Xxxxxxx X. Xxxxxx
CHANGE OF CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT between HomeBase, Inc., a Delaware corporation (the
"Company"), and Xxxxxxx X. Xxxxxx ("Executive"), dated as of August 31, 1998
(the "Effective Date").
Executive is a key executive of the Company or a Subsidiary and an
integral part of its management.
The Company recognizes that the possibility of a change of control of
the Company may result in the departure or distraction of management to the
detriment of the Company and its shareholders.
The Company wishes to assure Executive of fair severance should
Executive's employment terminate in specified circumstances following a change
of control of the Company and to assure Executive of certain other benefits upon
a change of control.
In consideration of Executive's continued employment with the Company
or a Subsidiary and other good and valuable consideration, the parties agree as
follows:
1. Benefits Upon Change of Control.
1.1 In General. Within 30 days following a Change of Control, whether
or not Executive's employment has been terminated, the Company shall pay to
Executive the following in a lump sum:
(a) an amount equal to the "Target Bonus" under the Company's
Management Incentive Plan or any other annual incentive plan which is
applicable to Executive for the fiscal year in which the Change of
Control occurs (or if the Target Bonus is reduced within 180 days
before the commencement of a Standstill Period, the "Target Bonus"
applicable to Executive for the fiscal year in which such reduction
occurred); and
(b) if Executive is a participant in a performance-based long-range
incentive plan at the Change of Control, such amount as is required to
be paid to Executive upon a Change of Control pursuant to the
provisions of such plan.
1.2 Benefits Following Qualified Termination of Employment. Executive
shall be entitled to the following benefits upon a Qualified Termination:
(a) Within 30 days following the Date of Termination, the
Company shall pay to Executive the following in a lump sum:
(i) an amount equal to two times Executive's Base Salary for one year
at the rate in effect immediately prior to the Date of
Termination or the Change of Control (or if Executive's Base
Salary was reduced within 180 days before the commencement of a
Standstill Period, the rate in effect immediately prior to such
reduction), plus the accrued and unpaid portion of Executive's
Base Salary through the Date of Termination. Any payments made to
Executive under any long term disability plan of the Company with
respect to the two years following termination of employment
shall be offset against such two times Base Salary payment.
Executive shall promptly make reimbursement payments to the
Company to the extent any such disability payments are received
after the Base Salary payment; and
(ii) an amount equal to two times Executive's automobile allowance for
one year at the rate in effect immediately prior to the Date of
Termination or the Change of Control, (or if such automobile
allowance was reduced within 180 days before the commencement of
a Standstill Period, the rate in effect immediately prior to such
reduction unless such reduction was offset by an increase in Base
Salary during such 180-day period), plus any portion of
Executive's automobile allowance payable but unpaid through the
Date of Termination; and
(iii)an amount equal to the Target Bonus amount, as defined and
determined under Section 1.1(a) above.
(b)(i) Until the day 24 months after the Date of Termination, the
Company shall maintain in full force and effect for the continued benefit of
Executive and Executive's family all life insurance and medical insurance (other
than long-term disability) plans and programs in which Executive was entitled to
participate immediately prior to the Change of Control (or if Executive's title
was changed to a level below that of Executive's Current Title within 180 days
before the commencement of a Standstill Period, all such plans and programs in
which Executive was entitled to participate immediately prior to such change, if
the benefits thereunder are greater), provided that Executive's continued
participation is possible under the general terms and provisions of such plans
and programs. In the event that participation in such plans or programs is not
available to Executive for any reason, including termination of the plan, the
Company shall arrange upon comparable terms to provide Executive with benefits
substantially similar to those which Executive is entitled to receive under such
plans and programs. Notwithstanding the foregoing, the Company's obligations
hereunder with respect to life insurance or medical insurance plans and programs
shall be deemed satisfied to the extent (but only to the extent) of any such
insurance coverage or benefits provided by another employer.
(b)(ii) If Qualified Termination occurs by reason of Disability, the
Company shall maintain in full force and effect for the continued benefit of
Executive, disability benefits and/or disability insurance at the same level to
which Executive was entitled immediately prior to the Qualified Termination.
