DEF 14A 1 d291885ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive proxy statement
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.    )

Filed by the Registrant  x                            Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

¨   Preliminary Proxy Statement
¨   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x   Definitive Proxy Statement
¨   Definitive Additional Materials
¨   Soliciting Material Pursuant to §240.14a-12
Collective Brands, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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LOGO

3231 Southeast Sixth Avenue

Topeka, KS 66607

April 13, 2012

Dear Fellow Stockholder,

On behalf of the Board of Directors and Management of Collective Brands, Inc., I cordially invite you to attend the Annual Meeting of Stockholders to be held at the Collective Brands, Inc. Worldwide Headquarters, at 3231 Southeast Sixth Avenue, Topeka, Kansas on Thursday, May 24, 2012, at 10:00 a.m., Central Daylight Saving Time. At the meeting, you will hear a report on the Company’s progress during fiscal 2011, our strategies for the future, and have the chance to meet the Company’s directors and executives. In addition, we will conduct the following business:

 

  I. Elect three directors, each for a three-year term;

 

  II. Conduct an advisory vote on executive compensation;

 

  III. Ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accountants for the 2012 fiscal year;

 

  IV. Approve the Amended and Restated Collective Brands, Inc. Incentive Compensation Plan;

 

  V. Approve the 2012 Collective Brands, Inc. Stock Incentive Plan; and

 

  VI. Conduct other business, if properly raised.

In the following pages you will find the formal notice of the meeting and the proxy statement. The proxy statement provides more details about the agenda and procedures for the meeting and includes biographical information about the director candidates. The Company’s Annual Report for the fiscal year ended January 28, 2012 is also enclosed.

Even if you only own a few shares, we want your shares to be represented at the meeting. I encourage you to vote via telephone or the Internet. Voting by telephone or the Internet is fast and convenient. More importantly, voting by telephone or the Internet is better for our environment and saves the Company money. If you prefer, you can sign, date and return your proxy card promptly in the enclosed envelope. To attend the meeting in person, please follow the instructions on page 1.

Thank you for your investment in Collective Brands, Inc.

Sincerely,

 

LOGO

Michael J. Massey

Chief Executive Officer and President


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DIRECTION TO COLLECTIVE BRANDS, INC. WORLDWIDE HEADQUARTERS

The Pozez Auditorium is located at the Collective Brands, Inc. Worldwide Headquarters located at 3231 Southeast Sixth Avenue, Topeka, Kansas.

Parking is available for you in the visitor’s parking lot. From the parking lot, you may enter the Collective Brands Inc. Worldwide Headquarters from the visitor’s entrance.

 

LOGO

Collective Brands via I-70 Eastbound Carnahan / Deer Creek Trafficway Exit 364B.

Exit 364B Carnahan / Deer Creek Trafficway and turn left (north) towards Southeast Sixth Avenue, approximately .7 miles.

Collective Brands via I-70 Westbound Carnahan / Deer Creek Trafficway Exit 364B.

Exit 364B Carnahan / Deer Creek Trafficway and turn right (north) towards Southeast Sixth Avenue, approximately .6 miles.


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LOGO

NOTICE OF COLLECTIVE BRANDS, INC. ANNUAL MEETING OF STOCKHOLDERS

Date:

May 24, 2012

Time:

10:00 a.m., Central Daylight Saving Time

Place:

Collective Brands, Inc. Worldwide Headquarters

Pozez Auditorium

3231 Southeast Sixth Avenue

Topeka, Kansas 66607

Purposes:

 

  I. Elect three directors, each for a three-year term;
  II. Conduct an advisory vote on executive compensation;
  III. Ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accountants for the 2012 fiscal year;
  IV. Approve the amended and restated Collective Brands, Inc. Incentive Compensation Plan;
  V. Approve the 2012 Collective Brands, Inc. Stock Incentive Plan; and
  VI. Conduct other business, if properly raised.

Who may vote?

Only stockholders of record on April 2, 2012, may vote.

Your vote is very important. I encourage you to vote via telephone or the Internet. Voting by telephone or the Internet is fast and convenient. More importantly, voting by telephone or the Internet is better for the environment and saves the Company money. If you prefer, you can sign, date and return your proxy card promptly in the enclosed envelope. If you attend the meeting, you may revoke your proxy and vote in person, if you wish to do so.

 

LOGO

Michael J. Massey

Secretary

April 13, 2012

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE

ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 24, 2012

The Proxy Statement related to our 2012 Annual Meeting of Stockholders and our Annual Report on Form 10-K for the fiscal year ended January 28, 2012 are available on our website at http://www.collectivebrands.com by selecting Investor Relations.


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Proxy Statement

     1   

Proposal I: Election of Directors

     3   

Charters and Corporate Governance Principles

     6   

Meetings of the Board

     10   

Board Compensation

     11   

Committees of the Board

     13   

Compensation Committee Ineterlocks and Insider Participation

     15   

Compensation, Nominating and Governance Committee Report

     15   

Compensation Discussion and Analysis

     16   

Summary Compensation Table

     33   

Fiscal 2011 Grants of Plan-Based Awards Table

     35   

Outstanding Equity Awards at the End of Fiscal 2011

     37   

Fiscal 2011 Option Exercises and Stock Vested

     39   

Pension Benefits for Fiscal 2011

     40   

Nonqualified Deferred Compensation for Fiscal 2011

     41   

Potential Payments upon Terminations or Change of Control

     42   

Proposal II: Advisory Vote on Executive Compensation

     45   

Beneficial Stock Ownership of Directors, Nominees, Executive Officers, and More Than Five Percent Owners

     46   

Audit and Finance Committee Report

     47   

Principal Accounting Fees and Services

     49   

Proposal III: Ratify the appointment of Deloitte  & Touche LLP as the Company’s Independent Registered Accountants for Fiscal Year 2012

     49   

Proposal IV: Approve the Amended and Restated Collective Brands, Inc. Incentive Compensation Plan

     50   

Proposal V: Approve the 2012 Collective Brands, Inc. Stock Incentive Plan

     53   

Related Party Transactions

     60   

Additional Information

     61   

Companies Comprising the Hay Group 2010 Retail Index Survey

     A-1   

Amended and Restated Collective Brands, Inc. Incentive Compensation Plan

     B-1   

2012 Collective Brands, Inc. Stock Incentive Plan

     C-1   


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LOGO

What are the purposes of this meeting?

The purposes of this meeting are to (i) elect three directors, each for a three-year term; (ii) conduct an advisory vote on executive compensation; (iii) ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accountants for the 2012 fiscal year; (iv) approve the Amended and Restated Collective Brands, Inc. Incentive Compensation Plan; (v) approve the 2012 Collective Brands, Inc. Stock Incentive Plan; and (vi) conduct other business, if properly raised.

Who may vote?

Stockholders of Collective Brands, Inc., a Delaware corporation (“Collective Brands,” the “Company,” or “CBI”), as recorded in our stock register on April 2, 2012, may vote at the meeting.

How to vote?

Proxies may be submitted via telephone by calling toll free 1-800-652-VOTE (8683), or the Internet at www.investorvote.com/PSS or United States mail. Also, you may vote in person at the meeting. We recommend that you vote by proxy even if you plan to attend the meeting. If you attend the meeting, you may revoke your proxy and vote in person, if you wish to do so.

How do proxies work?

The Board of Directors is asking for your proxy. Giving us your proxy means you authorize us to vote your shares at the meeting in the manner you direct. You may vote for or withhold voting authority with respect to each director candidate. You also may vote for, against or abstain from voting on proposals II, III, IV, and V. If you sign and return the enclosed proxy card, but do not specify how to vote, we will vote your shares in favor of our director candidates and in favor of Management’s proposals.

What is the difference between holding shares directly as a stockholder of record and holding shares in “street name” at a bank or broker?

Most of our stockholders hold their shares in “street name” through a broker, bank or other nominee rather than directly in their own name. There are differences between shares held of record and those held in “street name.”

Stockholder of Record. If your shares are registered directly in your name with our transfer agent, you are considered the stockholder of record with respect to those shares. As the stockholder of record, you have the right to vote, grant your voting directly to the Company or to a third party, or to vote in person at the meeting.

“Street Name” Stockholder. If your shares are held by a bank, broker, trustee or nominee, you are considered the beneficial owner of shares held in “street name,” and your bank or broker is considered the stockholder of record with respect to those shares. Your bank, broker, trustee or nominee will send you, as the beneficial owner, a package describing the procedure for voting your shares. You should follow the instructions provided by them to vote your shares. You are invited to attend the annual meeting; however, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from your bank, broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting.

 

 

This Proxy Statement and the enclosed form of proxy are being mailed to stockholders

On or about April 13, 2012.


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Why did I receive multiple proxy cards?

You may receive more than one proxy or voting instruction card depending on how you hold your shares. You will receive a combined proxy voting instruction card for shares registered in your name and for shares allocated to you under the Company’s profit sharing plans. If you hold shares in “street name,” you may also get material from them asking how you want to vote. Please vote each proxy or voting instruction card.

How do I revoke my proxy?

You may revoke your proxy before it is voted by submitting a new proxy card with a later date or subsequently voting via telephone or the Internet. Record holders may also revoke their proxy by voting in person at the meeting or by notifying the Company’s Secretary in writing at the address listed under “Questions” on page 65.

What is a quorum?

In order to carry on the business of the meeting, we must have a quorum. This means at least a majority of the outstanding shares eligible to vote must be represented at the meeting, either in person or by proxy. Shares owned by Collective Brands affiliated companies do not count for this purpose.

How many votes are needed?

The director candidates receiving the most votes will be elected to fill the seats on the Board. Proposals II through V of Management will each pass if a majority of the votes are in favor of them. Abstentions will have the same effect as a vote against the proposal. We count abstention and broker non-votes to determine if a quorum is present. When a broker returns a proxy, but does not have authority to vote on a particular proposal, we call it a “broker non-vote.”

As provided by law, the vote of Proposal II is advisory and non-binding. The Board will review the results of the vote and, consistent with our record of stockholder engagement, will take them into account in making determinations concerning executive compensation.

Who may attend the meeting?

Only stockholders, their proxy holders and the Company’s guests may attend the meeting. The top half of your proxy or voting instruction card is your admission ticket. Please bring the admission ticket with you to the meeting.

If you hold your shares through someone else, such as a stockbroker, send proof of your ownership to the Secretary at the address listed under “Questions” on page 65, and we will send you an admission ticket. Alternatively, you may bring proof of ownership with you to the meeting. Acceptable proof could include an account statement showing that you owned Collective Brands shares on April 2, 2012.

 

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PROPOSAL I: ELECTION OF DIRECTORS

Proposal I on the accompanying proxy card

Directors and Nominees for Director

The Company’s Board of Directors (the “Board”) currently consists of nine Directors, divided into three classes, serving staggered terms. Six of the Company’s current Directors are serving in two classes with terms that continue beyond the Annual Meeting, and they are not subject to election at the Annual Meeting. Three of the Company’s Directors who served in the preceding year, Messrs. John F. McGovern and D. Scott Olivet and Ms. Mylle H. Mangum serve in a class with a term that expires at the 2012 Annual Meeting of Stockholders. Messrs. John F. McGovern and D. Scott Olivet and Ms. Mylle H. Mangum are the nominees of the Board for re-election at the Annual Meeting of Stockholders, and if elected, they will each serve a term of three years that will expire at the Annual Meeting of Stockholders to be held in the year 2015, or until a successor is elected and qualified.

Messrs. Daniel Boggan Jr., Michael A. Weiss, and Robert C. Wheeler have terms expiring at the 2013 Annual Meeting of Stockholders. Messrs. Richard L. Markee, Robert F. Moran, and Matthew A. Ouimet have terms expiring at the 2014 Annual Meeting of Stockholders.

Each nominee has consented to being named as a nominee and to serve as a Director, if elected. If any nominee should subsequently become unavailable for election, the holders of proxies may, in their discretion, vote for a substitute or the Board may reduce the number of Directors to be elected.

Directors Subject to Election:

MYLLE H. MANGUM, 63, has served as a Director since November 1997. She has served as Chief Executive Officer of IBT Enterprises, LLC (formerly International Banking Technologies) since October 2003 and has also served as Chairman and Chief Executive Officer of IBT Holdings since July 2007. Prior to this, Ms. Mangum served as Chief Executive Officer of True Marketing Services, LLC since July 2002. She served as Chief Executive Officer of MMS Incentives, Inc. from 1999 to 2002. From 1997 to 1999 she served as President-Global Payment Systems and Senior Vice President-Expense Management and Strategic Planning for Carlson Wagonlit Travel, Inc. From 1992 to 1997 she served as Executive Vice President-Strategic Management for Holiday Inn Worldwide. Ms. Mangum was previously employed with BellSouth Corporation as Director-Corporate Planning and Development from 1986 to 1992, and President of BellSouth International from 1985 to 1986. Prior to that she was with General Electric. Ms. Mangum served as a Director of Emageon, Inc. from June 2004 to April 2009, Scientific-Atlanta, Inc. from November 1993 to February 2006, Respironics, Inc. from May 2004 to March 2008, and Decatur First Bank, a privately held company from May 2007 to August 2011. She has served as a Director of Barnes Group Inc. since December 2002, Haverty Furniture Companies, Inc. since May 1999, and Express, Inc. since August 2010. As a result of these and other professional experiences, Ms. Mangum possesses particular knowledge and experience in retail, merchandising, marketing, strategy, technology, supply chain, logistics, international business, and multi-division general management experience that strengthen the Board’s collective qualifications, skills, and experience.

JOHN F. MCGOVERN, 65, has served as a Director since June 2003. Mr. McGovern is the founder, and since 1999 a partner, of Aurora Capital LLC, a private investment and consulting firm based in Atlanta, GA. Prior to founding Aurora Capital, Mr. McGovern served in a number of positions of increasing responsibility at Georgia-Pacific Corporation from 1981 to 1999, including Executive Vice President/Chief Financial Officer from 1994 to 1999. Previously, Mr. McGovern had been Vice President and Division Executive, Forest Products Division from 1978 to 1981. Mr. McGovern served as a Director of GenTek, Inc. from 2003 to 2009, Golden Bear Golf, Inc. from 1996 to 2000, Seabulk International, Inc. from 2000 to 2002, Chart Industries, Inc. from 2004 to 2005, Maxim Crane Works Holdings, Inc. (a privately-held company) from

 

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2005 to 2008, Xerium Technologies Inc. from 2010 to present, The Newark Group from 2010 to present, and General Chemical Corp. from 2010 to present. He also served as a Director and officer of ChannelLinx, Inc. from 2000 to 2002, which filed bankruptcy subsequent to his resignation. He is currently a Director of Neenah Paper, Inc. since 2006. As a result of these and other professional experiences, Mr. McGovern possesses particular knowledge and experience in finance, strategy, and international finance that strengthen the Board’s collective qualifications, skills, and experience.

D. SCOTT OLIVET, 49, has served as a Director since September 2006 and non-executive Chairman of the Board since June 2011. Mr. Olivet has served as Executive Chairman of RED Digital Cinema, Chairman of Oakley, Inc. (“Oakley”) and Chief Executive Officer of Renegade Brands, LLC since July 2009. From 2005 to July 2009, Mr. Olivet served as Chief Executive Officer of Oakley. Prior to joining Oakley, Mr. Olivet served as Vice President, Nike Subsidiaries and New Business Development from August 2001 to September 2005. From 1998 to 2001, Mr. Olivet served as Senior Vice President of Real Estate, Store Design and Construction, for the Gap, Inc. From 1984 to 1998, Mr. Olivet was a partner with Bain & Company. He currently serves as a Director of Oakley since 2005 (a public company until 2007), and RED Digital Cinema, a privately held company, since 2006, and is a Trustee and Member of the Audit Committee of Pomona College. As a result of these and other professional experiences, Mr. Olivet possesses particular knowledge and experience in retail, merchandising, marketing, finance, strategy, technology, international business, and multi-division general management experience that strengthen the Board’s collective qualifications, skills, and experience.

THE BOARD UNANIMOUSLY RECOMMENDS THAT HOLDERS OF COLLECTIVE BRANDS COMMON STOCK VOTE IN FAVOR OF THE ABOVE NOMINEES, AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.

Continuing Directors:

DANIEL BOGGAN JR., 66, has served as a Director since September 1997. Mr. Boggan is retired. He served as Chief of Staff for Oakland, California Mayor Ron Dellums from January 2007 to July 2007. He served as Director of Business Development of Siebert Branford Shank & Co., LLC from September 2003 until his retirement in March 2006. Mr. Boggan served as Senior Vice President of the National Collegiate Athletic Association (“NCAA”) from 1998 to his retirement in August 2003. He joined the NCAA in 1994 as Group Executive Director for Education Services and served as Chief Operating Officer from January 1996 to August 1998. Prior to his tenure with the NCAA, Mr. Boggan was Vice Chancellor of the University of California from 1986 to 1994, and City Manager of Berkeley, California from 1982 to 1986. Mr. Boggan has served as a member of the Board of Directors of Viad Corporation since 2005 and The Clorox Company since 1990. As a result of these and other professional experiences, Mr. Boggan possesses particular knowledge and experience in finance, strategy, technology, government, and academia that strengthen the Board’s collective qualifications, skills, and experience.

