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EXHIBIT 10.27
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement") dated April 22, 2005
and
effective as of the date of closing of the transactions
contemplated by the
Securities Purchase Agreement dated March 14, 2005 (the
"Securities Purchase
Agreement") made by and among Brown Shoe Company, Inc. and
Heritage Fund III,
L.P., Heritage Fund IIIA, L.P., Heritage Investors III, L.L.C.
Bico Business
Trust, Pentland U.S.A., Inc., Donna Siciliano, Michael Smith,
Bruce Ginsberg,
Hal Parton, Gregg Ribatt, Bennett Footwear Holdings, LLC,
Bennett Footwear Group
LLC, Bennett Footwear Acquisition LLC, Bennett Footwear Retail
LLC, and Bennett
Investment Corporation ("Effective Date") between Bruce Ginsberg
("Employee")
and Brown Shoe Company, Inc., a New York corporation (together
with its
subsidiaries and as further defined in Section 13, the
"Company").
WHEREAS, pursuant to the Securities Purchase Agreement, Company
intends to
acquire all of the outstanding Limited Liability Company Units
of Bennett
Holdings Group, LLC ("Bennett") except for the Units held by
Bennett Investment
Corporation ("BIC") and all of the outstanding shares of capital
stock of BIC
held by Heritage;
WHEREAS, Employee is currently employed by Bennett or a
subsidiary of
Bennett (collectively "Bennett Companies") and the Company
wishes for the
Employee to continue as an employee of the Bennett Companies or
of the Company
on the terms provided herein;
WHEREAS, Employee has been serving as the Chief Executive
Officer of
Bennett Footwear Group, LLC ("BFG") in a managerial capacity
prior to the date
hereof;
WHEREAS, the Employee wishes to continue as an employee of the
Company and
is willing to render services to the Company on the terms and
conditions
hereinafter set forth;
WHEREAS, in order to accomplish its objectives, the Company
believes it is
essential that members of its senior management, such as
Employee, be encouraged
to remain with the Company during management transition and
thereafter and in
the event there is any change in corporate structure which
results in a Change
in Control;
WHEREAS, the Employee acknowledges that (i) the Company has
spent
substantial money, time and effort over the years in developing
and solidifying
its relationships with its customers throughout the world and in
developing its
Confidential Information; (ii) under this Agreement, the Company
is agreeing to
provide Employee with certain benefits based upon Employee's
assurances and
promises contained herein not to divert the Company's customers'
goodwill or to
put Employee in a position following Employee's employment with
Company in which
the confidentiality of Company's Confidential Information might
be compromised;
and
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WHEREAS, Employee wishes to have the protection provided for in
this
Agreement and, in exchange for such protection, is willing to
give to the
Company, under certain circumstances, Employee's covenant not to
compete, on the
terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual promises,
covenants and
agreements herein, and intending to be legally bound hereby, the
parties
mutually agree as follows:
1. DEFINITIONS.
a. "Cause" means (i) engaging by Employee in willful
misconduct
which is materially injurious to the Company or breaching a
fiduciary duty
or legal or contractual obligation which is not cured within 10
days of
notice; (ii) conviction of the Employee of a felony or the
conviction or
pleading nolo contendre to any misdemeanor relating to the
affairs of the
Company and its affiliates; (iii) engaging by Employee in fraud,
material
dishonesty or gross misconduct or gross negligence in connection
with the
business of the Company; (iv) engaging by Employee in any act of
moral
turpitude reasonably likely to materially and adversely affect
the Company
or its business; (v) the failure of the Employee to follow the
reasonable
direction of the Company regarding the Employee's material
duties; or (vi)
the habitual use by Employee of narcotics or alcohol; provided
that except
for category (ii) above Cause shall not exist unless and until
the Company
has afforded Employee reasonably-detailed written notice of an
intent to
terminate for Cause and the subsequent reasonable opportunity
(upon at
least 5 days notice) to be heard on the issues with or through
counsel at
a meeting of the Company's Chief Financial Officer, Senior Vice
President
of Human Resources, and the General Counsel, and the Company
then makes a
good faith determination that Cause exists.
