UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended August 1, 1998
[ ] Transition report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from __________ to __________
____________
Commission file number 1-2191
____________
BROWN GROUP, INC.
(Exact name of registrant as specified in its charter)
New York 43-0197190
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
8300 Maryland Avenue
St. Louis, Missouri 63105
(Address of principal executive offices) (Zip Code)
(314) 854-4000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
As of August 29, 1998, 18,046,477 shares of the registrant's common stock were
outstanding.
<PAGE>
BROWN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
<TABLE>
<CAPTION>
(Unaudited)
--------------------
August 1, August 2, January 31,
1998 1997 1998
--------- --------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents $ 32,180 $ 42,320 $ 50,136
Receivables, net of allowances of
$9,651 at August 1, 1998,
$8,974 at August 2, 1997, and
$9,925 at January 31, 1998 75,109 73,484 77,355
Inventories, net of adjustment to
last-in, first-out cost of
$15,265 at August 1, 1998,
$17,203 at August 2, 1997, and
$15,617 at January 31, 1998 396,657 439,208 380,177
Other Current Assets 26,014 37,634 30,862
--------- --------- ---------
Total Current Assets 529,960 592,646 538,530
Property and Equipment 214,260 208,234 212,330
Less allowances for depreciation
and amortization (135,310) (124,368) (129,586)
--------- --------- ---------
78,950 83,866 82,744
Other Assets 75,250 72,110 73,714
--------- --------- ---------
$ 684,160 $ 748,622 $ 694,988
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes Payable $ - $ 47,000 $ 54,000
Accounts Payable 161,772 160,795 118,907
Accrued Expenses 87,549 80,154 93,191
Income Taxes 14,197 5,674 11,995
Current Maturities of Long-Term Debt 15,000 2,000 -
--------- --------- ---------
Total Current Liabilities 278,518 295,623 278,093
Long-Term Debt and Capitalized
Lease Obligations 182,029 197,025 197,027
Other Liabilities 20,540 23,929 20,678
Shareholders' Equity
Common Stock 67,682 67,590 67,685
Additional Capital 46,883 46,814 47,036
Cumulative Translation Adjustment (10,079) (6,599) (8,427)
Unamortized Value of Restricted Stock (3,226) (5,290) (4,358)
Retained Earnings 101,813 129,530 97,254
--------- --------- ---------
203,073 232,045 199,190
--------- --------- ---------
$ 684,160 $ 748,622 $ 694,988
========= ========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
BROWN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Thousands, except per share)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
--------------------- ----------------------
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales $383,618 $378,823 $785,927 $770,638
Cost of Goods Sold 229,616 232,587 476,601 478,569
-------- -------- -------- --------
Gross Profit 154,002 146,236 309,326 292,069
-------- -------- -------- --------
Selling and Administrative Expenses 140,116 134,746 282,898 272,753
Interest Expense 4,858 5,364 10,490 11,129
Other (Income) Expense 1,284 346 1,236 (90)
-------- -------- -------- --------
Earnings Before Income Taxes 7,744 5,780 14,702 8,277
Income Tax Provision 3,449 2,250 6,536 3,205
-------- -------- -------- --------
NET EARNINGS $ 4,295 $ 3,530 $ 8,166 $ 5,072
======== ======== ======== ========
BASIC EARNINGS PER COMMON SHARE $ .24 $ .20 $ .46 $ .29
======== ======== ======== ========
DILUTED EARNINGS PER COMMON SHARE $ .24 $ .20 $ .46 $ .29
======== ======== ======== ========
DIVIDENDS PER COMMON SHARE $ .10 $ .25 $ .20 $ .50
======== ======== ======== ========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
BROWN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Twenty-six Weeks Ended
----------------------
August 1, August 2,
1998 1997
--------- ---------
<S> <C> <C>
Net Cash Provided by Operating Activities $ 47,531 $ 36,942
Investing Activities:
Capital expenditures (7,915) (9,677)
Other - 370
--------- ---------
Net Cash Used by Investing Activities (7,915) (9,307)
Financing Activities:
Decrease in short-term notes payable (54,000) (15,000)
Proceeds from issuance of common stock 37 14
Dividends paid (3,609) (9,015)
--------- ---------
Net Cash Used by Financing Activities (57,572) (24,001)
--------- ---------
Increase (Decrease) in Cash and Cash Equivalents (17,956) 3,634
Cash and Cash Equivalents at Beginning of Period 50,136 38,686
--------- ---------
Cash and Cash Equivalents at End of Period $ 32,180 $ 42,320
========= =========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
BROWN GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
- ------------------------------
The accompanying condensed consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and reflect all adjustments
which management believes necessary (which include only normal recurring
accruals and the effect on LIFO inventory valuation of estimated annual
inflationary cost increases and year-end inventory levels) to present fairly
the results of operations. These statements, however, do not include all
information and footnotes necessary for a complete presentation of financial
position, results of operations and cash flow in conformity with generally
accepted accounting principles.
