EXECUTION COPY
Exhibit 10.26
EMPLOYMENT
AGREEMENT
Gerald Storch
This EMPLOYMENT AGREEMENT (the
“ Agreement ”) is dated as of February 6,
2006 (the “ Execution Date ”) by and between
Toys “R” Us, Inc. (the “ Company ”),
a subsidiary of Toys “R” Us Holdings, Inc. (“
Holdings ”), and Gerald Storch (the “
Executive ”).
WHEREAS , as of the Execution Date, the Company and
Holdings desire to employ Executive and to enter into an agreement
embodying the terms of such employment and Executive desires to
accept such employment and enter into such an agreement.
NOW, THEREFORE
, in consideration of the premises
and mutual covenants herein and for other good and valuable
consideration, the parties agree as follows:
1. Term of Employment .
Subject to the provisions of Section 7 of this Agreement,
Executive shall be employed by the Company and, as described below,
Holdings and designated indirect subsidiaries of the Holdings, for
a period commencing on February 7, 2006 (the “ Hire
Date ”) and ending on the fifth anniversary of the Hire
Date (the “ Initial Term ”), on the terms and
subject to the conditions set forth in this Agreement. Following
the Initial Term, the term of Executive’s employment
hereunder shall automatically be renewed on the terms and
conditions hereunder for additional one year periods commencing on
each anniversary of the last day of the Initial Term (the Initial
Term and any annual extensions of the term of this Agreement,
subject to the provisions of Section 7 hereof, together, the
“ Employment Term ”), unless either party gives
written notice of non-renewal at least 60 days prior to such
anniversary.
2. Position .
a. During the Employment Term,
Executive shall serve as the Chief Executive Officer of each of
Holdings, the Company, Toys “R” Us – Delaware,
Inc. and any other indirect subsidiaries of Holdings that the board
of directors of Holdings (the “ Board ”)
designates (such entities collectively referred to as the “
TRU Group ”). In such positions, Executive shall have
such duties and authority as determined by the Board and the board
of directors of each subsidiary of Holdings, as applicable (each, a
“ Subsidiary Board ”) and commensurate with the
position of chief executive officer of a company of similar size
and nature to that of the TRU Group. During the Employment Term,
the Executive shall report solely to the Board and each Subsidiary
Board, as applicable, and shall serve as the Chairman of the Board
and each Subsidiary Board, as applicable.
b. During the Employment Term,
Executive will devote Executive’s full business time and
reasonable best efforts to the performance of Executive’s
duties hereunder and will not engage in any other business,
profession or occupation for compensation or otherwise which would
conflict or interfere in any material respect with the rendition of
such services
either directly or indirectly, without the prior
written consent of the Board; provided that nothing herein
shall preclude Executive from continuing to serve on any board of
directors or trustees, advisory board or government commission
which is listed on Exhibit A attached hereto, or, subject to the
prior approval of the Board, from accepting appointment to serve on
any board of directors or trustees of any business corporation or
any charitable organization; and provided , further
that, the Company understands that Executive will be traveling to
the Minneapolis, Minnesota area many weekends during the Employment
Term; provided in each case in the aggregate, that such
activities do not conflict or interfere with the performance of
Executive’s duties hereunder or conflict with
Section 8.
3. Base Salary . During the
Employment Term, the Company shall pay Executive a base salary at
the annual rate of $1,000,000, payable in substantially equal
periodic payments in accordance with the Company’s practices
for other executive employees, as such practices may be determined
from time to time. Executive shall be entitled to such increases in
Executive’s base salary, if any, as may be determined from
time to time in the sole discretion of the Board, which shall at
least annually review Executive’s rate of base salary to
determine if any such increase shall be made. Executive’s
annual base salary, as in effect from time to time hereunder, is
hereinafter referred to as the “ Base Salary
.”
4. Annual Bonus . During the
Employment Term, Executive shall be eligible to earn an annual
bonus award in respect of each fiscal year of the Company (an
“ Annual Bonus ”), in a target amount of up to
200% of Executive’s Base Salary (the “ Target
Bonus ”), payable upon the Company’s achievement of
certain performance targets established by the Board, after
consultation with Executive, and pursuant to the terms of the
Company’s incentive plan, as in effect from time to time.
