8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) February 28, 2006

THE BOMBAY COMPANY, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or Other Jurisdiction of Incorporation)

1-7832 (Commission File Number)	75-1475223 (I.R.S. Employer Identification No.)
550 Bailey Avenue, Fort Worth, Texas (Address of Principal Executive Officers)	76107 (Zip Code)

(817) 347-8200

(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c))

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Item 1.01 Entry into a Material Definitive Agreement

Section 1—Registrant’s Business and Operations.

Item 1.01—Entry into a Material Definitive Agreement.

A. Incentive Bonus Plan. On February 28, 2006, the Compensation and Human Resources Committee (the “Committee”) of the Board of Directors of The Bombay Company, Inc. (“Bombay”) approved an executive incentive bonus plan for the fiscal year ended February 3, 2007 (the “2006 Program”), pursuant to the Company’s Executive Management Incentive Compensation Plan (the “Incentive Plan") filed as an exhibit to the Company’s Definitive Proxy Statement dated April 10, 2003. The 2006 Program provides for performance based short-term incentive awards for the Company’s executive officers, conditioned upon the achievement of specified performance goals for the fiscal year.

Eligible participants under the 2006 Program include the following executive officers and named executive officers from the 2005 Proxy Statement: (i) James D. Carreker, Chief Executive Officer of the Company, (ii) Steven C. Woodward, Executive Vice President and General Merchandise Manager, (iii) Justin Lewis, Senior Vice President, (iv) Elaine D. Crowley, Senior Vice President, Chief Financial Officer and Treasurer, (v) Lucretia L. Doblado, Senior Vice President, (vi) Donald V. Roach, Senior Vice President, (vii) Michael J. Veitenheimer, Senior Vice President and Secretary, (viii) James D. Johnson, Vice President, and (ix) Pasty P. Holmes, Vice President.

Under the 2006 Program, each participant is eligible to receive a cash bonus, based upon a percentage of such participant’s annual salary, with the range of bonuses from 40% to 100%. For Fiscal 2006, 75% of the participant’s bonus is based on Company operating results and 25% on individual performance, except for the Chief Executive Officer, whose bonus is based entirely upon the Company’s operating results. The 2006 Program provides for incentives payments relating to the Company’s operating results for each six-month operating season based upon the attainment of objectively established financial goals for Fiscal 2006, which are subject to adjustment by the Committee for unusual items, if any. The bonus pools for each season are derived by setting aside a fixed percentage of the improvement in pre-tax operating results and contain a minimum threshold that must be met for the payment of any bonuses. The assessment of individual performance relating to each participant’s operational or functional area is made on an annual basis and payment is subject to the attainment of a minimum threshold of improvement in pre-tax operating results.   Bonuses are not capped, except for that of the Chief Executive Officer whose bonus is capped at 150% of base salary, and financial performance above performance target levels results in escalating bonus payments according to a predetermined formula.

As supported by the Securities and Exchange Commission’s Frequently Asked Questions dated November 23, 2004 (Question 13) and consistent with the treatment of similar information under Instruction 2 to Item 402(k) of Regulation S-K, the Registrant has excluded information relating to target levels with respect to specific quantitative or qualitative performance-related factors, or factors or criteria involving confidential commercial or business information, the disclosure of which would have an adverse effect on the Registrant.

B.Stock Options. On March 3, 2006, the Committee approved an annual grant of stock options (the”2006 Annual Stock Option Grant”) and a retention grant of stock options (the”2006 Retention Stock Option Grant”) to each of the executive officers of Bombay identified in the table below. Options were granted under the Company’s 1996-Long-Term Incentive Stock Plan (“Option Plan”) and are subject in all respects to the Option Plan’s terms and conditions. The Plan and the form of stock option grant agreement for the annual option grant are filed as Exhibits 10(d) and 10(e) to the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2005. The form of agreement for the retention option grant is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Executive Officer	2006 Annual Stock Option Grant 1	2006 Retention Stock  Option Grant 2
Steven C. Woodward	67,000	50,000
Justin W. Lewis	50,000	30,000
Elaine D. Crowley	50,000	30,000
Lucretia D. Doblado	50,000	20,000
Donald V. Roach	50,000	20,000
Michael J. Veitenheimer	50,000	20,000
James D. Johnson	40,000	10,000
Patsy P. Holmes	25,000	10,000

¹ The 2006 Stock Option Grants were made on March 3, 2006 at an exercise price equal to the fair market value based on the closing market value of Bombay’s Common Stock on the New York Stock Exchange on March 3, 2006 (which was $3.29). All options will vest in equal annual installments over four years beginning on the first anniversary of the grant date. Options expire seven years after the date of grant.