RICHARD L. MARKEE, 58, has served as a Director since July 2011. Mr. Markee has served as Executive Chairman of Vitamin Shoppe, Inc. since April 2011, served as a Director since September 2006, and was non-executive Chairman of the Board from April 2007 to September 2009. From September 2009 to April 2011, he served as the Company’s Chief Executive Officer and as Chairman of the Board. He previously served as the President of Babies ‘R’ Us from August 2004 to November 2007 and Vice Chairman of Toys ‘R’ Us, Inc. from May 2003 to November 2007. Mr. Markee also served as Interim Chief Executive Officer of Toys ‘R’ Us, Inc. and its subsidiaries from July 2005 to February 2006. He served as President of Toys ‘R’ Us U.S. from May 2003 to August 2004. From January 2002 to May 2003, he was Executive Vice President, President- Specialty Businesses and International Operations of Toys ‘R’ Us. He was an Operating Partner of Irving Place Capital Management, L.P., a private equity firm focused on making equity investments in middle-market companies from November 2008 to September 2009. From 2006 to 2008, Mr. Markee was an Operating Partner of Bear Stearns Merchant Banking, the predecessor to Irving Place Capital Management, L.P. He has also been a

 

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Director of Dorel Industries since November 2008. From June 2005 through July 2006, he served on the Board of Directors of The Sports Authority, Inc. From October 1999 to January 2002, he served as Executive Vice President — President of Babies ‘R’ Us and the Chairman of Kids ‘R’ Us. He is currently a member of the Board of Directors of Vitamin Shoppe, Inc., and Dorel Industries. As a result of these and other professional experiences, Mr. Markee possesses particular knowledge and experience in branded consumer products, marketing, strategic planning and leadership of complex organizations that strengthen the Board’s collective qualifications, skills and experience.

ROBERT F. MORAN, 61, has served as a Director since March 2007. Mr. Moran has served as the Chairman of the Board and Chief Executive Officer of PetSmart since February 2012. He served as President and Chief Executive Officer and a Director of PetSmart, Inc. since June 2009 and as President and Chief Operating Officer of the company since December 2001. He joined PetSmart in July 1999 as President of North American stores. Mr. Moran served as President of Toys ‘R’ Us, Ltd., Canada from 1998 to June 1999. Prior to that, he spent 20 years with Sears, Roebuck and Company in a variety of financial and merchandising positions, including President and Chief Executive Officer of Sears de Mexico. He was also Chief Financial Officer and Executive Vice President of Galerias Preciados of Madrid, Spain from 1991 to 1993. Mr. Moran served on the Board of Medial Management International, Inc., a privately held company from 2003 to 2008. As a result of these and other professional experiences, Mr. Moran possesses particular knowledge and experience in retail, merchandising, marketing, strategy, technology, finance, supply chain, logistics, international finance, international business, and multi-division general management experience that strengthen the Board’s collective qualifications, skills, and experience.

MATTHEW A. OUIMET, 53, has served as a Director since June 2008. Mr. Ouimet has served as President of Cedar Fair, L.P. since June 2011 and as Chief Executive Officer since January 2012. He previously served as President and Chief Operating Officer for Corinthian Colleges from July 2009 to October 2010 and Executive Vice President — Operations from January 2009 to June 2009. Prior to Corinthian Colleges, he served as President, Hotel Group for Starwood Hotels and Resorts Worldwide from August 2006 to September 2008. Prior to joining Starwood, Mr. Ouimet spent 17 years at The Walt Disney Company, where he last served as President Disneyland Resort. Mr. Ouimet served in a variety of other business development and financial positions, including President of Disney Cruise Line during his employment with Disney. Prior to his work with Disney, Mr. Ouimet was Controller and Senior Vice President, Finance for Lincoln Property Company from 1983 to 1989 and served as a Certified Public Accountant with Price Waterhouse from 1980 to 1983. As a result of these and other professional experiences, Mr. Ouimet possesses particular knowledge and experience in merchandising, marketing, finance, strategy, technology, government, academia, international business, and multi-division general management experience that strengthen the Board’s collective qualifications, skills, and experience.

MICHAEL A. WEISS, 70, has served as a Director since January 2005. Mr. Weiss has served as President and Chief Executive Officer and a member of the Board of Express, Inc. since July 2007 and Chairman of the Board since November 2011. From 2004 to July 2007, Mr. Weiss was retired. He also served President and Chief Executive Officer of Express from 1997 to 2004. Mr. Weiss joined Limited in 1981 and served in a number of positions of increasing responsibility including Vice Chairman from 1993 to 1997 and President of Express from 1982 to 1993. Previously, he had been General Manager for Trousers Up, a subsidiary of Apparel Industries, Inc., and Merchandise Manager for Casual Corner Group, Inc. Mr. Weiss began his career at Abraham & Straus, a subsidiary of Federated Department Stores. Mr. Weiss served as a Director of Chicos FAS, Inc. (also served as non-executive Chairman) from 2005 to 2007, Pacific Sunwear of California, Inc. from 2005 to 2008, and Borders Group, Inc. from 2005 to 2009. As a result of these and other professional experiences, Mr. Weiss possesses particular knowledge and experience in retail, merchandising, marketing, finance, strategy, technology, supply chain and logistics that strengthen the Board’s collective qualifications, skills, and experience.

ROBERT C. WHEELER, 70, has served as a Director since September 2001. Mr. Wheeler is retired. He served as President of Hill’s Pet Nutrition, Inc. from 1981 to April 2009. He assumed the title of Chairman and

 

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Chief Executive Officer in June 1996. From 1987 to 1992, he served as Vice President of Colgate-Palmolive Company and had been a Corporate Officer since 1992. Mr. Wheeler served as a Director of Security Benefit Group from 1998 to July 2010 and as Director of Stormont-Vail HealthCare, Inc. from 1990 to 2012. As a result of these and other professional experiences, Mr. Wheeler possesses particular knowledge and experience in merchandising, marketing, strategy, technology, supply chain, logistics, international business, integrated technologies for global organization and multi-division general management experience that strengthen the Board’s collective qualifications, skills, and experience.

Former Director:

MATTHEW E. RUBEL, 54, served as a Director from July 2005 and as Chairman of the Board from May 2008 to June 2011. Mr. Rubel served as Chief Executive Officer and President of Collective Brands, Inc. from July 2005 to June 2011. Prior to joining Collective Brands, Mr. Rubel was Chairman and Chief Executive Officer for Cole Haan from 1999 to July 2005. He served as Executive Vice President, J. Crew Group and Chief Executive Officer of Popular Club Plan from 1994 to 1999. While at J. Crew Group, Mr. Rubel was responsible for all licensing and international activities, as well as brand marketing and served on its Group Executive Committee. Mr. Rubel has also served as President and Chief Executive Officer of Pepe Jeans USA, and President of the Specialty Division of Revlon. Mr. Rubel served as a Director of Furniture Brands, Inc. from 2006 to 2008 and a Director of SUPERVALU, INC. since June, 2010. As a result of these and other professional experiences, Mr. Rubel possesses particular knowledge and experience in retail, merchandising, marketing, finance, strategy, technology, supply chain, logistics, digital commerce, international business, and multi-division general management experience that strengthened the Board’s collective qualifications, skills, and experience.

Charters and Corporate Governance Principles

At its February 2012 meeting, the Board reviewed its charter and governance guidelines for the Company and the Board. The full text of the Company’s governance guidelines, and the charters for the Board, Audit and Finance Committee and the Compensation, Nominating and Governance Committee (the “CN&G Committee”) are each posted on the Company’s investor relations website at www.collectivebrands.com and will also be provided free of charge to any stockholder requesting a copy by writing to: Collective Brands, Inc., Attn: Investor Relations Department, 3231 Southeast Sixth Avenue, Topeka, Kansas 66607.

Purpose of the Board of Directors

The business of Collective Brands is managed under the direction of the Board. The purpose of the Board is to oversee Management’s conduct of the Company’s business.

Board Responsibilities

The Board’s responsibilities (acting as a whole and through its standing committees) include:

 

   

Reviewing Management’s determination of objectives, strategies, policies and plans for the Company.

 

   

Electing, monitoring, evaluating, compensating and, if necessary, replacing the Chief Executive Officer and other senior executives.

 

   

Reviewing Management’s plans for guarding and preserving the Company’s assets including intangible assets such as the Company’s reputation and maintaining a reservoir of successor management talent.

 

   

Reviewing and approving equity and incentive compensation plans, and plans for major changes in the senior corporate organizational structure.

 

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Reviewing and approving Management’s strategic and business plans and conducting continuing appraisals of Management’s performance against established plans and objectives.

 

   

Through the Audit and Finance Committee, recommending outside auditors for approval by stockholders.

 

   

Reviewing and approving strategic business plans, major transactions, changes in corporate financial structure affecting balance sheet items, financial plans, objectives and actions, including significant capital allocations and expenditures.

 

   

Designating and appointing members of committees of the Board, establishing appropriate limits of authority, and receiving reports from such committees and reviewing and approving such committee’s recommendations where necessary.

 

   

Reviewing management’s recommendations for maintenance and revision of the Company’s Certificate of Incorporation and By-Laws.

 

   

Reviewing the CN&G Committee’s recommendations for perpetuation of a sound Board through planned and orderly recruitment activities, regular election and the filling of interim vacancies.

Board Organization

The Board currently consists entirely of independent directors who the Board has determined meet the New York Stock Exchange’s (the “NYSE”) definition of independence. Mr. Olivet currently serves as the non-executive Chairman of the Board. The Chairman of the Board is elected annually and if the Chairman of the Board is not an independent director, the Board will elect an independent director to serve as Lead Director at the Board meeting immediately following the Annual Meeting of Stockholders.

The Board currently maintains three standing committees: (i) the Executive Committee, (ii) the Audit and Finance Committee, and (iii) the CN&G Committee. The Audit and Finance and the CN&G Committees are each comprised entirely of independent directors. Assignments to, and chairs of, the committees are recommended by the CN&G Committee and selected by the Board. All committees regularly report to the Board on their activities. The Board may, from time to time, establish certain other committees to act on behalf of the Board of Directors.

Board Leadership Structure

The Board is currently comprised of nine directors, all of whom are independent. Since June 2011, coincident with Mr. Rubel’s resignation, Mr. Olivet has served as the non-executive Chairman of the Board. Prior to his resignation in June, 2011, Mr. Rubel served as Chairman of the Board, Chief Executive Officer and President and Mr. Wheeler served as Lead Director. The Board’s guidelines require that if the Chairman and Chief Executive Officer positions are held by the same individual, the Board must elect a Lead Director.

The Board believes that the current governance structure providing for an independent non-executive Chairman of the Board combined with an independent Board of experienced directors benefits the Company and its stockholders. The Chairman of the Board is elected annually after the Annual Meeting of Stockholders. The Chairman of the Board is responsible for: (1) chairing the meetings of the Board of Directors, other than executive sessions of the Board; (2) planning and organizing, in consultation with the Committee Chairs, the activities of the meetings of the Board of Directors, including setting the agenda for such meetings; (3) determining, together with the Committee Chairs, the quality, quantity and timeliness of the information that is to be provided to the Board on a regular basis; (4) facilitating on-going formal and informal communications between and among directors; (5) chairing the annual and special meetings of the stockholders; and (6) arranging for executive sessions of the Board of Directors.

 

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We recognize that different board leadership structures may be appropriate for companies in different situations and believe that no one structure is suitable for all companies at all times. We believe our current Board leadership structure, given the current composition of the Board and with Mr. Massey serving as Chief Executive Officer and President on an interim basis, is optimal.

Our Board conducts an annual evaluation in order to determine whether it and its committees are functioning effectively. As part of this annual self-evaluation, the Board evaluates whether the current leadership structure continues to be optimal for Collective Brands and its stockholders. Our Corporate Governance Guidelines provide the flexibility for our Board to modify or continue our leadership structure in the future, as it deems appropriate.

Risk Oversight

The Board, acting directly or through its committees, is responsible for overseeing the Company’s risk management process. In discharging its responsibilities, the Board directly or through its committees focuses on the Company’s general risk management strategy, the most significant risks facing the Company, and regularly reviews risk management and specific risk mitigation strategies that are implemented by Management. The Board is also apprised of particular risk management matters in connection with its general oversight and approval of corporate matters.

The Board has delegated to the Audit and Finance Committee oversight of the Company’s risk management process. The Audit and Finance Committee reviews with management (a) the Company’s policies with respect to risk assessment and management of risks that may be material to the Company, (b) the Company’s system of disclosure controls and system of internal controls over financial reporting, and (c) the Company’s compliance with legal and regulatory requirements. The CN&G Committee is responsible for reviewing the Company’s compensation programs to evaluate whether they are likely to pose any risks that are likely to have a material adverse effect on the Company. All committees report to the full Board at each regularly scheduled Board Meeting. When a matter rises to the level of a likely material enterprise risk, it generally will be discussed with the entire Board.

The Company’s management is responsible for day-to-day risk management. The Company’s Internal Audit and Risk Insurance Departments serve as the primary monitoring and testing functions for company-wide policies and procedures. They are responsible for identifying and coordinating risk management with key business leaders and regularly reporting to the Audit and Finance Committee. These departments administratively report to the Company’s Chief Financial Officer with the Internal Audit Department reporting directly to the Audit and Finance Committee. The Audit and Finance Committee also regularly receives reports from key business functions which discuss potential risks that may exist at the enterprise, strategic, financial, operational, and compliance and reporting levels.

This approach to risk management appropriately focuses the Board’s attention and allows management to run the Company with the oversight of the Board.

Board Operation

The Board has six regularly scheduled meetings per year. Audit and Finance and Compensation, Nominating and Governance Committee meetings are normally held in conjunction with board meetings. The Board and committee chairs are responsible for conducting meetings and informal consultations in a fashion that encourages informed, meaningful and probing deliberations. Directors generally receive their agenda and materials in advance of meetings and may ask for additional information from, or meet with, senior executives at any time.

 

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Board Advisors

The Board and its committees (consistent with their respective charters) may retain their own advisors, as they determine necessary, to carry out their responsibilities.

Board Evaluation

The CN&G Committee coordinates an annual evaluation process of the Board and each of the Board’s standing committees. The Audit and Finance Committee and the CN&G Committee each annually perform a self evaluation and a review of the adequacy of its charter. The CN&G Committee also periodically performs a Board skill assessment which includes an evaluation of Board diversity.

Selection of Directors

The Board is responsible for selecting nominees for Board membership, and establishing criteria for identifying potential nominees. In recommending candidates for election to the Board, the CN&G Committee considers the following criteria:

 

   

Personal qualities and characteristics, accomplishments and reputation in the business community;

 

   

Current knowledge and contacts in the communities in which the Company does business and in the Company’s industry or other industries relevant to the Company’s business;

 

   

Ability and willingness to commit adequate time to Board and committee matters;

 

   

The fit of the individual’s skills and personality with those of other Directors and potential directors in building a Board that is effective, collegial and responsive to the needs of the Company;

 

   

Diversity of viewpoints, background, experience and other demographics; and

 

   

A commitment to represent the Company’s stockholders as a whole.

The CN&G Committee considers nominees for Directors from any source, including individuals nominated by stockholders or outside consultants engaged by the CN&G Committee to recommend Director nominees. Director nominee suggestions must be submitted in writing to the Company’s Corporate Secretary at 3231 Southeast Sixth Avenue, Topeka, Kansas, 66607, and otherwise comply with the terms of the Company’s By-Laws. See also “About Stockholder Proposals and Nominations for Our 2013 Annual Meeting.”

Independence of Directors and Nominees for Director

The Board annually reviews and determines the independence of Directors. The Board also reviews and determines the independence of nominees for Director. No Director nominee or Director is considered independent unless the Board determines that he or she has no material relationship with the Company either directly, as a partner, stockholder or affiliate of an organization that has a material relationship with the Company, or indirectly. The Board has adopted categorical independence standards consistent with the New York Stock Exchange listing guidelines to evaluate the materiality of any such relationship. The Board has determined that each of the nominees for Director standing for election at the 2012 Annual Meeting is independent of the Company, because none of the nominees for Director has a material relationship with the Company either directly or indirectly. The Board has made this determination based on the following factors:

 

   

No nominee for Director is or has been an officer or employee of the Company or its subsidiaries or affiliates since the Company’s spin-off from The May Department Stores Company;

 

   

No nominee for Director has an immediate family member who is an officer of the Company or its subsidiaries or has any current or past material relationship with the Company;

 

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No nominee for Director has worked for, consulted with, been retained by, or received anything of substantial value from the Company aside from his or her compensation as a Director;

 

   

No nominee for Director is, or was within the past five years, employed by the independent auditors for the Company;

 

   

No executive officer of the Company serves on the compensation committee of any corporation that employs a nominee for Director or a member of the immediate family member of any nominee for Director;

 

   

No nominee for Director is an executive officer of any entity which the Company’s annual sales to or purchases from exceeded one percent of either entity’s annual revenues for the last fiscal year; and

 

   

No nominee for Director serves as a director, trustee, executive officer or similar position of a charitable or non-profit organization to which the Company or its subsidiaries made charitable contributions or payments in fiscal year 2011 in excess of $5,000.00.

As part of the independence review process, in March 2012, the Board reviewed a summary of each Director’s response to a questionnaire asking about their (and their immediate family members’) relationships with the Company and other potential conflicts of interest, as well as material provided by management regarding transactions, relationships or arrangements between the Company and the Directors or parties related to the Directors. Utilizing the above criteria, the Board determined that all Directors are independent, and that the members of the Audit and Finance Committee and the CN&G Committee are also independent.

Communications with the Board of Directors

The Board believes that Management speaks for the Company. The Board and individual members of the Board may, from time to time, meet or otherwise communicate with various constituencies. It is expected, however, that Board members will speak for the Company only with the knowledge of Management and, in most instances, at the request of Management. Stockholders and other interested parties may contact non-management members of the Board by sending written correspondence to the Director at the following address:

                , Director

Collective Brands, Inc.

c/o Secretary

3231 Southeast Sixth Avenue

Topeka, KS 66607

The Secretary will review and forward such correspondence to the Board members. The Secretary will also direct inquiries most properly addressed by other departments, such as customer service or accounts payable, to those departments to ensure that the inquiries are responded to in a timely manner. Any inquiry that presents a matter relevant to accounting, audit, internal controls, or similar issues that is not addressed to a specific Director, will be forwarded to the Chairman of the Audit and Finance Committee.

