by the Executive during the Executive's
employment by the Company and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without
the prior written consent of the Company or as may otherwise be required
by law or legal process, communicate, divulge or use any such information,
knowledge or data to anyone other than the Company and those designated by
it.
(c) Non-Solicitation or Hire During the Employment Period and for a
two-year period following the termination of the Executive's employment
for any reason, the Executive shall not, directly or indirectly: (i)
employ or seek to employ any person who is at the Date of Termination, or
was at any time within the six-month period preceding the Date of
Termination, an Executive, general manager or director or equivalent or
more senior level employee of the Company or any of its subsidiaries or
otherwise solicit, encourage, cause or induce any such employee of the
Company or any of its subsidiaries to terminate such employee's employment
with the Company or such subsidiary for the employment of another company
(including for this purpose the contracting with any person who was an
independent contractor (excluding consultant) of the Company during such
period), or; (ii) take any action that would interfere with the
relationship of the Company or its subsidiaries with their suppliers and
franchisees without, in either case, the prior written consent of the
Company's Board of Directors, or engage in any other action or business
that would have a material adverse effect on the Company.
(d) Non-Competition and Consulting
(i) During the Employment Period and for a two-year period
(the "Consulting Period") following the termination of the
Executive's employment for any reason, the Executive shall not,
directly or indirectly:
(x) Engage in any managerial, administrative, advisory,
consulting, operational or sales activities in a Restricted Business
anywhere in the Restricted Area, including, without limitation, as a
director or partner of such Restricted Business, or
(y) organize, establish, operate, own, manage, control or have
a direct or indirect investment or ownership interest in a
Restricted Business or in
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any corporation, partnership (limited or general), limited liability
company enterprise or other business entity that engages in a
Restricted Business anywhere in the Restricted Area; and
(ii) During the Consulting Period, the Executive shall:
(x) Be available to render services to the Company as an
independent contract or/consultant but not as an employee of the
Company; and
(y) perform such duties as may be reasonably requested in
writing from time to time during the Consulting Period by the Chief
Executive Officer; provided that such duties shall not conflict with
the duties of the Executive for a new employer if such employment
does not violate the terms of Section 11(d)(i) hereof.
(iii) Section 11(d) shall not bind the Executive during any
period following the termination of the Executives employment if
there has been a Change of Control irrespective of whether the
Change of Control occurs before or after the Date of Termination.
(iv) Nothing contained in this Section 11(d) shall prohibit or
otherwise restrict the Executive from acquiring or owning, directly
or indirectly, for passive investment purposes not intended to
circumvent this Agreement, securities of any entity engaged,
directly or indirectly, in a Restricted Business if either (i) such
entity is a public entity and such Executive (A) is not a
controlling Person of, or a member of a group that controls, such
entity and (B) owns, directly or indirectly, no more than 3% of any
class of equity securities of such entity or (ii) such entity is not
a public entity and the Executive (A) is not a controlling Person
of, or a member of a group that controls, such entity and (B) does
not own, directly or indirectly, more than 1% of any class of equity
securities of such entity.
(e) Definitions For purposes of this Section 11:
(i) "Restricted Business" means Wal-Mart, K-Mart, Target,
Kohl's, Noodle Kadoodle/Zany Brainy, e-toys, KB Toys, FAO Schwarz,
Buy Buy Baby or any other business, including mail order or internet
business, if more than one-third of the business' revenues are
generated by the manufacture, marketing or sale of toys (including,
without limitation, video games and computer software for kids,
electronic toys and wheel goods), juvenile or baby products,
juvenile furniture and children's clothing.
(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.
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(f) Relief The parties hereto hereby acknowledge that the provisions
of this Section 11 are reasonable and necessary for the protection of the
Company and its subsidiaries. In addition, the Executive further
acknowledges that the Company and its subsidiaries will be irrevocably
damaged if such covenants are not specifically enforced. Accordingly, the
Executive agrees that, in addition to any other relief to which the
Company may be entitled, the Company will be entitled to seek and obtain
injunctive relief (without the requirement of any bond) from a court of
competent jurisdiction for the purposes of restraining the Executive from
any actual or threatened breach of such covenants. In addition, without
limiting the Company's remedies for any breach of any restriction on the
Executive set forth in Section 11, except as required by law, the
Executive shall not be entitled to any payments set forth in Section 3 or
4 hereof if the Executive breaches any of the covenants applicable to the
Executive contained in this Section 11, the Executive will immediately
return to the Company any such payments previously received upon such a
breach, and, in the event of such breach, the Company will have no
obligation to pay any of the amounts that remain payable by the Company
under Section 3 or 4.