² The 2006 Retention Stock Option Grants were made on March 3, 2006 at fair market value based on the closing market value of Bombay’ Common Stock on the New York Stock Exchange on March 3, 2006 (which was $3.29). All options have a two-year cliff vesting period and will vest on March 3, 2008. Options expire seven years after the date of grant.

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C.Change of Control Severance Agreements. On February 28, 2006, the Company entered into a Change in Control Severance Agreement (“Agreement”) with each of the executive officers included in the table above. These Agreements provide that in the event that there is a change in control of the Company as defined in the Agreement and the executive officer’s employment is terminated during the period from six months prior to 24 months after the change of control, other than for cause, then such officer shall be entitled to receive, in lieu of any other cash severance payment and in exchange for a release of all claims against the registrant, a lump sum payment equal to a prorated bonus for the year in which the change of control occurs plus a pre-determined multiple of the then current annual base salary and annual bonus, as defined, the immediate vesting of all stock options and restricted stock previously granted and, continued health and welfare benefits for the period of time equal to the payment period set forth above. Total severance payments or benefits payable under the Agreement are subject to limits established under Section 280G of the Internal Revenue Code with respect to “parachute payments”. In the event that such a payment exceeded the amount permitted under Section 280G, the amount would be adjusted accordingly. The payment multiples are determined by position, with Executive Vice Presidents and Senior Vice Presidents being entitled to two times annual base salary and bonus and Vice Presidents entitled to one and one-half times annual base salary and bonus. A copy of the form of Change of Control Severance Agreement is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

Exhibit No.Description

99.1     99.2 Form of Employee Award Agreement Non Qualified Options Pursuant to The Bombay Company, Inc. 1996 Long-Term Incentive Stock Plan   Form of Change of Control Severance Agreement

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	THE BOMBAY COMPANY, INC.
	(Registrant)
Date: March 6, 2006	/s/ ELAINE D. CROWLEY
	Elaine D. Crowley Senior Vice President, Chief Financial Officer and Treasurer

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EX-99.1

EXHIBIT 99.1

EMPLOYEE AWARD AGREEMENT

Non Qualified Options

Pursuant to

THE BOMBAY COMPANY, INC.

1996 LONG-TERM INCENTIVE STOCK PLAN

(RETENTION AWARD)

This Award Agreement (“the Agreement”) is made this 3rd day of March, 2006 between THE BOMBAY COMPANY, INC., a Delaware corporation (the “Company”) and __________________, an employee of the Company or one of its subsidiaries (the “Employee”).

WHEREAS, the Company desires to carry out the purposes of The Bombay Company, Inc. 1996 Long-Term Incentive Stock Plan (the “Plan”) by affording Employee the opportunity to purchase shares of the Company’s $1.00 par value common stock (the “Shares”).

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth for other good and valuable consideration, the parties hereto agree as follows:

1.   Grant of Award. The Company hereby grants to Employee the right and option (the “Option”) to purchase an aggregate of _________ shares of the Company’s Shares, such Shares being subject to adjustment as provided in paragraph 8 hereof, and on the terms and conditions herein set forth. The Shares granted pursuant to this Option (the “Option Shares”) are granted as a non-qualified option.

2.Purchase Price. The purchase price of the Option Shares shall be $3.29 per Share, such purchase price being 100% of the fair market value of such Shares on the date first appearing above (the “Date of the Grant”).

3.Exercise of Award. Unless expired as provided in paragraph 5 below, and subject to the special provisions of paragraph 6 below, the Award for Option Shares may be exercised in full or in part commencing on the second anniversary of the Date of Grant.

4.Manner of Exercise; Payment of Purchase Price.

A.Subject to the terms and conditions of this Agreement, the Award shall be exercised by written notice to the Company at its principal office. Such notice shall state the election to exercise the Award and shall specify the number of Option Shares sought to be exercised pursuant to the notice. Such notice of exercise shall be signed by Employee and shall be irrevocable when given.