Meetings of the Board

The Board of Directors of the Company held a total of 14 meetings during fiscal 2011. No Director attended less than 75% of the aggregate of (i) the total number of Board meetings held during the period for which such Director held such office, and (ii) the total number of meetings held by all Board committees on which such Director served during the periods that such Director served on such committee.

While the Board of Directors understands that there may be situations that prevent a Director from attending an Annual Meeting of Stockholders, the Board strongly encourages all Directors to make attendance at all Annual Meetings of Stockholders a priority. All of the Company’s nine Directors attended the Company’s Annual Meeting of Stockholders held on May 26, 2011.

 

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Board Compensation

Director Compensation.    Management Directors, if any, are not entitled to additional compensation for their service as a Director or for attendance at Board, committee or annual stockholder meetings.

Concurrent with the transition to a non-executive Chairman of the Board in June 2011 and the elimination of the Lead Director role, the CN&G Committee engaged Hay Group to provide compensation recommendations for the non-executive Chairman role. Hay Group provided its own benchmarking of non-executive Chairman compensation within the retail industry and data from the National Association of Corporate Directors board pay report and other sources.

Considering Hay Group’s analysis, the CN&G Committee in June 2011 established an annual non-executive Chairman retainer consisting of $75,000 in cash and $75,000 in stock; the stock retainer for 2011 was paid to Mr. Olivet on June 17, 2011, in 5,226 shares that will vest on May 1, 2012. In addition, to appropriately compensate Mr. Olivet for the increased level of involvement required until a permanent Chief Executive Officer is hired and on-boarded, the Committee authorized a special cash transition payment of $50,000 per quarter. The final transition payment will be prorated for the quarter in which a permanent Chief Executive Officer is hired and on-boarded.

Other than the non-executive Chairman compensation arrangements and the elimination of the Lead Director retainer, no changes were made to the non-management Director compensation program in the past year.

The following table explains the key components of non-management Director compensation, which is based on a Board year basis that runs from one Annual Meeting of Stockholders until the next such meeting.

ELEMENTS OF TOTAL COMPENSATION

 

     2011 Board Year  

Annual Cash Retainer

   $ 50,000   

Annual Stock Retainer

   $ 100,000   

Meeting Fees (per meeting attended):

  

Board Meeting(1)

   $ 1,500   

Committee Meeting

   $ 1,000   

Annual Non-Executive Chairman Retainer:

Cash

Stock

   $

$

75,000

75,000

  

  

Committee Chairperson Retainer:

Audit and Finance

Compensation, Nominating and Governance

   $

$

25,000

20,000

  

  

Lead Director Retainer (eliminated June 2011)

   $ 20,000   

Reimbursement for expenses attendant to Board membership

     Yes   

 

(1)

The Board meeting fee will be increased by $1,000 if a Board meeting in the continental U.S. extends beyond 1 1/2 days. An international Board meeting fee of $3,000 to $6,000 (depending on duration and distance) will be paid for Board meetings outside the continental U.S.

The annual cash retainer, non-executive Chairman retainer, and Committee Chairperson retainer are each earned (or vest, if deferred) in one-fifth increments on the date of each regular meeting of the Board following the Annual Meeting of Stockholders. The annual retainers for any Director elected subsequent to the Annual Meeting of Stockholders are prorated.

 

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The 2011 Board year stock portion of each non-management Director’s annual retainer was paid in 6,548 restricted shares of Collective Brands common stock granted on May 26, 2011. The number of shares granted to each Director was determined based upon the closing share price on the date of the Annual Meeting of Stockholders. The restricted stock portion of the annual retainer vests on May 1 following the grant date. All shares of Collective Brands common stock granted to non-management Directors are subject to restrictions on transferability. Under these restrictions, Directors cannot transfer the shares granted to them until they cease membership on the Board or, if earlier, until the later of six months after they are awarded the grant and the date they have satisfied the stock ownership guidelines of the Company.

Annual stock retainers paid to the non-management Directors are granted under the Company’s Restricted Stock Plan for Non-Management Directors. This plan currently provides for the issuance of not more than 350,000 shares of Collective Brands common stock, subject to adjustment for changes in the Company’s capital structure.

The Board of Directors believes that the interests of Directors and stockholders are most closely aligned when the Directors themselves are stockholders and, accordingly, maintains Stock Ownership Guidelines for non-management Directors. The guidelines stipulate that Directors should hold (either directly or in their deferred compensation accounts discussed below) Collective Brands common stock shares equivalent in value to four times the annual cash retainer in effect at the time the guideline is established for each Director. The Board reviews Director ownership levels annually to evaluate progress toward these guidelines. Under the guidelines, Directors may not sell or otherwise transfer any of the shares of Collective Brands stock awarded to them by the Company until the target ownership level under the guideline is achieved. Currently, all Directors have met their ownership guidelines with the exception of Mr. Markee, who was elected to the Board in 2011.

The Collective Brands, Inc. Deferred Compensation Plan for Non-Management Directors allows each Director to defer receipt of retainers (but not meeting fees) received for services as a Director, whether payable in stock or cash, until after the calendar year in which the Director’s service on the Board ceases. Under this Plan, Directors may elect to use either Company stock or the thirty-year Treasury Bill rate on May 1 of each year as the measurement fund for the return on cash payments that are deferred. Directors must use Company stock as the measurement fund for any Company stock which is deferred.

The following table reflects the Compensation paid to the Company’s non-management Directors in fiscal 2011.

2011 NON-MANAGEMENT DIRECTOR COMPENSATION

 

Name of Director

(a)

   Fees Earned or Paid
in Cash(1)

($)
(b)
     Stock Awards  (1,2,3)
($)
(c)
     All Other
Compensation(4)

($)
(g)
     Total
($)
(h)
 

Daniel Boggan Jr.

     83,000         100,000                 183,000   

Mylle H. Mangum

     107,000         100,000                 207,000   

Richard L. Markee

     42,000         91,667                 133,667   

John F. McGovern

     108,000         100,000                 208,000   

Robert F. Moran

     83,000         100,000                 183,000   

D. Scott Olivet

     228,000         175,000                 403,000   

Matthew A. Ouimet

     83,000         100,000                 183,000   

Michael A. Weiss

     86,000         100,000                 186,000   

Robert C. Wheeler

     94,000         100,000                 194,000   

 

(1) Includes fees earned that were deferred under the Collective Brands, Inc. Deferred Compensation Plan for Non-Management Directors.

 

(2) For all Directors except Messrs. Markee and Olivet, values reflect the grant date fair value on May 26, 2011 (6,548 shares). For Mr. Markee, value reflects the grant date fair value on July 5, 2011 (6,030 shares). For Mr. Olivet, value reflects the grant date fair values on May 26, 2011 (6,548 shares) and June 17, 2011 (5,226 shares).

 

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(3) Total shares not vested as of January 28, 2012, for each Director, including those shares that have been deferred, were:

 

Director

   Shares Not Vested as of 1/28/12  

Boggan

     6,548   

Mangum

     6,548   

Markee

     6,030   

McGovern

     6,548   

Moran

     6,548   

Olivet

     11,774   

Ouimet

     6,548   

Weiss

     6,548   

Wheeler

     6,548   

 

(4) On occasion, non-management Directors receive footwear and other items of nominal value (which may include Company-paid spouse travel in conjunction with Board meetings) that may be considered perquisites. In 2011, the value of all such items did not exceed $5,000 for any individual Director.

Committees of the Board

Executive Committee

Members, Authority and Meetings.    The Executive Committee is composed of the non-executive Chairman of the Board, the chairperson of the Audit and Finance Committee and the chairperson of the Compensation, Nominating and Governance Committee. The non-executive Chairman of the Board serves as the Executive Committee’s chairperson. The Executive Committee may exercise all the powers of the Board but does not have the power to (i) approve or adopt, or recommend to the Company’s stockholders, any matter expressly required by Delaware law to be submitted to stockholders for approval; (ii) adopt, amend or repeal any By-Law of the Company; (iii) elect Directors of the Company; (iv) declare any dividend or make any other distribution to the Company’s stockholders; or (v) take actions with respect to matters delegated to other committees of the Board. The Executive Committee did not meet during fiscal 2011.

Audit and Finance Committee

Members, Authority and Meetings.    Pursuant to its charter, the Audit and Finance Committee is solely responsible for selecting the Company’s independent registered public accountants, reviewing their independence, approving all engagements, and evaluating their performance. The Audit and Finance Committee reviews results of the audit for each fiscal year, all material accounting policies of the Company, the coordination between the independent registered public accountants and the Company’s internal auditing group, the scope and procedures of the Company’s internal audit work, the quality and composition of the Company’s internal audit staff, and maintains procedures for the confidential and anonymous receipt of employee concerns regarding questionable accounting or auditing matters. The Audit and Finance Committee is responsible for reviewing and making recommendations to the Board with respect to matters such as the following: the financial policies of the Company; debt ratings; short-term versus long-term debt positions; debt-to-capitalization ratios; fixed charge coverage; working capital and bank lines; dividend policy; the long-range financial plans of the Company; the Company’s capital expenditure program, including rate of return standards and evaluation methods; specific debt and/or equity placement activities; external financial relationships with investment bankers; commercial bankers, insurance companies, etc.; financial public relations and communication programs; financial aspects of proposed acquisitions and/or divestitures; and the Company’s insurance and risk management programs. See also “Risk Oversight” and “Audit and Finance Committee Report.”

The Audit and Finance Committee regularly provides the Company’s internal auditor, Chief Financial Officer, General Counsel, Chief Administrative Officer and the Company’s independent registered public accountants with opportunities to privately meet with the Committee. The Audit and Finance Committee is also authorized to retain legal, accounting or other advisors as it determines appropriate. The members of the Audit

 

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and Finance Committee during 2011, were Messrs. McGovern (Chairman), Boggan, Moran, Olivet, and Ouimet. The Board determined that each of the members of the Audit and Finance Committee is an independent director as required by the rules of the NYSE and an audit committee financial expert as defined by Item 407(d) of Regulation S-K. During the 2011 fiscal year, the Audit and Finance Committee met nine times.

Compensation, Nominating and Governance Committee

Members, Authority and Meetings.    During 2011, the members of the CN&G Committee included Ms. Mangum (Chairman), and Messrs. Markee (since July 2011), Weiss and Wheeler. Each of these Directors satisfied the NYSE’s independence requirements, was a “non-employee director” within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and was an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). During fiscal 2011, the CN&G Committee met 12 times. The agenda for each CN&G Committee meeting is determined by discussions among the CN&G Committee Chairman, the Company Secretary, Management and the CN&G Committee’s advisors, as appropriate. A copy of the CN&G Committee’s charter was last reviewed at its February 2012 meeting, and can be found on the company’s Investor Relations website at www.collectivebrands.com.

The CN&G Committee is primarily responsible for establishing the Company’s compensation philosophy and various compensation programs and for monitoring the Company’s executive development efforts so that there is an adequate pool of personnel for orderly Management succession. In performing these functions, the CN&G Committee reviews and approves compensation arrangements for the Executive Compensation Group (the “ECG”) which consists of the Chief Executive Officer, other Section 16 officers, the principal executives of each of the Company’s operating units (if not Section 16 officers), and any other employee whose base annual compensation is in excess of $500,000. The CN&G Committee reviewed the Company’s compensation policies and practices for fiscal 2011 for all employees, including executive officers, and determined that the Company’s compensation programs are not reasonably likely to have a material adverse effect on the Company. Nonetheless, as part of its regular review of the Company’s compensation policies, management and the CN&G Committee regularly recommend improvements based upon market and environmental conditions and best practices. The CN&G Committee also reviewed the Company’s Compensation Discussion and Analysis and recommended to the Board that it be included in this proxy statement. In addition, the CN&G Committee serves as the “Committee” under the various Company incentive compensation and retirement plans (e.g., the stock-based incentive plans, executive incentive plans, supplementary retirement plan and deferred compensation plan).

As part of its corporate duties, the CN&G Committee establishes stock ownership guidelines for Company executives, reviews “related party transactions” and ethical issues involving the Company or management, and oversees the implementation of the Company’s Code of Ethics. The CN&G Committee is also responsible for reviewing the Board of Directors’ performance and annually coordinates self evaluations for the Board and each of its Committees, reviewing the mandatory retirement policy for Directors, and evaluating conflicts of interest involving a Director. In addition, the CN&G Committee identifies and recommends candidates to serve as Directors of the Board, the Chairman of the Board and/or Lead Director, members and chairpersons of Board committees and the Chief Executive Officer. The CN&G Committee considers nominees for Directors from any source, including individuals nominated by stockholders or outside consultants engaged by the CN&G Committee to recommend Director nominees. Director nominee suggestions must be submitted in writing to the Company’s Secretary at 3231 Southeast Sixth Avenue, Topeka, Kansas, 66607, and otherwise comply with the terms of the Company’s By-Laws.

The CN&G Committee may delegate some of its duties or responsibilities to one or more individual members, but only to the extent permitted by law, the New York Stock Exchange’s listing standards and the Company’s governing documents. The CN&G Committee also engages outside consultants to advise on various issues, including Chief Executive Officer compensation, executive officer compensation and certain benefit programs. Such consulting arrangements with Hay Group are discussed in the Compensation Discussion and

 

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Analysis under “Role of Consultants in Compensation Decisions.” The CN&G Committee also engages other consultants from time to time to assist with specific projects. The consultants engaged by the CN&G Committee report directly to the CN&G Committee and the Chief Executive Officer generally does not participate in recommendations prepared by these consultants regarding Chief Executive Officer compensation. The role of other executive officers in setting compensation is discussed in the Compensation Discussion and Analysis.

Compensation Committee Interlocks and Insider Participation

No member of the CN&G Committee (Ms. Mangum, Messrs. Markee, Weiss and Wheeler) has served as one of the Company’s officers or employees or has any relationship requiring disclosure under Item 404 of Regulation S-K promulgated under the Securities Act of 1933, as amended (see “Related Party Transactions”). None of the Company’s executive officers named in the Summary Compensation Table serves as a member of the board of directors or as a member of compensation committee of any other company that has an executive officer serving as a member of the Company’s Board or the CN&G Committee.

Compensation, Nominating and Governance Committee Report

The following Report of the CN&G Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Exchange Act, except to the extent the Company specifically incorporates this Report by reference therein.

The CN&G Committee has reviewed and discussed the Compensation Discussion and Analysis required under Item 402(b) of Regulation S-K set forth below with Management. Based on that review and discussion, the CN&G Committee recommended to the Company’s Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

Compensation, Nominating and Governance Committee:

Mylle H. Mangum — Chairman

Richard L. Markee

Michael A. Weiss

Robert C. Wheeler

 

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COMPENSATION DISCUSSION AND ANALYSIS

 

1.  Executive Summary

Fiscal 2011 was a year of transition and strategic re-focus for the Company; nevertheless, the alignment between executive pay and performance remained strong:

 

   

Named Executive Officers of Collective Brands and Payless ShoeSource received no annual incentive payments, consistent with the year-over-year declines in earnings before interest and taxes (“EBIT”) for their respective business units in fiscal 2011.

 

   

While Collective Brands Performance + Lifestyle Group (“PLG”) delivered a 10% improvement in EBIT over the prior year, actual EBIT for the PLG business unit in total still fell short of the 2011 goal and thus resulted in a below-target annual incentive payout.

 

   

All Named Executive Officers forfeited the performance-based equity grants they received in March 2011 because the Company’s fiscal 2011 earnings before interest, taxes, depreciation and amortization (“EBITDA”) results fell short of the 2011 goal.

 

   

Named Executive Officers of Collective Brands and Payless ShoeSource received below-target and zero payouts, respectively, under their fiscal 2009-2011 long-term cash incentive plans, which are based on 3-year EBITDA and return on invested capital (“ROIC”). In accordance with plan provisions, the payout was adjusted downward by 20% based on the Company’s 3-year total stockholder return.

 

   

Named Executive Officers of Collective Brands and Payless ShoeSource did not earn a performance credit in the Supplementary Retirement Account Balance Plan, because Collective Brands EBIT fell short of target.

While the Company’s overall profitability fell short of targets set at the beginning of the year, progress was achieved on several fronts in 2011:

 

   

Positive sales momentum continued at PLG, which broke the $1 billion mark in sales for the year and delivered its eighth consecutive quarter of double-digit sales growth. PLG’s comparable retail store sales grew 10% in the fourth quarter.

 

   

As a result of a strategic re-focus at Payless ShoeSource in the second half of 2011, with a particular emphasis on reconnecting with the budget-conscious consumer, that unit’s business results improved in the fourth quarter in several respects:

 

   

Traffic was better than at any time in the past six years;

   

U.S. comparable store sales were the strongest in nine quarters;

   

Footwear units sold had the strongest increase in 19 quarters.

A leadership transition occurred in June 2011 with the departure of Mr. Matthew E. Rubel, former Chairman, Chief Executive Officer and President. Mr. Michael J. Massey, Senior Vice President and General Counsel, was appointed Chief Executive Officer and President on an interim basis, and Mr. Scott Olivet, a non-management Director, was named non-executive Chairman of the Board of Directors. Mr. Rubel’s termination compensation, which was paid in accordance with his employment agreement, and the compensation arrangements for Messrs. Massey and Olivet are discussed elsewhere in this proxy statement.

To encourage the continued retention and engagement of key executive talent and to reward significant individual contributions, the CN&G Committee made discretionary equity awards to two Named Executive Officers and modest discretionary cash awards to two Named Executive Officers during the year, as detailed later in this Compensation Discussion and Analysis.