1.3 Coordination With Certain Tax Rules. Payments under Sections 1.1
and 1.2 shall be made without regard to whether the deductibility of such
payments (or any other payments to or for the benefit of Executive) would be
limited or precluded by Internal Revenue Code Section 280G and without regard to
whether such payments (or any other payments) would subject Executive to the
federal excise tax levied on certain "excess parachute payments" under Internal
Revenue Code Section 4999; provided, that if the total of all payments to or for
the benefit of Executive(including acceleration of vesting of benefits under
existing plans), after reduction for all federal taxes (including the tax
described in Internal Revenue Code Section 4999, if applicable) with respect to
such payments ("Executive's total after-tax payments"), would be increased by
the limitation or elimination of any payment under Sections 1.1 or 1.2, amounts
payable under Sections 1.1 and 1.2 shall be reduced to the extent, and only to
the extent, necessary to maximize Executive's total after-tax payments. The
determination as to whether and to what extent payments under Sections 1.1 or
1.2 are required to be reduced in accordance with the preceding sentence shall
be made at the Company's expense by PricewaterhouseCoopers LLP or by such other
certified public accounting firm as the Executive Compensation Committee of the
Company's Board of Directors may designate prior to a Change of Control. In the
event of any underpayment or overpayment under Sections 1.1 or 1.2, as
determined by PricewaterhouseCoopers LLP (or such other firm as may have been
designated in accordance with the preceding sentence), the amount of such
underpayment or overpayment shall forthwith be paid to Executive or refunded to
the Company, as the case may be, with interest at the applicable Federal rate
provided for in Section 7872(f)(2) of the Internal Revenue Code.
2. Noncompetition; No Mitigation of Damages; Other Severance Payments;
Withholding.
2.1 Noncompetition. Upon a Qualified Termination, any agreement by
Executive not to engage in competition with the Company subsequent to the
termination of Executive's employment, whether contained in an employment
contract or other agreement, shall no longer be effective.
2.2 No Duty to Mitigate Damages. Executive's benefits under this
Agreement shall be considered severance pay in consideration of Executive's past
service and Executive's continued service from the date of this Agreement, and
Executive's entitlement thereto shall neither be governed by any duty to
mitigate Executive's damages by seeking further employment nor offset by any
compensation which Executive may receive from future employment.
2.3 Other Severance Payments. In the event that Executive has an
employment contract or any other agreement with the Company (or a Subsidiary)
which entitles Executive to severance payments upon the termination of
Executive's employment with the Company, the amount of any such severance
payments shall be deducted from the payments to be made under this Agreement.
2.4 Withholding. Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to Executive shall be subject to
the withholding of such amounts, if any, relating to tax and other payroll
deductions as the Company may reasonably determine it should withhold pursuant
to any applicable law or regulation.
3. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled exclusively by
arbitration in Boston, Massachusetts in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof.
4. Legal Fees and Expenses. The Company shall pay all legal fees and
expenses, including but not limited to counsel fees, stenographer fees, printing
costs, etc. reasonably incurred by Executive in contesting or disputing that the
termination of Executive's employment during a Standstill Period is for Cause or
other than for good reason (as defined in paragraph (j) of Exhibit A) or in
obtaining any right or benefit to which Executive is entitled under this
Agreement. Any amount payable under this Agreement that is not paid when due
shall accrue interest at the prime rate as from time to time in effect at Xxxxx
Fargo Bank, N.A., or its successors or assigns, until paid in full.
5. Notice of Termination. During a Standstill Period, Executive's
employment may be terminated by the Company (or a Subsidiary) only upon 30 days'
written notice to Executive.
6. Notices. All notices shall be in writing and shall be deemed given
five days after mailing in the continental United States by registered or
certified mail, or upon personal receipt after delivery, telex, telecopy or
telegram, to the party entitled thereto at the address stated below or to such
changed address as the addressee may have given by a similar notice:
To the Company: HomeBase, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: President
To Executive: At Executive's home address, as last
shown on the records of the Company
7. Severability. In the event that any provision of this Agreement
shall be determined to be invalid or unenforceable, such provision shall be
enforceable in any other jurisdiction in which valid and enforceable and in any
event the remaining provisions shall remain in full force and effect to the
fullest extent permitted by law.
