EXHIBIT 10.1
FOOTSTAR
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Employment Agreement for Jeffrey Shepard
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FOOTSTAR
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Employment Agreement for Jeffrey Shepard
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Page
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1.
Definitions.............................................................................................1
2. Term of
Employment......................................................................................2
3. Position, Duties
and
Responsibilities...................................................................2
4. Base
Salary.............................................................................................3
5. Annual Incentive
Awards.................................................................................3
6. Long-Term Stock
Incentive
Programs......................................................................3
7. Employee Benefit
Programs...............................................................................3
8. Reimbursement of
Business and Other
Expenses............................................................4
9. Termination of
Employment...............................................................................4
10. Confidentiality;
Cooperation with Regard to
Litigation.................................................11
11.
Non-competition........................................................................................12
12. Non-solicitation
of
Employees..........................................................................13
13.
Remedies...............................................................................................14
14. Resolution of
Disputes.................................................................................14
15.
Indemnification........................................................................................14
16. Excise Tax
Gross-Up....................................................................................15
17. Deferred
Compensation..................................................................................17
18. Effect of
Agreement on Other
Benefits..................................................................17
19. Assignability;
Binding
Nature..........................................................................17
20.
Representation.........................................................................................17
21. Entire
Agreement.......................................................................................17
22. Amendment or
Waiver....................................................................................17
23.
Severability...........................................................................................18
24.
Survivorship...........................................................................................18
25.
Beneficiaries/References...............................................................................18
26. Governing
Law/Jurisdiction.............................................................................18
27.
Notices................................................................................................18
28.
Headings...............................................................................................19
29.
Counterparts...........................................................................................19
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EMPLOYMENT AGREEMENT
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AGREEMENT, made and entered into as of the 28th day of October,
2005
by and between Footstar, Inc., a Delaware
corporation and Footstar Corporation,
a Texas Corporation (together with its
successors and assigns permitted under
this Agreement, the "Company"), and Jeffrey
Shepard (the "Executive").
WITNESSETH:
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WHEREAS, the Company desires to employ the Executive pursuant to
an
agreement embodying the terms of such
employment (this "Agreement") and the
Executive desires to enter into this
Agreement and to accept such employment,
subject to the terms and provisions of this
Agreement;
NOW, THEREFORE, in consideration of the premises and mutual
covenants
contained herein and for other good and
valuable consideration, the receipt of
which is mutually acknowledged, the Company
and the Executive (individually a
"Party" and together the "Parties") agree
as follows:
1. Definitions.
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(a) "Approved Early
Retirement" shall have the meaning set forth in
Section 9(g) below.
(b) "Base Salary"
shall have the meaning set forth in Section 4
below.
(c) "Board" shall mean
the Board of Directors of the Company.
(d) "Cause" shall have
the meaning set forth in Section 9(c) below.
(e) "Confidential
Information" shall have the meaning set forth in
Section 10(c) below.
(f) "Constructive
Termination Without Cause" shall have the meaning
set forth in Section 9(d) below.
(g) "Effective Date"
shall have the meaning set forth in Section 2
below.
(h) "1996 ICP" shall
have the meaning set forth in Section 5(a)
below.
(i) "Kmart Agreement"
shall mean the Amended and Restated Master
Agreement made and entered into as of August 24, 2005 by and
between Kmart Corporation , the Company and related entities.
(j) "Normal
Retirement" shall have the meaning set forth in Section
9(g) below.
(k) "Plan of
Reorganization" shall mean the "Debtors First Amended
Joint Plan of Reorganization" as it may be amended from time to
time, filed in connection with the Company's cases under
Chapter
11 of the U.S. Bankruptcy Code.
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(l) "Restriction
Period" shall have the meaning set forth in Section
11 below.
(m) "SERP" shall mean
the Supplemental Retirement Plan for Senior
Management of Footstar, Inc., effective October 14, 1996, as
amended and restated effective June 19, 2002, as amended from
time to time.
(n) "Severance Period"
shall mean the period of 24 months following
the termination of the Executive's employment.
(o) "Subsidiary" shall
have the meaning set forth in Section 10(d)
below.
