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 Ben
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