B.The notice of exercise shall be accompanied by the full payment of the purchase price for the Option Shares in cash by certified check or bank cashiers check or through satisfactory arrangements for payment by a broker representing the Employee in the sale of some or all of the Option Shares. Subject to approval of an authorized Committee of the Board of Directors (the “Committee”), payment of the purchase price may be accomplished by the surrender of stock certifications representing Shares having an aggregate fair market value on the date of exercise equal to the purchase price of the Option Shares, or by a combination of cash and Shares.

C.Upon receipt of the purchase price, and subject to the terms of paragraph 11, a certificate representing the Option Shares exercised shall be registered in the name of the person or persons so exercising the Award. In the event the Award shall be exercised pursuant to paragraph 7, by any person or persons other than the Employee, such notice shall be accompanied by appropriate proof satisfactory to the Company of the right of such person or persons to exercise the Award. All Share issued as a result of an exercise of an Award as provided herein shall be fully paid and non-assessable.

D.The payment of withholding tax liability by Employee shall be a condition precedent to the Company’s obligation to issue any certificates for Shares resulting from an exercise of an Award.

5.Exercise and Expiration of Award. This Award, if not exercised, shall expire and become null and void upon the expiration of three (3) months after Employee ceases to be employed by the Company or any of its subsidiaries (subject to being extended based upon service duration with the Company) unless such termination shall have been for cause, as determined by the Committee, in which event the Award shall be null and void as of the date of such termination. Notwithstanding the above, if Employee retires from the Company or any of its subsidiaries (as determined by the Committee in its sole discretion), the Award may, at the Committee’s discretion, remain exercisable for a period not to exceed 36 months following such retirement. In the event of Employee’s death or permanent disability, the Award shall be exercisable for a period of 12 months following such death or disability. Notwithstanding the above, the Award shall, without exception, become null and void once a period of 7 years shall have lapsed since the Date of Grant. Except as provided in paragraph 6 below, only those portions of this Award vested as of the date of termination of Employee’s employment may be exercised.

6.Acceleration of Exercise Dates. Notwithstanding the provisions of paragraph 3 above relating to the vesting of this Award in installments, the Committee may, in its discretion, permit this Award to be immediately exercisable, until the expiration date provided in paragraph 5 above, for the entire number of Option Shares covered hereby upon the retirement of Employee or any Change in Control of the Company (as defined in the Plan).

7.Award Nontransferable. Unless permitted by law or regulation and approved by the Committee, the Award and any right related thereto shall not be transferable by Employee otherwise than by will or by the laws of descent and distribution and may be exercised during Employee’s lifetime only by Employee. Upon the death of Employee, the Award may be exercised by Employee’s executor, administrator, legatee or distributee, as the case may be.

8.Adjustments of Shares Subject to Award. If any Shares shall at any time be changed or exchanged by reason or reorganization, merger, consolidation, recapitalization, reclassification, stock split, combination of shares or a dividend payable in stock, then the aggregate number of Option Shares subject to this Agreement and the purchase price of such Option Shares shall be automatically adjusted such that Employee’s proportionate interest shall be maintained as before the occurrence of such event. The determination of any such adjustment by the Committee shall be final, binding and conclusive.

9.No Contract. This Agreement does not constitute a contract for employment and shall not affect the right of the Company to terminate Employee’s employment for any reason whatsoever.

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    10.Rights as Shareholder. This Award shall not entitle Employee or any permitted transferee to any rights of a shareholder of the Company or to any notice of proceedings of the Company with respect to any Option Shares issuable upon exercise of this Award unless and until the Award has been exercised for such Shares.

11.Restriction on Issuance of Shares. The Company shall not be required to issue or deliver any certificates for Shares purchased upon the exercise of an Award prior to the obtaining of any approval from any governmental agency which the Company shall, in its sole discretion, determine to be necessary or advisable, and the completion of any registration or other qualification of such Shares under any state or federal law, ruling or regulations of any governmental body which the Company shall, in its sole discretion, determine to be necessary or advisable. In addition, if Shares reserved for issuance upon exercise of Awards shall not then be registered under the Securities Act of 1933, the Company may, upon Employee’s exercise of any Award, require Employee or his permitted transferee to represent in writing that the Shares being acquired are for investment and not with a view to distribution, and may mark the certificate for the Shares with a legend restricting transfer and may issue stop transfer orders relating to such certificate to the transfer agent.

12.Lapse of Award. The Agreement shall be null and void in the event Employee shall fail to sign and return a counterpart hereof to the Company within thirty (30) days of its delivery to Employee.