(p) "Term of
Employment" shall have the meaning set forth in Section
2 below.
2. Term of Employment.
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The term of the Executive's employment under this Agreement
shall
commence on the date this agreement is
fully executed subject only to the
Company's emergence from bankruptcy
pursuant to its Plan of Reorganization (the
"Effective Date") and end on December 31,
2008 (the "Original Term of
Employment") or, if sooner, the date
Executive's employment is terminated
pursuant to Section 9. Thereafter the
Original Term of Employment shall be
automatically renewed for successive
one-year terms ("Renewal Terms") unless at
least 90 days prior to the expiration of
the Original Term of Employment or any
Renewal Term, either Party notifies the
other Party in writing that he or it is
electing to terminate this Agreement at the
expiration of the then current Term
of Employment. "Term of Employment" shall
mean the Original Term of Employment
and all Renewal Terms. If the Executive
elects not to renew this Agreement, his
employment termination following the
expiration of the Term of Employment shall
be treated as a voluntary termination
pursuant to Section 9(e) below. If the
Company elects not to renew this Agreement,
the Executive's employment
termination following the expiration of the
Term of Employment shall be treated
as a termination without Cause under
Section 9(f) below.
3. Position, Duties and Responsibilities.
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(a) Generally. Executive shall serve as an Executive Vice
President
to the Company as well as Chief Executive
Officer and President of the Company's
Meldisco Division until such date as Dale
Hilpert shall no longer serve as the
Company's Chief Executive Officer and
President whereupon Executive shall cease
to hold such positions and replace Mr.
Hilpert as the Company's Chief Executive
Officer and President. Executive shall have
and perform such duties,
responsibilities, and authorities as shall
be specified by the Company from time
to time and as are customary for a Chief
Executive Officer and President of a
publicly held corporation (or prior to the
date he holds such positions, as are
customary of an executive vice president
and chief executive officer and
president of a significant operating
division of a publicly held corporation) of
the size, type, and nature of the Company
as they may exist from time to time
and as are consistent with such position
and status. Executive shall devote all
of his business time and attention (except
for periods of vacation or absence
due to illness), and his best efforts,
abilities, experience, and talent to his
position and the businesses of the
Company.
(b) Other
Activities. Anything herein to the contrary
notwithstanding, nothing in this Agreement
shall preclude the Executive from (i)
engaging in charitable activities and
community affairs and (ii) managing his
personal investments and affairs, provided
that such activities do not
materially interfere with the proper
performance of his duties and
responsibilities under this Agreement.
Unless approved in writing by the Board,
the Executive may not serve on the board of
directors of any corporation or the
board of any association and/or charitable
organization.
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4. Base Salary.
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The Executive shall be paid an annualized salary, payable in
accordance with the regular payroll
practices of the Company, of not less than
$650,000, subject to annual review for
increase at the discretion of the
Compensation Committee of the Board ("Base
Salary").
5. Other Awards.
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(a) Incentive Awards. The Executive shall participate in the
Company's 1996 Incentive Compensation Plan
(the "1996 ICP") under which he shall
be afforded the opportunity to earn no less
than 100% of Base Salary per year if
targets are achieved or in a successor plan
to the 1996 ICP that provides the
Executive with an equivalent opportunity.
Measurement of Company performance and
payment of incentive awards shall be done
seasonally and in accordance with the
Company's practice with respect to the
incentive awards for other senior-level
executives.
(b) Retention Bonuses. The Executive shall receive $158,437.50
on
each July 1st and December 31st of 2006,
2007 and 2008 if the Executive
continues to be employed by the Company
through the date such payments are due.
(c) Emergence Payments. The Executive shall receive the
payments
approved and not yet paid under the Order
entered in the U.S. Bankruptcy Court
on May 6, 2004, immediately upon the
Company's emergence from bankruptcy
pursuant to its Plan of Reorganization.
