Exhibit 10.1
EMPLOYMENT
AGREEMENT
THIS AGREEMENT is
made by and between OfficeMax Incorporated, a Delaware corporation
(the “Company”), and Sam Duncan (the
“Executive”), dated April 14, 2005 and effective
as of the Effective Date (as hereinafter defined).
W I T N E S S E T
H:
WHEREAS, the
Company wishes to provide for the employment by the Company of the
Executive, and the Executive wishes to serve the Company, in the
capacities and on the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, it is
agreed as follows:
1.
TERM. The term of this Agreement (the “Term”) and
Executive’s employment hereunder shall commence on
April 18, 2005 (the “Effective Date”) and end on
April 17, 2008, provided that, commencing on April 17,
2008 and on each subsequent anniversary thereof (each, a
“Renewal Date”), the Term shall be extended by an
additional year unless either party shall have given written notice
of non-renewal to the other at least 90 days prior to the
applicable Renewal Date.
2.
POSITION AND DUTIES.
(a)
During the Term the Executive shall serve as the Chief Executive
Officer and President of the Company; in each case with such duties
and responsibilities as are customarily assigned to such positions,
and have such other duties and responsibilities not inconsistent
therewith as may from time to time be assigned to him by the
Board. As of the Effective Date or as soon thereafter as
practicable, the Company shall cause the Executive to be elected as
a member of the board of directors of the Company (the
“Board”) to serve as a member of the class of directors
with a term expiring in 2006. Thereafter, while Executive is
employed during the Term, the Company shall cause the Executive to
be included in the slate of persons nominated to serve as directors
on the Board following the end of each term of the
Executive’s service as a director. Upon any termination
of his employment with the Company, the Executive shall promptly
resign from the Board and from all other offices held with the
Company and its subsidiaries.
(b)
During the Term, and excluding any periods of vacation and sick
leave to which the Executive is entitled, the Executive shall
devote his full attention and time to the business and affairs of
the Company and use the Executive’s reasonable best efforts
to carry out such responsibilities faithfully and
efficiently. It
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shall not be considered a violation of the
foregoing for the Executive to manage his personal investments or,
subject to the approval of the Board, to serve on corporate,
industry, civic or charitable boards or committees, so long as such
activities do not interfere with the performance of the
Executive’s responsibilities as an executive officer of the
Company in accordance with this Agreement.
(c)
During the Term, the Executive shall be based at the
Company’s principal headquarters in Itasca, Illinois, except
for travel reasonably required for the performance of the
Executive’s duties hereunder.
3.
COMPENSATION.
(a)
BASE SALARY. During the Term, the Executive shall receive an
annual base salary (“Annual Base Salary”) of
$850,000. The Annual Base Salary shall be payable in
accordance with the Company’s regular payroll practice for
its senior executives, as in effect from time to time. During
the Term, the Annual Base Salary shall be periodically reviewed by
the Executive Compensation Committee of the Board (the
“Compensation Committee”) for possible increase.
Following any such increase, the term “Annual Base
Salary” shall thereafter refer to the Annual Base Salary as
so increased.
(b)
CASH BONUSES.
(i)
SIGN-ON BONUS. If, within 60 days following the Effective
Date, the Executive’s prior employer takes steps to rescind
or seek reimbursement of the Executive’s 2004 bonus in the
amount of $400,557 (the “2004 Bonus”), which was paid
on or about April 5, 2005, the Executive shall use his
reasonable best efforts to resist his prior employer’s
actions. If, despite Executive’s efforts, he is
unsuccessful in causing his prior employer to reinstate the 2004
Bonus, the Company shall pay to the Executive a sign-on bonus of
$400,557 (the “Sign-on Bonus”), which amount is in lieu
of the Executive’s 2004 bonus from his prior employer.
If the Company pays the Sign-on Bonus and Executive is subsequently
successful in causing his prior employer to reinstate the 2004
Bonus, the Executive shall immediately notify the Company of
any amount of such bonus paid to him by his prior employer and
promptly reimburse such amount to the Company.