13.Confidentiality and Non-Solicitation Restrictions. In consideration of Employee’s receipt of the above stock option grant, Employee agrees as follows:

A.Employee will not disclose to any person any confidential information obtained while in the employ of the Company, including, without limitation, any of the Company’s inventions, methods of distribution, vendors, customers or other trade secrets; provided, however, that this provision shall not preclude Employee from use of or disclosure of information known generally to the public or of information not considered confidential by persons engaged in the business conducted by the Company or from disclosure required by law or court order. Upon termination of employment with the Company, Employee shall immediately return to the Company all documents, reports, files, memoranda, records, keys and pass cards, software and other physical or personal property which Employee has received or prepared or helped to prepare in connection with his or her employment which is in Employee’s possession or control and Employee agrees not to retain any copies, duplications, reproductions or excerpts thereof.

B.Employee will not now or for a period of one (1) year in the future solicit and/or attempt to recruit employees of the Company for other employment with any subsequent employer or attempt directly or indirectly to solicit the trade or business of any current or prospective customer, supplier or partner of the Company.

C.In the event Employee fails to comply with the provisions of paragraphs A and B above, the Company shall have the right to rescind any transaction involving the Shares granted pursuant to this option up to six (6) months prior to such failure to comply and for up to two (2) years thereafter. In the event of any such rescission, Employee shall pay to the Company the amount of any gain realized or payment received as a result of the rescinded exercise in such manner and on such terms and conditions as may be required, and the Company shall be entitled to set-off against the amount of any such gain any amount owed to the Employee by the Company.

14.Binding Effect. This Agreement shall be binding upon the heirs, executors, administrators, and successors of the parties hereto.

15.Governing Instrument and Law. This Award and any Shares issued hereunder shall in all respects by the terms and provisions of the Plan, and by the laws of the State of Texas, and in the event of a conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control.

THE BOMBAY COMPANY, INC.

By: ________________________

Michael J. Veitenheimer

Senior Vice President & General Counsel

Accepted and Agreed:

_______________________________       Date: _____________________________

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EX-99.2

EXHIBIT 99.2

THE BOMBAY COMPANY, INC.

CHANGE OF CONTROL SEVERANCE AGREEMENT

This Change of Control Severance Agreement (the “Agreement”) is made and entered into effective as of February 28, 2006 (the “Effective Date”), by and between _____________ (the “Employee”) and The Bombay Company, Inc., a Delaware corporation (the “Company”). Certain capitalized terms used in this Agreement are defined in Section 1 below.

RECITALS

A.It is expected that the Company from time to time will consider the possibility of a Change of Control. The Board of Directors of the Company (the “Board”) recognizes that such consideration can be a distraction to the Employee and can cause the Employee to consider alternative employment opportunities.

B.The Board believes that it is in the best interests of the Company and its shareholders to provide the Employee with an incentive to continue his employment and to maximize the value of the Company upon a Change of Control for the benefit of its shareholders.

C.In order to provide the Employee with enhanced financial security and sufficient encouragement to remain with the Company notwithstanding the possibility of a Change of Control, the Board believes that it is imperative to provide the Employee with certain severance benefits upon the Employee’s termination of employment following a Change of Control.

AGREEMENT

In consideration of the mutual covenants herein contained and the continued employment of Employee by the Company, the parties agree as follows:

1.Definition of Terms. The following terms referred to in this Agreement shall have the following meanings:

(a)Annual Bonus. “Annual Bonus” shall mean the greater of the amount equal to the average of the three (3) most recent annual bonuses awarded to the Employee by the Company or the current targeted annual bonus for the fiscal year in which the Change of Control occurs.

(b)Cause. “Cause” shall mean (i) any act of personal dishonesty taken by the Employee in connection with his responsibilities as an employee which is intended to result in substantial personal enrichment of the Employee, (ii) the Employee’s conviction of a felony which the Board reasonably believes has had or will have a material detrimental effect on the Company’s reputation or business, (iii) a willful act by the Employee which constitutes misconduct and is injurious to the Company, and (iv) continued willful violations by the Employee of the Employee’s obligations to the Company after there has been delivered to the Employee a written demand for performance from the Company which describes the basis for the Company’s belief that the Employee has not substantially performed his duties.