 

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The Company’s 2011 advisory vote on executive compensation (say-on-pay) passed with 82% of votes cast in favor. Regarding the frequency of future say-on-pay votes, 82% of all votes were cast in support of annual frequency, which the Company had recommended. In advance of the 2011 Annual Meeting of Stockholders, the Company engaged in conversations with major stockholders regarding these proposals and the future approach to the use of time- and performance-vested equity awards; based on stockholder feedback, the CN&G Committee publicly disclosed a commitment to make at least 50% of future equity grants to Named Executive Officers in the form of performance-vested awards.

With the assistance of Hay Group, an independent compensation consultant, the CN&G Committee conducted several reviews to ensure that the Company’s executive compensation programs remain consistent with its compensation philosophy and deliver rewards that are closely aligned with the Company’s performance, talent management objectives, and stockholder interests. These reviews resulted in the following actions:

 

   

In March 2011, the Company committed to granting future annual equity incentive awards to Named Executive Officers that are no less than 50% performance-based in the aggregate, and we increased the vesting period for time-based equity awards to 3-year cliff vesting.

 

   

In September 2011, the Company updated our Compensation Comparison Group to ensure the continued appropriateness of our external benchmarking.

 

   

For fiscal 2011, Named Executive Officers were awarded merit increases that directly correlate to the results each Named Executive Officer achieved on objectives established and evaluated through the Company’s performance management program. These increases ranged from 0% to 3.1%, similar to the increases awarded throughout the Company for comparable levels of performance.

 

   

The Company added a second performance measure, net revenue, to the annual incentive plan for all participants, including Named Executive Officers, beginning in fiscal 2012. The plan will be based 75% on EBIT and 25% on net revenue, to drive continued focus on profitable top-line growth.

 

   

The Company increased the weighting of the relative total stockholder return modifier in the long-term cash incentive plan from ±20% to ±50%, beginning with the 2012-2014 performance period, to further strengthen participants’ alignment with stockholder interests.

 

   

Beginning in March 2012, new equity awards will include a double-trigger provision for vesting upon a Change of Control. In the event of a Change of Control, the vesting of outstanding equity awards will occur only if the award recipient is involuntarily terminated without cause following the Change of Control. Vesting will also occur if an award recipient terminates for good reason following the Change of Control, if an employment agreement between the award recipient and the Company provides for good reason termination.

 

   

The Company have added a claw back provision to the Company’s Incentive Compensation Plan and 2012 Stock Incentive Plan, as discussed under Proposals IV and V in this proxy statement. This provision gives the CN&G Committee discretionary authority to claw back awards granted under these plans if the Company restates its financial statements and, as a result, participants’ awards should have been lower. The discretionary authority will allow the CN&G Committee to adopt a stand-alone claw back policy, which can then be applied under these plans, once the regulations required under the Dodd-Frank Act are finalized by the Securities and Exchange Commission.

In addition, our overall compensation program is consistent with recognized best practices in corporate governance, such as:

 

   

Long-standing stock ownership guidelines for executives and non-management Directors;

 

   

Limited executive benefits and perquisites;

 

   

No gross-ups on taxable benefits, other than relocation-related gross-ups applicable to all employees;

 

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Insider trading policy, applicable to all employees and non-management Directors, which prohibits:

 

   

Speculative transactions involving Company stock, such as short sales, opposite-way transactions within a six-month period, and the purchase or sale of puts, calls, options or other derivative securities based on Company stock;

   

Hedging or monetization transactions by employees and non-management Directors involving Company stock, such as zero cost collars and forward sale contracts;

   

The purchase of Company stock on margin or the use of Company stock as collateral for borrowing.

The compensation-related reviews and actions undertaken in fiscal 2011 are described in detail in this Compensation Discussion and Analysis. We invite you to read the entire report and the tables that follow to obtain a complete understanding of our executive compensation program.

Throughout the Compensation Discussion and Analysis, the following definitions will apply:

 

   

“CEO” refers to the Chief Executive Officer and President of Collective Brands, Inc.

 

   

“Named Executive Officer” refers to the CEO and other executive officers named in the Summary Compensation Table. These include Mr. Massey; Ms. LuAnn Via, President and Chief Executive Officer of Payless ShoeSource; Mr. Gregg Ribatt, President and Chief Executive Officer of Collective Brands Performance + Lifestyle Group; Mr. Darrel Pavelka, Executive Vice President, Global Supply Chain, Merchandise Distribution & Planning and IT; Mr. Douglas Boessen, Division Senior Vice President and Chief Financial Officer; and Mr. Rubel, formerly Chairman, Chief Executive Officer and President of Collective Brands, whose employment with the Company ended on June 15, 2011.

 

   

“EBIT” refers to earnings before interest and taxes, which is defined for purposes of this discussion as operating profit from continuing operations

 

   

“CBI” and “Company” refer to Collective Brands, Inc.

 

   

“Payless” refers to the Payless ShoeSource business unit of CBI

 

   

“PLG” refers to the Collective Brands Performance + Lifestyle Group business unit of CBI

 

   

“ICP” refers to the Collective Brands Incentive Compensation Plan

 

   

“Fiscal 2009,” “fiscal 2010,” “fiscal 2011” and “fiscal 2012” refer to the fiscal years ended(ing) January 30, 2010; January 29, 2011; January 28, 2012; and February 2, 2013, respectively

 

2. Compensation Framework: Philosophy and Process

Compensation Philosophy.    The philosophy underlying the Company’s executive compensation program is to provide a compelling, market-based total compensation program tied to performance and aligned with stockholder interests. Key to our executive compensation philosophy are the following objectives:

 

   

Pay for performance.    To foster a strong connection between executive compensation and business performance that enhances stockholder value, Named Executive Officers continue to receive a majority of their compensation through performance-based incentives and equity-based awards.

 

   

Attract, motivate and retain highly qualified executives.    The Company is committed to providing a total compensation program designed to attract superior leaders to the Company and retain performers of the highest caliber. An annual talent and organization planning process helps link compensation to the sustained performance and potential of each executive.

 

   

Be competitive with the compensation programs of other comparable employers.    To achieve this goal, the CN&G Committee annually compares the Company’s pay practices and overall pay levels with other leading retail and wholesale organizations.

 

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Target total direct compensation (base salary and annual and annual and long-term target incentive opportunities) for Named Executive Officers is benchmarked to the market median (50th percentile) in the aggregate, although some components of compensation may vary from the median based on an executive’s experience, performance, potential and retention risk. In addition, these variations reflect the reality that the Company competes with many larger companies for top-level executive talent. When Company and individual performance exceed targets, delivered compensation should rise above median, and when performance falls short of targets, delivered compensation should fall below median.

Compensation Risk Assessment.    The CN&G Committee is responsible for regularly reviewing the Company’s compensation programs to evaluate whether they pose any risks that are reasonably likely to have a material adverse effect on the Company and for reporting to the full Board as appropriate. Additionally, as part of its regular review of the Company’s compensation policies, the CN&G Committee regularly implements improvements based upon market and environmental conditions, best practices, and the advice of its independent consultant.

In March 2011, the CN&G Committee conducted an update to the 2010 risk assessment completed by its independent consultant and concluded that the Company’s compensation programs do not pose risks that are reasonably likely to have a material adverse effect on the Company. In reaching this conclusion, the CN&G Committee took into consideration the fact that our incentive plans and compensation arrangements contained similar risk mitigation features as in prior years. The design changes made for 2012 (see “Executive Summary” above) further strengthen the connections between executive pay, company performance and stockholder interests, including the mitigation of risk.

Compensation Mix.    As illustrated in the charts below, over the past three years, the CN&G Committee has adjusted the mix of fixed and variable pay, and increased the proportion of equity compensation tied to specific financial measures, to ensure a solid link between Named Executive Officers’ pay, Company performance, and stockholder value creation:

 

   

One-half to two-thirds of each Named Executive Officer’s target compensation is variable in nature and tied to specified financial metrics or stock price appreciation.

 

   

The “performance-based compensation” component of the charts below has increased primarily because the use of performance-vested restricted equity awards has grown in each of the last three years:

 

  2010: 25% of the base annual equity grant value was linked to a financial performance measure.
  2011: 37.5% of the base annual equity grant value was linked to a financial performance measure; also, for discretionary equity awards made to three Named Executive Officers later in the year, at least 50% of the grant value was linked to a financial performance measure.
  2012: 50% of the base annual equity grant was tied to a financial performance measure, consistent with the CN&G Committee’s March 2011 commitment that future annual grants to Named Executive Officers will be at least 50% performance-vested in the aggregate.

Aggregate Named Executive Officer Compensation Mix

 

LOGO

 

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The table below illustrates the continued progression toward linking Named Executive Officers compensation to specified financial performance measures. Of particular note is the reduced use of time-vested equity awards since 2010; these awards represented approximately 25% of the target compensation mix for Named Executive Officers other than Mr. Boessen in 2010, 15-20% in 2011, and only 12-16% in 2012. The shift in the target compensation mix for Mr. Massey also reflects his move to the interim CEO role in June 2011.

Named Executive Officers Compensation Mix at Target (as a % of total direct compensation)

 

     Mr. Massey     Ms. Via     Mr. Ribatt     Mr. Pavelka     Mr. Boessen  
     2011
Pre-CEO
    2012
CEO
    2011     2012     2011     2012     2011     2012     2011 &
2012
 

Compensation Linked to Financial Performance

     50     58     49     54     50     54     50     53     46

Performance-vested restricted stock

     5     11     12     17     12     16     9     12     2

Long-term performance-based cash incentive

     20     16     15     15     16     16     17     17     23

Annual cash incentive

     25     31     22     22     22     22     24     24     21

Compensation Linked to Stock Price Appreciation

     9     11     21     16     19     15     15     12     7

Time-vested stock appreciation rights

     4     0     9     0     8     0     6     0     0

Time-vested restricted stock

     5     11     12     16     11     15     9     12     7

Base Salary

     41     31     30     30     31     31     35     35     47

Role of Consultants in Compensation Decisions.    In fiscal 2011, to support compensation design and decision making for 2012, the CN&G Committee engaged Hay Group for a review of interim CEO and non-management Director compensation approaches, benchmarking of executive compensation, a review of the Company’s annual and long-term incentive strategy and 2012 plan design, and annual tally sheet development. All of these projects were subject to the CN&G Committee’s review and direction. Management also utilized Hay Group for benchmarking of compensation below the ECG level, binomial valuations of annual equity grants and broad-based Hay Group compensation surveys.

Role of Executives in Compensation Decisions.    As noted in its charter, the CN&G Committee is responsible for evaluating and approving the compensation policies and arrangements applicable to the ECG. The CEO provides the CN&G Committee with performance feedback and compensation recommendations for ECG members (other than himself) during and at the end of each fiscal year. Initial employment offers, promotions, discretionary awards and ongoing compensation arrangements for individuals in the ECG are recommended to the CN&G Committee by the CEO and Senior Vice President — Human Resources.

The CEO and Senior Vice President — Human Resources also provide their perspectives and recommendations to the CN&G Committee on a variety of human resource matters, such as annual and long-term incentive goals, plan design changes for Board-approved compensation plans, and officer succession. The Company’s Law Department and outside counsel to the Company also advise the CN&G Committee on the legal aspects relating to compensation and employment matters.

Benchmarking in Fiscal 2011.    The CN&G Committee in November 2011 retained Hay Group as its compensation consultant to assist with analyzing the appropriate level of compensation for Named Executive Officers other than the CEO. Specifically, Hay Group provided the CN&G Committee with benchmarking data and directional recommendations to enable the CN&G Committee to make informed decisions and stay abreast of changing market practices. Because Hay Group had advised the CN&G Committee regarding the interim CEO compensation arrangements for Mr. Massey in June 2011, no additional benchmarking was completed for the interim CEO role at the end of 2011.

 

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To facilitate the benchmarking, Hay Group used the Compensation Comparison Group described below and the Hay Group 2011 Retail Industry Survey Group (see Appendix A for a list of companies in this group). In February 2012, Hay Group reported that base salaries, target cash compensation, and target direct compensation for the Named Executive Officers, in aggregate, are appropriately positioned around the median of the market, as noted in the table below. The CN&G Committee determined that any variations from the median were warranted in light of differences in business unit performance and structure as well as individual executive performance, potential and retention risk. The CN&G Committee made no changes to the Named Executive Officers’ compensation arrangements for 2012 other than annual merit increases.

 

    

Base Salary

  

Target Total Cash
Compensation

  

Target Total Direct
Compensation

Mr. Massey(1)

   Median    Median    Median

Ms. Via

   Median    Median    Between Median and P75

Mr. Ribatt

   Between Median and P75    Between Median and P75    P75

Mr. Pavelka

   Median    Median    Median

Mr. Boessen

   Between P25 and Median    Median    Median

 

(1) 

Mr. Massey’s compensation was benchmarked against the Senior Vice President and General Counsel role he held prior to also being named interim CEO.

The Compensation Comparison Group Used for Benchmarking.    The Compensation Comparison Group is comprised primarily of retail companies, a portion of which are also engaged in wholesale and/or licensing activity, used to benchmark executive compensation. This group also is used to calculate a modifier based on total stockholder return (“TSR”) in the long-term portion of the ICP (as noted in “Long-Term Cash Incentive Awards” below) by comparing the Company’s stock performance to the stock performance of companies in the Compensation Comparison Group, and it is used for the peer performance graph in the Form 10-K. The group may be revised by the CN&G Committee from time to time as the market and retail environment change, using the following criteria:

 

   

U.S.-domiciled, publicly-traded companies in retail, wholesale and licensing that primarily do business in footwear, apparel and/or accessories and that have customer targets similar to the Company;

 

   

Annual sales from  1/2 to 2 1/2 times the Company’s annual sales;

 

   

Recognized for strong design focus, a strong earnings growth, thought leadership, and/or strong brands across multiple lines or products; and/or

 

   

Appropriately-sized companies from which the Company may recruit key talent.

If a company falls significantly outside the stated revenue parameter but meets other criteria, the compensation benchmarking data will be adjusted using a regression analysis to ensure appropriate comparisons.

In November 2011, the CN&G Committee formally reviewed the Compensation Comparison Group against the criteria listed above. Additionally, while the CN&G Committee does not view market capitalization as a preferred criterion due to its volatility and its alignment with expected profitability rather than scale, market capitalization was included in the 2011 review.

Based on its review, the CN&G Committee made the following changes to the Compensation Comparison Group to ensure it effectively represents the market and competitive landscape:

 

   

Removed three companies whose revenues fall significantly outside the desired revenue parameters (Kohl’s Corporation; The Gap, Inc.; and The Finish Line, Inc.).

 

   

Added three specialty apparel retail companies that fall within the revenue parameters (Ascena Retail Group, Inc.; Aeropostale, Inc., and ANN, Inc.).

 

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Added The Jones Group, Inc., whose wholesale business includes a significant footwear and accessory component and whose revenues fall within the desired parameters.

 

   

Removed The Timberland Company (acquired by V.F. Corporation) and three companies that are not as closely aligned with the desired parameters other than revenue (Williams-Sonoma, Inc.; Polo Ralph Lauren Corporation; V.F. Corporation).

These changes have resulted in improved alignment with our net revenue parameters, as noted in the chart below, as well as increased focus on specialty retailing and footwear and accessory wholesaling companies that have customer targets similar to the Company’s.

 

LOGO

Incorporating these changes, the 16 companies that now constitute the Compensation Comparison Group are listed below. This group was used for the November 2011 executive compensation benchmarking and will be used to determine the Company’s TSR modifier beginning with the fiscal 2012-14 performance period.

 

Abercrombie & Fitch Co.

  DSW, Inc.

Aeropostale, Inc.

  Foot Locker, Inc.

American Eagle Outfitters, Inc.

  Genesco Inc.

ANN, Inc.

  The Jones Group, Inc.

Ascena Retail Group, Inc.

  Limited Brands, Inc.

Brown Shoe Company, Inc.

  Ross Stores, Inc.

The Children’s Place Retail Stores, Inc.

  Urban Outfitters, Inc.

Decker’s Outdoor Corporation

  Wolverine Worldwide, Inc.

Tally Sheets.    As part of its review of Named Executive Officer compensation, and to aid in its oversight of executive compensation program design, the CN&G Committee continued its review of “tally sheets” detailing each element of compensation for the Company’s Named Executive Officers, including:

 

   

Salary

 

   

Annual and long-term incentives

 

   

Costs incurred by the Company to provide various health and insurance benefits and perquisites to its Named Executive Officers

 

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Each Named Executive Officer’s equity awards and accumulated realized and unrealized equity gains

 

   

The amounts each Named Executive Officer will receive if he or she leaves the Company under various circumstances (such as retirement or termination in connection with a change of control)

The tally sheets for fiscal 2011 were prepared by Hay Group and presented to the CN&G Committee in February 2012. Based on the tally sheets, Hay Group advised the CN&G Committee that Named Executive Officer compensation was generally consistent with the Company’s compensation philosophy and aligned with the interests of the Company’s stockholders.

Changes to Compensation Components/Programs.    The CN&G Committee established the following interim CEO compensation arrangements for Mr. Massey in June 2011 to compensate him for this expanded role and its duties and responsibilities:

 

   

No increase in base salary until the next regularly scheduled merit increase in April 2012;

 

   

A $400,000 special payment on December 31, 2011, as compensation for the interim CEO role through that date;

 

   

A second $400,000 special payment on June 30, 2012, as compensation for the interim CEO role through that date;

 

   

An increased annual incentive target (from 60% to 100% of base salary) during the time Mr. Massey is serving as interim CEO;

 

   

No change in the long-term cash incentive target (50% of base salary);

 

   

A special one-time award of stock-settled stock appreciation rights (“SARs”) with a grant-date value of $250,000 on the August 26, 2011, quarterly grant date. One-half of the award was granted in time-vested SARs with 3-year cliff vesting. The other half was granted in performance-vested SARs tied to the Company’s fiscal 2011 EBIT performance; this half of the special grant was entirely forfeited based on actual 2011 EBIT results.