12. Successors
(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will, within thirty days after a Change of Control,
and the Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company within thirty days after any
such event of succession to, assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used
in this Agreement, "Company" shall mean the Company as herein before
defined and any successor to its business and/or assets as aforesaid that
assumes and agrees to perform this Agreement by operation of law, or
otherwise.
13. Miscellaneous
(a) Governing Law This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey, without reference
to principles of conflict of laws.
(b) Captions The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
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(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., 461 From
Road, Paramus, New Jersey 07652, Attention: General Counsel; or to
such other address as either party shall have furnished to the other
in writing in accordance herewith. Notice and communications shall
be effective when actually received by the addressee.
(e) Assistance to Company At all times during and after the
Employment Period and at the Company's expense for significant
out-of-pocket expenses actually and reasonably incurred by the Executive
in connection therewith, the Executive shall provide reasonable assistance
to the Company in the collection of information and documents and shall
make the Executive available when reasonably requested by the Company in
connection with claims or actions brought by or against third parties or
investigations by governmental agencies based upon events or circumstances
concerning the Executive's duties, responsibilities and authority during
the Employment Period.
(f) Severability of Provisions Each of the sections contained in
this Agreement shall be enforceable independently of every other section
in this Agreement, and the invalidity or nonenforceability of any section
shall not invalidate or render unenforceable any other section contained
in this Agreement. The Executive acknowledges that the restrictive
covenants contained in Section 11 are a condition of this Agreement and
are reasonable and valid in geographical and temporal scope and in all
other respects. If any court or arbitrator determines that any of the
covenants in Section 11, or any part of any of them, is invalid or
unenforceable, the remainder of such covenants and parts thereof shall not
thereby be affected and shall be given full effect, without regard to the
invalid portion, if any court or arbitrator determines that any of such
covenants, or any part thereof, is invalid or unenforceable because of the
geographic or temporal scope of such provision, such court or arbitrator
shall reduce such scope to the minimum extent necessary to make such
covenants valid and enforceable.
(g) Withholding The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
(h) Waiver The Executive's or the Company's failure to insist upon
strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company
may have hereunder shall not be
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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 Northeastern New Jersey
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 for such award, with the
reference to and reliance on relevant law. Any such award shall be final
and binding on each and all of the parties thereto and their personal
representatives, and judgment may be entered thereon in any court having
jurisdiction thereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and the Company has caused these presents to be executed in its name on its
behalf, all as of the day and year first above written.
------------------------------
EXECUTIVE
TOYS "R" US, INC.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
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EXHIBIT A
SEPARATION AND RELEASE AGREEMENT
This Separation and Release Agreement ("Release Agreement") is entered
into as of this ______ day of _____________, between Toys "R" Us, Inc. and any
successor thereto (the "Company") and ______________________ (the "Executive").
The Executive and the Company agree as follows:
1. The employment relationship between the Executive and the Company will
be terminated effective __________________ (the "Termination Date").
2. In accordance with the rights, responsibilities, and obligations
contained in Executive's Employment Agreement ("Employment Agreement") dated
____________ and the rights, responsibilities, and obligations contained herein,
the Company agrees to pay the Executive certain payments after the Termination
Date as follows:
a. The Executive shall receive, on _____________, $__________, which
represents __________ percent (____%) of Executive's targeted annual
bonus and incentive awards for the fiscal year of _________. The
Executive will receive an additional bonus for year ________ over
the pro-rata period if the calculated bonus for the year ______
exceeds the targeted bonus for the year ______.
b. The Executive will receive a total of $__________ payable in equal
bi-weekly installments, over the eighteen (18) months following the
Termination Date. This total sum represents an aggregate amount
equal to (1) two times the Executive's Annual Base Salary in effect
on the Termination Date, (2) two times the targeted amount of the
annual incentive award and bonus for year ______. The first payment
of $___________ shall be payable with the pay period ending
__________.
c. All unvested options held by the Executive shall continue to vest in
accordance with their terms for two years after the Termination Date
and all remaining unvested options held by the Executive shall vest
on the two year anniversary of the Termination Date. All unvested
profit shares continue to vest in accordance with their terms for
two years after the Termination Date. Any options held by the
Executive that are vested on the Termination Date or vest thereafter
pursuant to this clause may be exercised until the earlier of the
thirty-month anniversary date of the Termination Date and the
expiration date of such options and the Executive shall not be
entitled to any additional grants of any stock options, restricted
stock, other equity based or long-term awards.
d. The Executive will be eligible for participation in the Company's
benefit plans, as set forth in paragraphs 4(d) of the Executive's
Employment Agreement dated December 11, 2000.
