CHANGE OF CONTROL AGREEMENT
This
CHANGE OF CONTROL AGREEMENT (this “Agreement”),
is
entered into as of the 3rd day of August, 2008 (the “Agreement
Date”),
by
and between Collective Brands, Inc., a Delaware corporation (the “Company”),
and
Xxxxx X. Click (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
(4) Approval
by the stockholders of the Company of a complete liquidation or dissolution
of
the Company.
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(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
less
than 35 miles from such office.
(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.
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(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, 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.
4
(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, 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.
5
(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), 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:
(A) the
assignment to the Executive of any duties inconsistent in any respect with
the
Executive’s position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
3(a), or any other action by the Company that results in a diminution in such
position, authority, duties or responsibilities, excluding for this purpose
an
isolated, insubstantial and inadvertent action not taken in bad faith and that
is remedied by the Company promptly after receipt of notice thereof given by
the
Executive;
(B) any
failure by the Company to comply with any of the provisions of Section 3(b),
other than an isolated, insubstantial and inadvertent failure not occurring
in
bad faith and that is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
6
(C) the
Company’s requiring the Executive to be based at any office or location other
than as provided in Section 3(a)(1)(B) or the Company’s requiring the Executive
to travel on Company business to a substantially greater extent than required
immediately prior to the Effective Date;
(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).
For
purposes of this Section 4(c), any good faith determination of Good Reason
made
by the Executive shall be conclusive. 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.
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 30 days after
the Date of Termination, the aggregate of the following
amounts:
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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 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
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
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(C) 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
(D) 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;
(E) 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
(F) 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.
9
(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.
(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.
(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 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 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.
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.
10
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 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.
11
(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 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:
(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;
12
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 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.
13
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:
if
to the
Executive:
to
the
address then on file with the Company’s payroll department
if
to the
Company:
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.
14
(f) If
the
Company determines that the Executive is a “key employee” within the meaning of
Section 409A of the Internal Revenue Code and that, as a result of
such status, any portion of the payments under this Agreement (without
regard to any other plan of deferred compensation) would be subject to
additional or accelerated taxation, the Company will delay paying such portion
of the payment until the earliest permissible date on which payments may
commence without triggering such additional taxation (with such delay not to
exceed six months), with the first such payment to include the amounts that
would have been paid earlier but for the above delay plus simple interest on
any
unpaid amounts equal to 6-month LIBOR on the date of termination of employment
plus 450 basis points.
(g) 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 Employment Agreement, dated as of August 1, 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 August 1, 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: Paragraphs 3 (relating to non-competition), and 8(a) (relating to
certain remedies that the Company and the Executive shall have).
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.
|
Xxxxx
X. Click
|
|
|
By:
|
/s/
Xxxxxxx X. Xxxxx
|
|
Name:
|
Xxxxxxx
X. Xxxxx.
|
|
Chairman,
Chief Executive Officer and
President
|
|
15