The Company's business is subject to seasonal influences, and interim results
may not necessarily be indicative of results which may be expected for any
other interim period or for the year as a whole.
For further information refer to the consolidated financial statements and
footnotes included in the Company's Annual Report and Form 10-K for the period
ended January 31, 1998.
Note B - Earnings Per Share
- ---------------------------
The following table sets forth the computation of basic and diluted earnings
per share for the periods ended August 1, 1998 and August 2, 1997 (000's,
except per share data):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------- ----------------------
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Numerator:
Net earnings -
Basic and Diluted $ 4,295 $ 3,530 $ 8,166 $ 5,072
======= ======= ======= =======
Denominator:
Weighted average shares
outstanding-Basic 17,689 17,591 17,657 17,578
Effect of potentially
dilutive securities 290 289 276 218
------- ------- ------- -------
Weighted average shares
outstanding-Diluted 17,979 17,880 17,933 17,796
======= ======= ======= =======
Basic earnings per share $ .24 $ .20 $ .46 $ .29
======= ======= ======= =======
Diluted earnings per share $ .24 $ .20 $ .46 $ .29
======= ======= ======= =======
</TABLE>
<PAGE>
Note C - Comprehensive Income
- -----------------------------
Effective February 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130),
which established standards for the reporting and display of Comprehensive
Income and its components. Comprehensive Income represents the change in
Shareholders' Equity during a period from transactions and other events and
circumstances from nonowner sources. It includes all changes in equity except
those resulting from investments by owners and distributions to owners.
The following table sets forth the reconciliation from Net Income to
Comprehensive Income (000's):
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------- ----------------------
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
--------- --------- --------- ---------
Net Income $ 4,295 $ 3,530 $ 8,166 $ 5,072
Currency Translation Adjustment (2,055) (85) (1,652) (2,166)
------- ------- ------- -------
Comprehensive Income $ 2,240 $ 3,445 $ 6,514 $ 2,906
======= ======= ======= =======
Note D - Computer Software Costs
- --------------------------------
Effective February 1, 1998, the Company elected to adopt AICPA Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" (SOP 98-1), which requires the capitalization of
certain costs, including internal payroll costs, incurred in connection with
the development or acquisition of software for internal use. The adoption of
this standard resulted in an increase in net earnings of $276,000 or $0.02 per
diluted share for the thirteen weeks ended August 1, 1998 and $636,000 or $0.04
per diluted share for the twenty-six weeks ended August 1, 1998. No
restatement of prior year results was allowed or required.
Note E - Pagoda International Restructuring Reserve
- ---------------------------------------------------
In fiscal 1998, the Company utilized approximately $9.7 million of the $31.0
million initial restructuring reserve primarily to cover inventory markdowns,
royalty agreement shortfalls and severance. In addition, in fiscal 1998 the
Company provided an additional $1.4 million to cover costs associated with the
restructuring. It is expected that the remaining reserve of $21.1 million as
of August 1, 1998, will be utilized primarily in the remainder of fiscal 1998.
Year-to-date operating losses and additional charges for Pagoda International
are $5.5 million, and total losses for fiscal 1998 are projected to be between
$7.0 million and $8.0 million.
Note F - Condensed Consolidated Financial Information
- -----------------------------------------------------
Certain of the Company's debt is unconditionally and jointly and severally
guaranteed by certain wholly-owned domestic subsidiaries of the Company.
