CHANGE OF CONTROL AGREEMENT
Exhibit 10.2
This AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT (this “Agreement”), is entered into as
of the 19 day of December, 2008 (the “Agreement Date”), by and between COLLECTIVE BRANDS, INC., a
Delaware corporation (the “Company”), and XXXXXXX X. XXXXX (the “Executive”).
WHEREAS, the Board of Directors of the Company (the “Board”), has determined that it is in the
best interests of the Company and its stockholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a
Change of Control (as defined herein). The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties and risks created
by a pending or threatened Change of Control and to encourage the Executive’s full attention and
dedication to the current Company and in the event of any threatened or pending Change of Control,
and to provide the Executive with compensation and benefits arrangements upon a Change of Control
that ensure that the compensation and benefits expectations of the Executive will be satisfied and
that are competitive with those of other corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Certain Definitions.
(a) “Effective Date” means the first date on which a Change of Control occurs.
Notwithstanding anything in this Agreement to the contrary, if a Change of Control occurs and if
the Executive’s employment with the Company is terminated without Cause or for Good Reason within
one year prior to the date on which the Change of Control occurs then “Effective Date” means the
date immediately prior to the date of such termination of employment unless such termination did
not occur at the request of a third party that has taken steps reasonably calculated to effect a
Change of Control. Further, notwithstanding anything in this Agreement to the contrary, if a
Potential Change of Control occurs and if the Executive’s employment with the Company is terminated
as provided in Section 5(e), then “Effective Date” means the date immediately prior to the date of
such termination of employment.
(b) “Change of Control Period” means the period commencing on the Effective Date and ending on
the third anniversary thereof.
(c) “affiliated company” means any company controlled by, controlling or under common control
with the Company.
(d) “Change of Control” means:
(1) The acquisition by any 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 (A) the then-outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”) or (B) 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 Section 1(d), none of
the following shall constitute a Change
of Control: (i) any acquisition directly from the Company of 30% or less of Outstanding
Company Common Stock or Outstanding Company Voting Securities provided that at least a majority of
the members of the board of directors of the Company following such acquisition were members of the
Incumbent Board at the time of the Board’s approval of such acquisition, (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 affiliated company, or (iv) any acquisition by the Company which,
by reducing the number of shares of Outstanding Company Common Stock or Outstanding Company Voting
Securities, increases the proportionate number of shares of Outstanding Company Common Stock or
Outstanding Company Voting Securities beneficially owned by any Person to 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting Securities; provided, however, that,
if such Person shall thereafter become the beneficial owner of any additional shares of Outstanding
Company Common Stock or Outstanding Company Voting Securities and beneficially owns 20% or more of
either the Outstanding Company Common Stock or the Outstanding Company Voting Securities, then such
additional acquisition shall constitute a Change of Control; or
(2) 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 subsequent 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, but excluding, for this purpose, any such individual whose initial
assumption of office 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
(3) Consummation of a reorganization, merger, consolidation or 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, (A) more than 50%, respectively, of 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
(x) the corporation resulting from such Business Combination, or (y) a corporation that, 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, is represented by the Outstanding Company
Common Stock and the Outstanding Company Voting Securities (or, if applicable, is represented by
shares into which Outstanding Company Common Stock or Outstanding Company Voting Securities were
converted pursuant to such Business Combination) in substantially the same proportions as their
ownership immediately prior to such Business Combination of the Outstanding Company Common Stock
and the Outstanding Company Voting Securities, as the case may be, (B) 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, except to the extent that such
ownership existed prior to the Business Combination, and (C) at least a majority 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
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(4) Approval by the stockholders of the Company of a complete liquidation or dissolution of
the Company.
(e) “Potential Change of Control” means:
(1) At least two directors of a particular class of directors, as of the date hereof, are
replaced for any reason by directors who are not members of the Incumbent Board at the time of such
replacement; provided, however, that any individual becoming a director subsequent 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, but excluding, for this
purpose, any such individual whose initial assumption of office 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
(2) The Board adopts a resolution to the effect that, for purposes of this Agreement, a
Potential Change of Control has occurred.