3. 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
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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 or affiliates or any act that would constitute "Cause" under
the Employment Agreement or a breach under the Employment Agreement.
4. In accordance with the rights, responsibilities, and obligations
contained within the Employment Agreement and the rights, responsibilities, and
obligations contained within the Release Agreement, the Executive agrees as
follows:
a) In consideration of the rights, responsibilities, and obligations
contained in the Employment Agreement and the rights,
responsibilities, and obligations contained in the Release
Agreement, 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,
Executives, 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 (that prohibit discrimination based upon disability); the
Family and Medical Leave Act of 1993 (which prohibits discrimination
based on requesting or taking a family or medical leave); Section
1981 of the Civil Rights Act of 1866 (which prohibits discrimination
based upon race); Section 1985(3) of the Civil Rights Act of 1871
(which prohibits conspiracies to discriminate); the Employee
Retirement Income Security Act of 1974, as amended (which prohibits
discrimination with regard to benefits); any other federal, state or
local laws against discrimination; or any other federal, state, or
local statute, or common law relating to employment, wages, hours,
or any other terms and conditions of employment. This includes a
release by the Executive of any claims for wrongful discharge,
breach of contract, torts or any other claims in any way related to
the Executive's employment with or resignation or termination from
the Company. This release also includes a release of any claims for
age discrimination under the Age Discrimination in Employment Act,
as amended ("ADEA"); New Jersey Law Against Discrimination Equal Pay
Act of 1963; and, the Consolidated Omnibus Budget Reconciliation Act
of 1985. 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.
b) The Executive waives any right to reinstatement or future employment
with the Company or with any of it's subsidiaries or affiliates
following the Executive's separation from the Company on the
Termination Date.
5. This Agreement is not an admission by either the Executive or the
Company of any wrongdoing or liability.
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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
Executives, directors, stockholders or employees. The Company further agrees
that it will engage in no act that is intended, or may reasonably be expected to
harm the reputation, business or prospects of the Executive.
7. The Executive agrees that he shall not disparage or comment negatively
about the Company to anyone, including, but not limited to, its customers,
competitors or members of the general public that may avail themselves of
services rendered by Company. Likewise, the Company agrees that it will make no
disparaging remarks about Executive.
8. The Executive and the Company agree that the Executive will only speak
about the Company by means of a joint press release that shall be prepared and
approved, in advance, by both parties.
9. The Executive and the Company agree to keep the existence, terms and
conditions of this Release Agreement completely and strictly confidential except
as required by law, or provided by paragraph 8 above.
10. The Executive and the Company agree that certain provisions of the
Employment Agreement including, specifically, those set forth in paragraphs
9(a), 9(b), 11(b), and 11(c), are binding and in full force and effect during
the period of time set forth in the Release Agreement.
11. The Executive agrees that for a two year period following the
Termination Date the Executive shall not, directly or indirectly, engage in any
managerial, administrative, advisory, consulting, operational or sales
activities or organize, establish, operate, own, manage, or control a direct or
indirect investment or ownership interest in Wal-Mart, K-Mart, Target, Kohl's,
Noodle Kadoodle/Zany Brainy, e-toys, KB Toys, FAO Schwarz, Buy Buy Baby or any
other business, including mail order or internet business, if more than
one-third of the business' revenues are generated by the manufacture, marketing
or sale of toys (including, without limitation, video games and computer
software for kids, electronic toys and wheel goods), juvenile or baby products,
juvenile furniture or children's clothing.
12. The Executive shall promptly return all the Company's property in the
Executive's possession, including, but not limited to, the Company's keys,
credit cards, cellular phones, computer, software and peripherals and originals
or copies of books, records, or other information pertaining to the Company's
business. The Executive shall return any leased or Company car at the expiration
of the Consulting Period (as defined in the Employment Agreement), or at that
time when he is entitled to receive a car from his future employer, whichever
comes first. While the Executive is using the Company car, the Company will
continue to reimburse the Executive for routine automobile maintenance,
automobile repairs and automobile insurance. The Executive is personally
responsible for all other costs associated with the use of the Company car.
13. 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 Employment Agreement.
14. This Agreement represents the complete agreement between the Executive
and the
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Company concerning the subject matter in this Agreement and supersedes all prior
agreements or understandings, written or oral. No attempted modification or
waiver of any of the provisions of this Agreement shall be binding on either
party unless in writing and signed by both the Executive and the Company.
