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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)
Emp