Section 2. Term of Agreement and Covered Employment. (a) Term of Agreement.
This Agreement shall be in effect from the Agreement Date and shall terminate on the third
anniversary thereof; provided, however, that, commencing on the date one year after the Agreement
Date, and on each annual anniversary of such date (such date and each annual anniversary thereof,
the “Renewal Date”), unless previously terminated, this Agreement shall be automatically extended
so as to terminate three years from such Renewal Date, unless, at least 60 days prior to the
Renewal Date, the Company shall give notice to the Executive that the Change of Control Period
shall not be so extended (a “Nonrenewal Notice”). Notwithstanding the delivery of any such
Nonrenewal Notice, this Agreement shall continue in effect for the Change of Control Period if a
Change of Control occurs during the term of this Agreement. Notwithstanding anything in this
Section to the contrary, this Agreement shall terminate if (i) the Executive or the Company
terminates the Executive’s employment prior to a Change of Control (except as provided in Section
1(a)), or (ii) the Executive’s employment terminates in accordance with Sections 1(a), 4 or 5 and
the Company has fulfilled all of its obligations to the Executive under this Agreement.
(b) Covered Employment. The Company hereby agrees to continue the Executive in its
employ, and the Executive hereby agrees to remain in the employ of the Company, subject to the
terms and conditions of this Agreement, for the Change of Control Period.
Section 3. Terms of Employment. (a) Position and Duties. (1) During the
Change of Control Period, (A) the Executive’s position (including status, offices, titles and
reporting requirements), authority, duties and responsibilities shall be at least commensurate in
all material respects with the most significant of those held, exercised and assigned at any time
during the 120-day period immediately preceding the Effective Date and (B) the Executive’s services
shall be performed at the office where the Executive was employed immediately preceding the
Effective Date or at any other location provided Executive’s one-way commute from the Executive’s
principal residence is increased by no more than thirty-five (35) miles.
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(2) During the Change of Control Period, and excluding any periods of vacation and sick leave
to which the Executive is entitled, the Executive agrees to devote reasonable attention and time
during normal business hours to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the Executive hereunder, to use the
Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities.
During the Change of Control Period, it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly interfere with the performance of the
Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It
is expressly understood and agreed that, to the extent that any such activities have been conducted
by the Executive prior to the Effective Date, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall
not thereafter be deemed to interfere with the performance of the Executive’s responsibilities to
the Company.
(b) Compensation. (1) Base Salary. During the Change of Control Period, the
Executive shall receive an annual base salary (the “Annual Base Salary”), which Annual Base Salary
shall be paid at a monthly rate at least equal to 12 times the highest monthly base salary paid or
payable, including any base salary that has been earned but deferred, to the Executive by the
Company and the affiliated companies in respect of the 12-month period immediately preceding the
month in which the Effective Date occurs. During the Change of Control Period, the Annual Base
Salary shall be reviewed at least annually, beginning no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date. Any increase in the Annual Base
Salary shall not serve to limit or reduce any other obligation to the Executive under this
Agreement. The Annual Base Salary shall not be reduced after any such increase and the term
“Annual Base Salary” shall refer to the Annual Base Salary as so increased.
(2) Annual Bonus. In addition to the Annual Base Salary, the Executive shall be
awarded, for each fiscal year ending during the Change of Control Period, an annual bonus (the
“Annual Bonus”) in cash at least equal to the Executive’s highest bonus under the Company ’s
annual and long-term incentive plans, or any comparable bonus under any predecessor or successor
plan, for the last three full fiscal years prior to the Effective Date (annualized, in the event
that the Executive was not employed by the Company for the whole of such fiscal year) (the “Recent
Annual Bonus”). Each such Annual Bonus shall be paid no later than the end of the third month of
the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(3) Incentive, Savings and Retirement Plans. During the Change of Control Period, the
Executive shall be entitled to participate in all incentive, savings and retirement plans (other
than the Collective Brands, Inc. Supplementary Retirement Plan and any successor plan (the “SRP”)),
practices, policies, and programs applicable generally to other peer executives of the Company and
the affiliated companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to both regular and
special incentive opportunities, to the extent, if any, that such distinction is applicable),
savings opportunities and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and the affiliated companies
for the Executive under such plans, practices, policies and programs as in effect at any time
during the 120-day period immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to other
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peer executives of the Company and the affiliated companies (excluding, for all purposes, the
SRP).”