Accordingly, condensed consolidating balance sheets as of August 1, 1998 and
August 2, 1997, and the related condensed consolidating statements of earnings
and cash flows for the twenty-six weeks ended August 1, 1998 and August 2,
1997, are provided. These condensed consolidating financial statements have
been prepared using the equity method of accounting in accordance with the
requirements for presentation of such information. Management believes that
this information, presented in lieu of complete financial statements for each
of the guarantor subsidiaries, provides meaningful information to allow
investors to determine the nature of the assets held by, and the operations and
cash flows of, each of the consolidating groups.
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF AUGUST 1, 1998
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
---------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents . . $ 6,170 $ 10,007 $ 24,253 $ (8,250) $ 32,180
Receivables, net. . . . . . . 32,569 10,121 32,419 - 75,109
Inventory, net. . . 51,667 336,559 22,296 (13,865) 396,657
Other current assets . . . . (667) 16,037 5,792 4,852 26,014
---------- ------------ ------------- ----------- ------------
Total Current Assets . . . . 89,739 372,724 84,760 (17,263) 529,960
Property and Equipment, net. . . 15,968 55,796 7,186 - 78,950
Other Assets . . . . . . . . . . 46,663 17,071 11,628 (112) 75,250
Investment in Subsidiaries . . . 240,698 33,129 3,811 (277,638) -
---------- ------------ ------------- ----------- ------------
Total Assets . . . . . . . . $ 393,068 $ 478,720 $ 107,385 $ (295,013) $ 684,160
========== ============ ============= =========== ============
Liabilities & Shareholders' Equity
Current Liabilities
Notes payable . . . . . . . . $ - $ - $ - $ - $ -
Accounts payable. . . . . . . 6,458 132,021 23,293 - 161,772
Accrued expenses. . . . . . . 24,511 49,467 14,519 (948) 87,549
Income taxes. . . . . . . . . 3,690 9,640 1,233 (366) 14,197
Current maturities of
long-term debt . . . . . . . 15,000 - - - 15,000
---------- ------------ ------------- ----------- ------------
Total Current Liabilities 49,659 191,128 39,045 (1,314) 278,518
Long-Term Debt and Capitalized
Lease Obligations. . . . . . 182,029 - 39 (39) 182,029
Other Liabilities. . . . . . . . 20,117 125 367 (69) 20,540
Intercompany Payable (Receivable) (61,810) 65,501 17,918 (21,609) -
Shareholders' Equity . . . . . . 203,073 221,966 50,016 (271,982) 203,073
---------- ------------ ------------- ----------- ------------
Total Liabilities and
Shareholders' Equity . $ 393,068 $ 478,720 $ 107,385 $ (295,013) $ 684,160
========== =========== ============ =========== ============
</TABLE>
<PAGE>
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
TWENTY-SIX WEEKS ENDED AUGUST 1, 1998
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
---------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales. . . . . . . . . . . . $ 135,737 $ 610,568 $ 176,437 $ (136,815) $ 785,927
Cost of goods sold . . . . . . . 97,955 373,309 142,152 (136,815) 476,601
---------- ------------ ------------- ----------- ------------
Gross profit . . . . . . . . . . 37,782 237,259 34,285 - 309,326
Selling and administrative
expenses. . . . . . . . . . . 39,346 215,179 29,204 (831) 282,898
Interest expense . . . . . . . . 10,421 5 64 - 10,490
Intercompany interest
(income) expense. . . . . . . (7,338) 7,298 40 - -
Other (income) expense . . . . . (1,601) (8) 2,014 831 1,236
Equity in (earnings) of
subsidiaries. . . . . . . . . (9,298) (723) - 10,021 -
---------- ------------ ------------- ----------- ------------
Earnings (Loss) Before
Income Taxes . . . . . . . . 6,252 15,508 2,963 (10,021) 14,702
Income tax provision (benefit) . (1,914) 6,210 2,240 - 6,536
---------- ------------ ------------- ----------- ------------
Net Earnings . . . . . . . . $ 8,166 $ 9,298 $ 723 $ (10,021) $ 8,166