Notwithstanding the foregoing, in the event the Company’s
performance exceeds such performance targets, Executive shall be
eligible to earn an Annual Bonus in an amount in excess of the
Target Bonus, as determined by the Board in accordance with the
Company’s incentive plan, as in effect from time to time. The
Annual Bonus, if any, shall be paid to Executive not later than two
and one-half (2 1 / 2
) months after the
end of the applicable fiscal year of the Company.
5. Employee Benefits;
Perquisites; Business and Relocation Expenses .
a. Employee Benefits . During
the Employment Term, Executive and his spouse and dependents, as
applicable, shall be entitled to participate in the Company’s
welfare benefit plans and retirement plans, including, without
limitation, the Company’s 401(k) and supplemental executive
retirement plans and medical, dental and life insurance plans, as
in effect from time to time (collectively, the “ Employee
Benefits ”), on the same basis as those benefits are or
may be made available to the other senior executives of the Company
(other than benefits which have been terminated or for which
participation has been frozen). The Company shall be permitted to
modify such benefits from time to time consistent with any
modifications that impact other senior executives of the
Company.
b. Perquisites . During the
Employment Term, Executive shall be entitled to receive such
perquisites as are made available to other senior executives of the
Company in accordance with the Company’s policies, as in
effect from time to time. Executive shall be entitled to not less
than four (4) weeks of paid vacation per year, which vacation
shall be taken at
Executive’s discretion, having regard to
the Company’s operations, Executive’s performance of
his duties, and in accordance with the terms of the Company’s
vacation policy, as in effect from time to time, applicable to
Executive.
c. Business Expenses . During
the Employment Term, reasonable business expenses incurred by
Executive in the performance of Executive’s duties hereunder
shall be reimbursed by the Company in accordance with the
Company’s policies, as in effect from time to time,
applicable to senior executive officers of the Company.
d. Relocation Expenses . The
Company shall reimburse Executive for all relocation costs he
reasonably incurs in connection with relocating his family to the
area in proximity of Wayne, New Jersey, to the extent consistent
with the Company’s current relocation policies or as mutually
agreed upon by Executive and the Board.
6. Equity . Executive shall
purchase equity in Holdings and Holdings shall make an option grant
to Executive pursuant to the Toys “R” Us Holdings, Inc.
2005 Management Equity Plan (the “ Equity Plan
”) and shall enter into certain agreements in connection with
such grant (such agreements and the Equity Plan, collectively, the
“ Equity Documents ”).
7. Termination . The
Employment Term and Executive’s employment hereunder may be
terminated by either party at any time and for any reason;
provided that Executive will be required to give the Company
at least 30 days’ advance written notice of any resignation
of Executive’s employment without Good Reason (as defined in
Section 7(c) below) (other than due to Executive’s death
or Disability). Notwithstanding any other provision of this
Agreement, the provisions of this Section 7 shall exclusively
govern Executive’s rights upon termination of employment with
the TRU Group; provided, however, that nothing contained in this
Section 7 shall alter Executive’s or Holdings’
rights with respect to the Equity Documents, which shall continue
to govern Executive’s equity holdings following any
termination in accordance herewith.
a. By the Company For Cause or By
Executive Without Good Reason .
(i) The Employment Term and
Executive’s employment hereunder may be terminated by the
Company for Cause (as defined below) and shall terminate
automatically upon Executive’s resignation without Good
Reason (other than due to Executive’s death or Disability);
provided that Executive will be required to give the Company
at least 30 days’ advance written notice of such
resignation.