(4) Welfare Benefit Plans. During the Change of Control Period, the Executive and/or
the Executive’s family, as the case may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans, practices, policies and programs provided by the
Company and the affiliated companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other peer executives of the Company and the
affiliated companies, but in no event shall such plans, practices, policies and programs provide
the Executive with benefits that are less favorable, in the aggregate, than the most favorable of
such plans, practices, policies and programs in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to the Executive,
those provided generally at any time after the Effective Date to other peer executives of the
Company and the affiliated companies.
(5) Expenses. During the Change of Control Period, the Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the Company and the affiliated
companies in effect for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and the affiliated companies.
(6) Fringe Benefits. During the Change of Control Period, the Executive shall be
entitled to fringe benefits, including, without limitation, tax and financial planning services,
payment of club dues, and, if applicable, use of an automobile, airplane and payment of related
expenses, in accordance with the most favorable plans, practices, programs and policies of the
Company and the affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of the Company and
the affiliated companies.
(7) Office and Support Staff. During the Change of Control Period, the Executive
shall be entitled to an office or offices of a size and with furnishings and other appointments,
and to exclusive personal secretarial and other assistance, at least equal to the most favorable of
the foregoing provided to the Executive by the Company and the affiliated companies at any time
during the 120-day period immediately preceding the Effective Date or, if more favorable to the
Executive, as provided generally at any time thereafter with respect to other peer executives of
the Company and the affiliated companies.
(8) Vacation. During the Change of Control Period, the Executive shall be entitled to
paid vacation in accordance with the most favorable plans, policies, programs and practices of the
Company and the affiliated companies as in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of the Company and
the affiliated companies.
Section 4. Termination of Employment. (a) Death or Disability. The
Executive’s employment shall terminate automatically if the Executive dies during the Change of
Control Period. If the Company determines in good faith that the Disability (as defined herein) of
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the Executive has occurred during the Change of Control Period (pursuant to the definition of
“Disability”), it may give to the Executive written notice in accordance with Section 11(b) of its
intention to terminate the Executive’s employment. In such event, the Executive’s employment with
the Company shall terminate effective on the thirtieth (30th) day after receipt of such
notice by the Executive (the “Disability Effective Date”), provided that, within the thirty (30)
days after such receipt, the Executive shall not have returned to full-time performance of the
Executive’s duties. “Disability” means the absence of the Executive from the Executive’s duties
with the Company on a full-time basis for 180 consecutive business days as a result of incapacity
due to mental or physical illness that is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal
representative.
(b) Cause. The Company may terminate the Executive’s employment during the Change of
Control Period for Cause. “Cause” means:
(A) the willful and continued failure of the Executive to perform
substantially the Executive’s duties with the Company or any affiliated company
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to the
Executive by the Board or the Chief Executive Officer of the Company that
specifically identifies the manner in which the Board or the Chief Executive
Officer of the Company believes that the Executive has not substantially performed
the Executive’s duties, or
(B) the willful engaging by the Executive in illegal conduct or gross
misconduct that is materially and demonstrably injurious to the Company.
For purposes of this Section 4(b), no act, or failure to act, on the part of the Executive
shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that the Executive’s action or omission was in the best
interests of the Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer of the
Company or a senior officer of the Company or based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith
and in the best interests of the Company. 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 not less than three-quarters of the entire
membership 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 for the Executive, to be heard before the Board and a thirty (30) day period to cure
the condition constituting Cause), finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in Section 4(b)(1) or 4(b)(2), and specifying the
particulars thereof in detail. If the Board does not give a Notice of Termination for Cause within
ninety (90) days after any member of the Board (other than the Executive and any other member of
the Board involved in the event constituting Cause) has actual knowledge that an event constituting
Cause has occurred, the Board cannot assert that event as a basis to terminate the Executive’s
employment for Cause.