6. Long-Term Stock Incentive Programs.
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(a) General. The Executive shall be eligible to participate in and
to
receive stock incentive awards under the
1996 ICP and any successor plan.
(b) Effective Date Award. On the Effective Date, the Company
shall
grant Executive a restricted stock grant of
130,000 shares of the Company's
common stock, which restrictions shall
lapse only upon certain terminations of
the Executive's employment as provided in
Section 9 below. Prior to the
Effective Date, the Executive may elect
that the Company grant him restricted
stock units with comparable vesting terms
in lieu of the restricted stock
provided for herein.
7.
Employee Benefit Programs.
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(a) General Benefits. During the Term of Employment, the
Executive
shall be entitled to participate in such
employee pension and welfare benefit
plans and programs of the Company and such
perquisite programs as are made
available to the Company's senior-level
executives or to its employees
generally, as such plans or programs may be
in effect from time to time,
including, without limitation, health,
medical, dental, long-term disability,
travel accident and life insurance plans,
participation in executive health, tax
preparation and financial planning
programs.
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(b) SERP. The Executive, or in the event of Executive's death,
his
beneficiary, shall be entitled to accrue
benefits under the supplemental
executive retirement plan ("SERP"), in
accordance with the terms of such Plan.
8. Reimbursement of Business and Other Expenses.
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The Executive is authorized to incur reasonable expenses in
carrying
out his duties and responsibilities under
this Agreement, and the Company shall
promptly reimburse him for all such
expenses, subject to documentation in
accordance with the Company's policy.
9. Termination of Employment.
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(a) Termination Due to Death. In the event the Executive's
employment
with the Company is terminated due to his
death, his estate or his
beneficiaries, as the case may be, shall be
entitled to and their sole remedies
under this Agreement shall be:
(i) Base Salary through the date of death which shall be paid
in
a single lump sum not later than 15 days
following the Executive's death;
(ii) pro rata incentive award for any incomplete performance
period of the year in which the Executive's
death occurs, assuming that the
Executive would have received award(s)
equal to 100% of the target award for
such performance period for any incomplete
performance period, which shall be
payable in a lump sum promptly (but in no
event later than 15 days) after his
death;
(iii) lapse of all restrictions on any restricted stock award
and restricted stock unit awards (including
any performance-based restricted
stock or restricted stock units)
outstanding at the time of his death;
(iv) immediate vesting of any matching grant under the
Company's
Switch to Equity Program ("STEP") and
distribution of all deferred shares and
matching shares, without restrictions, that
are credited to Executive as of the
date of death;
(v) immediate vesting of all outstanding stock options and the
right to exercise such stock options for a
period of one year following death
(or such longer period as may be provided
in stock options granted to other
similarly situated executive officers of
the Company) or for the remainder of
the exercise period, if less;
(vi) immediate vesting of all outstanding awards under the
Company's "Career Equity" program, payable
in a cash lump sum promptly (but in
no event later than 15 days) after his
death;
(vii) the balance of any incentive awards earned as of the date
of death (but not yet paid), which shall be
paid in a single lump sum not later
than 15 days following the Executive's
death;
(viii) the "lump sum value" payable under Article 7 of the SERP
as if the Executive's death occurred on the
day after a "change in control" as
defined in the SERP; and
(ix) other or additional benefits then due or earned in
accordance with applicable plans and
programs of the Company.
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(b) Termination by the Company due to Disability.