b. "Change of Control" means (i) any person other than the
Company
acquiring more than 25 percent of the Company's Common Stock
through a
tender offer, exchange offer or otherwise; (ii) the liquidation
or
dissolution of the Company following the sale of all or
substantially all
of its assets; or (iii) the Company not being the surviving
parent
corporation resulting from any merger or consolidation to which
it has
been a party (other than a merger between the Company and a
newly formed
shell corporation, the sole purpose and effect of which merger
is to
reincorporate the Company in a jurisdiction other than New York
and where
the surviving corporation in such merger assumes the obligations
of the
Company hereunder).
c. "Competitor" shall mean any person, firm, corporation,
partnership or other entity which in its prior fiscal year had
annual
gross sales volume or revenues of footwear of more than
$20,000,000 or is
reasonably expected to have
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such sales or revenues in either the current fiscal year or the
next
following fiscal year.
d. "Confidential Information" shall have the meaning set forth
in
Section 10.
e. "Customer" shall mean any wholesale customer of the Company
which
either purchased from the Company during the one (1) year
immediately
preceding the Termination Date, or is reasonably expected by the
Company
to purchase from the Company in the one (1) period immediately
following
the Termination Date, more than $1,000,000 in footwear.
f. "Good Reason," when used with reference to a voluntary
termination by Employee of Employee's employment with the
Company, shall
mean (i) a reduction in Employee's base salary as in effect on
the date
hereof, or as the same may be increased from time to time; (ii)
a material
reduction in Employee's status, position, responsibilities or
duties, or
(iii) any change, without the Employee's consent, in the
Employee's
principal office location to a location that is more than fifty
(50) miles
from the Employee's principal office location.
g. "Term" means the period commencing on the Effective Date
and
terminating three (3) years after the Effective Date; provided,
however,
that the Term shall automatically be extended for successive
additional
one year periods thereafter unless either party to this
Agreement provides
the other party with notice of termination of this Agreement at
least
thirty days prior to the expiration of the original three-year
period or
any one-year period thereafter.
h. "Termination Date" shall mean the effective date as
provided
hereunder of the termination of Employee's employment, for any
reason,
including by death or disability, subject to the limitations set
forth in
Section 2.f below.
2. TERMINATION DURING TERM -- CHANGE IN CONTROL SEVERANCE
INAPPLICABLE.
a. The Company may terminate Employee's employment for Cause at
any
time, effective upon the giving to Employee of a written notice
of
termination specifying in detail the particulars of the conduct
of
Employee deemed by the Company to justify such termination for
Cause, and
otherwise acting in accordance with Section 1.a hereof.
b. The Company may terminate Employee's employment without Cause
at
any time, effective upon the giving to Employee of a written
notice of
termination specifying that such termination is without
Cause.
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c. Employee may terminate Employee's employment with the Company
at
any time.
d. Upon a termination by the Company of Employee's employment
for
Cause during the Term, but prior to a Change in Control or more
than 24
months after a Change in Control, Employee shall be entitled
only to the
payments specified in Section 3.a. below. Upon a termination by
the
Company of Employee's employment without Cause during the Term,
but prior
to a Change in Control or more than 24 months after a Change in
Control,
Employee shall be entitled to all of the payments and benefits
specified
in Section 3 below.
e. If Employee voluntarily terminates Employee's employment
during
the Term, but prior to a Change in Control or more than 24
months after a
Change in Control, Employee shall notify the Company in writing
if
Employee believes the termination is for Good Reason. Employee
shall set
forth in reasonable detail why Employee believes there is Good
Reason. If
such termination is for Good Reason, Employee shall be entitled
to all of
the payments and benefits specified in Section 3 below. If such
voluntary
termination is for other than Good Reason, then Employee shall
be entitled
only to the payments specified in Section 3.a. below.
f. If Employee's employment is terminated by virtue of
Employee's
death or disability, then Employee shall be entitled only to the
payments
specified in Section 3.a. below.
3. PAYMENTS AND BENEFITS UPON TERMINATION DURING TERM -- CHANGE
IN CONTROL
SEVERANCE INAPPLICABLE. To the extent provided in Section 2
above, upon
termination of Employee's employment during the Term, but prior
to a Change in
Control or more than 24 months after a Change in Control,
Employee shall receive
the following payments and benefits:
a. The Company shall pay to Employee on the Termination Date (i)
the
full base salary earned by employee through the Termination Date
and
unpaid at the Termination Date, plus (ii) credit for any
vacation earned
by Employee but not taken at the Termination Date, plus (iii)
all other
amounts earned by Employee and unpaid as of the Termination
Date.
b. The Company shall continue to pay the Employee's base
monthly
salary at the highest rate in effect at any time during the
twelve months
immediately preceding the Termination Date (including Employee's
targeted
bonus in the current year) for the twelve months succeeding
Employee's
Termination Date. Such amounts shall be paid in accordance with
the
Company's regular pay period policy for its employees.