(c) Good Reason. The Executive’s employment may be terminated by the Executive for
Good Reason. “Good Reason” means in the absence of a written consent by the Executive:
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(A) the assignment to the Executive of any duties inconsistent in any material
respect with the Executive’s position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated by
Section 3(a) of this Agreement, or any other action by the Company that results in
a material diminution in such position, authority, duties or responsibilities;
(B) any other action or inaction that constitutes a material breach of the
terms of the Agreement;
(C) the Company’s requiring the Executive to be based at any office or
location different than the office the Executive was employed immediately preceding
the Effective Date if such relocation increases Executive’s one-way commute from
the Executive’s principal residence by more than thirty-five (35) miles;
(D) any purported termination by the Company of the Executive’s employment
otherwise than as expressly permitted by this Agreement;
(E) any failure by the Company to comply with and satisfy Section 10(c); or
(F) any failure of the Executive to be a member of the Board of Directors of
the Company, or of any successor to the Company, or the ultimate parent of the
Company or any such successor (as applicable), other than by reason of your
voluntary resignation, Cause, death or Disability.
Anything in this Agreement to the contrary notwithstanding a termination by the Executive for
any reason during the thirty (30)-day period immediately following the first anniversary of a
Change of Control shall be deemed to be a termination for Good Reason for all purposes of this
Agreement.
(d) Notice of Good Reason. Prior to complying with Sections 4(e) and 11(b), (1) the
Executive must provide written notification of the Executive’s intention to resign within ninety
(90) days after the Executive knows or has reason to know of the occurrence of any such event in
Sections 4(c)(A)-(F) constituting Good Reason, (2) the Company shall have thirty (30) days from the
receipt of such notice to effect a cure of the condition constituting Good Reason under Section
4(c) and (3) if the Company is unable to cure the condition constituting Good Reason within the
thirty (30)-day period then the Executive must terminate his employment within two years from the
date such event constituting Good Reason occurred, otherwise the event will no longer constitute
Good Reason. For the avoidance of doubt, Good Reason will not include any isolated, insubstantial
and inadvertent action not taken in bad faith by the Company and that is cured promptly upon
receiving notice from the Executive.
(e) Notice of Termination. Any termination by the Company for Cause, or by the
Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto
given in accordance with Section 11(b). “Notice of Termination” means a written notice that (1)
indicates the specific termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis
for termination of the Executive’s employment under the provision so indicated, and (3) if the Date
of Termination (as defined herein) is other than the date of receipt of such notice, specifies the
Date of Termination (which Date of Termination shall be not more than
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thirty (30) days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such
fact or circumstance in enforcing the Executive’s or the Company’s respective rights hereunder.
(f) Date of Termination. “Date of Termination” means (1) if the Executive’s
employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified in the Notice of Termination, as
the case may be, (2) if the Executive’s employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (3) if the Executive’s employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be.
