EXHIBIT 10.10
CHANGE OF CONTROL AGREEMENT
This AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT (this
"Agreement"), restated as of the __ day of _________, 2004 (the "Restatement
Effective Date"), by and between Payless ShoeSource, Inc., a Delaware
corporation (the "Company"), and ____________ (the "Executive") amends and
restates that certain Change of Control Agreement, dated as of ______________,
by and between the Company and 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
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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 Restatement Effective
Date and shall terminate on the third anniversary thereof; provided, however,
that, commencing on the date one year after the Restatement 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
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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.
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(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.
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(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
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(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;
(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
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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; or
(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:
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(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:
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, 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
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(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
(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,
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provide the Executive with outplacement services the scope and provider
of which shall be selected by the Executive in the Executive's sole
discretion; and
(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.
(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,
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(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.
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),
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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.
(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
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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;
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
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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
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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:
if to the Executive:
_________________________
Payless ShoeSource, Inc.
0000 XX Xxxxx Xxxxxx
Xxxxxx, Xxxxxx 00000
if to the Company:
Payless ShoeSource, Inc.
0000 XX Xxxxx Xxxxxx
Xxxxxx, Xxxxxx 00000
Attention: General Counsel
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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 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
_______________ (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 _________________, 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).
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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.
_________________________________________
Executive
PAYLESS SHOESOURCE, INC.
By: _____________________________________
Name: Xxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive
Officer
