Change in
Control Agreement
THIS
CHANGE IN CONTROL AGREEMENT is made by and between Office Depot,
Inc., a Delaware corporation (the “Company”), and
Michael D. Newman (the “Executive”) and is dated as of
the date signed by Executive.
The
Board of Directors of the Company (the “Board”) has
determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued
dedication of the Executive, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change
of Control and to encourage the Executive’s full attention
and dedication to the Company currently and in the event of any
threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change
of Control which ensure that the compensation and benefits
expectations of the Executive will be satisfied and which are
competitive with those of other corporations. Therefore, in order
to accomplish these objectives, the Board has caused the Company to
enter into this Agreement.
NOW,
THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1.
Certain Definitions . (a) The “Effective
Date” shall mean the first date during the Change of Control
Period (as defined in Section 1(b)) on which a Change of
Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control
occurs and if the Executive’s employment with the Company is
terminated prior to the date on which the Change of Control occurs,
and if it is reasonably demonstrated by the Executive that such
termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change
of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control, then for all purposes of this
Agreement the “Effective Date” shall mean the date
immediately prior to the date of such termination of
employment.
(b) The
“Change of Control Period” shall mean the period
commencing on the date hereof and ending on the third anniversary
of the date hereof; provided, however, that commencing on the date
one year after the date hereof, and on each annual anniversary of
such date (such date and each annual anniversary thereof shall be
hereinafter referred to as the “Renewal Date”), unless
previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such
Renewal Date, unless at least 60 days prior to the Renewal
Date the Company shall give notice to the Executive that the Change
of Control Period shall not be so extended.
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2.
Change of Control . For the purpose of this Agreement, a
“Change of Control” shall mean:
(a) The
acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)) (a
“Person”) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% 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”) (such 20% ownership shall be referred to as the
“Threshold Amount”); provided, however, that for
purposes of this subsection (a), if the Threshold Amount is reached
by reason of the following events, a Change in Control will not be
triggered: (i) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company of the Company’s
outstanding common stock, or (ii) any acquisition by any
person pursuant to a transaction which complies with each and all
of clauses (i), (ii) and (iii) of subsection (c) of
this Section 2. For the sake of clarity, if the Threshold
Amount is reached by reason of the Company repurchasing its own
outstanding common stock, a Change in Control will be triggered;
or
(b) Individuals
who, as of the date hereof, constitute 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 the date hereof whose
election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office 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;
or
(c) 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 , following such Business Combination, (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 80% 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 Business Combination (including, without
limitation, a corporation 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
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Voting Securities, as the
case may be, (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% 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 shareholders of the Company of a complete liquidation or
dissolution of the Company.
3.
Employment Period . The Company hereby agrees to continue
the Executive in its employ, and the Executive hereby agrees to
remain in the employ of the Company subject to the terms and
conditions of this Agreement, for the period commencing on the
Effective Date and ending on the first anniversary of such date
(the “Employment Period”). Such period may be extended
in writing by the mutual agreement of the Company and Executive at
any time prior to such first anniversary.
4.
Terms of Employment . (a) Position and Duties .
(i) During the Employment Period, (A) the
Executive’s position (including status, offices, titles and
reporting requirements), authority, duties and responsibilities
shall be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at any time
during the 120-day period immediately preceding the Effective Date
and (B) the Executive’s services shall be performed at
the location where the Executive was employed immediately preceding
the Effective Date or any office or location less than 35 miles
from such location.
(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 reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive’s reasonable best
efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees,
(B) deliver lectures, fulfill speaking engagements or teach at
educational institutions, and (C) manage personal investments,
so long as such activities do not significantly interfere with the
performance of the Executive’s responsibilities as an
employee of the Company in accordance with this Agreement. It is
expressly understood and agreed that to the extent that any such
activities have been conducted by the Executive prior to the
Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive’s
responsibilities to the Company.
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(b)
Compensation . (i) Base Salary . During the
Employment Period, the Executive shall receive an annual base
salary, including any applicable car allowance (“Annual Base
Salary”), which shall be paid in installments in accordance
with the Company’s standard payroll practices for salary, at
least equal to twelve times the highest monthly base salary and car
allowance paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month period
immediately preceding the month in which the Effective Date occurs.
During the Employment Period, the Annual Base Salary shall be
reviewed no more than 12 months after the last salary increase
awarded to the Executive prior to the Effective Date and thereafter
at least annually. Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive
under this Agreement. Annual Base Salary shall not be reduced after
any such increase and the term Annual Base Salary as utilized in
this Agreement shall refer to Annual Base Salary as so increased.
