Exhibit 10.2
Change in Control
Agreement
THIS CHANGE IN CONTROL AGREEMENT is made as of December 14th
by and between Office Depot, Inc., a Delaware corporation (the
“Company”), and Steven M. Schmidt (the
“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 Voting Securities, as the case
may be, (ii) no Person (excluding any corporation resulting
from such Business
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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 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 of the conduct
described in subsection (i) or (ii) above, and specifying
the particulars thereof in detail.
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(c) Good
Reason . The Executive’s employment may be terminated by
the Executive for Good Reason within the 1 year period following
the date of the initial existence of the event or circumstances
constituting Good Reason. For purposes of this Agreement,