(c)Change of Control. “Change of Control” of the Company, unless otherwise determined by the Board, shall mean the happening of any of the following events:

(i)the acquisition, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership of 20% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however, that any acquisition by (i) the Company or any of its subsidiaries, (ii) any employee benefit plan (or related trust) of the Company or its subsidiaries, or (iii) any corporation with respect to which following such acquisition, more than 50% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the common stock and voting securities of the Company immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the then outstanding shares of common stock of the Company or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, as the case may be, shall not constitute a Change of Control;

(ii)individuals who, as of the Effective Date, constituted 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 subsequent to such date whose election, or nomination for election by the Company’s shareholders, 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. Notwithstanding the foregoing, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company shall not be considered as though such individual were a member of the Incumbent Board; or

(iii)approval by the shareholders of the Company of (i) a reorganization, merger or consolidation of the Company, in each case, with respect to which the individuals and entities who were the respective beneficial owners of the common stock and voting securities of the Company immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 50% 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, as the case may be, of the corporation resulting from such reorganization, merger or consolidation or (ii) a complete liquidation or dissolution of the Company or of the sale or other disposition of all or substantially all of the assets of the Company.

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(d)Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.

(e)Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

(f)Protection Period. “Protection Period” shall mean the time beginning six (6) months prior to a Change of Control and continuing for twenty-four (24) months after the Change of Control.

(g)Termination Date. “Termination Date” shall mean the effective date of any notice of termination or resignation delivered by one party to the other hereunder.

2.Term of Agreement; Termination. This Agreement shall be effective as of the Effective Date, however, anything in this Agreement to the contrary notwithstanding, neither this Agreement nor any of its provisions shall be operative unless and until there has been a Change of Control. The term of this Agreement shall be for a period of three (3) years beginning on the Effective Date (“Initial Term”) and shall automatically renew thereafter for successive one (1) year periods (“Renewal Term”) unless or until:

(a)terminated by the Company with no less than six months advance written notice to the Employee prior to the end of the then current Initial or Renewal Term;

(b)the date that all obligations of the parties hereto under this Agreement have been satisfied; or

(c)if earlier, on the date, prior the Protection Period, the Employee is no longer employed by the Company.

3.At-Will Employment. The Company and the Employee acknowledge that the Employee’s employment is and shall continue to be at-will, as defined under applicable law. If the Employee’s employment terminates for any reason, the Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, or as may otherwise be established under the Company’s then existing employee benefit plans or policies at the time of termination.

4.Severance Benefits.

(a)Termination Following A Change of Control. If the Employee’s employment with the Company is terminated by the Company without Cause at any time within the Protection Period, the Employee shall be entitled to the following severance benefits:

(i)[ENTER NUMBER] (__) months of the Employee’s base salary as in effect as of the date of such termination, less applicable withholding, payable in a lump sum within thirty (30) days of the Termination Date;

(ii)[ENTER PERCENTAGE] (___%) of the Employee’s Annual Bonus plus a prorated amount of the Employee’s current targeted annual bonus for the fiscal year in which the Change of Control occurs, less applicable withholding, payable in a lump sum within thirty (30) days of the Termination Date;

(iii)all stock options granted by the Company to the Employee prior to the Change of Control shall become fully vested and exercisable as of the Termination Date to the extent such stock options are outstanding and unvested as of the Termination Date, and all restricted stock granted by the Company to the Employee prior to the Termination Date shall become fully vested as of the Termination Date to the extent such restricted stock is outstanding and unvested as of the Termination Date;

(iv)in the event the Employee elects continuation of health (i.e., medical, vision and dental) coverage in accordance with the terms of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall pay the same portion of the premiums for such coverage as it pays for similarly situated active employees of the Company until the earlier of the date (i) [ENTER NUMBER] (__) months from the Termination Date or (ii) the date the Employee’s COBRA continuation coverage under the Company’s benefit plans terminates for any reason;

(v)to the extent permitted by the terms of the applicable plans, the same level of welfare benefits other than health coverage (i.e. life insurance, long-term disability insurance) as in effect for the Employee on the day immediately preceding the Termination Date shall continue until the earlier of the date that the Employee obtains similar benefits from a subsequent employer or the date [ENTER NUMBER] (__) months from the Termination Date; and

(b)Other Termination. If the Employee’s employment with the Company is terminated other than by the Company without Cause, in each case within the Protection Period, then the Employee shall not be entitled to receive severance or other benefits hereunder, but may be eligible for those benefits (if any) as may then be established under the Company’s then existing severance and benefits plans and policies at the time of termination.