8. General Provisions.
8.1 Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of the parties and be enforceable by Executive's personal or
legal representatives or successors. If Executive dies while any amounts would
still be payable to Executive hereunder, benefits would still be provided to
Executive's family hereunder or rights would still be exercisable by Executive
hereunder if Executive had continued to live, such amounts shall be paid to
Executive's estate, such benefits shall be provided to Executive's family and
such rights shall remain exercisable by Executive's estate in accordance with
the terms of this Agreement. This Agreement shall not otherwise be assignable by
Executive.
8.2 Successors. This Agreement shall inure to and be binding upon the
Company's successors, including any successor to all or substantially all of the
Company's business and/or assets. The Company will require any successor to all
or substantially all of the business and/or assets of the Company by sale,
merger (where the Company is not the surviving corporation), lease or otherwise,
by agreement in form and substance satisfactory to Executive, to assume
expressly this Agreement. If the Company shall not obtain such agreement prior
to the effective date of any such succession, Executive shall have all rights
resulting from termination by Executive for good reason (as defined in paragraph
(j) of Exhibit A) under this Agreement. This Agreement shall not otherwise be
assignable by the Company.
8.3 Amendment or Modification; Waiver. This Agreement may not be
amended unless agreed to in writing by Executive and the Company. No waiver by
either party of any breach of this Agreement shall be deemed a waiver of a
subsequent breach.
8.4 Titles. No provision of this Agreement is to be construed by
reference to the title of any section. ------
8.5 Continued Employment. This Agreement shall not give Executive any
right of continued employment or any right to compensation or benefits from the
Company or any Subsidiary except the right specifically stated herein to certain
severance and other benefits, and shall not limit the Company's (or a
Subsidiary's) right to change the terms of or to terminate Executive's
employment, with or without Cause, at any time other than during a Standstill
Period, except as may be otherwise provided in a written employment agreement
between the Company (or a Subsidiary) and Executive.
8.6 Termination of Agreement Outside of Standstill Period. This
Agreement shall be automatically terminated upon the first to occur of (i) the
date five (5) years after the Effective Date of this Agreement unless a
Standstill Period is in effect on such date, in which case such termination
shall occur upon the expiration of such Standstill Period or (ii) the
termination of Executive's employment for any reason, whether voluntary or
involuntary, at any time other than during a Standstill Period or (iii) the
180th day after a change in Executive's title to a level below that of
Executive's Current Title unless a Standstill Period was in effect on the date
of such change or within 180 days thereafter or (iv) if Executive is employed by
a Subsidiary of the Company, the date on which the Subsidiary either ceases to
be a Subsidiary of the Company or sells or otherwise disposes of all or
substantially all of its assets, unless such event occurs during a Standstill
Period and Executive's employment shall have been terminated in a Qualified
Termination within 90 days of such event.
8.7 Prior Agreement. This Agreement amends and restates and shall
supersede and replace any prior change of control severance agreement between
the Company or any of its subsidiaries, or any predecessor, and Executive.
8.8 Definitions. The terms defined in Exhibits A and B hereto are used
herein as so defined.
8.9 Governing Law. The validity, interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
HOMEBASE, INC.
By___________________________
Executive:
-----------------------------
EXHIBIT A
Definitions
The following terms as used in this Agreement shall have the
following meanings:
(a) "Base Salary" shall mean Executive's annual base salary,
exclusive of any bonus or other benefits Executive may receive.
(b) "Cause" shall mean dishonesty, conviction of a felony, gross
neglect of duties (other than as a result of Incapacity, Disability or
death), or conflict of interest which conflict shall continue for 30 days
after the Company gives written notice to Executive requesting the cessation
of such conflict.