The Company shall provide the Executive with at least fifteen
(15)
days advance written notice that it is
terminating Executive's employment on
account of Disability. For purposes of this
Agreement, "Disability" means a
condition that qualifies the Executive to
receive benefits under the Company's
Long-Term Disability Plan. In the event the
Executive's employment with the
Company is terminated due to his
Disability, then the Executive shall be
entitled to and his sole remedies under
this Agreement shall be:
(i) Base Salary through the date of employment termination,
which shall be paid in a single lump sum
not later than 15 days following the
employment termination;
(ii) $1,950,000 payable in a cash lump sum promptly (but in no
event later than 15 days) following the
Executive's termination of employment
less the aggregate of any payments made to
the Executive under Section 5(b)
above;
(iii) pro rata incentive award for any incomplete performance
period of the year in which the Executive's
employment termination occurs,
assuming that the Executive would have
received award(s) equal to 100% of the
target award for such performance period
for any incomplete performance period,
which shall be payable in a lump sum
promptly (but in no event later than 15
days) after his employment termination;
(iv) lapse of all restrictions on any restricted stock award
and
restricted stock unit awards (including any
performance-based restricted stock
or restricted stock units) outstanding at
the time of his employment
termination;
(v) immediate vesting of any matching grant under STEP and
distribution of all deferred shares and
matching shares, without restrictions,
that are credited to Executive as of the
date of employment termination;
(vi) immediate vesting of all outstanding stock options and the
right to exercise such stock options for a
period of one year following his date
of employment termination (or such longer
period as may be provided in stock
options granted to other similarly situated
executive officers of the Company)
or for the remainder of the exercise
period, if less;
(vii) immediate vesting of all outstanding awards under the
Company's "Career Equity" program, payable
in a cash lump sum promptly (but in
no event later than 15 days) after his
employment termination;
(viii) the balance of any incentive awards earned (but not yet
paid), which shall be paid in a single lump
sum not later than 15 days following
the date of the Executive's employment
termination;
(ix) continuation of medical, dental and life insurance
coverage
for two years on the same terms and
conditions as described in this Agreement,
by the same or equivalent medical, dental
and life insurance coverages as in
effect for the Executive immediately prior
to the date employment terminates but
if, during such two year period, the
Executive is precluded from continuing his
participation in any Company plan or
program or, if no such plan or program
exists due to the Company's (or a
successor's) failure to maintain any such plan
or program, then the Company shall pay to
the Executive a cash amount on an
after-tax basis sufficient to pay the cost
to the Executive of obtaining such
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coverage for the relevant period, as long
as the Executive provides evidence to
the Company that he has actually obtained
such coverage. Such cash amount shall
be paid to the Executive quarterly in
advance of the date the premiums are due.
If the Company is providing comparable
coverage, it shall be acceptable for the
Company to convert group life insurance
coverage to portable term insurance. The
Executive shall complete such paperwork and
obtain such physical examinations as
shall be necessary for the Company to
obtain any coverage under this paragraph.
For purposes of calculating COBRA
eligibility, the COBRA period shall be deemed
to run concurrently with the continuation
of coverage provided herein;
(x) the "lump sum value" payable under Article 7 of the SERP as
if the Executive's employment termination
occurred on the day after a "change in
control" as defined in the SERP; and
(xi) other or additional benefits then due or earned in
accordance with applicable plans and
programs of the Company.
(c) Termination by the Company for Cause.
(i) "Cause" shall mean:
(A)
the Executive's willful and material breach of Sections
3, 10, 11 or 12 of this Agreement;
(B) the Executive is convicted of a felony; or
(C) the Executive engages in conduct that constitutes
willful gross neglect or willful gross
misconduct in carrying out his duties
under this Agreement, resulting, in either
case, in material harm to the
financial condition or reputation of the
Company.
For purposes of this Agreement, an act or
failure to act on Executive's part
shall be considered "willful" if it was
done or omitted to be done by him not in
good faith, and shall not include any act
or failure to act resulting from any
incapacity of Executive.
(ii) A termination for Cause shall not take effect unless the
provisions of this paragraph (ii) are
complied with. The Executive shall be
given written notice by the Company of its
intention to terminate him for Cause,
such notice (A) to state in detail the
particular act or acts or failure or
failures to act that constitute the grounds
on which the proposed termination
for Cause is based and (B) to be given
within 180 days of the Company's learning
of such act or acts or failure or failures
to act. The Executive shall have 10
days after the date that such written
notice has been given to him in which to
cure such conduct, to the extent such cure
is possible. If he fails to cure such
conduct, the Executive shall then be
entitled to a hearing before the
Compensation Committee of the Board at
which the Executive is entitled to
appear. Such hearing shall be held within
21 days of such notice to the
Executive, provided he requests such
hearing within 10 days of the written
notice from the Company of the intention to
terminate him for Cause. If, within
five days following such hearing, the
Executive is furnished written notice by
the Board confirming that, in its judgment,
grounds for Cause on the basis of
the original notice exist, he shall
thereupon be terminated for Cause. Such
hearing shall not limit any other review as
set forth in this Agreement on a de
novo basis.