========== ============ ============= =========== ============
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
TWENTY-SIX WEEKS ENDED AUGUST 1, 1998
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
---------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Cash Provided (Used) by
Operating Activities. . . . . $ 13,023 $ 36,162 $ (11,779) $ 10,125 $ 47,531
Investing Activities:
Capital expenditures. . . . . (213) (6,086) (1,616) - (7,915)
Other . . . . . . . . . . . . - - - - -
---------- ------------ ------------ ------------ ------------
Net Cash (Used) by
Investing Activities. . . . . (213) (6,086) (1,616) - (7,915)
Financing Activities:
Increase (decrease) in
short-term notes payable . . (54,000) - - - (54,000)
Proceeds from issuance of
common stock . . . . . . . . 37 - - - 37
Dividends paid. . . . . . . . (3,609) - - - (3,609)
Intercompany financing. . . . 49,484 (26,912) (4,237) (18,335) -
---------- ------------ ------------ ------------ ------------
Net Cash Provided (Used) by
Financing Activities. . . . . (8,088) (26,912) (4,237) (18,335) (57,572)
Increase (Decrease) in Cash and
Cash Equivalents. . . . . . . 4,722 3,164 (17,632) (8,210) (17,956)
Cash and Cash Equivalents at
Beginning of Period . . . . . 1,448 6,843 41,885 (40) 50,136
---------- ------------ ------------ ------------ ------------
Cash and Cash Equivalents at
End of Period . . . . . . . . $ 6,170 $ 10,007 $ 24,253 $ (8,250) $ 32,180
========== ============ ============ ============ ============
</TABLE>
<PAGE>
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF AUGUST 2, 1997
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
---------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents . . $ 1,324 $ 10,533 $ 30,463 $ - $ 42,320
Receivables, net. . . . . . . 30,538 10,225 32,721 - 73,484
Inventory, net. . . . . . . . 67,010 339,202 47,535 (14,539) 439,208
Other current assets. . . . . 7,321 17,416 7,544 5,353 37,634
---------- ------------ ------------- ------------ ------------
Total Current Assets . . . . 106,193 377,376 118,263 (9,186) 592,646
Property and Equipment, net. . . 18,328 57,784 7,754 - 83,866
Other Assets . . . . . . . . . . 42,701 16,661 12,973 (225) 72,110
Investment in Subsidiaries . . . 265,382 58,691 3,811 (327,884) -
---------- ------------ ------------- ------------ ------------
Total Assets . . . . . . . . $ 432,604 $ 510,512 $ 142,801 $ (337,295) $ 748,622
========== ============ ============= ============ ============
Liabilities & Shareholders' Equity
Current Liabilities
Notes payable . . . . . . . . $ 47,000 $ - $ - $ - $ 47,000
Accounts payable. . . . . . . 6,599 132,319 21,877 - 160,795
Accrued expenses. . . . . . . 25,953 44,901 13,875 (4,575) 80,154
Income taxes. . . . . . . . . 4,627 1,428 (1,203) 822 5,674
Current maturities of
long-term debt . . . . . . . 2,000 - - - 2,000
---------- ------------ ------------- ------------ ------------
Total Current Liabilities 86,179 178,648 34,549 (3,753) 295,623
Long-Term Debt and Capitalized
Lease Obligations. . . . . . 197,025 - 75 (75) 197,025
Other Liabilities. . . . . . . . 21,184 2,244 597 (96) 23,929
Intercompany Payable (Receivable) (103,829) 86,441 17,738 (350) -
Shareholders' Equity . . . . . . 232,045 243,179 89,842 (333,021) 232,045
---------- ------------ ------------- ------------ ------------
Total Liabilities and
Shareholders' Equity . $ 432,604 $ 510,512 $ 142,801 $ (337,295) $ 748,622
========== =========== ============= ============ ============
</TABLE>
<PAGE>
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
TWENTY-SIX WEEKS ENDED AUGUST 2, 1997
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
---------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales. . . . . . . . . . . . $ 123,986 $ 588,349 $ 185,494 $ (127,191) $ 770,638
Cost of goods sold . . . . . . . 88,250 370,691 146,891 (127,263) 478,569