No other changes were made to Named Executive Officer compensation programs for fiscal 2012 beyond those discussed in “Executive Summary.”

 

3.    Elements of Compensation for the Past Fiscal Year

Elements of Compensation during Active Employment.    The elements of compensation for Named Executive Officers including the CEO during fiscal 2011 are summarized in the following table, with additional details in the subsequent narrative:

 

Compensation

Element

   Fixed or
Variable
   Purpose of the Element

A. Base Salary

   Fixed   

•Compensate the Named Executive Officer for core responsibilities, years of service with the Company, and related experience at other companies

•Provide a regular and stable source of income

B. Non-equity incentive plan compensation, such as annual and long-term cash incentives

   Variable   

•Annual cash incentive: Reward achievement of specific annual business goals consistent with the Company’s strategic objectives

•Long-term cash incentive: Reward achievement of specific long-term (3-year) business objectives; encourage continued high level of performance and retention of talent

 

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Compensation

Element

   Fixed or
Variable
   Purpose of the Element

C. Long-term equity incentive compensation

   Variable   

•Align Named Executive Officers’ interests with those of stockholders through awards whose value is linked to stock price appreciation

•Encourage retention

D. Cash bonuses

   Variable   

•On a discretionary basis, reward exemplary performance in support of the Company’s business objectives and initiatives

•Recognize “above and beyond” contributions

E. Retirement and other benefits and perquisites

   Fixed   

•Attract and retain executives by providing post-employment replacement income, tax-efficient savings opportunities, and modest additional perquisites appropriate for the Company’s senior-most executives

A. Base Salary

Salary levels are reviewed by the CN&G Committee annually and upon a promotion or other change in job responsibility. The base salaries of Named Executive Officers are determined in accordance with the factors and information described under “Compensation Philosophy” above. After reviewing that information, including individual performance results during fiscal 2011, the CN&G Committee provided salary increases of 3.1% for Mr. Massey, 1% for Ms. Via, 2% for Mr. Ribatt, 2.25% for Mr. Pavelka, and 0% for Mr. Boessen. In aggregate, base salaries for all Named Executive Officers increased by 1.7% from April 2011 to April 2012.

B. Non-Equity Incentive Plan Compensation — Cash Incentive Opportunities

The Company maintains the ICP that provides Named Executive Officers and selected other senior management members an opportunity to earn cash incentive payments if business results meet or exceed certain pre-established performance goals. The CN&G Committee, in its sole discretion, designates eligible employees as participants for each annual and/or long-term performance period. All Named Executive Officers were eligible for an annual incentive award for fiscal 2011; all Named Executive Officers other than Mr. Ribatt were eligible for a long-term incentive award for the fiscal 2009-2011 performance period. Mr. Ribatt became eligible for long-term incentive awards beginning with the fiscal 2010-2012 performance period.

Both the fiscal 2011 annual and fiscal 2009-2011 long-term components of the ICP provided for a threshold, target, and maximum payout, depending on actual results relative to pre-established performance goals; payouts are interpolated between the defined performance levels. For each component, the payout is capped at 300% of target and cannot exceed a maximum individual incentive award of $5,000,000. If the target performance goals are satisfied at 100%, the target incentive normally will be paid, subject to the CN&G Committee’s discretion. The threshold performance goals are the minimum performance results that must be attained by the Company for an incentive payment to be made. The target annual and long-term incentive awards are equal to a specified percentage of base salary as described in “Fiscal 2011 Annual Incentive Award Calculations” below.

 

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Table of Contents

(1)  Annual Cash Incentive Awards

Fiscal 2011 Annual Cash Incentive Award Performance Goals.    The annual component of the ICP for fiscal 2011 was based on EBIT for each Named Executive Officer’s assigned business unit: CBI EBIT for Messrs. Massey, Pavelka and Boessen; Payless EBIT for Ms. Via; and PLG EBIT for Mr. Ribatt. Incentive goals were established by the CN&G Committee for fiscal 2011 based upon a variety of considerations as illustrated in the following table.

 

Payout
Opportunity

  

Fiscal 2011 Goal Setting Approach

   CBI
Fiscal
2011

EBIT
Goal
   Payless
Fiscal
2011

EBIT
Goal
   PLG
Fiscal
2011
EBIT
Goal
  

Payout as % of
Target

Threshold

  

•   A threshold “range” provides incentive and motivation even when results fall below target, at a payout in appropriate proportion to the EBIT performance

•   A payout at the upper end of the threshold range (50% of target) generally requires achievement of at least 65% of the EBIT target

•   Over the long run, threshold or higher payout is anticipated to be achieved at least 90% of the time

   $92.9 to

$149.9

million

   $61.3 to

$92.6

million

   $30.2 to

$46.3

million

   20-50%

Target

  

•   The fiscal 2011 EBIT targets require improvement over the actual 2010 EBIT results within the annual cash component of the ICP as follows: +10% for CBI, +8% for Payless, and +20% for PLG

•   Over the long run, a target or higher payout is anticipated to be achieved at least 50% of the time

   $208.7

million

   $135.2

million

   $76.2

million

   100%

Maximum

3x Target

  

•   The maximum payout generally requires achievement of at least 125% of target EBIT, mitigated by internal and external considerations

•   Over the long run, a payout significantly above target (e.g., twice the target) is anticipated to be achieved about 10% of the time

•   The fiscal 2011 maximum payouts require improvement over the actual 2010 EBIT results within the annual cash component of the ICP as follows: +50% for CBI, +58% for Payless, and +234% for PLG

   $285.1

million

   $198.2

million

   $138.3

million

   300% (not to exceed $5 million)

Fiscal 2011 Annual Cash Incentive Award Calculations.    Named Executive Officers received annual awards under the ICP as reflected below. These amounts are included in the Summary Compensation Table under Column (g), “Non-Equity Incentive Plan Compensation.”

 

     Business
Unit Link
   2011 EBIT      Fiscal 2011 Annual Cash Incentive  
      Target
(millions)
     Adjusted(3)
(millions)
     Target
Opportunity

(% of  salary)
    Actual
% of
Target
Awarded
    Award $  

Mr. Massey (1)

   CBI    $ 208.7       $ 75.3         100 %(1)      0   $ 0   

Ms. Via

   Payless    $ 135.2       $ 4.2         75     0   $ 0   

Mr. Ribatt

   PLG    $ 76.2       $ 65.2         65     83   $ 412,510   

 

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     Business
Unit Link
   2011 EBIT      Fiscal 2011 Annual Cash Incentive  
      Target
(millions)
     Adjusted(3)
(millions)
     Target
Opportunity

(% of  salary)
    Actual
% of
Target
Awarded
    Award $  

Mr. Pavelka

   CBI    $ 208.7       $ 75.3         65     0   $ 0   

Mr. Boessen

   CBI    $ 208.7       $ 75.3         45     0   $ 0   

Mr. Rubel(2)

   CBI    $ 208.7       $ 75.3         120     0   $ 0   

 

(1) Mr. Massey’s target opportunity was increased from 60% to 100% of base salary beginning June 15, 2011, and will remain at that level while he serves as interim CEO.
(2) Mr. Rubel was not eligible for an annual cash incentive for fiscal 2011 due to his resignation on June 15, 2011.
(3) The ICP allows for the adjustment of performance measures at the discretion of the CN&G Committee to the extent necessary to exclude, among other things, the effects of extraordinary, unusual or non-recurring items, as long as the adjustment does not cause any incentive award to fail to qualify as performance-based compensation under Section 162(m) of the Code. The fiscal 2011 EBIT results in the table above reflect adjustments made by the CN&G Committee for the following expenses not contemplated when the annual goals were established:

 

   

Certain goodwill, intangibles and asset impairments ($73.5 million for CBI, $34.6 million for Payless, $27.3 million for PLG);

 

   

CEO severance ($10 million for CBI and Payless);

 

   

Certain store closing and severance expenses ($14.7 million for CBI, $13.8 million for Payless, $0.9 million for PLG);

 

   

Professional service expenses associated with the strategic review ($3.8 million for CBI, $3.4 million for Payless, $0.4 million for PLG).

(2)  Long-Term Cash Incentive Awards

The long-term component of the ICP currently utilizes long-term performance periods that operate concurrently (that is, a new performance period commences each year). Generally, each long-term performance period consists of three consecutive fiscal years.

A. Fiscal 2009-2011 Performance Period

2009-2011 Long-Term Cash Incentive Performance Goals.    The long-term component of the ICP for the fiscal 2009- 2011 performance period was based on CBI EBIT and ROIC for CBI Named Executive Officers and on Payless EBIT and ROIC for Ms. Via. Final payouts for all participating Named Executive Officers were subject to a specified adjustment of up to +20%, based on the Company’s 3-year TSR relative to the average TSR of the companies in the Compensation Comparison Group over the same period. The EBIT, ROIC and TSR goals were set at the beginning of the performance period and disclosed in the Compensation Discussion and Analysis for fiscal 2009.

2009-2011 Long-Term Cash Incentive Award Calculations.    Named Executive Officers received annual awards under the ICP as reflected below. These amounts are included in the Summary Compensation Table under Column (g), “Non-Equity Incentive Plan Compensation.” Mr. Ribatt became eligible for a long-term cash incentive beginning with the fiscal 2010-12 performance period.

For CBI, the actual 2009-2011 EBITDA and ROIC represented payouts of 69% and 109% of target, respectively. The average of these payouts, with the -20% TSR modifier, resulted in a final payout of 71% of target. For Payless, the actual 2009-2011 EBITDA and ROIC fell below the threshold level, resulting in a zero payout for Ms. Via.

 

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Table of Contents
          2009-2011 EBITDA      2009-2011
ROIC
          Fiscal 2009-2011 Long-Term Cash
Incentive
 
     Business
Unit
Link
   Target
(millions)
     Adjusted(2)
(millions)
     Target
%
    Actual
%
    TSR
Modifier
    Target
Opportunity

(% of
salary)
    Actual %
of Target
Awarded
    Award
$
 

Mr. Massey

   CBI    $ 906.3       $ 831.1         8.0     8.1     –20     25     71   $ 67,894   

Ms. Via

   Payless    $ 746.0       $ 582.0         14.2     9.0     –20     25     0   $ 0   

Mr. Pavelka

   CBI    $ 906.3       $ 831.1         8.0     8.1     –20     25     71   $ 94,963   

Mr. Boessen

   CBI    $ 906.3       $ 831.1         8.0     8.1     –20     20     71   $ 42,600   

Mr. Rubel(1)

   CBI    $ 906.3       $ 831.1         8.0     8.1     –20     50     0   $ 0   

 

(1) Mr. Rubel was not eligible for a long-term cash incentive for fiscal 2009-2011 due to his resignation on June 15, 2011.
(2) The fiscal 2009-2011 EBITDA results in the table above reflect the same fiscal 2011 adjustments for CBI and Payless as noted above in “Fiscal 2011 Annual Incentive Calculations.” They also reflect fiscal 2009 adjustments related to litigation ($1.4 million for both CBI and Payless) and strategic realignment ($1.7 million for CBI, $1.4 million for Payless).

B. Fiscal 2011-2013 Performance Period

2011-2013 Long-Term Cash Incentive Award Performance Goals. The performance goals established for the 2011-2013 performance period reflect the business plan in place at the beginning of the performance period. These goals require a specified level of 3-year cumulative EBITDA and 3-year average ROIC, based on the Named Executive Officer’s assigned business unit. The CN&G Committee selected these performance measures because they reflect long-term stockholder value creation. Earned payouts will be interpolated between the levels stated below, and a payment may be earned on one measure but not the other. For CBI and Payless, EBITDA and ROIC are equally weighted in the payout calculation; for PLG, the weighting is 75% on EBITDA and 25% on ROIC. For Named Executive Officers for CBI and Payless, payouts are further subject to a modifier of +20% based on the company’s TSR relative to the TSR of the 19 companies in the Compensation Comparison Group in place at the start of the performance period (identified in an earlier section of this report).

 

     2011-2013 Long-Term Cash Incentive Goals  
     CBI      Payless      PLG  
Payout %    3-Year
Average
ROIC
    3-Year
Cumulative
EBITDA
(millions)
     3-Year
Average
ROIC
    3-Year
Cumulative
EBITDA
(millions)
     3-Year
Average
ROIC
    3-Year
Cumulative
EBITDA
(millions)
 

50% (threshold)

     8.6   $ 936.0         10.9   $ 669.7         9.5   $ 283.7   

100% (target)

     11.4   $ 1,113.8         14.5   $ 783.7         13.5   $ 386.0   

200%

     13.3   $ 1,227.5         16.9   $ 856.7         16.2   $ 454.1   

250%

     14.2   $ 1,284.4         18.0   $ 893.2         18.9   $ 522.3   

 

     CBI TSR Relative to the Peer Group
(percentile rank)
 
     10th     25th     50th     75th     90th  

Modifier

     –20     –10     0     +10     +20

C. Equity Incentive Plan Compensation

The Company may provide long-term incentives through various equity awards including stock options, restricted stock, stock appreciation rights, phantom stock and/or performance units. These equity awards are designed to attract, retain and motivate management employees and tie their compensation directly to the performance of the Company’s common stock. The CN&G Committee determines the mix of awards granted to executives and the grants are typically made annually. Throughout this discussion, all grants of stock appreciation rights (“SSARs”) have an exercise price equal to the fair market value of the Company’s common

 

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stock on the grant date, a 7-year term and are settled in stock. Grants made prior to 2010 have a 200% maximum appreciation cap, meaning that the maximum payout is .6667 shares of common stock per SSAR; grants made in 2010 and later have a 125% maximum appreciation cap, meaning that the maximum payout is .5556 shares of common stock per SSAR. Vested SSARs will automatically exercise if the share price reaches the cap. The SSARs are capped to balance the amount of potential rewards from the grants and related potential dilution and expense.

(1)  Fiscal 2012 Equity Incentive Awards

The CN&G Committee authorized fiscal 2012 long-term equity grants for selected employees on March 20, 2012, under the 2006 Collective Brands, Inc. Stock Incentive Plan (“SIP”). For the Named Executive Officers, the 2012 annual award consists of two components, as described below.

 

   

Approximately 50% of the target value of the 2012 equity incentive award will be delivered in the form of performance share units subject to the achievement of CBI’s fiscal 2012 EBITDA goal. The units will be settled in 0 to 1.25 shares per unit granted. Any shares eligible for vesting based on performance will vest ratably over three years, beginning on the first anniversary of the grant date. The number of shares eligible for vesting will be interpolated if actual performance falls between the stated performance levels. The fiscal 2012 EBITDA target represents a significant increase from the prior year’s actual EBITDA and is consistent with the 2012 EBITDA goal used in the CBI long-term cash incentive plans.

 

% of 2012 EBITDA Target Achieved

  

Shares Eligible for Vesting

110% of Target (maximum)

   1.25 shares per unit will vest

105% of Target

   1.12 shares per will vest

100% of Target

   1 share per unit will vest

95% of Target

   .75 shares per unit will vest

90% of Target

   .5 shares per unit will vest

85% of Target (threshold)

   .25 shares per unit will vest

<85% of Target

   Entire award will be forfeited

 

   

The remaining 50% of the 2012 annual grant value will be delivered in the form of restricted stock that will cliff-vest on the third anniversary of the grant date.

As noted in “Executive Summary,” the CN&G Committee in 2011 awarded discretionary performance-vested SSAR awards to two Named Executive Officers during the year:

 

   

Ms. Via received a grant of performance-vested SSARs on November 23, 2011, with a grant-date fair market value of $400,000. Earned shares will vest ratably in thirds, beginning April 1, 2013. The CN&G Committee made this award in recognition of her leadership of the Payless strategy re-focus that began in June 2011 and her key role in driving top-line sales improvement at Payless.

 

   

Mr. Pavelka also received a grant of SSARs on that date, with a grant-date fair market value of $250,000. One-half of his grant is in time-vested SSARs and will cliff-vest on the third anniversary of the grant date, to enhance the retentive component of his compensation package and to recognize his expanded leadership role to include Information Technology. The remaining one-half of the grant is in performance-vested SSARs, to recognize his contributions to the Payless strategy re-focus and top-line sales improvement initiatives at Payless; earned shares will vest ratably in thirds, beginning April 1, 2013.

 

   

The performance measure for the performance-vested SSARs will be fiscal 2012 Payless North America store-for-store sales (“SFS sales”), based on a 2012 SFS sales target of 7.7%.

 

  ¡    

If SFS sales are below 50% of target, the entire award will be forfeited

  ¡    

If SFS sales are at least 50% of target, half of the award will vest

  ¡    

If SFS sales are at least 75% of target, three-fourths of the award will vest

 

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  ¡    

IF SFS sales are at target or above, the entire award will vest

  ¡    

Earned SSARs will be interpolated between 50% and 100% of target

See “Changes to Compensation Components/Programs” for a description of the one-time special equity award granted to Mr. Massey upon assuming the interim CEO role in June 2011.

(2)  Equity Incentive Grant Dates

The CN&G Committee established grant dates for fiscal 2012 equity awards at its September 2011 meeting, based upon timing of the Company’s earnings releases and other relevant factors, as follows:

 

Annual 2012 Equity Incentive Grant Date

   The date of the March CN&G Committee meeting, which occurred on March 20, 2012

Prorated 2012 Equity Incentive Grant Dates

(for new hires and promotions during the period)

   The second business day following each quarterly earnings release

 

D.  Cash Bonuses

The CN&G Committee may provide cash bonuses to the CEO and other Named Executive Officers as recognition for their individual contributions to the Company’s business objectives and initiatives. For fiscal 2012, the CN&G Committee awarded the following discretionary cash awards:

 

    

Rationale

   Amount Payable by
April 15, 2012
 

Mr. Pavelka

   Contributions to talent management initiatives, and expansion of role to include Information Technology    $ 20,000   

Mr. Ribatt

   Sales growth and talent management initiatives at PLG    $ 20,000   

 

E.  Retirement Benefits

All Named Executive Officers other than Mr. Ribatt are eligible to participate in the CBI Supplementary Retirement Account Balance Plan (“SERP”). The SERP is designed to provide a median or higher level of retirement benefits for eligible executives when combined with other retirement benefits (e.g., the CBI 401(k) Profit Sharing Plan described below along with Social Security benefits), reward eligible executives for their long-term contributions to the Company, and retain such executives until retirement.