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c. The Company shall provide to Employee for a period of
twelve
months after the Termination Date medical and/or dental coverage
under the
medical and dental plans maintained by the Company (the Company
will
continue to pay the Company's portion of such benefits and the
Employee
will continue to pay the Employee's portion of such benefits).
Upon
Employee's re-employment during such period, to the extent
covered by the
new employer's plan, coverage under the Company's plan shall
lapse.
Additionally, the Company shall make a cash lump sum payment in
an amount
equal to the sum of (i) and (ii) below:
(i) The fair market value (determined as of the
Termination Date) of that number of shares of non-vested
restricted
stock of the Company held by the Employee which would have
vested
within the twelve-month period following the Employee's
Termination
Date had the Employee remained employed with the Company;
plus
(ii) With respect to each non-vested option to purchase
Company stock held by the Employee which would have vested
within
the twelve-month period following the Employee's Termination
Date
had the Employee remained employed with the Company, the excess,
if
any, of the fair market value (determined as of the
Termination
Date) of the Company stock subject to such option over the
exercise
price of such option.
Employee's participation in and/or coverage under all other
employee
benefit plans, programs or arrangements sponsored or maintained
by the
Company shall cease effective as of the Termination Date.
d. The Company shall pay the reasonable costs of
outplacement
services selected by the Company for twelve months after the
Termination
Date.
4. TERMINATION WITHIN 24 MONTHS AFTER A CHANGE IN CONTROL WHICH
OCCURS
DURING THE TERM.
a. The Company may terminate Employee's employment for Cause at
any
time, effective upon the giving to Employee of written notice
of
termination specifying in detail the particulars of the conduct
of
Employee deemed by the Company to justify such termination for
Cause, and
otherwise acting in accordance with Section 1.a hereof.
b. The Company may terminate Employee's employment without Cause
at
any time, effective upon the giving to Employee of a written
notice of
termination specifying that such termination is without
Cause.
c. Employee may terminate Employee's employment with the Company
at
any time.
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d. Upon a termination by the Company of Employee's employment
for
Cause within 24 months after a Change in Control which occurs
during the
Term, Employee shall be entitled only to the payments specified
in Section
5.a. below. Upon a termination by the Company of Employee's
employment
without Cause within 24 months after a Change in Control which
occurs
during the Term, Employee shall be entitled to all of the
payments and
benefits specified in Section 5 below.
e. If Employee voluntarily terminates Employee's employment
within
24 months after a Change in Control which occurs during the
Term, Employee
shall notify the Company in writing if the Employee believes
the
termination is for Good Reason, setting forth in reasonable
detail why
Employee believes there is Good Reason for such termination. If
such
termination is for Good Reason, Employee shall be entitled to
all of the
payments and benefits specified in Section 5 below. If such
voluntary
termination is for other than Good Reason, then Employee shall
be entitled
only to the payments specified in Section 5.a. below.
5. PAYMENTS AND BENEFITS UPON TERMINATION WITHIN 24 MONTHS AFTER
A CHANGE
IN CONTROL WHICH OCCURS DURING TERM. To the extent provided in 4
above, upon
termination of Employee's employment within 24 months after a
Change in Control
which occurs during the Term, Employee shall receive the
following payments and
benefits:
a. The Company shall pay to Employee on the Termination Date (i)
the
full base salary earned by Employee through the Termination Date
and
unpaid at the Termination Date, plus (ii) credit for any
vacation earned
by Employee but not taken at the Termination Date, plus (iii)
all other
amounts earned by Employee and unpaid as of the Termination
Date.
b. The Company shall pay to Employee in a lump sum not later
than 30
days after her Termination Date an amount equal to 300 percent
of the sum
of (i) Employee's base annual salary at the highest rate in
effect at any
time during the twelve months immediately preceding the
Termination Date,
and (ii) Employee's targeted bonus for the current year. In
addition, the
Company shall pay Employee's targeted bonus payment for the year
of
termination, prorated to the Termination Date.
c. The Company shall provide to Employee for a period of
thirty-six
months after the Termination Date medical and/or dental coverage
under the
medical and dental plans maintained by the Company (the Company
will
continue to pay the Company's portion of such benefits and the
Employee
will continue to pay the Employee's portion of such benefits).