(ii)
ANNUAL INCENTIVE AWARD. For fiscal years during the Term, the
Executive shall participate in annual cash incentive compensation
plans, as adopted and approved by the Board or the Compensation
Committee from time to time, with targets and performance measures
determined by the Compensation Committee. The
Executive’s annual target cash incentive opportunity pursuant
to such plans for each fiscal year shall equal 100% (or such
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greater
percentage as the Board may establish for Executive from time to
time) of the Annual Base Salary in effect for the Executive at the
end of such fiscal year, with a maximum potential award equal to
225% of the Annual Base Salary in effect for the Executive at the
beginning of such fiscal year, subject to any limitations set by
the Compensation Committee from time to time. With respect to
the award for the Company’s 2005 fiscal year, the
Executive’s annual cash incentive award shall be governed by
the provisions of the 2003 OfficeMax Incentive and Performance Plan
(the “Plan”) and an award agreement substantially in
the form attached as Exhibit A. Any annual cash incentive
awards payable to the Executive will be paid at the time the
Company normally pays such awards to its senior
executives.
(c)
OPTION GRANTS.
(i)
INITIAL OPTION GRANT. As soon as practicable following the
Effective Date, the Compensation Committee shall grant to the
Executive a ten-year nonqualified option (the “Initial
Option”) to purchase 70,000 shares of the
Company’s common stock (“Company Stock”).
The Initial Option shall have a per share exercise price equal to
the closing price of the Company Stock on the New York Stock
Exchange on the date of grant. The Initial Option shall vest
and become fully exercisable with respect to 33.3% of the shares
subject thereto on each of the first three anniversaries of the
grant date and shall be governed by the provisions of the Plan and
an option agreement substantially in the form attached hereto as
Exhibit B.
(ii)
OTHER OPTION GRANT. As soon as practicable following the
Effective Date, the Compensation Committee shall grant to the
Executive an additional ten-year nonqualified option (the
“Other Option”) to purchase 180,000 shares of
Company Stock. The Other Option shall vest with respect to
20% of the Company Stock subject to the Other Option on each of the
first five anniversaries of the grant date and shall be governed by
the provisions of the Plan and an option agreement substantially in
the form attached hereto as Exhibit C.
(d)
RESTRICTED STOCK UNIT GRANTS.
(i)
INITIAL RESTRICTED STOCK UNITS. As soon as practicable
following the Effective Date, the Compensation Committee shall
grant to the Executive an aggregate of 35,000 restricted Company
Stock units under the Plan (such units, the “Initial
Restricted Stock Units”). Each Initial Restricted Stock
Unit shall be governed by the provisions of the Plan and an
agreement substantially in the form attached hereto as Exhibit
D. Subject to the provisions of the agreement and the Plan,
33.3% of the Initial Restricted Stock Units shall vest and
immediately be paid on each of the first three anniversaries of the
grant date; provided, however, that
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if, in the
good faith determination of the Company (which shall be made
immediately prior to the scheduled vesting date), some or all of
the remuneration attributable to the payment of the Initial
Restricted Stock Units shall fail to be deductible by the Company
for federal income tax purposes pursuant to Section 162(m) of
the Internal Revenue Code, as amended (the “Code”), the
payment of such Initial Restricted Stock Units shall be
automatically deferred (the “Automatic Deferral”) and
shall instead take place on the day following the six month
anniversary of the Date of Termination (as defined below); provided
further, however, that if, in the good faith determination of the
Company such Automatic Deferral can reasonably be expected to
result in the imposition of tax on the Executive with respect to
the Initial Restricted Stock Units prior to payment being made with
respect to such Initial Restricted Stock Units pursuant to
Section 409A of the Code, this provision shall be reformed to
provide that all of the Initial Restricted Stock Units shall be
paid out on the day following the six month anniversary of the Date
of Termination.