15. Each of the sections contained in this Agreement shall be enforceable
independently of every other section in this Agreement, and the invalidity or
non-enforceability of any section shall not invalidate or render unenforceable
any other section contained in this Agreement.
16. It is further understood that for a period of 7 days following the
execution of this Agreement in duplicate originals, the Executive may revoke
this Agreement, and this Agreement shall not become effective or enforceable
until the revocation period has expired. No revocation of this Agreement by the
Executive shall be effective unless the Company has received, within the 7-day
revocation period, written notice of any revocation, all monies received by the
Executive under this Agreement and all originals and copies of this Agreement.
17. This Agreement has been entered into voluntarily and not as a result
of coercion, duress, or undue influence. The Executive acknowledges that the
Executive has read and fully understands the terms of this Agreement and has
been advised to consult with an attorney before executing this Agreement.
Additionally, the Executive acknowledges that the Executive has been afforded
the opportunity of at least 21 days to consider this Agreement.
The parties to this Agreement have executed this Agreement as of the day
and year first written above.
TOYS "R" US, INC.
By:
----------------------------
Name:
Title:
EXECUTIVE
------------------------------
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EXHIBIT B
Capitalized terms used in the Agreement that are not elsewhere defined in
the Agreement have the definitions set forth below:
"Annual Base Salary" means the annual base salary of the Executive as of
the date of the Agreement as may be increased from time to time in the
discretion of the Committee.
"Board" means the Board of Directors of the Company.
"Cause" means: (i) the conviction of, or pleading guilty or nolo contendere to,
a felony involving moral turpitude: 9Ii) the commission of any fraud,
misappropriation or misconduct which causes demonstrable injury to the Company
or a subsidiary; (iii) an act of dishonesty resulting or intended to result,
directly or indirectly, in material gain or personal enrichment to the Executive
at the expense of the Company or a subsidiary; (iv) any material breach of the
Executive's fiduciary duties to the Company as an employee or Executive; (v) a
serious violation of the Toys "R" Us Ethics Agreement or any other serious
violation of a Company policy; (vi) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the Company or
one of its subsidiaries (other than any such failure resulting from incapacity
due to physical or mental illness resulting in a Disability), within a
reasonable time after a written demand for substantial performance is delivered
to the Executive by the Board, which specifically identifies the manner in which
the Board believes that the Executive has not substantially performed the
Executive's duties; (vii) the failure by the Executive to comply, in any
material respect, with the provisions of Section 11 of the Agreement; of (viii)
the failure by the Executive to comply with any other undertaking set forth in
the Agreement or any breach by the Executive hereof that is reasonably likely to
result in a material injury to the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interest of the Company. Any act,
or failure to act, based upon authority given pursuant to the resolution duly
adopted by the Board or based upon the advice of regular outside counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. the cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of a majority of the entire membership of
the Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, the Executive is guilty of the conduct
described, and specifying the particulars thereof in detail.
"Change of Control" - See Exhibit C.
"Committee" means that Company's Management Compensation and Stock Option
Committed of the Board of Directors or any successor committed 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 cause
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
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termination by the Company other than for Cause, the Date of Termination shall
be the date so designated by the Company in its notification to the Executive of
such termination, (iii) if the Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Executive or the effective date of the Disability, as the case may be, and (iv)
the last day of the Employment Period during with 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 February 1, 1997, as the same may be
amended from time to time.
"Good Reason" means, without the Executive's prior written consent, the
occurrence of any of the following, provided that the Executive delivers a
Notice of Termination specifying such occurrence within 30 days thereof:
(i) the assignment of the Executive to a position materially inconsistent
with the requirements of Section 2(a) of the Agreement, excluding for this
purpose an action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive; provided,
however, that the foregoing shall not constitute "Good Reason" if it is not
attendant to a reduction in the Executive's Annual Base Salary or total target
compensation, except that a request by the Company for the Executive to relocate
outside Northeastern New Jersey shall constitute "Good Reason";
(ii) any failure by the Company to comply in any material respect with any
of the provisions of section 2(b) of the Agreement, other than failure not
occurring in bad faith and that is remedied by the Company within a reasonable
time after receipt of notice thereof given by the Executive;
(iii) any failure by the Company to comply with an satisfy Section 12(c)
of the Agreement, or
(iv) notice by the Company that it is not extending the termination date
of the
(v)
(vi) Employment period.