All Named Executive Officers are also permitted to participate in the Company’s tax-qualified defined contribution plans: the CBI 401(k) Profit Sharing Plan for CBI and Payless Named Executive Officers, and the PLG Employee Savings and Investment Plan for Mr. Ribatt. See “Pension Benefits for Fiscal 2011” for more details on the SERP and 401(k) plans.

In addition, all Named Executive Officers are eligible to participate in the CBI Deferred Compensation Plan as described under “Nonqualified Deferred Compensation for Fiscal 2011.”

The following retirement benefits may be available to Named Executive Officers but are contingent upon the executive remaining employed with the Company until age 55 and completing at least five years of service:

 

   

A prorated portion of any annual and long-term incentive awards earned for the active performance periods in the year the executive retires from the Company, if specified in the Named Executive Officer’s employment agreement; and

 

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Unless a shorter period is specified in the applicable grant agreement, extended exercise period for outstanding stock options and SSARs that are vested as of the executive’s retirement date, allowing exercise until the earlier of: (i) the expiration date of the award or (ii) three years following the executive’s retirement.

Other Benefits and Perquisites.    The Named Executive Officers also participate in benefit plans on the same terms as other employees. Among these are welfare plans (health plans, life insurance, short-term disability), paid time off and ancillary benefits. In addition, the Company provides the Named Executive Officers with perquisites and other personal benefits that the CN&G Committee believes are reasonable and consistent with the Company’s compensation philosophy. The primary benefits provided to these executives include:

 

   

Company-paid life insurance equal to two times annual compensation as defined by the Company’s employer-paid life insurance plan, up to $1,000,000 of coverage;

 

   

For Named Executive Officers other than Mr. Ribatt, Company-paid long-term disability coverage providing a benefit of 60% of the first $110,000 of annual compensation; for Mr. Ribatt, Company-paid long-term disability coverage providing a benefit of up to $17,500 per month;

 

   

Automobile allowance of $10,000 per year for Ms. Via and Messrs. Ribatt and Pavelka and $7,000 per year for Mr. Massey.

All or a portion of the benefits listed above may constitute taxable income to the Named Executive Officers. The amount of compensation attributable to the benefits described above and included in the Summary Compensation table under Column (i), “All Other Compensation” is determined based upon the Company’s incremental cost (as required by the Securities and Exchange Commission).

 

4.  Employment and Termination Agreements

Each Named Executive Officer has an employment agreement that may require the Company to pay the officer upon termination of employment. In addition, Named Executive Officers other than Ms. Via have change of control agreements to mitigate the significant level of uncertainty regarding job security and potential incentive compensation value that would likely arise in the event of a change in control. Collectively, these agreements help the Company attract and retain Named Executive Officers.

Pursuant to the employment agreements, each Named Executive Officer is entitled to receive salary, has the ability to earn annual and long-term incentive awards under the ICP, and may receive equity grants and other benefits generally available to the senior management of the assigned business unit.

For current Named Executive Officers, the termination events requiring payments, and the amounts payable upon those events, are discussed and quantified under “Potential Payments upon Termination or Change of Control.”

On June 15, 2011, we announced Mr. Rubel’s departure from the company and the appointment of Mr. Massey to the role of President and CEO on an interim basis. As specified in the employment agreement between the Company and Mr. Rubel, he became eligible for the following severance benefits when his employment ended on that date:

 

   

An amount equal to two times the sum of Mr. Rubel’s base salary and target annual incentive, or $5,280,000, paid in a lump sum on July 1, 2011;

 

   

Additional severance of $1,521,900, consistent with the employment agreement, paid in a lump sum on July 1, 2011;

 

   

Accelerated vesting of 351,899 unvested SSARs and 73,230 unvested restricted shares of Company stock that would otherwise have vested in the 24-month period following termination;

 

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Extended exercise period for vested SSARs, until the earlier of the original expiration date or June 15, 2014;

 

   

24 months of continued medical and dental coverage for Mr. Rubel and his eligible dependents.

Upon his termination, Mr. Rubel forfeited 21,557 SSARs, 23,929 performance share units and 71,786 restricted shares of Company stock. The restrictive covenants in his employment agreement (non-competition and non-solicitation) remain in effect through June 15, 2013.

 

5.  Equity Ownership/Retention Guidelines

The Company believes it is important for its Named Executive Officers and other selected senior executives to establish and maintain a meaningful equity ownership interest in the Company. To this end, ownership levels and equity transactions for these individuals are reviewed annually by the Board of Directors to evaluate progress toward the Company’s equity ownership guidelines for Named Executive Officers (as specified below).

 

Position

   Value of CBI Shares Owned as
a Multiple of Base Salary
 

President and CEO, CBI(1)

     5.0 Times   

President and CEO, Payless and PLG

     2.0 Times   

CBI Executive Vice President

     2.0 Times   

Business Unit Executive Vice President

     1.5 Times   

Senior Vice President

     1.5 Times   

Division Senior Vice President

     1.0 Times   

 

(1) Mr. Massey remains subject to an ownership guideline equivalent to 1.5 times base salary during his tenure as interim CEO.

Executives with ownership guidelines are expected to attain the guideline multiple within seven years of appointment to one of the positions listed above. The equity ownership requirements are satisfied with:

 

   

Direct ownership of shares of Company common stock;

 

   

Shares of Company stock owned in the Company’s employee stock purchase plan;

 

   

Shares of Company stock equivalents under any of the Company’s 401(k) plans;

 

   

Company stock units credited under the Company’s Deferred Compensation Plan; and

 

   

Unvested restricted shares and restricted stock units payable only in shares of the Company’s common stock granted under the Company’s stock plans (reduced by 40% to represent the executive’s tax liability).

Unvested awards subject to performance conditions and outstanding stock options and SSARs are not counted toward the ownership requirements. “Base Salary” means the executive’s base salary at the time of appointment to one of the positions listed above.

Until his or her respective ownership multiple is satisfied, the senior management member is expected to retain all shares of Company stock owned or otherwise acquired, except those shares used to pay required tax obligations upon the vesting of restricted stock or used to pay the exercise price or tax obligation upon exercise of stock options and SSARs. Once the senior management member attains the appropriate ownership multiple, he or she is considered to remain in compliance with the guidelines as long as the number of shares held is not reduced below the number at which the ownership threshold was met. Shares of Company stock owned in excess of those required to comply with the ownership guidelines may be traded only during periods permitted by the Company’s insider trading program. If the ownership guidelines are not satisfied within the specified time period, the executive may not sell shares of Company stock without the written approval of the CEO. Messrs. Massey, Ribatt, and Pavelka have met their ownership guidelines. The compliance deadlines are July 22, 2015, for Ms. Via and November 30, 2015, for Mr. Boessen.

 

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6.  Tax and Accounting Impact of Executive Compensation

Deductibility of Compensation.    Under Section 162(m) of the Code, public corporations are generally not permitted a federal income tax deduction for compensation in excess of $1,000,000 paid in any fiscal year to the corporation’s chief Named Executive Officer and three other most highly compensated Named Executive Officers, other than the chief financial officer (determined as of the end of that fiscal year). “Qualifying performance-based compensation,” however, is exempt from Section 162(m), making it deductible for federal income tax purposes if certain requirements are met. It is generally the CN&G Committee’s intention to structure performance-based equity awards and annual and long-term incentives to Named Executive Officers who may be subject to Section 162(m) as performance-based compensation that satisfies the requirements of Section 162(m). The CN&G Committee, however, may award non-deductible compensation (such as time-vested restricted stock) under circumstances as it deems appropriate. Further, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, and other uncertainties including but not limited to the Company’s stock price, no assurance can be given, notwithstanding the Company’s stated intentions, that compensation intended by the Company to satisfy the requirements for deductibility under Section 162(m) will do so.

For fiscal 2011, we believe that no current Named Executive Officer had compensation in excess of $1,000,000 that would not qualify as performance-based compensation under Section 162(m) of the Code.

In developing the Company’s severance program, the CN&G Committee also took into account that some severance payments made after a change of control might not be fully deductible by the Company due to the limitations imposed under Section 280G of the Code.

Accounting for Equity-Based Compensation.    Grants under the Company’s equity incentive plans are accounted for as required by FASB ASC Topic 718. The CN&G Committee takes into account the financial statement impact of awards when deciding whether to make them and how to structure them.

 

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The following table summarizes the total compensation paid or earned by each of our Named Executive Officers, for the fiscal year ended January 28, 2012, as required by rules and regulations promulgated by the Securities and Exchange Commission. The Company has entered into employment agreements with all of the Named Executive Officers.

SUMMARY COMPENSATION TABLE

 

Name and
Principal Position

(a)

   Year

(b)
    Salary

($)(1)

(c)
    Bonus

($)(2)

(d)
    Stock
Awards

($)(3)

(e)
    Option
Awards

($)(3)
(f)
    Non-Equity
Incentive Plan
Compensation

($)(4)
(g)
    Change in
Pension
Value  and
Non-Qualified
Deferred
Compensation
Earnings(s)

($)(5)
(h)
    All Other
Compensation

($)(6)
(i)
    Total

($)

(j)
 

Michael J. Massey CEO,

President, General Counsel, and Secretary

     2011        426,952        400,000        52,413        159,291        67,894        64,062        13,529        1,184,141   

Douglas G. Boessen

Division SVP, Chief Financial Officer and Treasurer

    

 

 

2011

2010

2009

  

  

  

   

 

 

332,885

316,538

300,000

  

  

  

   

 

 


  

  

  

   

 

 

33,252

52,456

19,733

  

  

  

   

 

 


20,783

63,769

  

  

  

   

 

 

42,600

232,031

193,200

  

  

  

   

 

 

38,231

87,347

80,550

  

  

  

   

 

 

3,239

5,763

4,652

  

  

  

   

 

 

450,207

714,918

661,904

  

  

  

Gregg S. Ribatt

President and CEO Performance + Lifestyle Group

     2011        700,058        20,000        842,111        159,137        412,510               11,663        2,145,479   

LuAnn Via

President and CEO Payless ShoeSource

    

 

 

2011

2010

2009

  

  

  

   

 

 

708,279

694,231

675,000

  

  

  

   

 

 


25,000

  

  

  

   

 

 

281,188

343,102

189,745

  

  

  

   

 

 

579,307

339,941

476,532

  

  

  

   

 

 


583,179

765,244

  

  

  

   

 

 

69,232

221,922

118,473

  

  

  

   

 

 

15,519

16,057

44,853

  

  

  

   

 

 

1,653,525

2,198,432

2,294,847

  

  

  

Darrel J. Pavelka

EVP Global Supply Chain

    

 

 

2011

2010

2009

  

  

  

   

 

 

573,827

555,769

535,000

  

  

  

   

 

 

20,000

51,400

  

  

  

   

 

 

143,661

248,593

83,100

  

  

  

   

 

 

340,979

98,526

229,042

  

  

  

   

 

 

94,963

603,671

559,878

  

  

  

   

 

 

91,853

244,914

188,930

  

  

  

   

 

 

13,627

14,693

14,881

  

  

  

   

 

 

1,278,910

1,766,166

1,662,231

  

  

  

Matthew E. Rubel

Former Chairman, CEO and President(7)

    

 

 

2011

2010

2009

  

  

  

   

 

 

456,250

1,163,115

1,123,500

  

  

  

   

 

 


  

  

  

   

 

 

1,468,024

1,954,613

969,500

  

  

  

   

 

 

482,453

2,105,173

2,380,316

  

  

  

   

 

 


2,383,853

1,808,835

  

  

  

   

 

 


  

  

  

   

 

 

6,913,871

181,011

173,904

  

  

  

   

 

 

9,320,598

7,787,765

6,456,055

  

  

  

 

(1) “Salary” reflects amounts paid to or deferred by the Named Executive Officers during each fiscal year. Annual salary changes for each of the Named Executive Officers normally occur approximately mid April of each year.

 

(2) For 2011, “Bonus” reflects an Interim CEO cash award for Mr. Massey ($400,000) and discretionary cash awards for Mr. Ribatt ($20,000) and Mr. Pavelka ($20,000). For 2009, “Bonus” reflects discretionary cash awards for Mr. Pavelka ($30,000) and Ms. Via ($25,000). For Mr. Pavelka it also includes a CE/CE performance rating bonus of $21,400. Bonus also includes amounts deferred (if any) by the respective officer under the Company’s Deferred Compensation Plan.

 

(3) Amounts represent the 2011, 2010, and 2009 grant-date fair value, respectively, calculated in accordance with FASB ASC Topic 718. See Note 10 (Share-Based Compensation) to the notes to consolidated financial statements set forth in Company’s Annual Report on Form 10-K for the fiscal year ended January 28, 2012 for the assumptions made in determining ASC 718 grant date fair values.

 

(4) “Non-Equity Incentive Plan Compensation” reflects the annual and long-term cash incentives paid under the Company’s Incentive Compensation Plan including any amounts deferred by the particular Named Executive Officer under the Company’s Deferred Compensation Plan. For all Named Executive Officers excluding Mr. Ribatt, the 2011 long-term performance period is fiscal 2009-2011; the 2010 long-term performance period is fiscal 2008-2010; the 2009 long-term performance period is fiscal 2007-2009. Mr. Ribatt did not have a long-term performance plan for 2011.

 

(5) “Earnings” on amounts deferred under the Company’s Deferred Compensation Plan by executives are not included in this column. Amounts deferred by executives earn returns based solely on the actual return of the measurement fund selected by the executive. See the Non-Qualified Deferred Compensation Table for fiscal 2011, fiscal 2010, and fiscal 2009, as well as the Pension Benefits Table for fiscal 2011, fiscal 2010, and fiscal 2009.

 

(6) For fiscal 2011 this column includes the following for each of the Named Executive Officers: For Mr. Massey, this column includes premiums paid for life insurance and long-term disability insurance ($1,829); car allowance ($7,000); income for use of company-provided aircraft for personal air travel ($3,143); and the Company’s contribution to his 401(k) account ($1,557).

 

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   For Mr. Boessen, this column includes premiums paid for life insurance and long-term disability insurance ($1,682) and the Company’s contribution to his 401(k) account ($1,557).

 

   For Mr. Ribatt, this column includes premiums paid for life insurance and long-term disability insurance ($1,663) and car allowance ($10,000).

 

   For Ms. Via, this column includes premiums paid for life insurance and long-term disability insurance ($2,764); car allowance ($10,000); income for use of company-provided aircraft for personal air travel ($1,198); and the Company’s contribution to her 401(k) account ($1,557).

 

   For Mr. Pavelka, this column includes premiums paid for life insurance and long-term disability insurance ($2,764); car allowance ($9,307); and the Company’s contribution to his 401(k) account ($1,557).

 

   For Mr. Rubel, this column includes contractually required premiums paid for life insurance and long-term disability insurance ($2,538); premiums for the executive medical reimbursement plan ($2,083); car allowance ($8,000); company-paid driver ($4,891); income for use of company-provided aircraft for personal air travel ($54,335); tax preparation fee reimbursement ($2,900) for the 2010 tax year; outplacement services ($15,000); COBRA reimbursements ($12,740); tax gross-up for COBRA reimbursements ($9,484); special termination payment ($5,280,000); and severance ($1,521,900).

 

   The amounts shown for perquisites represent the incremental cost of such perquisites to the Company. With respect to personal use of Company provided aircraft, the amounts represent the incremental cost to the Company of providing such aircraft. For 2009, 2010 and 2011, all Company provided aircraft consisted of chartered flights and therefore the incremental cost to the Company for personal use of company provided aircraft is computed based on the actual costs of the charter or the incremental cost of any personal travel when combined with a business trip. If a passenger is flying for personal use in an otherwise available seat on a flight that is for Company business, calculating the incremental cost is not practical, and the Company has therefore used the greater of the Standard Industry Fare Level (“SIFL”) rate or first class airfare between the two closest commercial airports as an estimate.

 

(7) Mr. Rubel served as CBI Chairman, CEO and President until his resignation on June 15, 2011.