Upon
Employee's re-employment during such period, to the extent
covered by the
new employer's plan, coverage under the Company's plan shall
lapse.
Employee's participation in and/or coverage under all other
employee
benefit plans, programs or arrangements
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sponsored or maintained by the Company shall cease effective as
of the
Termination Date.
d. The Company shall pay the reasonable costs of
outplacement
services selected by the Company for twelve months after the
Termination
Date.
6. MITIGATION OR REDUCTION OF BENEFITS. Employee shall not be
required to
mitigate the amount of any payment provided for in Section 3 or
Section 5 by
seeking other employment or otherwise. Except as otherwise
specifically set
forth herein, the amount of any payment or benefits provided in
Section 3 or
Section 5 shall not be reduced by any compensation or benefits
or other amounts
paid to or earned by Employee as the result of employment by
another employer
after the Termination Date or otherwise.
7. EMPLOYEE EXPENSES AFTER CHANGE IN CONTROL. If Employee's
employment is
terminated by the Company within 24 months after a Change in
Control which
occurs during the Term and there is a dispute with respect to
this Agreement,
then all Employee's costs and expenses (including reasonable
legal and
accounting fees) incurred by Employee (a) to defend the validity
of this
Agreement, (b) if Employee's employment has been terminated for
Cause, to
contest such termination, (c) to contest any determinations by
the Company
concerning the amounts payable by the Company under this
Agreement, or (d) to
otherwise obtain or enforce any right or benefit provided to
Employee by this
Agreement, shall be paid by the Company if Employee is the
prevailing party.
8. RELEASE. Notwithstanding anything to the contrary stated in
this
Agreement, no benefits will be payable pursuant to Sections 3
and 5 except under
Sections 3.a. and 5.a. prior to execution by Employee of a
release to the
Company substantially in the form attached as Exhibit A;
provided the Company
must execute such release if Employee executes such release and
Company must
provide all such benefits if Employee executes such release.
9. COVENANT NOT TO COMPETE.
a. NON-COMPETITION AGREEMENT.
i. Employee acknowledges that (i) the Company has spent
substantial money, time and effort over the years in developing
and
solidifying its relationships with its customers throughout the
world and
in developing its Confidential Information; (ii) under this
Agreement, the
Company is agreeing to provide Employee with certain benefits
based upon
Employee's assurances and promises contained herein not to
divert the
Company's customers' goodwill or to put Employee in a position
following
Employee's employment with Company in which the confidentiality
of
Company's Confidential Information might be compromised.
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ii. Accordingly, Employee agrees that, during Employee's
employment with the Company and for a period of thirty-six (36)
months
after a Termination Date described in the second sentence of
Section 2.d
or 4.d, Employee will not, directly or indirectly, on Employee's
own
behalf or on behalf of any other person, firm, corporation or
entity
(whether as owner, partner, consultant, employee or
otherwise):
A. provide any executive- or managerial-level services
in the footwear industry in the United States in competition
with
the Company;
B. hold any executive- or managerial-level position with
any Competitor;
C. engage in any research and development activities or
efforts for a Competitor, whether as an employee,
consultant,
independent contractor or otherwise, to assist the Competitor
in
competing in the footwear industry;
D. cause or attempt to cause any Customer to divert,
terminate, limit, modify or fail to enter into any existing
or
potential relationship with the Company;
E. cause or attempt to cause any shoe supplier or
manufacturer of the Company to divert, terminate, limit, modify
or
fail to enter into any existing or potential relationship with
the
Company;
F. solicit, entice, employ or seek to employ, in the
shoe industry, any executive- or managerial-level employee of,
or
any consultant or advisor to, the Company; and
G. communicate in any way that negatively reflects upon,
or disparages in any way, or induces or encourages others to
disparage in any way, the Company, its services, its products,
or
any of its current or former directors, officers, employees
or
agents, or the Company's practices, policies or strategies;
provided that, if Employee wishes to participate in a bona
fide
opportunity in conflict with Sub-sections 9.a.ii.A-E hereof: (1)
E
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