Section 5. Obligations of the Company upon Termination. (a) Good Reason; Other
Than for Cause, Death or Disability. If, during the Change of Control Period, the Company
terminates the Executive’s employment other than for Cause or Disability or the Executive
terminates employment for Good Reason:
(A) the Company shall pay to the Executive, in a lump sum in cash within
thirty (30) days after the Date of Termination (provided, however, that no amount
shall be paid pursuant to this paragraph (A) after March 15 of the year following
the first anniversary of a Change of Control), the aggregate of the following
amounts:
the sum of (i) the Executive’s Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (ii) the product of (x) the higher
of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or payable, including
any bonus or portion thereof that has been earned but deferred (and annualized for
any fiscal year consisting of less than 12 full months or during which the
Executive was employed for less than 12 full months), for the most recently
completed fiscal year during the Change of Control Period, if any (such higher
amount, the “Highest Annual Bonus”) and (y) a fraction, the numerator of which is
the number of days in the current fiscal year through the Date of Termination and
the denominator of which is 365, and (iii) any compensation previously deferred by
the Executive (together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case, to the extent not theretofore paid (the sum of
the amounts described in subclauses (i), (ii) and (iii), the “Accrued
Obligations”); and
the amount equal to the product of (i) three and (ii) the sum of (x) the
Executive’s Annual Base Salary and (y) the Highest Annual Bonus; and
in lieu of the receipt of shares of common stock of the Company (“Common
Stock”) issuable upon the exercise of outstanding options (other than stock options
qualifying as incentive stock options (“ISOs”) under Section 422A of the Internal
Revenue Code of 1986, as amended (the “Code”) which ISOs were granted on or prior
to April 29, 1996) (“Options”), stock appreciation rights (“SARs”) and performance
units (“Units”), if any (the Options, SARs and Units
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shall be referred to herein collectively as the “Awards”), granted to the
Executive under the Company’s 1996 Stock Incentive Plan or any successor or
substitute plans thereto, or otherwise not under any such plan, an amount equal to
the product of (i) the excess of (x) in the case of an ISO granted after April 29,
1996, the closing price of Common Stock as reported on the New York Stock Exchange
on the Date of Termination or the last full trading day immediately prior to the
Date of Termination (or, if not listed on such exchange, on a nationally recognized
exchange or quotation system on which trading value in the Common Stock is highest)
(the “Closing Price”) and, in the case of all other Awards, the higher of the
Closing Price and the highest per share price for Common Stock actually paid in
connection with any Change of Control, over (y) the per share exercise price (if
any) of each Award, and (2) the number of shares of Common Stock covered by each
such Award, whether or not such Award is exercisable on the Date of Termination;
and
(B) for three (3) years after the Executive’s Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue benefits to the Executive and/or the
Executive’s family at least equal to those that would have been provided to them in
accordance with the plans, programs, practices and policies described in Section
3(b)(4) if the Executive’s employment had not been terminated or, if more favorable
to the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and the affiliated companies and their
families, provided, however, that, if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits under another
employer provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during such applicable
period of eligibility. If the Executive has attained age fifty (50) on the Date of
Termination and if, with five additional years of age and service beyond the
Executive’s age and years of service as of the Date of Termination, the Executive
would have been entitled to receive any other benefits under the Company’s
post-retirement programs as in effect immediately prior to the Effective Date, then
the Executive shall be entitled to such benefits as if the Executive had attained
those five additional years of age and been employed by the Company for those five
additional years of service, as of the Date of Termination, and such benefits shall
commence immediately and be determined and provided under the terms of such plans
as in effect immediately prior to the Effective Date, without regard to any
amendments subsequent to the Effective Date that adversely affect the rights of
participants thereunder; and
(C) Notwithstanding any provision in any equity or equity-based grant
agreement or any other agreement or plan covering the Executive, all of the
non-competition restrictions imposed on the Executive under such equity or
equity-based grant agreement shall cease to apply for all purposes of such equity
or equity-based grant agreement, including but not limited to all options, stock
appreciation rights, and performance units granted to the Executive at any time;
and
(D) the Company shall, at its sole expense as incurred, and subject to a
maximum limit equal to three (3) times the Executive’s monthly compensation,
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provide the Executive with outplacement services the scope and provider of
which shall be selected by the Executive in the Executive’s sole discretion; and
(E) to the extent not theretofore paid or provided, the Company shall timely
pay or provide to the Executive any other amounts or benefits required to be paid
or provided or that the Executive is eligible to receive under any plan, program,
policy or practice or contract or agreement of the Company and the affiliated
companies (such other amounts and benefits, the “Other Benefits”).