---------- ------------ ------------- ------------ ------------
Gross profit . . . . . . . . . . 35,736 217,658 38,603 72 292,069
Selling and administrative
expenses. . . . . . . . . . . 38,012 200,324 35,110 (693) 272,753
Interest expense . . . . . . . . 11,033 - 96 - 11,129
Intercompany interest
(income) expense. . . . . . . (7,721) 7,720 1 - -
Other (income) expense . . . . . (1,790) 319 616 765 (90)
Equity in (earnings) of
subsidiaries. . . . . . . . . (7,888) (2,589) - 10,477 -
---------- ------------ ------------- ------------ ------------
Earnings (Loss) Before
Income Taxes . . . . . . . . 4,090 11,884 2,780 (10,477) 8,277
Income tax provision (benefit) . (982) 3,996 191 - 3,205
---------- ------------ ------------- ------------ ------------
Net Earnings . . . . . . . . $ 5,072 $ 7,888 $ 2,589 $ (10,477) $ 5,072
========== ============ ============== =========== ============
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
TWENTY-SIX WEEKS ENDED AUGUST 2, 1997
<TABLE>
<CAPTION>
Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Eliminations Totals
---------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Cash Provided (Used) by
Operating Activities . . . . $ 13,914 $ 28,416 $ (9,343) $ 3,955 $ 36,942
Investing Activities:
Capital expenditures . . . . (2,008) (6,732) (937) - (9,677)
Other. . . . . . . . . . . . 363 - 7 - 370
---------- ------------ ------------- ------------ ------------
Net Cash (Used) by
Investing Activities . . . . (1,645) (6,732) (930) - (9,307)
Financing Activities:
Increase (decrease) in
short-term notes payable. . (15,000) - - - (15,000)
Proceeds from issuance of
common stock. . . . . . . . 14 - - - 14
Dividends paid . . . . . . . (9,015) - - - (9,015)
Intercompany financing . . . 13,186 (17,461) 10,429 (6,154) -
---------- ------------ ------------- ------------ ------------
Net Cash Provided (Used) by
Financing Activities . . . . (10,815) (17,461) 10,429 (6,154) (24,001)
Increase (Decrease) in Cash and
Cash Equivalents . . . . . . 1,454 4,223 156 (2,199) 3,634
Cash and Cash Equivalents at
Beginning of Period. . . . . (130) 6,310 30,307 2,199 38,686
---------- ------------ ------------- ------------ ------------
Cash and Cash Equivalents at
End of Period . . . . . . . . $ 1,324 $ 10,533 $ 30,463 $ - $ 42,320
========== ============ ============= ============ ============
</TABLE>
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------
Results of Operations
---------------------
Quarter ended August 1, 1998 compared to the Quarter ended August 2, 1997
- -------------------------------------------------------------------------
Consolidated net sales for the fiscal quarter ended August 1, 1998 were $383.6
million compared to $378.8 million in the quarter ended August 2, 1997. Net
earnings of $4.3 million for the second quarter of 1998 compare to net earnings
of $3.5 million in the second quarter of 1997 primarily as a result of higher
sales and gross profit margins.
Second quarter 1998 sales from the footwear retailing operations increased 2.3%
from the second quarter of 1997. Famous Footwear's total sales of $218.2
million increased 2.1% from last year representing a same-store sales increase
of 0.5% and 7 more stores, reflecting a total of 810 stores in operation. The
Naturalizer Retail division's total sales increased 5.1% in the 1998 second
quarter to $36.6 million, reflecting an increase of 2.5% on a same-store basis
and higher sales in new stores opened versus those stores closed in the past
year, partially offset by the effect of 10 fewer stores in operation. The
Canadian retailing operation's sales increased 5.7% in Canadian dollars
reflecting flat same-store sales with 9 more stores in operation than in the
second quarter of 1997. However, due to the weakening of the Canadian dollar,
sales in U.S. dollars were flat with last year.