(ii) For purposes of this Agreement,
“ Cause ” shall mean (A) Executive’s
willful and continued failure to perform his material duties with
respect to the TRU Group as provided hereunder (other than any such
failure resulting from incapacity due to physical or mental illness
resulting in a Disability) which continues beyond 10 days after a
written demand for substantial performance is delivered to
Executive by the Board, which demand specifically identifies the
manner in which the Board believes that Executive has not performed
his material duties; (B) the commission of any fraud,
misappropriation or misconduct by Executive that causes
demonstrable material injury, monetarily or otherwise, to the
Company or an affiliate; (C)
the conviction of, or pleading guilty or nolo
contendere to, a felony involving moral turpitude; (D) an act
resulting or intended to result, directly or indirectly, in
material gain or personal enrichment to the Executive at the
expense of the Company or an affiliate; (E) any material
breach of Executive’s fiduciary duties to the Company or an
affiliate as an employee or officer; (F) a material violation
of the Company’s Code of Ethical Standards, Business
Practices and Conduct or any other material violation of a TRU
Group policy; (G) the failure by the Executive to comply, in
any material respect, with the provisions of Sections 8 and 9 of
this Agreement or any of the restrictive covenants imposed pursuant
to the Equity Documents, which failure continues beyond 10 days
after a written demand to cure such failure is delivered to
Executive by the Board; or (H) the failure by the Executive to
comply with any other undertaking set forth in this Agreement or
any other agreement Executive has with the Company or any affiliate
or any breach by Executive hereof or thereof if such failure or
breach is reasonably likely to result in a material injury to the
Company or an affiliate. 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 (excluding, however, the
Executive, to the extent he is a member 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, Cause exists
and specifying the particulars thereof in detail.
(iii) If Executive’s
employment is terminated by the Company for Cause, or if Executive
resigns without Good Reason, Executive shall be entitled to
receive:
(A) a lump sum payment of the Base
Salary that is earned by Executive but unpaid as of the date of
Executive’s termination of employment, paid in accordance
with the Company’s payroll practices, but in no event later
than thirty (30) days following Executive’s termination
of employment;
(B) a lump sum payment of any Annual
Bonus that is earned by Executive but unpaid as of the date of
termination for the immediately preceding fiscal year, paid in
accordance with Section 4 (except to the extent payment is
otherwise deferred pursuant to any applicable deferred compensation
arrangement with the Company);
(C) reimbursement, within 30 days
following submission by Executive to the Company of appropriate
supporting documentation, for any unreimbursed business expenses
properly incurred by Executive in accordance with the Company
policy referenced in Section 5(c) above prior to the date of
Executive’s termination; provided claims for such
reimbursement (accompanied by appropriate supporting documentation)
are submitted to the Company within ninety (90) days following
the date of Executive’s termination of employment;
and
(D) such Employee Benefits, if any,
as to which Executive may be entitled under the employee benefit
plans of the Company (the amounts described in clauses
(A) through (D) hereof being referred to as the “
Accrued Rights ”).
Following such termination of Executive’s
employment by the Company for Cause or resignation by Executive
without Good Reason, except as set forth in this
Section 7(a)(iii), Executive shall have no further rights to
any compensation or any other benefits under this
Agreement.
b. Disability or Death
.
(i) The Employment Term and
Executive’s employment hereunder shall terminate upon
Executive’s death and may be terminated by the Company upon
the Executive’s Disability. For purposes of this Agreement,
“Disability” shall mean the determination that the
Executive is disabled pursuant to the terms of the Company’s
long term disability plan.
(ii) Upon termination of
Executive’s employment hereunder for either Disability or
death, Executive or Executive’s estate (as the case may be)
shall be entitled to receive:
(A) the Accrued Rights;
and
(B) a pro rata portion of the Annual
Bonus, if any, that Executive would have been entitled to receive
pursuant to Section 4 hereof for such year based upon the
Company’s actual results for the year of termination and the
percentage of the fiscal year that shall have elapsed through the
date of Executive’s termination of employment, payable to
Executive pursuant to Section 4 had Executive’s
employment not terminated.
Following Executive’s
termination of employment due to Executive’s death or
Disability, except as set forth in this Section 7(b)(ii),
Executive or his estate, as applicable, shall have no further
rights to any compensation or any other benefits under this
Agreement.
c. By the Company Without Cause
or by Executive for Good Reason .
(i) Executive’s employment
hereunder may be terminated (A) by the Company without Cause
(which shall not include Executive’s termination of
employment due to his death or Disability) or (B) by Executive
for Good Reason (as defined below).