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(iii) In the event the Company terminates the Executive's
employment for Cause, he shall be entitled
to and his sole remedies under this
Agreement shall be:
(A) Base Salary through the date of the termination of his
employment for Cause, which shall be paid
in a single lump sum not later than 15
days following the Executive's termination
of employment;
(B) any incentive awards earned (but not yet paid), which
shall be paid in a single lump sum not
later than 15 days following the
Executive's termination of employment;
and
(C) other or additional benefits then due or earned in
accordance with applicable plans or
programs of the Company including but not
limited to the STEP and Career Equity
program.
(d) "Constructive Termination Without Cause" shall mean a
termination
of the Executive's employment at his
initiative following the occurrence,
without the Executive's written consent, of
one or more of the following events
(except as a result of a prior
termination):
(A) an assignment of any duties to Executive which are
materially inconsistent with his status as
a senior executive of the Company,
that is not cured within 10 days of
Executive's advance written notice of such
occurrence;
(B) a decrease in annual Base Salary or in the target
incentive award annual opportunity below
100% of Base Salary, that is not cured
within 10 days of Executive's advance
written notice of such occurrence;
(C) any other failure by the Company to perform any
material obligation under, or breach by the
Company of any material provision
of, this Agreement that is not cured within
30 days of Executive's advance
written notice of such occurrence;
(D) any failure to secure the agreement of any successor
corporation to the Company or successor to
the Company's business (whether by
sale of stock or assets) to fully assume
the Company's obligations under this
Agreement, that is not cured within 10 days
of Executive's advance written
notice of such occurrence;
(E) a termination of the Executive's employment at his
initiative as provided in this Section
following the relocation of his principal
place of employment outside a 35-mile
radius of his principal place of
employment as of the Effective Date; or
(F) a termination of the Executive's employment at his
initiative following the acquisition, by
any person or entity, the business of
the Company, whether by virtue of the sale
of the stock or assets of the
Company; provided that the Executive does
not accept an offer of comparable
employment from such person or entity. For
purposes of this subsection
"comparable employment" shall mean
employment (i) where the Executive performs
substantially the same duties performed by
the Executive immediately prior to
the acquisition and no duties that are
inconsistent with the Executive's then
status as an executive (except that
employment shall not fail to be considered
"comparable employment" merely because the
Company becomes a freestanding
division of a larger corporation); (ii)
Executive receives at least the same
salary rate and bonus in effect immediately
prior to the acquisition; (iii)
Executive receives an equivalent target
annual bonus opportunity; (iv) Executive
is eligible for substantially comparable
employee benefits in the aggregate to
the employee benefits applicable
immediately prior to the acquisition,
including, without limitation, equivalent
severance benefits offered under this
Agreement, life insurance, retirement
benefits and supplemental retirement
benefits; and (v) Executive's principal
place of employment that is not more
than 35 miles from Executive's principal
place of employment on the Effective
Date.
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(e) Voluntary Termination. In the event of a termination of
employment by the Executive on his own
initiative after delivery of 10 business
days advance written notice (or if the
Company elects to extend such termination
date, in the event of an employment
termination no later than 30 days beyond the
termination date specified by the Executive
in his notice), other than a
termination due to death, Disability, a
Constructive Termination Without Cause,
or Approved Early Retirement or Normal
Retirement pursuant to Section 9(g)
below, the Executive shall have the same
entitlements as provided in Section
9(c)(iii) above for a termination for
Cause. In the event the Company elects to
extends the Executive's employment beyond
the ten business day notice period,
the Company shall provide Executive with
the following in a single lump sum not
later than 15 days following the
Executive's termination of employment (i) a pro
rata incentive award for the performance
period in which the Executive's
employment terminates for the additional
period employed as a result of such
extension assuming that the Executive would
have incentive awards for the entire
year equal to 100% of Base Salary for such
year (or such higher percentage of
Base Salary as is payable for achievement
of targeted performance during the
relev