(b) Death. If the Executive’s employment is terminated by reason of the Executive’s
death during the Change of Control Period, this Agreement shall terminate without further
obligations to the Executive’s legal representatives under this Agreement, other than for payment
of Accrued Obligations and the timely payment or provision of the Other Benefits. The Accrued
Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in
cash within thirty (30) days of the Date of Termination. With respect to the provision of the
Other Benefits, the term “Other Benefits” as utilized in this Section 5(b) shall include, without
limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and the affiliated companies
to the estates and beneficiaries of peer executives of the Company and the affiliated companies
under such plans, programs, practices and policies relating to death benefits, if any, as in effect
with respect to other peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date (excluding any death benefits payable under the SRP) or,
if more favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in effect on
the date of the Executive’s death with respect to other peer executives of the Company and the
affiliated companies and their beneficiaries (excluding any death benefits payable under the SRP).
(c) Disability. If the Executive’s employment is terminated by reason of the
Executive’s Disability during the Change of Control Period, this Agreement shall terminate without
further obligations to the Executive, other than for payment of Accrued Obligations and the timely
payment or provision of the Other Benefits. The Accrued Obligations shall be paid to the Executive
in a lump sum in cash within thirty (30) days of the Date of Termination. With respect to the
provision of the Other Benefits, the term “Other Benefits” as utilized in this Section 5(c) shall
include, and the Executive shall be entitled after the Disability Effective Date to receive,
disability and other benefits at least equal to the most favorable of those generally provided by
the Company and the affiliated companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the Executive and/or the
Executive’s family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the affiliated companies and their families.
(d) Cause; Other Than for Good Reason. If the Executive’s employment is terminated
for Cause during the Change of Control Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to the Executive (1) the Executive’s
Annual Base Salary through the Date of Termination, (2) the amount of any compensation previously
deferred by the Executive, and (3) the Other Benefits, in each case, to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Change of Control Period,
excluding a termination for Good Reason, this Agreement shall terminate without further obligations
to the Executive, other than for the Accrued Obligations and the timely payment or provision of the
Other Benefits. In such case, all the Accrued Obligations
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shall be paid to the Executive in a lump sum in cash within thirty (30) days of the Date of
Termination.
(e) Obligations of the Company and the Executive upon a Potential Change of Control.
If, prior to the Change of Control Period, a Potential Change of Control occurs, the Executive
hereby agrees to remain in the employ of the Company, on the same basis and terms and conditions as
the Executive is employed by the Company immediately prior to the Potential Change of Control, for
the twelve (12)-month period following such Potential Change of Control. If the Executive’s
employment is terminated by the Company other than for Cause, death or Disability, or the Executive
terminates his employment for Good Reason, during the twelve (12)-month period following the
occurrence of a Potential Change of Control, without regard to whether a Change of Control has
actually occurred or is likely to occur, the Executive’s employment shall be deemed to have been
terminated by the Company in anticipation of a Change of Control, and the Executive shall be
entitled to receive the payments and benefits provided in Section 5(a) hereof, except that no
amount shall be paid pursuant to clause (ii) of the first paragraph of Section 5(a)(A) of this
Agreement (relating to a fractional payment of the Highest Annual Bonus) and the amount specified
in Appendix A shall be paid at the same time as the other amounts specified in Section 5(a)(A) are
paid.
Section 6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive’s continuing or future participation in any plan, program, policy or practice
provided by the Company or the affiliated companies and for which the Executive may qualify, nor,
subject to Section 11(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or the affiliated companies.
Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any
plan, policy, practice or program of or any contract or agreement with the Company or the
affiliated companies at or subsequent to the Date of Termination shall be payable in accordance
with such plan, policy, practice or program or contract or agreement, except as explicitly modified
by this Agreement.
Section 7. Full Settlement. The Company’s obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by
any set-off, counterclaim, recoupment, defense, or other claim, right or action that the Company
may have against the Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement, and such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company agrees to pay as incurred, to
the full extent permitted by law, all legal fees and expenses that the Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive
or others of the validity or enforceability of, or liability under, any provision of this Agreement
or any guarantee of performance thereof (including as a result of any contest by the Executive
about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any
delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code.