(ii)
OTHER RESTRICTED STOCK UNITS. As soon as practicable
following the Effective Date, the Compensation Committee shall
grant to the Executive an additional grant of an aggregate of
15,000 restricted Company Stock units under the Plan (such units,
together with any additional units credited hereunder, the
“Other Restricted Stock Units”). Each Other
Restricted Stock Unit shall vest with respect to 20% of the Other
Restricted Stock Units on each of the first five anniversaries of
the grant date and shall otherwise be governed by the provisions of
the Plan and an agreement substantially in the form attached hereto
as Exhibit E, provided that the provisions set forth above with
respect to Automatic Deferral shall also apply to the Other
Restricted Stock Units.
(e)
OTHER LONG-TERM INCENTIVE COMPENSATION. Commencing with the
Company’s 2006 fiscal year and annually thereafter while the
Executive is employed during the Term, the Company shall grant to
the Executive long-term incentive compensation awards (which may
consist of equity awards, long-term cash awards or other forms of
long-term incentive compensation, as determined by the Compensation
Committee) with a present value (as determined by the Compensation
Committee) approximately equal to 350% of the Executive’s
then-current Annual Base Salary. Such awards shall have terms
and conditions (including performance criteria, vesting schedules
and acceleration provisions, if any) determined by the Compensation
Committee.
(f)
OTHER BENEFITS. While the Executive is employed during the
Term: (1) the Executive shall be entitled to participate in all
tax-qualified retirement plans of the Company and shall be entitled
to participate in all fringe benefit and perquisite practices,
policies and programs of the Company, in each case
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as
are made available to the senior officers of the Company and (2)
the Executive and/or the Executive’s eligible dependents, as
the case may be, shall be eligible to participate in all welfare
benefit plans, practices, policies and programs provided by the
Company, including any medical, prescription, dental, disability,
employee life insurance, group life insurance, accidental death and
travel accident insurance plans and programs to the same extent,
and subject to the same terms and conditions, as such arrangements
are made available to the senior officers of the
Company.
(g)
PAID TIME OFF AND RELOCATION. The Executive shall be entitled
to 5 weeks paid time off per year in accordance with the
Company’s paid time off policy. Carryover of unused
paid time off from year to year shall be according to the terms of
the policy. Executive shall be provided relocation benefits
consistent with the Company’s relocation policy, attached as
Exhibit F, for expenses incurred in connection with the relocation
of Executive and his spouse to the Itasca, Illinois, area.
(h)
CHANGE OF CONTROL AGREEMENT. Following the Effective Date,
the Executive and the Company shall enter into a change of control
agreement (the “Change of Control Agreement”)
substantially similar to those which the Company has offered or
will offer to its other senior executives in 2005 (and attached
hereto as Exhibit G), it being understood that if the
Executive’s employment is terminated under circumstances
entitling him to severance benefits under this Agreement and the
Change of Control Agreement, the severance payments described in
Section 5(a) shall be offset (but not below zero) by similar
payments and benefits provided under the Change of Control
Agreement.
(i)
SUPPLEMENTAL PENSION BENEFIT. Upon the fifth anniversary of
the Effective Date, the Executive (if employed by the Company on
such anniversary) shall vest in a supplemental pension benefit (the
“Supplemental Pension Benefit”) in an annual amount
equal to the product of (A) two percent (2%) of the sum of (1) the
average amount of Annual Base Salary earned by the Executive with
respect to the five most recently completed years of the
Executive’s employment with the Company (such years to be
calculated by reference to calendar years) plus (2) the average
amount of the annual cash bonuses earned by the Executive pursuant
to Section 3(b)(ii) for the Company’s five completed
fiscal years immediately preceding the termination of the
Executive’s employment and (B) the number of completed full
years of Executive’s employment with the Company (also
calculated by reference to calendar years, provided that Executive
shall be deemed to have completed a full calendar year of
employment with the Company for 2005). The amount of the
Executive’s Supplemental Pension Be
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