Sales from footwear wholesaling businesses decreased 1.2% to $113.9 million
compared to $115.3 million in the second quarter of 1997. The sales decline
primarily relates to lower sales of $6.4 million from the Pagoda International
marketing division as the Company continues to reduce its investment in that
business. However, Brown Shoe Company's wholesale divisions - Brown Branded
Marketing and Pagoda USA - achieved combined sales of $99.4 million, reflecting
a 5.0% increase from last year. The increase in sales was primarily derived
from the Naturalizer and NaturalSport brands.
Gross profit as a percent of sales increased to 40.1% from 38.6% for the same
period last year. This increase was primarily due to higher margins at Famous
Footwear offset slightly by lower margins in the wholesale business.
Selling and administrative expenses as a percent of sales increased to 36.5%
from 35.6% for the same period last year. This increase was due to higher
expenses at Famous Footwear and Naturalizer Retail.
Other expense in the second quarter of 1998 primarily represents additional
Pagoda International charges of $0.8 million.
The consolidated tax rate was 44.5% of consolidated pre-tax income for the
second quarter of 1998 compared to 38.9% in last year's quarter resulting from
no tax benefit being provided on operating losses at the Pagoda International
marketing division in fiscal 1998.
Six Months ended August 1, 1998 compared to the Six Months ended August 2, 1997
- -------------------------------------------------------------------------------
Consolidated net sales for the first half of 1998 were $785.9 million, an
increase of 2.0% from the first six months of 1997 total of $770.6 million.
Net earnings of $8.2 million for the first half of 1998 compare to net earnings
of $5.1 million for the first half of 1997.
<PAGE>
Sales from the footwear retailing operations increased 4.5% to $528.0 million
from the first half of 1997. Famous Footwear's total sales for the first six
months of 1998 increased 4.1% from the first half of last year to $430.5
million, reflecting a 2.1% increase in same-store sales and 7 more units in
operation. With 10 less stores in operation, Naturalizer stores' total sales
increased 7.6% to $70.8 million in the first half of 1998, reflecting an
increase of 4.9% on a same-store basis and higher sales levels in new stores
versus those stores closed in 1998. Sales from the Canadian retailing
operation during the first half of 1998 increased 3.7% to $26.8 million, with
a same-store sales increase of 3.7% and 9 more units than in the six-month
period ended August 2, 1997.
Sales from footwear wholesaling businesses for the first six months of 1998
decreased 2.8% to $257.9 million from the same period last year. The sales
decline primarily relates to lower sales of $18.2 million from the Pagoda
International marketing division. However, Brown Shoe Company's wholesale
divisions - Brown Branded Marketing and Pagoda USA - achieved combined sales
of $226.8 million, reflecting a 5.4% increase from last year. The increase in
sales was derived from the Children's division of Pagoda USA, as well as sales
gains in the Naturalizer and NaturalSport brands.
Gross profit as a percent of sales increased to 39.4% for the six-month period
ended August 1, 1998 from 37.9% for the six-month period ended August 2, 1997.
This increase was primarily due to higher margins at Famous Footwear.
Selling and administrative expenses as a percent of sales increased to 36.0%
for the first six months of 1998 from 35.4% for the first six months of 1997.
This increase was due to higher expenses at Famous Footwear and Naturalizer
Retail.
Other expense for the first half of 1998 primarily represents additional Pagoda
International charges of $1.4 million.
The consolidated tax rate was 44.5% of consolidated pre-tax income for the
first half of 1998 compared to 38.7% in last year resulting from no tax benefit
being provided on higher operating losses at the Pagoda International marketing
division in fiscal 1998.
Financial Condition
- -------------------
A summary of key financial data and ratios at the dates indicated is as
follows:
August 1, August 2, January 31,
1998 1997 1998
--------- -------- -----------
Working Capital (millions) $251.4 $297.0 $260.4
Current Ratio 1.9:1 2.0:1 1.9:1
Total Debt as a Percentage of
Total Capitalization 49.2% 51.5% 55.8%
Net Debt (Total Debt less Cash and
Cash Equivalents) as a Percentage
of Total Capitalization 44.8% 46.7% 50.2%
<PAGE>
Cash flow from operating activities for the first half of fiscal 1998 was a net
generation of $47.5 million versus $36.9 million last year. In 1998's first
half, cash flow improved primarily as a result of lower accounts receivable and
continued improvement in inventory management.