Section 8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or distribution by the Company or the
affiliated companies to or for the benefit of the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise but
11
determined without regard to any additional payments required under this Section 8) (the
“Payment”) would be subject to the excise tax imposed by Section 4999 of the Code, or any interest
or penalties are incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, collectively, the “Excise Tax”), then the Executive
shall be entitled to receive an additional payment (the “Gross-Up Payment”) in an amount such that
after payment by the Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of this Section 8(a), if it shall be determined
that the Executive is entitled to the Gross-Up Payment, but that the Payments do not exceed 110% of
the greatest amount that could be paid to the Executive such that the receipt of the Payments would
not give rise to any Excise Tax (the “Reduced Amount”), then no Gross-Up Payment shall be made to
the Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. The
reduction of amounts payable hereunder, if applicable, shall be determined in a manner which has
the least economic cost to the Executive and, to the extent the economic cost is equivalent, then
all the Payments in the aggregate will be reduced in the inversed order of when all the Payments in
the aggregate, would have been made to the Executive until the reduction specified is achieved.
(b) Subject to the provisions of Section 8(c), all determinations required to be made under
this Section 8, including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be
made by Deloitte & Touche LLP or such other certified public accounting firm as may be designated
by the Executive (the “Accounting Firm”) that shall provide detailed supporting calculations both
to the Company and the Executive within fifteen (15) business days of the receipt of notice from
the Executive that there has been a Payment or such earlier time as is requested by the Company.
In the event that the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, is not able to make the determinations required
hereunder for any reason, or the Company determines that the Accounting Firm is precluded from
performing such services under applicable independence standards or otherwise, the Executive shall
appoint another nationally recognized accounting firm to make the determinations required hereunder
(which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 8, shall be paid by the Company to the Executive within five
days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting
Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination by the Accounting
Firm hereunder or as a result of a permitted or required redetermination of the Excise Tax, it is
possible that Gross-Up Payments that will not have been made by the Company should have been made
(the “Underpayment”) or that Gross-Up Payments that were initially made by the Company exceeded the
amount necessary to reimburse the Executive as contemplated in the first sentence of Section 8(a)
or were not due pursuant to the application of the last sentence of Section 8(a) (“Overpayment”).
In the event the Company exhausts its remedies pursuant to Section 8(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by
the Company to or for the benefit of the Executive. The Accounting Firm shall determine the amount
of any Overpayment that has been made and whether any permitted redetermination of the Excise Tax
would result in an Overpayment and such Overpayment shall be promptly paid to the Company by the
Executive to the extent he is entitled to a refund on account of such
12
Overpayment (together with interest at the rate provided in Section 1274(d)(2) of the Code
from the date of such entitlement). It is the intent of this provision that the Gross-Up Payment
reflect the Excise Tax liability, if any, actually incurred by the Executive in the opinion of the
Accounting Firm.
(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten (10) business days
after the Executive is informed in writing of such claim and shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the thirty (30)-day period following the date on
which the Executive gives such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that the Company desires to contest
such claim, the Executive shall:
(A) give the Company any information reasonably requested by the Company
relating to such claim,
(B) take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company,
(C) cooperate with the Company in good faith in order effectively to contest
such claim, and
(D) permit the Company to participate in any proceedings relating to such
claim;
provided, however, that the Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest, and shall indemnify
and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such representation and payment
of costs and expenses. Without limitation on the foregoing provisions of this Section 8(c), the
Company shall control all proceedings taken in connection with such contest, and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the applicable taxing authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine; provided, however, that, if the Company
directs the Executive to pay such claim and xxx for a refund, the Company shall advance the amount
of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and provided, further, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company’s control of the contest shall be limited to issues with respect to which
the Gross-Up Payment would be payable hereunder, and the Executive shall be entitled
13
to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to
Section 8(c), the Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company’s complying with the requirements of Section 8(c)) promptly
pay to the Company the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 8(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days
after such determination, then such advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
Section 9. Confidential Information. The Executive shall hold in a fiduciary capacity
for the benefit of the Company all secret or confidential information, knowledge or data relating
to the Company or the affiliated companies, and their respective businesses, which information,
knowledge or data shall have been obtained by the Executive during the Executive’s employment by
the Company or the affiliated companies and which information, knowledge or data shall not be or
become public knowledge (other than by acts by the Executive or representatives of the Executive in
violation of this Agreement). After termination of the Executive’s employment with the Company,
the Executive shall not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those persons designated by the Company. In no event shall an
asserted violation of the provisions of this Section 9 constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this Agreement.