In respect of any termination during a Standstill Period, Executive
shall not be deemed to have been terminated for Cause until the later to
occur of (i) the 30th day after notice of termination is given and (ii) the
delivery to Executive of a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the Company's directors at a
meeting called and held for that purpose (after reasonable notice to
Executive), and at which Executive together with his counsel was given an
opportunity to be heard, finding that Executive was guilty of conduct
described in the definition of "Cause" above, and specifying the particulars
thereof in detail; provided, however, that the Company may suspend Executive
and withhold payment of Executive's Base Salary from the date that notice of
termination is given until the earliest to occur of (a) termination of
Executive for Cause effected in accordance with the foregoing procedures (in
which case Executive shall not be entitled to Executive's Base Salary for
such period), (b) a determination by a majority of the Company's directors
that Executive was not guilty of the conduct described in the definition of
"Cause" above (in which case Executive shall be reinstated and paid any of
Executive's previously unpaid Base Salary for such period), or (c) the 90th
day after notice of termination is given (in which case Executive shall be
reinstated and paid any of Executive's previously unpaid Base Salary for
such period).
(c) "Change of Control" shall have the meaning set forth in Exhibit
B.
(d) "Company" shall mean HomeBase, Inc. or any successor.
(e) "Current Title" shall mean Executive's title on the date 180
days prior to the commencement of a Standstill Period.
(f) "Date of Termination" shall mean the date on which Executive's
employment is terminated.
(g) "Disability" shall have the meaning given it in the Company's
long-term disability plan. Executive's employment shall be deemed to be
terminated for Disability on the date on which Executive is entitled to
receive long-term disability compensation pursuant to such long-term
disability plan.
(h) "Executive" shall have the meaning set forth in the first paragraph
of this Agreement.
(i) "Incapacity" shall mean a disability (other than Disability
within the meaning of the immediately preceding definition) or other
impairment of health that renders Executive unable to perform Executive's
duties to the reasonable satisfaction of the Board of Directors of the
Company. If by reason of Incapacity Executive is unable to perform
Executive's duties for at least six months in any 12-month period, upon
written notice by the Company the employment of Executive shall be deemed to
have terminated by reason of Incapacity.
(j) "Qualified Termination" shall mean the termination of
Executive's employment during a Standstill Period (1) by the Company other
than for Cause, or (2) by Executive for good reason, or (3) by reason of
death, Incapacity or Disability.
For purposes of this definition, termination for "good reason"
shall mean the voluntary termination by Executive of Executive's employment
(A) within 120 days after the occurrence without Executive's express written
consent of any of the events described in clauses (I), (II), (III), (IV),
(V) or (VI) below, provided that Executive gives notice to the Company at
least 30 days in advance requesting that the situation described in those
clauses be remedied, and the situation remains unremedied upon expiration of
such 30-day period; (B) within 120 days after the occurrence without
Executive's express written consent (which must expressly refer to such
consent as being given under this Agreement) of the events described in
clauses (VII) or (VIII) below, provided that Executive gives notice to the
Company at least 30 days in advance; or (C) upon occurrence of the events
described in clause(IX) below, provided that Executive gives notice to the
Company at least 30 days in advance:
(I) the assignment to Executive of any duties inconsistent with
Executive's positions, duties, responsibilities, reporting
requirements, and status with the Company (or a Subsidiary)
immediately prior to a Change of Control, or a substantive change
in Executive's titles or offices as in effect immediately prior
to a Change of Control, or any removal of Executive from or any
failure to reelect Executive to such positions, except in
connection with the termination of Executive's employment by the
Company (or a Subsidiary) for Cause or by Executive other than
for good reason; or any other action by the Company (or a
Subsidiary) which results in a diminishment in such position,
authority, duties or responsibilities, other than an
insubstantial and inadvertent action which is remedied by the
Company or the Subsidiary promptly after receipt of notice
thereof given by Executive; or
(II) if Executive's rate of Base Salary for any fiscal year is less
than 100 percent of the rate of Base Salary paid to Executive in
the completed fiscal year immediately preceding the Change of
Control, or if Executive's total cash compensation opportunities,
including salary, incentives and automobile allowance, for any
fiscal year are less than 100 percent of the total cash
compensation opportunities made available to Executive in the
