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Item 5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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On April 21, 2020,
Bed Bath & Beyond Inc. (the “Company”) announced that John Hartmann has been appointed as the Chief Operating
Officer of the Company and President, buybuy BABY, effective as of May 18, 2020 or such earlier date as the Company and Mr.
Hartmann may mutually agree (the “Effective Date”). Mr. Hartmann, 56, has served as President and Chief Executive
Officer of True Value Company since May 2013. Prior to True Value Company, Mr. Hartmann served as Chief Executive Officer of
Mitre 10 New Zealand Ltd from March 2010 to May 2013. The Company issued a press release on April 21, 2020 announcing Mr.
Hartmann’s appointment, a copy of which is attached as Exhibit 99.1 hereto.
In connection with
Mr. Hartmann’s appointment as the Chief Operating Officer of the Company and President, buybuy BABY, the Company
entered into an employment agreement (the “Employment Agreement”) with Mr. Hartmann, effective as of the
Effective Date, with the following key terms:
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Term. The Employment Agreement has an initial term of three years commencing on the Effective Date (the “Initial
Term”). After the expiration of the Initial Term, the Employment Agreement automatically renews on an annual basis until
either party provides 30 days’ notice of intent not to renew.
·
Cash Compensation. Mr. Hartmann’s annual base salary will equal $1,000,000, and, beginning in fiscal year 2020,
he will be eligible to receive a target annual bonus of 125% of his base salary, to be earned based upon the achievement of performance
objectives to be determined by the Compensation Committee of the Board of Directors of the Company (the “Committee”).
·
Long-Term Equity Incentives. In fiscal year 2020, Mr. Hartmann will be eligible to receive a long-term, performance-based
equity incentive award with a target value at grant of $3,500,000 (the “LTI Awards”), under the Company’s 2012
Incentive Compensation Plan (“2012 Plan”) or the Company’s 2018 Incentive Compensation Plan (“2018 Plan”).
This target award value will be reviewed annually for adjustment by the Committee in its sole discretion for performance-based
equity incentive awards to be granted after fiscal year 2020. The performance criteria for LTI Awards will be determined by the
Committee in its sole discretion, and the LTI Awards will be subject to the terms and conditions of the 2012 Plan or the 2018 Plan
and any applicable award agreements.
·
Benefits. Mr. Hartmann will be eligible to participate in the Company’s employee benefit plans, policies and
arrangements applicable to other executive officers generally, and will be eligible for certain benefits specified in the Employment
Agreement, including home buyout and relocation assistance in connection with his relocation to the New York metropolitan area,
financial planning and an automobile allowance.
·
Inducement Awards.
o
Cash. On the Company’s first payroll date following the Effective Date, Mr. Hartmann will receive a one-time
sign-on inducement cash award of $187,500. Additionally, on the Company’s first payroll date following the Effective Date,
Mr. Hartmann will receive a one-time sign-on cash payment of $500,000 (the “Sign-On Bonus”). If Mr. Hartmann’s
employment is terminated by the Company for “cause”, or Mr. Hartmann resigns without “good reason” (as
each of those terms is defined in the Employment Agreement), in each case, prior to the first anniversary of the Effective Date,
Mr. Hartmann will be obligated to repay the Sign-On Bonus to the Company, net of taxes and be obligated to cooperate with the Company
to facilitate the Company’s recoupment of the taxes withheld and remitted to the applicable taxing authorities with respect
to the Sign-On Bonus.
o
Equity-Based. As an inducement material to his entering into the Employment Agreement and commencing employment with
the Company, on the Effective Date, Mr. Hartmann will receive an inducement award in the form of time-vesting restricted stock
units (“RSUs”) equal in value to $3,000,000 on the Effective Date (the “Make-Whole RSU Award”). The Make-Whole
RSU Award will vest in substantially equal installments on each of the first, second and third anniversaries of the Effective Date,
subject, in general, to Mr. Hartmann remaining in the Company’s employ through the applicable vesting date.
The Make-Whole RSU Award is intended
to replace certain equity awards that were forfeited by Mr. Hartmann upon his resignation from his previous employer. The number
of RSUs subject to the Make-Whole RSU Award on the Effective Date will be calculated based on the volume-weighted average closing
per-share trading price of Company common stock over the twenty trading day period ending immediately prior to the Effective Date.
The equity-based inducement awards discussed above will be issued outside of the 2012 Plan and the 2018 Plan, in accordance with
Nasdaq Listing Rule 5635(c)(4), but will be subject to substantially the same terms as awards made under such plans.
·
Termination due to Death or Disability. In the event of a termination of Mr. Hartmann’s employment due to his
death or disability, (i) the Make-Whole RSU Award, to the extent not previously vested, will immediately vest in full, and (ii)
the Company will pay Mr. Hartmann (or his estate) any earned but unpaid annual bonus for the year prior to the year of termination
(collectively, the “Inducement Award Acceleration”). Mr. Hartmann (or his estate or legal representative) is required
to deliver a formal release of all claims prior to, and as a condition of, his receipt of the payments and accelerated vesting
described in the Employment Agreement following a termination of his employment due to death or disability.
·
Termination without Cause or for Good Reason. The Employment Agreement provides that if the Company terminates Mr.
Hartmann’s employment other than for “cause,” or in the event Mr. Hartmann terminates with “good reason,”
then in addition to Inducement Award Acceleration, Mr. Hartmann will receive severance pay equal to the sum of one point five times
Mr. Hartmann’s base salary and his target annual bonus, and up to 18 months of COBRA benefits at active employee rates.
Severance pay will be paid in accordance with normal payroll. The definitions of “cause” and “good reason”
are set forth in the Employment Agreement. Mr. Hartmann is required to deliver a formal release of all claims prior to, and as
a condition of, his receipt of any of the severance payments, accelerated vesting, and other post-employment benefits described
in the Employment Agreement.
·
Restrictive Covenants. The Employment Agreement also provides for non-competition, non-solicitation and non-interference
during the term of employment and for eighteen months thereafter, and non-disparagement and confidentiality during the term of
employment and surviving the end of the term of employment.
The foregoing description of the Employment
Agreement in this Current Report on Form 8-K is a summary of, and is qualified in its entirety by, the terms of the Employment
Agreement. A copy of the Employment Agreement is attached hereto as Exhibit 10.1 and incorporated herein by reference.