Section 10. Successors. (a) This Agreement is personal to the Executive, and,
without the prior written consent of the Company, shall not be assignable by the Executive other
than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive’s legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place.
“Company” means the Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise.
Section 11. Miscellaneous. (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the provisions hereof and shall have no force
or effect. This Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal representatives.
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(b) All notices and other communications hereunder shall be in writing and shall be given by
hand delivery to the other party or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
if to the Executive:
to the address then on file with the Company’s payroll department
to the address then on file with the Company’s payroll department
if to the Company:
Collective Brands, Inc.
[3231 XX Xxxxx Xxxxxx
Xxxxxx, Xxxxxx 00000]
Attention: General Counsel
Collective Brands, Inc.
[3231 XX Xxxxx Xxxxxx
Xxxxxx, Xxxxxx 00000]
Attention: General Counsel
or to such other address as either party shall have furnished to the other in writing in accordance
herewith. Notice and communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable under this Agreement such United States
federal, state or local or foreign taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(e) The Executive’s or the Company’s failure to insist upon strict compliance with any
provision of this Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to terminate employment
for Good Reason pursuant to Section 4(c), shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
(f) From and after the Effective Date or the date that a Potential Change of Control occurs,
and except as expressly set forth herein, this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof, including the Amended and Restated
Employment Agreement, dated as of December • , 2008 (the “Employment Agreement”); provided,
however, in no event shall this Agreement supersede or replace the Indemnification Agreement
between the Executive and the Company, dated as of July 18, 2005, as from time to time amended
prior to the Effective Date; and provided further that, to the extent not inconsistent with any
provision hereof, the following provisions of the Employment Agreement shall remain in effect
during the Change of Control Period: Section 7 (relating to proprietary information), Section 8
(relating to certain covenants), Section 12(d) (relating to certain remedies that the Company and
the Executive shall have) and Section 13(b)(2) (relating to Section 409A, with any references in
that provision to other sections of the Employment Agreement also being deemed references to
similar provisions of this Agreement, as appropriate, so as to give maximum effect to such
provision.
15
IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the
authorization from the Board, the Company has caused these presents to be executed in its name on
its behalf, all as of the day and year first above written.
| EXECUTIVE |
||||
| /s/ Xxxxxxx X. Xxxxx | ||||
| Name of Executive: Xxxxxx X. Xxxxx | ||||
| COLLECTIVE BRANDS, INC. |
||||
| By: | /s/ Xxxxx X. Click | |||
| Name: Xxxxx X. Click | ||||
| Title: Senior Vice President – Human Resources | ||||
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APPENDIX A
CHART OF ADDITIONAL SEVERANCE PAYMENT UNDER SECTION 5(E)
CHART OF ADDITIONAL SEVERANCE PAYMENT UNDER SECTION 5(E)
| Fiscal Quarter in which | ||||
| Date of Termination | Payment under Section | |||
| Occurs | 6(b)(2)(B) $* | |||
First Fiscal Quarter |
$ | 1,000,000 | ||
Second Fiscal Quarter |
$ | 1,425,000 | ||
Third Fiscal Quarter |
$ | 1,850,000 | ||
Fourth Fiscal Quarter |
$ | 2,275,000 | ||
| * | The amounts set forth in this column shall be increased automatically by the percentage increase, if any, in the Executive’s Salary from January 1, 2009. |
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