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 Betty J. 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.
(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.
(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.
(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.
(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 t
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