As used in this Agreement, the term “affiliated
companies” shall include any company controlled by,
controlling or under common control with the Company.
(ii)
Annual Bonus . In addition to Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the “Annual Bonus”)
in cash at least equal to the Executive’s highest bonus under
the Company’s annual bonus plans, or any comparable bonus
under any predecessor or successor plan or plans, for the last
three full fiscal years prior to the Effective Date (annualized in
the event that the Executive was not employed by the Company for
the whole of such fiscal year) (the “Recent Annual
Bonus”). Notwithstanding the previous sentence, the Executive
shall be awarded the Annual Bonus only if the Executive is employed
by the Company at the end of the applicable fiscal year ending
during the Employment Period. Each such Annual Bonus shall be paid
in the fiscal year next following the fiscal year for which the
Annual Bonus is awarded, no later than the fifteenth day of the
third month of such fiscal year, unless the Executive shall elect
to defer the receipt of such Annual Bonus pursuant to the terms of
any deferred compensation arrangement maintained by the Company
that permits such deferral.
(iii)
Incentive, Savings and Retirement Plans . During the
Employment Period, the Executive shall be entitled to participate
in all incentive, savings and retirement plans, practices, policies
and programs applicable generally to other peer Executives of the
Company and its affiliated companies, but in no event shall such
plans, practices, policies and programs provide the Executive with
incentive opportunities (measured with respect to both regular and
special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company
and its affiliated companies for the Executive under such plans,
practices, policies and programs as in effect at any time during
the 120-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any
time after the Effective Date to other peer executives of the
Company and its affiliated companies.
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(iv)
Welfare Benefit Plans . During the Employment Period, the
Executive and/or the Executive’s family, as the case may be,
shall be eligible for participation in and shall receive all
benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices,
policies and programs provide the Executive with benefits which are
less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive
at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those
provided generally at any time after the Effective Date to other
peer executives of the Company and its affiliated
companies.
(v)
Expenses . During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company and its
affiliated companies in effect for the Executive at any time during
the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and
its affiliated companies. To the extent that any such reimbursement
does not qualify for exclusion from Federal income taxation, the
Company will make the reimbursement only if the Executive incurs
the corresponding expense during the Employment Period and submits
the request for reimbursement no later than two months prior to the
last day of the calendar year following the calendar year in which
the expense was incurred so that the Company can make the
reimbursement on or before the last day of the calendar year
following the calendar year in which the expense was incurred; the
amount of expenses eligible for such reimbursement during a
calendar year will not affect the amount of expenses eligible for
such reimbursement in another calendar year, and the right to such
reimbursement is not subject to liquidation or exchange for another
benefit from the Company.
(vi)
Fringe Benefits . During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without
limitation, tax and financial planning services, and, if
applicable, use of an automobile and payment of related expenses,
in accordance with the most favorable plans, practices, programs
and policies of the Company and its affiliated companies in effect
for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies.
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(vii)
Office and Support Staff . During the Employment Period, the
Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most
favorable of the foregoing provided to the Executive by the Company
and its affiliated companies at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies.
(viii)
Vacation . During the Employment Period, the Executive shall
be entitled to paid vacation in accordance with the most favorable
plans, policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the
Company and its affiliated companies.
5.
Termination of Employment . (a) Death or Disability .
The Executive’s employment shall terminate automatically upon
the Executive’s death or Disability during the Employment
Period. For purposes of this Agreement, “Disability”
shall mean the absence of the Executive from the Executive’s
duties with the Company on a full-time basis for 180 consecutive
days as a result of incapacity due to mental or physical illness
which is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the
Executive or the Executive’s legal representative.
(b)
Cause . The Company may terminate the Executive’s
employment during the Employment Period for Cause. For purposes of
this Agreement, “Cause” shall mean:
(i)
the continued failure of the Executive to perform substantially the
Executive’s duties with the Company or one of its affiliates
(other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the
manner in which the Board or Chief Executive Officer believes that
the Executive has not substantially performed the Executive’s
duties, or
(ii)
the engaging by the Executive in illegal conduct or gross
misconduct in violation of the Company’s Code of Ethical
Behavior.
Any act, or failure to
act, based upon authority given pursuant to a resolution duty
adopted by the Board or upon the instructions of the Chief
Executive Officer or a senior officer of the Company or based upon
the advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause
unless
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and until there shall have
been delivered to the Executive a copy of a resolution duly adopted
by the Company’s Board of Directors, finding that, in the
good faith opinion of the Board, the Executive is guilty
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