The decline in the current ratio at August 1, 1998 compared to August 2, 1997,
is due primarily to the impact of the Pagoda International restructuring
charges and operating losses recorded in late fiscal 1997.
The decrease in the ratio of total debt as a percentage of total capitalization
at August 1, 1998, compared to the end of fiscal 1997, is due to strong cash
flow which allowed the Company to reduce notes payable. At August 1, 1998,
$17.3 million of letters of credit were the only items outstanding under the
Company's $155 million revolving bank Credit Agreement.
Forward-Looking Statements
- --------------------------
This Form 10-Q contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Actual results could
differ materially. In Exhibit 99 to the Company's fiscal 1997 Annual Report
on Form 10-K, detailed factors that could cause variations in results to occur
are listed and discussed. Such Exhibit is incorporated herein by reference.
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1 - Legal Proceedings
- --------------------------
There have been no material developments during the quarter ended August 1,
1998, in the legal proceedings described in the Company's Form 10-K for the
period ended January 31, 1998.
Item 5 - Other Information
- --------------------------
In accordance with the Bylaws of the Company, a stockholder who at any
annual meeting of stockholders of the Company intends to nominate a person
for election as a director or present a proposal must so notify the
Secretary of the Company in writing, describing such nominee(s) or proposal
and providing specified information concerning such stockholder or nominee
and the reasons for and interest of such stockholder in the proposal, as
well as various other matters. Generally, to be timely, such notice must
be received by the Secretary at the executive offices of the Company not
less than 60 days nor more than 90 days prior to the meeting; provided,
however, that in the event that less than 70 days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than
the close of business on the 10th day following the day on which such notice
of the meeting was mailed or such public disclosure was made. The Company's
next annual meeting is currently scheduled to be held on May 27, 1999, so
that any such notice must be received between February 26, 1999, and March
28, 1999, to be considered timely for purposes of the 1999 Annual Meeting.
Any person interested in making such a nomination or proposal should request
a copy of the relevant Bylaw provisions from the Secretary of the Company.
These time periods also apply in determining whether notice is timely for
purposes of rules adopted by the Securities and Exchange Commission relating
to exercise of discretionary voting authority, and are separate from and in
addition to the Securities and Exchange Commission's requirements that a
stockholder must meet to have a proposal included in the Company's proxy
statement. Stockholder proposals intended to be presented at the 1999
Annual Meeting must be received by the Company no later than December 25,
1998, in order to be eligible for inclusion in the Company's proxy statement
and proxy relating to that meeting. Upon receipt of any proposal, the
Company will determine whether to include such proposal in accordance with
regulations governing the solicitation of proxies.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Listing of Exhibits
(3) (i) (a) Certificate of Incorporation of the
Corporation as amended through
February 16, 1984, incorporated
herein by reference to Exhibit 3 to
the Company's Report on Form 10-K for
the fiscal year ended November 1,
1986.
(i) (b) Amendment of Certificate of
Incorporation of the Corporation
filed February 20, 1987, incorporated
herein by reference to Exhibit 3 to
the Company's Report on Form 10-K for
the fiscal year ended January 30,
1988.
(ii) Bylaws of the Corporation as amended
through March 5, 1998, incorporated
herein by reference to Exhibit 3 to
the Company's Report on Form 10-K for
the fiscal year ended January 31,
1998.
(10) (f) Severance Agreement, dated July 27,
1998 between the Company and Brian C.
Cook, filed herewith.
(10) (g) Severance Agreement, dated July 27,
1998 between the Company and Ronald
A. Fromm, filed herewith.
(10) (h) Severance Agreement, dated July 27,
1998 between the Company and Gary M.
Rich, filed herewith.
(10) (i) Severance Agreement, dated July 27,
1998 between the Company and Harry E.
Rich, filed herewith.
(10) (j) Severance Agreement, dated July 27,
1998 between the Company and David H.
Schwartz, filed herewith.
