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Severance Benefits Agreement - Martin E. Hanaka

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Severance Benefits Agreement


Mr. Martin E. Hanaka 4 Woodcrest Road Westborough, MA 01581


Dear Mr. Hanaka:


1. Officer Relationship. You are currently, or are about to become, an officer of Staples, Inc. and/or one of its subsidiaries ("Staples"). In order to induce you to remain or enter into its employ, Staples agrees that you shall receive the severance benefits set forth in this letter agreement (the "Agreement") in the event your employment with Staples is terminated under the circumstances described below.


2. Term of the Agreement. The term of this Agreement (the "Term") shall commence as of the date hereof and shall continue in effect until the later of May 31, 2000 or 24 months after any Change of Control that may occur prior to May 31, 2000. Notwithstanding the termination of your employment, any obligations hereunder which by their terms continue (such as severance benefits) shall survive such termination. This Agreement does not constitute a contract of employment or impose on Staples any obligation to retain you as an employee, it being acknowledged that your employment is "at will" and that both you and Staples may terminate your employment at any time. Any termination of your employment by Staples or by you during the Term shall be communicated by written notice of termination ("Notice of Termination") to the other party hereto in accordance with Section 7, which Notice of Termination shall specify the provisions of this Agreement, if any, upon which such termination is based. The "Date of Termination" shall mean the effective date of such termination as specified in the Notice of Termination (provided that no such Notice of Termination shall specify an effective date more than 180 days after the date of such Notice of Termination).


3. Change in Employment Status. You shall be entitled to the benefits provided in Section 4 if the following event (a "Qualified Termination") occurs: your employment with Staples terminates for any reason, unless such termination is (i) because of your death or Disability, (ii) by Staples for Cause, or (iii) by you other than for Good Reason.


4. Compensation Upon Termination.


(a) In the event of a Qualified Termination, Staples will (i) pay to you for a period of 18 months after the Date of Termination, in equal monthly installments, severance payments at an annual rate equal to the sum of (i) your annual base salary rate in effect immediately prior to the Qualified Termination (or such higher rate as may 2


have been in effect within the 90 days prior to the Notice of Termination) plus (ii) an annualized amount equal to the average annual bonus paid to (or accrued for) you by Staples during the three full fiscal years preceding such Qualified Termination.


(b) In the event of a Qualified Termination, for an 18-month period after the Date of Termination, Staples shall provide you with life, disability, dental, accident and group health insurance benefits substantially similar to those available to similarly situated officers. Notwithstanding the foregoing, Staples shall not provide any such benefit if an equivalent benefit is actually received by you during such period following your termination from another party.


(c) Notwithstanding a Qualified Termination, the vesting schedule of your then outstanding options to purchase Common Stock of Staples shall be accelerated only to the extent specifically provided in the respective option agreements; provided, however, that in the event of a termination of your employment by Staples without Cause, the vesting of your initial stock options granted on August 15, 1994 shall be accelerated such that such options shall be immediately exercisable in full.


(d) If such Qualified Termination is within two years after a Change in Control, you shall be entitled to the benefits provided in paragraphs (a) and (b) above for an additional 6 months beyond the time period specified in such paragraphs.


(e) The amount of any monthly payments to be made to you under Section 4(a) shall be reduced by 50% of any cash compensation earned by or accrued for you as a result of services rendered by you for a third party during the month immediately preceding the date of such payment; provided, however, that (i) this paragraph (e) shall not apply in the event of a Qualified Termination occurring within 24 months after a Change of Control, and (ii) nothing in this Agreement shall obligate you to seek to mitigate the amount of any payments provided for in this Agreement by seeking alternative employment or otherwise.


(f) The benefits payable under this Section 4 shall be conditioned on none of the following events occurring: (i) a determination by the Board of Directors of Staples within 60 days after your termination that your conduct prior to your termination would have warranted a discharge for "Cause" as specified in Section 5(c), or (ii) the Board of Directors of Staples determines that your conduct after termination of employment fails to comply with the terms of any non-competition or confidentiality provision contained in any employment, consulting, advisory, non-disclosure, non-competition or other similar agreement between you and Staples.


5. Certain Definitions.


As used herein, the following terms shall have the following respective meanings:


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(a) Change in Control. A "Change in Control" shall occur or be deemed to have occurred only if any of the following events occur:


(i) any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than Staples, any trustee or other fiduciary holding securities under an employee benefit plan of Staples, or any corporation owned directly or indirectly by the sto
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