(ii) For purposes of this Agreement,
“ Good Reason ” shall mean, without the consent
of the Executive and other than in connection with a termination of
the Executive’s employment by the Company for Cause or due to
Executive’s death or Disability, (A) a reduction in
Executive’s rate of Base Salary or annual incentive
compensation opportunity; (B) a material reduction in
Executive’s duties and responsibilities as set forth in
Section 2 above, an adverse change in some material respect in
Executive’s titles as set forth in Section 2 above or
the assignment to Executive of duties or responsibilities
materially inconsistent with such titles; or (C) notice by the
Company pursuant to Section 1 that it is not extending the
Employment Term, in each case, that is not cured within 10 days
after receipt by the Company of written notice from Executive.
Notwithstanding the foregoing, any termination by Executive for
Good Reason may only occur if Executive provides a Notice of
Termination (as defined in Section 7(d)) for Good Reason
within 45 days after Executive learns about the occurrence of the
event giving rise to the claim of Good Reason.
(iii) If Executive’s
employment is terminated by the Company without Cause (excluding by
reason of Executive’s death or Disability) or by Executive
for Good Reason, Executive shall be entitled to receive:
(A) the Accrued Rights;
(B) a pro rata portion of the Annual
Bonus, if any, that Executive would have been entitled to receive
pursuant to Section 4 hereof for such year based upon the
Company’s actual results for the year of termination and the
percentage of the fiscal year that shall have elapsed through the
date of Executive’s termination of employment, payable to
Executive pursuant to Section 4 had Executive’s
employment not terminated;
(C) subject to Executive’s
continued compliance with the provisions of Sections 8 and 9 and
Executive’s execution (and non-revocation) of a release of
all claims against the TRU Group in a form substantially similar to
the Separation and Release Agreement attached hereto as Exhibit B,
an amount equal to the sum of (x) two (2) times the Base
Salary at the rate in effect immediately prior to the date of
Executive’s termination of employment and (y) the
product of (I) the actual Annual Bonus received in respect of
the fiscal year immediately preceding the year of Executive’s
termination of employment (the “ Prior Bonus ”)
and (II) the “ Severance Period ” (as defined
below) as expressed in years, payable in installments following the
Executive’s termination in accordance with the
Company’s periodic payroll practices; provided ,
however , that the aggregate amount described in this
subsection (C) shall be in lieu of notice or any other
severance amounts to which the Executive may otherwise be entitled
and shall be reduced by any amounts owed by Executive to the
Company or any affiliate. For purposes of clause (y) of this
subsection (C), if Executive’s employment is terminated prior
to his first opportunity to receive an Annual Bonus, the Annual
Bonus, if any, that Executive would have been entitled to receive
pursuant to Section 4 hereof for such year based upon the
Company’s actual results for the year of termination will be
substituted for the Prior Bonus. The “Severance Period”
shall initially be a twelve (12) month period commencing on
the Executive’s termination of employment, which period shall
be increased by three (3) months on each anniversary of the
Hire Date prior to such termination of employment, up to a maximum
of twenty-four (24) months; and
(D) continuation of medical, dental
and life insurance benefits (pursuant to the same benefit plans as
in effect for active employees of the Company), with Executive
paying a portion of such costs as if Executive’s employment
had not terminated, until the earlier to occur of (1) the end
of the Severance Period and (2) the date on which Executive
commences to be eligible for coverage under substantially
comparable medical, dental and life insurance benefit plans from
any subsequent employer; provided if such continued coverage is not
possible under the general terms and provisions of such plan(s)
during such period, the Company shall pay an amount to Executive
equal to the Company’s cost of providing such benefits to
Executive as if Executive’s employment had not terminated. In
order to facilitate such coverage, Executive and his spouse and
dependents, as applicable, in accordance with the
Company’s policies in effect
at the time of Executive’s termination, shall agree to elect
continuation coverage in accordance with the provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1986, as amended
(“ COBRA Coverage ”) and the Company may satisfy
its obligations hereunder by paying a portion of the premiums
required for such COBRA Coverage.
Following Executive’s
termination of employment by the Company without Cause (excluding
by reason of Executive’s death or Disability) or by Executive
for Good Reason, except as set forth in this
Section 7(c)(iii), Executive shall have no further rights to
any compensation or any other benefits under this
Agreement.
d. Notice of Termination .
Any purported termination of employment by the Company or
by