 

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FISCAL 2011 GRANTS OF PLAN-BASED AWARDS

 

Name   Grant Date     Award
Type
    Estimated Future Payouts Under Non-
Equity Incentive Plan Awards
    Estimated Future Payouts Under
Equity
Incentive Plan Awards
   

All Other
Stock Awards:
Number of
Shares of
Stock or
Units(1)

(#)

   

All Other
Option
Awards:
Number of
Securities
Underlying Options

(#)

   

Exercise

of Base
Price of
Option
Awards(2)
($/Sh)

   

Grant Date

Fair Value

($)

 
               

Threshold

($)

   

Target

($)

   

Maximum

($)

    Threshold
(#)
   

Target

(#)

   

Maximum

(#)

             

(a)

  (b)    

 

    (c)     (d)     (e)     (f)     (g)     (h)     (i)     (j)     (k)     (l)  

Michael J. Massey

   

 

 

 

 

 

 

3/24/2011

3/24/2011

3/24/2011

3/24/2011

3/24/2011

8/26/2011

8/26/2011

  

  

  

  

  

  

  

   

 

 

 

 

RSU

RSA

SAR

SAR

SAR

  

  

  

  

  

   

 

 

 

 

 

 

73,213

107,875

(3) 

(4) 

  

  

  

  

  

   

 

 

 

 

 

 

366,064

215,750

  

  

  

  

  

  

  

   

 

 

 

 

 

 

1,098,192

647,250

  

  

  

  

  

  

  

   

 

 

 

 

 

 


0

  

  

  

  

  

  

  

   

 

 

 

 

 

 


2,562

  

  

(5) 

  

  

  

  

   

 

 

 

 

 

 


3,843

  

  

  

  

  

  

  

   

 

 

 

 

 

 


2,563

  

  

  

(6) 

  

  

  

   

 

 

 

 

 

 


4,617

26,965

26,966

  

  

  

  

(7) 

(8) 

(9) 

   

 

 

 

 

 

 


20.45

12.70

12.70

  

  

  

  

  

  

  

   

 

 

 

 

 

 


52,393

52,413

34,443

124,848

124,853

  

  

  

  

  

  

  

Douglas G. Boessen

   

 

 

 

3/24/2011

3/24/2011

3/24/2011

3/24/2011

  

  

  

  

   

 

RSU

RSA

  

  

   

 

 

 

30,150

83,750

(3) 

(4) 

  

  

   

 

 

 

150,750

167,500

  

  

  

  

   

 

 

 

452,250

502,500

  

  

  

  

   

 

 

 


0

  

  

  

  

   

 

 

 


541

  

  

(5) 

  

   

 

 

 


676

  

  

  

  

   

 

 

 


1,626

  

  

  

(6) 

   

 

 

 


  

  

  

  

   

 

 

 


  

  

  

  

   

 

 

 


11,063

33,252

  

  

  

  

Gregg S. Ribatt

   

 

 

 

 

 

3/24/2011

3/24/2011

3/24/2011

3/24/2011

3/24/2011

3/24/2011

  

  

  

  

  

  

   

 

 

 

RSU

RSU

RSA

SAR

  

  

  

  

   

 

 

 

 

 

99,400

177,500

(3) 

(4) 

  

  

  

  

   

 

 

 

 

 

497,000

355,000

  

  

  

  

  

  

   

 

 

 

 

 

1,491,000

1,065,000

  

  

  

  

  

  

   

 

 

 

 

 


0

14,669

  

  

  

  

  

  

   

 

 

 

 

 


11,839

29,339

  

  

(5) 

(10) 

  

  

   

 

 

 

 

 


17,759

44,008

  

  

  

  

  

  

   

 

 

 

 

 


11,840

  

  

  

  

(6) 

  

   

 

 

 

 

 


21,332

  

  

  

  

  

(7) 

   

 

 

 

 

 


20.45

  

  

  

  

  

  

   

 

 

 

 

 


242,108

599,983

242,128

159,137

  

  

  

  

  

  

LuAnn Via

   

 

 

 

 

 

3/24/2011

3/24/2011

3/24/2011

3/24/2011

3/24/2011

11/23/2011

  

  

  

  

  

  

   

 

 

 

RSU

RSA

SAR

SAR

  

  

  

  

   

 

 

 

 

 

106,575

177,625

(3) 

(4) 

  

  

  

  

   

 

 

 

 

 

532.875

355,250

  

  

  

  

  

  

   

 

 

 

 

 

1,598,625

1,065,750

  

  

  

  

  

  

   

 

 

 

 

 


0

  

  

  

  

  

  

   

 

 

 

 

 


13,750

  

  

(5) 

  

  

  

   

 

 

 

 

 


20,625

  

  

  

  

  

  

   

 

 

 

 

 


13,750

  

  

  

(6) 

  

  

   

 

 

 

 

 


24,775

86,417

  

  

  

  

(7) 

(11) 

   

 

 

 

 

 


20.45

12.51

  

  

  

  

  

  

   

 

 

 

 

 


281,188

281,188

184,822

394,485

  

  

  

  

  

  

Darrel J. Pavelka

   

 

 

 

 

 

 

3/24/2011

3/24/2011

3/24/2011

3/24/2011

3/24/2011

11/23/2011

11/23/2011

  

  

  

  

  

  

  

   

 

 

 

 

RSU

RSA

SAR

SAR

SAR

  

  

  

  

  

   

 

 

 

 

 

 

80,780

144,250

(3) 

(4) 

  

  

  

  

  

   

 

 

 

 

 

 

403,900

288,500

  

  

  

  

  

  

  

   

 

 

 

 

 

 

1,211,700

865,500

  

  

  

  

  

  

  

   

 

 

 

 

 

 


0

  

  

  

  

  

  

  

   

 

 

 

 

 

 


7,025

  

  

(5) 

  

  

  

  

   

 

 

 

 

 

 


10,538

  

  

  

  

  

  

  

   

 

 

 

 

 

 


7,025

  

  

  

(6) 

  

  

  

   

 

 

 

 

 

 


12,658

27,005

27,005

  

  

  

  

(7) 

(8) 

(11) 

   

 

 

 

 

 

 


20.45

12.51

12.51

  

  

  

  

  

  

  

   

 

 

 

 

 

 


143,661

143,661

94,429

123,275

123,275

  

  

  

  

  

  

  

Matthew E. Rubel

   

 

 

 

 

 

3/24/2011

3/24/2011

3/24/2011

3/24/2011

3/24/2011

2/24/2011

  

  

  

  

  

  

   

 

 

 

RSU

RSA

SAR

SAR

  

  

  

  

   

 

 

 

 

 

288,000

600,000

(3) 

(4) 

  

  

  

  

   

 

 

 

1,440,000

1,200,000

  

  

  

  

   

 

 

 

 

 

4,320,000

3,600,000

  

  

  

  

  

  

   

 

 

 

 

 


0

  

  

  

  

  

  

   

 

 

 

 

 


71,785

  

  

(5) 

  

  

  

   

 

 

 

 

 


107,678

  

  

  

  

  

  

   

 

 

 

 

 


71,786

  

  

  

(6) 

  

  

   

 

 

 

 

 


64,672

64,672

  

  

  

  

(7) 

(12) 

   

 

 

 

 

 


20.45

20.45

  

  

  

  

  

  

   

 

 

 

 

 


1,468,003

1,468,024

482,453

530,736

  

  

  

  

  

  

 

(1) Stock awards are eligible for dividends; however, the Company has not historically paid dividends.

 

(2) Grant price is the fair market value (“FMV”) on the date of grant. The FMV is the closing stock price on the date of grant.

 

(3) Annual portion of the incentive under the Company’s Incentive Compensation Plan (“ICP”) as described in the Compensation Discussion & Analysis (“CD&A”).

 

(4) Long-term portion of the incentive under the ICP as described in the CD&A.

 

(5) Performance-vested restricted stock units vest one-third per year for three years beginning on the first anniversary of the grant date if the performance criterion is satisfied. The amount eligible for vesting is based upon achievement of EBITDA to plan. For 2011, the EBITDA goal was not met and the entire award will be forfeited.

 

(6) Restricted stock awards will vest in equal increments on the second and third anniversary of the grant date; March 25, 2012 and March 25, 2013, respectively.

 

(7) Stock Settled Appreciation Rights (“SSARs”) vest one-third per year for three years beginning on the first anniversary of the grant date.

 

(8) Stock Settled Appreciation Rights (“SSARs”) cliff vest on the third anniversary of the grant date.

 

(9) Performance-vested Stock Settled Appreciation Rights (“SSARs”) vest one-third per year for three years beginning on the first anniversary of the grant date if the performance criterion is satisfied. The amount eligible for vesting is based upon the achievement of EBIT to plan. For 2011, the performance criterion was not satisfied, and the entire award will be forfeited.

 

35


Table of Contents
(10) Performance-vested restricted stock units cliff vest on the third anniversary of the grant date if the performance criterion is satisfied. The amount eligible for vesting is based on achievement of EBITDA to plan for fiscal 2011-2013.

 

(11) Performance-vested Stock Settled Appreciation Rights (“SSARs”) vest one-third per year for three years beginning on April 1, 2013, if the performance criterion is satisfied. The amount eligible for vesting is based upon achievement of fiscal 2012 plan for Payless North America store-for-store sales.

 

(12) Performance-vested Stock Settled Appreciation Rights (“SSARs”) vest one-third per year for three years beginning on the first anniversary of the grant date if the performance criterion is satisfied. The amount eligible for vesting is based upon the achievement of total stockholder return goals. This award was forfeited upon Mr. Rubel’s termination.

 

36


Table of Contents

OUTSTANDING EQUITY AWARDS AT THE END OF FISCAL 2011

 

      Option Awards(1)      Stock Awards  

Name

   Number of
Securities
Underlying
Unexercised
Options

(#)
Exercisable
    Number of
Securities
Underlying
Unexercised Options

(#)
Unexercisable
    Option
Exercise
Price

($)
     Option
Expiration
Date
     Number
of Shares or
Units of
Stock That
Have Not
Vested

(#)
    Market Value of
Shares or
Units of
Stock That
Have Not
Vested(2)

($)
 
(a)    (b)     (c)     (e)      (f)      (g)     (h)  

Michael J. Massey

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34,000

10,000

5,600

13,000

5,850

10,000

10,400

9,900

12,800

12,500

10,666

1,606

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

  

(5) 

(6) 

  

  

  

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 


10,000

5,334

3,214

4,617

26,965

26,966

  

  

  

  

  

  

  

  

  

(4) 

  

  

(7) 

(8) 

(9) 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16.8650

22.4800

22.4800

22.4800

22.4800

33.1150

33.1150

16.1900

23.1600

12.4500

11.0800

11.0800

22.1800

20.4500

12.7000

12.7000

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5/31/2012

4/7/2013

4/7/2013

4/7/2013

4/7/2013

3/29/2014

3/29/2014

5/28/2014

9/4/2014

3/27/2015

3/26/2016

3/26/2016

3/25/2017

3/24/2018

8/26/2018

8/26/2018

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


2,562

1,117

2,229

1,486

2,563

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

(10) 

(5) 

(11) 

(6) 

(12) 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


42,785

18,654

37,224

24,816

42,802

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Douglas G. Boessen

    

 

 

 

 

 

 

 

 

 

 

 

 

 

7,000

5,000

2,100

1,925

5,500

4,000

3,925

5,080

5,000

2,000

3,400

5,666

852

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

  

(5) 

(6) 

   

 

 

 

 

 

 

 

 

 

 

 

 

 


5,000

2,834

1,704

  

  

  

  

  

  

  

  

  

  

  

(4) 

  

  

   

 

 

 

 

 

 

 

 

 

 

 

 

 

16.8650

22.4800

22.4800

22.4800

22.4800

33.1150

33.1150

23.1600

12.4500

18.6300

11.2000

11.0800

11.0800

22.1800

  

  

  

  

  

  

  

  

  

  

  

  

  

  

    

 

 

 

 

 

 

 

 

 

 

 

 

 

5/31/2012

4/7/2013

4/7/2013

4/7/2013

4/7/2013

3/29/2014

3/29/2014

9/4/2014

3/27/2015

9/8/2015

12/8/2015

3/26/2016

3/26/2016

3/25/2017

  

  

  

  

  

  

  

  

  

  

  

  

  

  

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


541

594

1,183

788

1,626

  

  

  

  

  

  

  

  

  

  

  

  

  

  

(10) 

(5) 

(11) 

(6) 

(12) 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


9,035

9,920

19,756

13,160

27,154

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Gregg S. Ribatt

    

 

 

 

 

124,306

51,666

9,393

(3) 

  

(5) 

(6) 

  

   

 

 

 

 


10,000

25,834

18,788

21,332

  

(4) 

  

  

(7) 

   

 

 

 

 

12.4500

11.0800

11.0800

22.1800

20.4500

  

  

  

  

  

    

 

 

 

 

3/27/2015

3/26/2016

3/26/2016

3/25/2017

3/24/2018

  

  

  

  

  

    

 

 

 

 

 

 

 

 

 

 


11,839

29,339

5,417

7,448

4,966

11,840

  

  

  

  

  

(10) 

(13) 

(5) 

(11) 

(6) 

(12) 

   

 

 

 

 

 

 

 

 

 

 


197,711

489,961

90,464

124,382

82,932

197,728

  

  

  

  

  

  

  

  

  

  

  

 

37


Table of Contents
      Option Awards(1)      Stock Awards  

Name

   Number of
Securities
Underlying
Unexercised
Options

(#)
Exercisable
    Number of
Securities
Underlying
Unexercised Options

(#)
Unexercisable
    Option
Exercise
Price

($)
     Option
Expiration
Date
     Number
of Shares or
Units of
Stock That
Have Not
Vested

(#)
    Market Value of
Shares or
Units of
Stock That
Have Not
Vested(2)

($)
 
(a)    (b)     (c)     (e)      (f)      (g)     (h)  

LuAnn Via

    

 

 

 

 

 

 

33,548

37,741

44,750

13,935

(3) 

(3) 

  

(5) 

(6) 

  

  

   

 

 

 

 

 

 


33,500

22,375

27,872

24,775

86,417

  

  

(4) 

  

  

(7) 

(14) 

   

 

 

 

 

 

 

18.6300

18.6300

11.0800

11.0800

22.1800

20.4500

12.5100

  

  

  

  

  

  

  

    

 

 

 

 

 

 

9/8/2015

9/8/2015

3/26/2016

3/26/2016

3/25/2017

3/24/2018

11/23/2018

  

  

  

  

  

  

  

    

 

 

 

 

 

 

 

 

 

 

 

 


13,750

4,709

1,000

7,735

5,156

13,750

  

  

  

  

  

  

  

(10) 

(5) 

(5) 

(11) 

(6) 

(12) 

   

 

 

 

 

 

 

 

 

 

 

 

 


229,625

78,640

16,700

129,175

86,105

229,625

  

  

  

  

  

  

  

  

  

  

  

  

  

Darrel J. Pavelka

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34,000

20,000

5,600

5,850

13,000

12,500

10,400

28,500

27,100

15,000

23,750

4,039

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

  

(5) 

(6) 

  

  

  

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


12,500

11,875

8,078

12,658

27,005

27,005

  

  

  

  

  

  

  

  

  

  

(4) 

  

  

(7) 

(14) 

(15) 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16.8650

22.4800

22.4800

22.4800

22.4800

33.1150

33.1150

23.1600

23.1600

12.4500

11.0800

11.0800

22.1800

20.4500

12.5100

12.5100

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5/31/2012

4/7/2013

4/7/2013

4/7/2013

4/7/2013

3/29/2014

3/29/2014

9/4/2014

9/4/2014

3/27/2015

3/26/2016

3/26/2016

3/25/2017

3/24/2018

11/23/2018

11/23/2018

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


7,025

2,500

5,604

3,736

7,025

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

(10) 

(5) 

(11) 

(6) 

(12) 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


117,318

41,750

93,587

62,391

117,318

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

  

Matthew E. Rubel

    

 

 

 

 

 

 

417,700

136,049

151,746

100,000

100,000

238,176

43,114

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

   

 

 

 

 

 

 


  

  

  

  

  

  

  

   

 

 

 

 

 

 

20.6500

33.1150

23.1600

12.4500

11.0800

22.1800

20.4500

  

  

  

  

  

  

  

    

 

 

 

 

 

 

7/18/2012

3/29/2014

6/15/2014

6/15/2014

6/15/2014

6/15/2014

6/15/2014

  

  

  

  

  

  

  

    

 

 

 

 

 

 

 


47,856

  

  

  

  

  

  

  

(10) 

   

 

 

 

 

 

 

 


799,195

  

  

  

  

  

  

  

  

 

(1) The Option Awards columns in this table include stock-settled appreciation rights (SSARs).
(2) The closing stock price at the end of the fiscal year (1/28/2012) was $16.70.
(3) Award fully vested.
(4) Award fully vests on 3/26/2012.
(5) Remainder of award vests 3/26/2012.
(6) Remainder of award vests on 3/25/2012 and 3/25/2013.
(7) Award vests in equal increments on 3/24/2012, 3/24/2013, and 3/24/2014.
(8) Award fully vests on 8/26/2014.
(9) If performance criterion is satisfied, the award will vest in equal increments on 8/26/2012, 8/26/2013, and 8/26/2014.
(10) Performance criterion was not satisfied; entire award will be forfeited.
(11) Award vests in equal increments on 3/25/2012 and 3/25/2013.
(12) Award fully vests on 3/24/2014.
(13) If performance criterion is satisfied, the award will fully vest on 3/24/2014.
(14) If performance criterion is satisfied, the award will vest in equal increments on 4/1/2013, 4/1/2014, and 4/1/2015.
(15) Award fully vests on 11/23/2014.

 

38


Table of Contents

FISCAL 2011 OPTION EXERCISES AND STOCK VESTED

The table below summarizes the Named Executive Officers’ stock option exercises and stock vesting activity for the fiscal year ending January 28, 2012.

 

     Option Awards      Stock Awards  

Name

(a)

   Number of Shares
Acquired on
Exercise

(#)
(b)
     Value Realized  on
Exercise

($)
(c)
     Number of Shares
Acquired on Vesting

(#)
(d)
     Value Realized  on
Vesting

($)
(e)
 

Michael J. Massey(1)

                     2,585         54,156   

Douglas G. Boessen(2)

                     1,441         29,395   

Gregg S. Ribatt(3)

                     16,601         347,791   

LuAnn Via(4)

                     9,544         189,744   

Darrel J. Pavelka(2)

                     6,702         133,737   

Matthew E. Rubel(5)

     494,999         1,480,040         184,916         3,160,886   

 

(1) Reflects restricted stock vesting from the 3/27/2008, 3/26/2009, and 3/25/2010 grants.

 

(2) Reflects restricted stock vesting from the 3/27/2008, 12/8/2008, 3/26/2009, and 3/25/2010 grants.

 

(3) Reflects restricted stock vesting from the 3/27/2008, 3/26/2009, and 3/25/2010 grants.

 

(4) Reflects restricted stock vesting from the 9/8/2008, 3/26/2009, and 3/25/2010 grants.