(c)Termination Apart from a Change of Control. If the Employee’s employment with Company terminates for any reason or for no reason other than during the Protection Period, then the Employee shall not be entitled to receive severance or other benefits pursuant to this Agreement, but may be eligible for those benefits (if any) as may then be established under the Company’s then existing severance and benefits plans and policies at the time of termination.

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5.Taxes.

(a)The Employee shall be responsible for payment of all federal, state, and local income and employment taxes, any applicable excise taxes, and any other government assessments owing by the Employee for all benefits received pursuant to this Agreement. All payments required to be made by the Company hereunder and all other benefits provide to the Employee hereunder shall be subject to the withholding of such amounts relating to taxes and other government assessments as the Companymay reasonably determine it should withhold pursuant to any applicable law, rule, or regulation.

(b)Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution made, or benefit provided, by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable or provided pursuant to the terms hereof or otherwise) would not exceed the amount that would constitute a “parachute payment” as defined in Code Section 280G by more than ten percent (10%), then the severance payment payable pursuant to this Agreement shall be reduced so that the aggregate present value of all payments in the nature of compensation to (or for the benefit of) the Employee which are contingent on a change of control (as defined in Code Section 280G(b)(2)(A)) is One Dollar ($1.00) less than the amount which the Employee could receive without being considered to have received any parachute payment (the amount of this reduction in the severance payment is referred to herein as the “Excess Amount”). The determination of the amount of any reduction required by this Section 5(b) shall be made by an independent accounting firm (other than the Company’s independent accounting firm) selected by the Company and acceptable to the Employee, and such determination shall be conclusive and binding on the parties hereto.

6.Successors.

(a)Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets shall, in a written agreement, assume the Company’s obligations under this Agreement and agree expressly to perform the Company’s obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this subsection (a) or which becomes bound by the terms of this Agreement by operation of law.

(b)Employee’s Successors. Without the written consent of the Company, Employee shall not assign or transfer this Agreement or any right or obligation under this Agreement to any other person or entity. Notwithstanding the foregoing, the terms of this Agreement and all rights of Employee hereunder shall inure to the benefit of, and be enforceable by, Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

7.Notices.

(a)General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Employee, mailed notices shall be addressed to the Employee’s home address as reflected in the Company’s records or as most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to 550 Bailey Avenue, Fort Worth, Texas 76107, and all notices shall be directed to the attention of its General Counsel.

(b)Notice of Termination. Any termination by the Company for Cause shall be communicated by a notice of termination to the other party hereto given in accordance with this Section. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the Termination Date (which shall be not more than 30 days after the giving of such notice).

8.Arbitration.

(a)Any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, shall be settled by binding arbitration to be held in Tarrant County, Texas, in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association (the “Rules”). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator’s decision in any court having jurisdiction.

(b)The arbitrator(s) shall apply Texas law to the merits of any dispute or claim, without reference to conflicts of law rules. The arbitration proceedings shall be governed by federal arbitration law and by the Rules, without reference to state arbitration law. The Employee hereby consents to the personal jurisdiction of the state and federal courts located in Texas for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants.

(c) The Employee understands that nothing in this Section modifies the Employee’s at-will employment status. Either the Employee or the Company can terminate the employment relationship at any time, with or without Cause.

(d)THE EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. THE EMPLOYEE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF EMPLOYEE’S RIGHT TO A JURY TRIAL.

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9.Miscellaneous Provisions.

(a)No Duty to Mitigate. The Employee shall not be required to mitigate the amount of any payment contemplated by this Agreement, nor shall any earnings that the Employee may receive from any other source reduce any such payment.

(b)Waiver. No provision of this Agreement may be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee); provided, however, that the Company may change or modify this Agreement without the Employee’s consent or signature if the Company determines, in its sole discretion, that such change or modification is necessary for purposes of compliance with or exemption from the requirements of Code Section 409A or any regulations or other guidance issued thereunder. No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(c)Integration. This Agreement represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements, whether written or oral, with respect to this Agreement.

(d)Choice of Law. The internal substantive laws, but not the conflict of laws rules, of the State of Texas, shall govern the validity, interpretation, construction and performance of this Agreement.

(e)Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.

(f)Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the Effective Date first above written.

COMPANY:THE BOMBAY COMPANY, INC.

BY: __________________________

TITLE: _______________________

EMPLOYEE:______________________________

BY: __________________________

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