"Notice of Termination" means a written notice that (i) indicates the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provisions so indicated and (iii) if the Date of Termination (as defined above)
is other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving of such notice).
"Plans" means all employee compensation, benefit and welfare plans,
policies and programs of the Company, which may include, without limitation,
incentive, savings, retirement, stock option, restricted stock, supplemental
Executive retirement, pension, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel accident
insurance plans, vacation practices, fringe benefit practices and policies
relating to the reimbursement of business expenses.
"Retirement" shall have the meaning ascribed to that term in the Plan
under which benefits are being sought by the Executive.
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EXHIBIT C
CHANGE OF CONTROL
I. Certain Definitions
"Change of Control" means, after the date hereof:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(dX3) or 14(dX2) 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 of the Company of any of its
subsidiaries, (ii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any subsidiary of the Company,
(iii) any acquisition by any Person pursuant to a transaction that complies with
clauses (i), (ii) and (iii) of subsection (c) below, or (iv) any acquisition by
any entity in which the Executive has a material direct or indirect equity
interest; or
(b) The cessation of the "Incumbent Board" for any reason to constitute at
least a majority of the Board. "Incumbent Board" means the members of the Board
on the date hereof and any member of the Board subsequent to the date hereof
whose election, or nomination for election by the Company's stockholders, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board, except that the Incumbent Board shall not include any member of
the Board whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board.
(c) The consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, immediately following such
Business Combination each of the following would be correct:
(i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately prior
to such Business Combination beneficially own, directly or indirectly,
more than 60% of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the Person resulting from such Business Combination
(including, without limitation, a Person which as a result of such
transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior
to such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, and
(ii) no Person (excluding (A) any employee benefit plan (or related
trust) sponsored or maintained by the Company or any subsidiary of the
Company, or such corporation resulting from such Business Combination or
any Affiliate of such corporation, or (B) any entity in which the
Executive has a material equity interest, or any "Affiliate" (as defined
in Rule 405 under the
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Securities Act of 1933, as amended) of such entity) beneficially owns,
directly or indirectly, 25% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination, or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership
existed prior to the Business Combination, and
(iii) at least a majority of the members of the board of directors
of the corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(d) Approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
II. Tax Gross-Up
(a) If required by Section 10 of the Agreement, in addition to the
payments described in Sections 4 and 7 of the Agreement and the grants described
in the Stock Unit Agreement, the Company shall pay to the Executive an amount
(the "Gross-up") such that the net amount retained by the Executive, after
deduction of any Excise Tax and any Federal, state and local income taxes,
equals the amount of such payments that the Executive would have retained had
such Excise Tax not been imposed. In addition, the Company shall indemnify and
hold the Executive harmless on an after-tax basis from any Excise Tax imposed on
or with respect to any such payment (including, without limitation, any
interest, penalties and additions to tax) payable in connection with any such
Excise Tax. For purposes of determining the amount of any Gross-up or the amount
required to make an indemnity payment on an after-tax basis, it shall be assumed
that the Executive is subject to Federal, state and local income tax at the
highest marginal statutory rates in effect for the relevant period after taking
into account any deduction available in respect of any such tax (e.g., if state
and local taxes are deductible for Federal income tax purposes in the relevant
period, it shall be assumed that such taxes offset income that would otherwise
be subject to Federal income tax at the highest marginal statutory rate in
effect for such period).
(b) Subject to the provisions of paragraph (c) of this Exhibit C, the
determination of (i) whether a Gross-up is required and the amount of such
Gross-up and (ii) the amount necessary to make any payment on an after-tax
basis, shall be made in accordance with the assumptions set forth in paragraph
(a) of this Exhibit C by Ernst & Young LLP or such other "Big Six" accounting
firm designated by the Executive and reasonably acceptable to the Company.
(c) The Executive shall notify the Company as soon as practicable in
writing of any claim by the Internal Revenue Service that, if successful, would
require any Gross-up or indemnity payment. The Executive shall not pay such
claim prior to the expiration of the 30-day period following the date on which
it gives such notice to the Company. If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest such
claim, the Executive shall take all actions necessary to permit the Company to
control all proceedings taken in connection with such contest. In that
connection, the Company may, at its sole option, pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences in respect of such
claim and may, at its sole option, either direct the Executive to pay the tax
claimed and sue 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 sue for a refund, the Company shall advance the amount of
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such payment to the Executive on an interest-free basis and at no net after-tax
cost to the Executive. If the Executive becomes entitled to receive any refund
or credit with respect to such claim (or would be entitled to a refund or credit
but for a counterclaim for taxes not indemnified hereunder), the Executive shall
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon) plus the amount of any tax benefit available
to the Executive as a result of making such payment (any such benefit calculated
based on the assumption that any deduction available to the Executive offsets
income that would otherwise be taxed at the highest marginal statutory rates of
Federal, state and local income tax for the relevant periods).