 

(5) Reflects Stock Settled Appreciation Right (“SSAR”) exercises from the 3/27/2008 and 3/26/2009 grants and restricted stock vesting from the 3/27/2008, 3/26/2009, and 3/25/2010 grants.

 

39


Table of Contents

PENSION BENEFITS FOR FISCAL 2011

The table below shows the present value of accumulated benefits payable to each of the Named Executive Officers, including the number of years of service credited to each such Named Executive Officer, under the Supplementary Retirement Account Balance Plan (“SERP”) as determined using interest rate assumptions consistent with those used in the Company’s financial statements. Current Named Executive Officers other than Mr. Ribatt are eligible for benefits under the Plan. Mr. Ribatt is not eligible because PLG is not a participating employer in the Plan.

 

Name

(a)

 

Plan Name

(b)

  Number of Years
Credited Service(1)

(c)
    Account
Balance(2)

($)
(d)
    Payments During Last
Fiscal Year

($)
(e)
 

Michael J. Massey

  Supplementary Retirement Account Balance Plan     21.4      $ 989,559                                     —   

Douglas G. Boessen

  Supplementary Retirement Account Balance Plan     14.2      $ 501,765          

LuAnn Via

  Supplementary Retirement Account Balance Plan     3.5      $ 409,627          

Darrel J. Pavelka

  Supplementary Retirement Account Balance Plan     32.0      $ 2,510,864          

Matthew E. Rubel

  Supplementary Retirement Account Balance Plan     n/a        n/a        n/a   

 

(1) Years of service is calculated based on the number of years of service to the Company including any service with our former parent company, The May Department Stores Company, prior to our spin-off in 1996.

 

(2) Included in the amount is a transition credit that vests after the attainment of age 55 and at least 5 years of company service. Currently included is $747,677 for Mr. Massey, $333,882 for Mr. Boessen and $2,155,143 for Mr. Pavelka. Mr. Pavelka is vested in the credit.

Supplementary Retirement Account Balance Plan.    The Company does not maintain a broad-based defined benefit retirement plan. The Company does, however, maintain the SERP that covers a select group of management and highly compensated employees of CBI and Payless. The SERP is a non-qualified, unfunded, “top-hat” plan.

An employee in the select “top-hat” group may be a participant in the SERP on January 1 if his or her base salary on December 31 is at least 150% of the federal “highly compensated employee” threshold in effect on that date under Section 414(q)(1)(B) of the Code. The base salary requirement for participation in the plan on January 1, 2012, was $165,000. Once the executive qualifies for participation in the SERP, he or she remains a participant contingent upon employment in a position that is part of the select top-hat group.

Named Executive Officers who are SERP participants are eligible for various types of credits after the completion of each plan year. The credits made in fiscal 2012 will be based on fiscal 2011 eligible compensation, which is base salary plus annual incentive paid in the 2011 plan year.

 

   

Basic credit:    5% of the participant’s eligible compensation

 

   

Performance credit:    10% of the participant’s eligible compensation, contingent upon achievement of a pre-established performance goal

   

The performance metric is established annually by the CN&G Committee.

   

For 2011, the performance metric was CBI EBIT. Because the Company’s actual EBIT performance fell short of the $208.7 million target, no Named Executive Officers who are SERP participants will receive a performance credit in April 2012.

   

For 2012, the performance metric will be CBI EBIT. The credit will be awarded in April 2013 if the Company achieves its EBIT target, which is the same as the EBIT target under the annual cash incentive component of the ICP.

 

   

Transition credit:    SERP members prior to the plan amendment on January 1, 2008, received a transition credit in consideration of benefits accrued under the prior defined benefit plan design. Messrs. Massey, Pavelka and Boessen received this credit.

 

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In addition to the credits described above, the CN&G Committee may authorize discretionary credits in the event of extraordinary circumstances.

SERP participants become 50% vested in the basic, performance and discretionary credits after five years of Company service. Vesting increases 10% per year thereafter, with full vesting after the completion of 10 years of Company service. For those SERP participants who received a transition credit, that credit will vest if the participant reaches age 55 and has completed 5 years of service prior to retirement. Mr. Pavelka is vested in the transition credit.

Unvested basic, performance and discretionary account balances and transition account balances will be credited with interest at a rate established annually. The rate of 3.55% for the 2012 plan (calendar) year was set in December 2011 and was based on the trailing 12-month average U.S. Treasury 10-year note rate with a 120% modifier to approximate a long-term risk-free rate of return. Upon vesting, the basic, performance and discretionary account balances will be credited with earnings or debited for losses based on the performance of investment funds designated under the plan, which are the same funds identified under “Nonqualified Deferred Compensation Plan” except that a CBI Common Stock Fund is not available for the SERP.

In the event of a “Change of Control” of the Company, the SERP provides that the participant’s account balance will become 100% vested. See the discussion under the “Potential Payments upon Termination or Change of Control.”

401(k) Plans.    Participants (including Named Executive Officers) may make voluntary contributions to the 401(k) Plan applicable to his or her assigned business unit on a before-tax and/or after-tax basis. Participants are permitted to direct that any Company contribution and/or participant contribution made to their account under the respective 401(k) Plan be invested in one of several investment funds, including a CBI Common Stock fund.

Named Executive Officers other than Mr. Ribatt are eligible to participate in the Collective Brands 401(k) Profit Sharing Plan (“PSP”). Subject to the Company’s discretion, the Company expects to contribute an aggregate of 2.5% of its “net profits” (as defined in the PSP) to the 401(k) PSP for U.S. and Puerto Rico Associates. Mr. Ribatt is eligible to participate in the Collective Brands Performance + Lifestyle Group Employee Savings and Investment Plan, a safe-harbor 401(k) plan.

NONQUALIFIED DEFERRED COMPENSATION FOR FISCAL 2011

Pursuant to the Company’s Deferred Compensation Plan, eligible executives including all Named Executive Officers may defer portions of their income including salary and bonus deferrals. An executive may defer up to 75% of base salary and up to 100% of annual and/or long-term cash incentives for the fiscal year. The table below shows the contributions, earnings, and withdrawals by each of the Named Executive Officers for Fiscal 2011.

 

Name
(a)

   Executive
Contributions in
Last FY
($)
(b)
     Aggregate
Earnings (Loss)
in Last FY
($)
(c)
    Aggregate
Withdrawals/
Distributions
($)
(d)
     Aggregate
Balance
at Last FYE
($)
(e)
 

Michael J. Massey

     0         0        0         0   

Douglas G. Boessen

     0       $ 25        0       $ 43,159   

Gregg S. Ribatt

     0         0        0         0   

LuAnn Via

     0         0        0         0   

Darrel J. Pavelka

     0       $ (30,397     0       $ 817,355   

Matthew E. Rubel

     0         0        0         0   

 

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The Deferred Compensation Plan offers a diverse group of investment funds that the executive may select to measure the performance of the amount deferred. The measurement funds as of the end of fiscal 2011 were: Wells Fargo Advantage Heritage Money Market Institutional Fund, American Funds Growth Fund, DWS Eq 500 Index VIP — Class A, Delaware VIP Value Series, Neuberger Berman Advisers Management Trust Mid Cap Growth (Class I), Fidelity VIP Mid Cap Portfolio, AllianceBernstein Small/Mid Cap Portfolio, Baron Capital Asset Fund: Insurance Shares, Delaware VIP Small Cap Value Series, Lincoln VIP International Fund, Janus Aspen Flexible Bond Service Fund, Delaware VIP High Yield Series, Templeton Global Income Securities Class I, and the Collective Brands Common Stock Fund. Investment gains/losses are attributed to each executive’s account based on the actual performance of the investments selected. Participants may elect to receive distributions in the form of a lump-sum payment or up to 15 annual installments upon separation from service; all distributions are made in accordance with Section 409A of the Code.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL

Employment Agreements.    The material provisions of the employment agreements relating to termination are described below.

 

   

Each of the agreements stipulates a period of non-competition and non-solicitation of 18 to 24 months following termination of employment. For Ms. Via, who does not have a Change of Control Agreement, this provision will be waived in the event she is terminated involuntarily without cause following a Change of Control.

 

   

Each agreement provides that in the event of termination by reason of death, disability, for cause or voluntarily by executive, the executive’s base salary and benefits will cease.

 

   

If a Named Executive Officer is involuntarily terminated without cause, then the executive will be entitled to the following, provided that the executive is not in violation of the non-competition, non-solicitation, confidentiality and work product provisions of the employment agreement:

 

A severance payment equal to two times (except for Mr. Boessen’s payment, which is 1.5 times) the executive’s then-current base salary, by the later of (i) 2  1/2 months from the end of the fiscal year in which the executive’s employment terminates and (ii) April 15th of the year following the year in which the executive’s employment terminates;

  The prorated portion of any annual or long-term cash incentive compensation that may be earned and payable under the terms of the ICP;
  For Messrs. Massey, Ribatt and Pavelka, accelerated vesting of unvested performance share units, restricted stock, stock options and SSARs that would otherwise have vested during the 12-month period following termination; for Mr. Ribatt, accelerated vesting of 50% of unvested performance share units, restricted stock, stock options and SSARs that would otherwise have vested between 12 and 18 months following termination; and for Ms. Via, accelerated vesting of unvested performance share units, restricted stock, and SSARs granted after June 15, 2011 that would have otherwise vested during the 12-month period following termination.
  A special payment towards 18 months of COBRA (24 months for Mr. Ribatt); and
  An executive outplacement program through a Company-designated service provider.

Change of Control Agreements.    The Company has entered into a Change of Control agreement with each Named Executive Officer other than Ms. Via. These Change of Control agreements generally provide for the terms of employment after a Change of Control (generally superseding the terms of the employment agreement) and for benefits if he or she terminates employment for “good reason” or is involuntarily terminated other than for death or disability within three years after a Change of Control. Good reason includes the Company’s relocation of the executive to an office more than 35 miles from executive’s principal office, a termination by the executive within twelve months after a “Potential Change of Control,” or a termination by the executive within a 30-day window following the first anniversary of a Change of Control.

 

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For this purpose, a Change of Control includes any of the following events:

 

   

Any “person,” as defined in the Exchange Act, acquires 20% or more of the Company’s common stock or voting securities;

 

   

A majority of the Company’s Directors are replaced and not approved by the “Incumbent Board”;

 

   

Consummation of certain mergers (e.g., a merger after which the Company’s pre-merger voting shares represent less than 50% of the voting shares of the combined entity), or a sale of all or substantially all of the Company’s assets; or

 

   

Approval by stockholders of a liquidation of the Company.

Upon a covered termination of employment, the agreements provide that the executive will receive a lump sum payment equal to the aggregate of: (1) three times the sum of (a) base salary in effect at termination or, if greater, base salary in effect immediately prior to the Change of Control, plus (b) the greater of the highest bonus actually paid in the previous three years or the bonus paid in the most recently completed fiscal year following a Change of Control, and (2) a cash payment for cancellation of all stock options or stock appreciation rights.

Each Change of Control agreement also provides that the executive will receive outplacement benefits and three years of continued participation in the Company’s welfare benefit plans (or such longer period as is provided in such plan).

The Change of Control agreements also provide a tax gross-up for any excise taxes that may be incurred under Section 4999 of the Code if payment under the agreement would result in the executive receiving at least 110 percent of the “safe harbor” amount. In the event that payments do not meet the 110 percent threshold, the payments are reduced so that no excise tax is imposed.

In addition, in the event of a Change of Control under the terms of the respective Company plans:

 

   

Amounts deferred under the Company’s Deferred Compensation Plan will be distributed to all participants in a lump sum cash payment, subject to certain distribution limits under Section 409A of the Code;

 

   

All options and SSARs granted prior to March 20, 2012, that do not contain a performance condition will become immediately and fully exercisable and, if performance based, will vest at target. All options and SSARs granted on or after March 20, 2012, that do not contain a performance condition will become a right to receive cash upon vesting equal to the difference between the exercise price and stock price at the time of the change of control and, if performance based, target performance assumed.

 

   

All account balances under the SERP will vest immediately; and

 

   

All restrictions on any restricted stock, performance share units, and phantom stock units granted prior to March 2012 will lapse, and such shares and units will become fully vested.

  Performance share units will vest at target if a Change in Control occurs before the completion of the performance period.
  Restricted stock, performance share units, and phantom stock units granted in March 2012 or later will become fully vested only if the Named Executive Officer is terminated involuntarily without cause or for good reason following the Change in Control.

If termination were to occur during a “Potential Change of Control,” an additional severance payment would be provided to Messrs. Massey, Pavelka and Ribatt in lieu of any annual and long-term cash incentives otherwise payable for performance periods in progress as of the termination date:

 

       

Additional Severance Payment for Termination During “Potential Change of Control”

Fiscal Quarter in which Termination Occurs

 
        Q1        Q2        Q3        Q4  

Mr. Massey

     $ 180,000         $ 250,000         $ 330,000         $ 410,000   

Mr. Pavelka

     $ 260,000         $ 380,000         $ 510,000         $ 630,000   

Mr. Ribatt

     $ 110,000         $ 220,000         $ 320,000         $ 430,000   

 

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The following tables reflect the estimated compensation payable to the Named Executive Officers in the event of termination of employment due to retirement, voluntary termination (with and without good reason), death, disability, involuntary termination without cause, and following a Change of Control. The amounts assume that such termination was effective on January 28, 2012, and the Change of Control occurred on such date. The actual amounts to be paid can be determined only at the time of the executive’s actual termination of employment.

 

Named Executive
Officer

(a)

  Cash
Severance
Payment(1)

(b)
    Incremental
Pension
Benefit(2)

(c)
    Benefit
Continuation
& Outplacement
Services(3)

(d)
    Value of
Vested
Stock &
Accelerated
Vesting of
Unvested
Stock

(e)
    Incentive
Compensation(4)

(f)
    Tax Gross
Up(5)

(g)
    Totals
(h)
 

Michael J. Massey

             

•  Voluntary termination or for cause

          134,010        67,894          201,904   

•  Disability

          214,704 (6)      67,894          282,598   

•  Death

          451,544 (7)      67,894          519,438   

•  Good Reason or without cause

    863,000          23,247        269,853 (9)      67,894          1,223,994   

•  Change of Control (COC)

      747,677          451,544 (8)          1,199,221   

•  Termination for good reason or without cause after COC

    2,437,543          138,022          381,014        1,112,639        4,069,218   

•  Disability/Death after COC

            67,894          67,894   

•  Potential Change of Control

    2,847,543                138,022        269,853 (9)              1,268,080        4,523,498   

Douglas Boessen

             

•  Voluntary termination or for cause

          71,793        42,600          114,393   

•  Disability

          114,629 (6)      42,600          157,229   

•  Death

          185,810 (7)      42,600          228,410   

•  Good Reason or without cause

    502,500          23,247        71,793        42,600          640,140   

•  Change of Control (COC)

      333,882          185,810 (8)          519,692   

•  Termination for good reason or without cause after COC

    1,701,094          113,342          232,031          2,046,467   

•  Disability/Death after COC

                                    42,600                42,600   

Gregg S. Ribatt

             

•  Voluntary termination or for cause

          818,663        412,510          1,231,173   

•  Disability

          1,116,441 (6)      412,510          1,528,951   

•  Death

          2,005,517 (7)      412,510          2,418,027   

•  Good Reason or without cause

    1,420,000          38,461        1,071,878 (10)      412,510          2,942,849   

•  Change of Control (COC)

          2,005,517 (8)          2,005,517   

•  Termination for good reason or without cause after COC

    4,599,345          223,777          823,115          5,646,237   

•  Disability/Death after COC

            412,510          412,510   

•  Potential Change of Control

    5,029,345                223,777        1,071,878 (10)              1,994,955        8,319,955   

LuAnn Via

             

•  Voluntary termination or for cause

          251,495            251,495   

•  Disability

          562,115 (6)          562,115   

•  Death

          1,467,845 (7)          1,467,845   

•  Good Reason or without cause

    1,421,000          20,605        251,495            1,693,100   

•  Change of Control (COC)

            409,627                1,467,845 (8)                      1,877,472   

Darrel Pavelka

             

•  Voluntary termination or for cause

          251,495        94,963          346,458   

•  Disability

          414,920 (6)      94,963          509,883   

•  Death

          895,527 (7)      94,963          990,490   

•  Good Reason or without cause

    1,154,000          23,247        473,919 (9)      94,963          1,746,129   

•  Change of Control (COC)

          895,527 (8)          895,527   

•  Termination for good reason or without cause after COC

    3,542,013          177,035          603,671          4,322,719   

•  Disability/Death after COC

            94,963          94,963   

•  Potential Change of Control

    4,172,013                177,035        473,919 (9)              1,873,308        6,696,275   

 

(1) For all Named Executive Officers the cash severance payment represents the payment of salary for the remainder of the employment contract term at the current salary level. For Named Executive Officers with a COC agreement who terminate for good reason or are terminated without cause following a COC, the cash severance payment is three times the sum of salary and the highest bonus (annual and long-term) actually paid in the previous three years.

 

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(2) The amount reflects the immediate vesting of unvested account balances following a COC for the Supplementary Retirement Plan.

 

(3) For Mr. Ribatt, the amount includes twenty-four months of benefit continuation in the Company’s welfare benefit plans and fifteen months of outplacement services. For other executives the amount includes eighteen months continuation in the Company’s welfare benefits plans and fifteen months of outplacement services. For all executives following a COC the amount includes thirty-six months of benefit continuation in the Company’s welfare benefit and outplacement services.

 

(4) For termination events other than after a COC, amounts shown include both the annual and long-term incentives earned for the last completed fiscal year. For Named Executive Officers with a COC agreement who terminate after a COC, amounts shown reflect the highest bonus (annual and long-term) actually paid in the previous three years.

 

(5) Collective Brands utilizes a 100% modified gross-up calculation. Tax Gross Up calculations include the following assumptions: change-in-control stock price