CHANGE OF CONTROL AGREEMENT
EXHIBIT 10.6
This CHANGE OF CONTROL AGREEMENT (this “Agreement”), is made and entered into effective as of
the 30th day of December , 2008 (the “Agreement Effective Date”), by and between
Collective Brands, Inc., a Delaware corporation (the “Company”), and Xxxxxxx X. Xxxxxxx (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.
(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
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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
(4) Approval by the stockholders of the Company of a complete liquidation or dissolution of
the Company.
Section 2. Term of Agreement and Covered Employment. (a) Term of Agreement.
This Agreement shall be in effect from the Agreement Effective Date and shall terminate on December
30, 2011; provided, however, that, commencing on the date one year after the Agreement Effective
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.
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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 less than 35 miles from such office.
(1) 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 Ef-
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fective 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,
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 peer executives
of the Company and the affiliated companies.
(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
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automobile 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
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 30th day after receipt of such notice by the Executive
(the “Disability Effective Date”), provided that, within the 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:
(1) 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
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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
(2) 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), 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.
(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:
(1) 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;
(2) any other action or inaction that constitutes a material breach of the terms of the
Agreement;
(3) 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 35
miles;
(4) any purported termination by the Company of the Executive’s employment otherwise than as
expressly permitted by this Agreement; or
(5) any failure by the Company to comply with and satisfy Section 10(c).
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Anything in this Agreement to the contrary notwithstanding a termination by the Executive
for any reason during the 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 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 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.
(e) 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.
(f) Notice of Good Reason. Prior to complying with Sections 4(d) and 11(b), (1) the
Executive must provide written notification of the Executive’s intention to resign within 90 days
after the Executive knows or has reason to know of the occurrence of any such event in Sections
4(c)(1)-(5) constituting Good Reason, (2) the Company shall have 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 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.
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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:
(1) the Company shall pay to the Executive, in a lump sum in cash within 30 days after the Date of
Termination, (provided, however, that no amount shall be paid pursuant to this Subsection 5(a)(1)
after March 15 of the year following the first anniversary of a Change of Control), the aggregate
of the following amount:
(A) 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
(B) 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
(C) 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 22, 1996) (“Options”), stock appreciation rights
(“SARs”) and performance units ( “Units”), if any (the Options, SARs and Units 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, an amount equal to the product of (i)
the excess of (x) in the case of an ISO granted after April 22, 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
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(2) for three 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 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
(3) if the Executive has attained age 50 but has not attained age 55 on the Date of
Termination, then for purposes of determining benefits under Section 3.2(c) of the Company’s
Supplementary Retirement Plan or any successor plan, as in effect immediately prior to the
Effective Date (the “Supplemental Plan”), the Executive shall be deemed to be entitled to the
benefits under Section 3.2(c) of the Supplemental Plan if, during the five-year period following
the Effective Date, the Company terminates the Executive’s employment other than for Cause or the
Executive terminates his employment for Good Reason (it being expressly agreed that,
notwithstanding anything to the contrary contained herein, the rights under this Section 5(a)(3)
shall survive for the five-year period following the Effective Date); and
(4) 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;
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(5) 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, 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
(6) 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 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 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.
(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 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.
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(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 shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination.
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
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Executive
(whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or
otherwise but 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 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 inverse 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 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
- 13 -
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 Overpayment (together with
interest at the rate provided in Section 1274(b)(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 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 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:
(1) give the Company any information reasonably requested by the Company relating to such
claim,
(2) 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,
(3) cooperate with the Company in good faith in order effectively to contest such claim, and
(4) permit the Company to participate in any proceedings relating to such claim;
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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 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 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
- 15 -
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.
(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:
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if to the Executive:
Xxxxxxx Xxxxxxx
Collective Brands, Inc.
0000 XX Xxxxx Xxxxxx
Xxxxxx, Xxxxxx 00000
Xxxxxxx Xxxxxxx
Collective Brands, Inc.
0000 XX Xxxxx Xxxxxx
Xxxxxx, Xxxxxx 00000
if to the Company:
Collective Brands, Inc.
0000 XX Xxxxx Xxxxxx
Xxxxxx, Xxxxxx 00000
Attention: General Counsel
Collective Brands, Inc.
0000 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 Sections 4(c)(1) through 4(c)(5), 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 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 employment agreement, dated as of January 4, 2008, as amended (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 January 4, 2008, 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 4 (relating to non-competition),
Section 10 (relating to certain remedies that the Company and the Executive shall have), and
Section 18 (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).
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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.
| /s/ Xxxxxxx X. Xxxxxxx | ||||||
| Xxxxxxx X. Xxxxxxx | ||||||
| Collective Brands, Inc. | ||||||
| By: Name: |
/s/ Xxxxx X. Click
|
|||||
| Title: | Senior Vice President-Human Resources | |||||