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EXHIBIT D
STOCK UNIT AGREEMENT
STOCK UNIT AGREEMENT, dated as of _________________ (the "Unit
Agreement"), between TOYS "R" US, INC., a Delaware corporation (the "Company"),
and ______________________ (the "Executive").
WITNESSETH:
WHEREAS, the Company has approved an Amendment (the "Amendment") to the
Company's 1994 Stock Option and Performance Incentive Plan (the "Plan")
providing for performance criteria that may be utilized by the Management
Compensation and Stock Option Committee (the "Committee") in connection with the
grant of Performance Shares (as defined in the Plan and referred to herein as
"Stock Units");
WHEREAS, concurrently herewith, the Executive and the Company are entering
into an Employment Agreement, dated as of even date herewith (the "Employment
Agreement");
WHEREAS, as further inducement for the Executive to execute the Employment
Agreement and continue in the employ of the Company, the Committee has
determined to grant the Executive the Stock Units as described in this Unit
Agreement; and
WHEREAS, the Board and the Committee desire that the compensation arising
from the Stock Units shall qualify as "performance-based compensation" for
purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the covenants set forth herein and for
other good and valuable consideration, the parties agree as follows:
1. Definitions Capitalized terms used herein without definition shall have
the meanings ascribed to them in the Plan.
2. Stock Unit Grant Subject to the terms and conditions set forth in this
Unit Agreement and in Section 10 of the Plan, the Executive is hereby granted
10,000 Stock Units. Each Stock Unit represents the right to receive one share of
Restricted Stock (collectively, with other shares of 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 Shares shall be promptly
deposited after the date hereof in the grantor trust created pursuant to the
Grantor Trust Agreement, dated as of October 1, 1995 between the Company and
American Express Trust Company, a Minnesota trust company (together with any
grantor trust subsequently established by the Company, the "Trust") and shall be
allocated by the Trust to the Executive's account therein subject to the
forfeiture conditions of Section 3 below. Any property attributable to the
Shares, including, without limitation, dividends and distributions thereon,
shall be deposited into the Trust, shall as promptly as practicable be
reinvested in shares of stock, and shall be allocated by the Trust to the
Executive's account therein subject to the forfeiture conditions of Section 3
below.
3. Forfeiture Conditions The Stock Units granted to the Executive
hereunder shall be forfeited:
(i) in their entirety, if the Executive's employment with the
Company terminates prior to the second anniversary of the date hereof,
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(ii) with respect to 50% of the Shares, if the Executive's
employment with the Company terminates on or after the second anniversary
of the date hereof and prior to the third anniversary of the date hereof.
4. Investment Representation The Shares acquired by the Executive under
this Unit Agreement will be acquired for the Office's account and not with a
view to the distribution thereof, and the Executive will not sell or otherwise
dispose of the Shares unless the Shares are registered under the Securities Act
of 1933, as amended (the "Act"), or the Executive shall furnish the Company with
an opinion of counsel reasonably satisfactory to the Company that such
registration is not required, and a legend to such effect may be placed on the
certificate for the Shares.
5. 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.
6. 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
7. Governing Law This Unit Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey, without reference to
principles of conflict of laws. Exclusive jurisdiction with respect to any legal
proceeding brought concerning any subject matter contained in this Unit
Agreement shall be settled by arbitration as provided in the Employment
Agreement.
8. Captions The captions of this Unit Agreement are not part of the
provisions hereof and shall have no force or effect.
9. 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.
10. 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., 461 From Road,
Paramus, New Jersey 07652, Attention: General Counsel;
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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11. Interpretation The interpretation and decision with regard to any
question arising under this Unit Agreement or with respect to the Stock Units
made by the Committee shall be final and conclusive on the Executive.
12. Successors This Unit Agreement shall be binding upon the Company and
its successors and assigns.
IN WITNESS WHEREOF, this Agreement has been executed by the Company by one
of its duly authorized Executives as of the date specified above.
TOYS "R" US, INC.
By:
----------------------------
Name:
Title:
I hereby acknowledge receipt of the Stock Units and agree to the provisions set
forth in this Agreement.
----------------------
EXECUTIVE
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