completed fiscal year immediately preceding the Change of Control
unless any such reduction represents an overall reduction of no
more than 10 percent in the rate of Base Salary paid or cash
compensation opportunities made available, as the case may be,
and affects all other executives in the same organizational level
(it being the Company's burden to establish this fact); or
(III)the failure of the Company (or a Subsidiary) to continue in
effect any benefits or perquisites, or any pension, life
insurance, medical insurance or disability plan in which
Executive was participating immediately prior to a Change of
Control unless the Company (or a Subsidiary) provides Executive
with a plan or plans that provide substantially similar benefits,
or the taking of any action by the Company (or a Subsidiary) that
would adversely affect Executive's participation in or materially
reduce Executive's benefits under any of such plans or deprive
Executive of any material fringe benefit enjoyed by Executive
immediately prior to a Change of Control unless the elimination
or reduction of any such benefit, perquisite or plan is of an
aggregate value of no more than 5 percent of the rate of Base
Salary and affects all other executives in the same
organizational level (it being the Company's burden to establish
this fact); or
(IV) any purported termination of Executive's employment by the
Company (or a Subsidiary) for Cause during a Standstill Period
which is not effected in compliance with paragraph (b) of this
Exhibit; or
(V) any relocation of Executive of more than 40 miles from the place
where Executive was located at the time of the Change of Control;
or
(VI) any other breach by the Company of any provision of this
Agreement; or
(VII) the Company sells or otherwise disposes of, in one transaction or
a series of related transactions, assets or earning power
aggregating more than 30 percent of the assets (taken at asset
value as stated on the books of the Company determined in
accordance with generally accepted accounting principles
consistently applied) or earning power of the Company (on an
individual basis) or the Company and its subsidiaries (on a
consolidated basis) to any other Person or Persons (as those
terms are defined in Exhibit B); or
(VIII) if Executive is employed by a Subsidiary of the Company, such
Subsidiary either ceases to be a Subsidiary of the Company or
sells or otherwise disposes of, in one transaction or a series of
related transactions, assets or earning power aggregating more
than 30 percent of the assets (taken at asset value as stated on
the books of the Subsidiary determined in accordance with
generally accepted accounting principles consistently applied) or
earning power of such Subsidiary (on an individual basis) or such
Subsidiary and its subsidiaries (on a consolidated basis) to any
other Person or Persons (as those terms are defined in Exhibit
B); or
(IX) the voluntary termination by Executive of Executive's employment
at any time during the period commencing eight months plus one
day after the Change of Control and ending 12 months after the
Change of Control, provided, that in the event of any such
voluntary termination pursuant to this clause (IX), the Executive
shall be entitled to receive only one-half (1/2) of the lump sum
amount provided for in Section 1.2(a) and the benefits provided
for in Section 1.2(b)(i) shall be provided for one-half (1/2) the
number of months from the Date of Termination stipulated in that
Section.
(k) "Standstill Period" shall be the period commencing on the date
of a Change of Control and continuing until the close of business on the
last business day of the 24th calendar month following such Change of
Control.
(l) "Subsidiary" shall mean any corporation in which the Company
owns, directly or indirectly, 50 percent or more of the total combined
voting power of all classes of stock.
EXHIBIT B
Definition of Change of Control
A "Change of Control" shall mean:
(a) The acquisition by an 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"); provided, however, that for
purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a transaction which satisfies the
criteria set forth in clauses (i), (ii) and (iii) of subsection (c) of this
definition; 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 subsequently to the date hereof whose election, or nomination for
election by the Company's stockholders, 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
(except that this proviso shall not apply to any individual whose initial
assumption of office as a director 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 involving the Company or a sale or other disposition of all or
substantially all of the assets of the Company (a "Business Combination"),
in each case, unless, immediately 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 60% 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, of the corporation resulting from
such Business Combination (which as used in section (c) of this definition
shall include, 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 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 and
(iii) at least half 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 stockholders of the Company of a
complete liquidation or dissolution of the Company.