(27) Financial Data Schedule (Page 99)
(99.1) Discussion of Certain Risk Factors
That Could Affect the Company's
Operating Results as incorporated
herein by reference to the Company's
Report on Form 10-K for the fiscal
year ended January 31, 1998.
(b) Reports on Form 8-K:
The Company filed no reports on Form 8-K during the
quarter ended August 1, 1998.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BROWN GROUP, INC.
Date: September 11, 1998 /s/ Harry E. Rich
--------------------- --------------------------------
Executive Vice President
and Chief Financial Officer and
On Behalf of the Corporation as
the Principal Financial Officer
<PAGE>
Exhibit 10(f)
SEVERANCE AGREEMENT
SEVERANCE AGREEMENT (the "Agreement") dated July 27, 1998
("Effective Date") between Brian C. Cook ("Employee") and Brown
Group, Inc., a New York corporation (as further defined in
Section 14, the "Company").
WHEREAS, in order to accomplish its objectives, the Company
believes it is essential that members of its Operating Committee,
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, 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, his
covenant not to compete.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions.
a. "Cause" means (i) engaging by Employee in willful
misconduct which is materially injurious to the Company;
(ii) conviction of the Employee of a felony; (iii) engaging
by Employee in fraud, material dishonesty or gross
misconduct 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; or (v) habitual use by Employee of
narcotics or alcohol.
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.
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
shoes of more than $20,000,000 or is reasonably expected to
have 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 11.
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 shoes.
f. "Good Reason," when used with reference to a
voluntary termination by Employee of his 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; or (ii) a reduction in
Employee's status, position, responsibilities or duties.
g. "Term" means the period commencing on the
Effective Date and terminating three years after the
Effective Date; provided, however, that the Term shall
automatically be extended for successive additional one year
periods unless either party to this Agreement provides the
other party with notice of termination of this Agreement at
least six months prior to the expiration of such one year
periods.
h. "Termination Date" shall mean the effective date
as provided hereunder of the termination of Employee's
employment.
2. Termination During Term -- Change in Control Severance
Inapplicable.
a. Employee's employment may be terminated by the
Company 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.
b. Employee's employment may be terminated by the
Company 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 his 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
Sections 3.a. and 6 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 Sections 3
and 6 below.
e. If Employee voluntarily terminates his employment
during the Term, but prior to a Change in Control or more
than 24 months after a Change in Control, he shall notify
Employer in writing if he 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 Sections 3
and 6 below. If such voluntary termination is for other
than Good Reason, then Employee shall be entitled only to
the payments specified in Sections 3.a. and 6 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 his 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 to Employee his
base monthly salary at the highest rate in effect at any
time during the twelve months immediately preceding the
Termination Date (including his targeted bonus in the
current year) for the eighteen months succeeding his
Termination Date. Such amounts shall be paid in accordance
with the Company's regular pay period policy for its
employees.
c. The Company, at its expense, shall provide to
Employee for a period of eighteen months after the
Termination Date medical and/or dental coverage under the
medical and dental plans maintained by the Company. 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 eighteen
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 eighteen 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.
e. For purposes of determining Employee's benefit
under the Brown Group, Inc. Supplemental Employment
Retirement Plan, an additional 1.5 years of Credited Service
shall be credited to the Employee's actual or deemed
Credited Service.
4. Termination Within 24 Months After a Change in Control
Which Occurs During the Term.
a. Employee's employment may be terminated by the
Company 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.
b. Employee's employment may be terminated by the
Company 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 his employment with the
Company at any time.
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 Sections 5.a. and
6 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
Sections 5 and 6 below.
e. If Employee voluntarily terminates his employment
within 24 months after a Change in Control which occurs
during the Term, he shall notify the Company in writing if
he 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 Sections 5 and 6 below. If such
voluntary termination is for other than Good Reason, then
Employee shall be entitled only to the payments specified in
Sections 5.a. and 6 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 his 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 his Termination Date an amount
equal to 250 percent of the sum of (i) his base annual
salary at the highest rate in effect at any time during the
twelve months immediately preceding the Termination Date,
and (ii) his targeted bonus for the current year. In
addition, the Company shall pay to Employee his targeted
bonus payment for the year of termination prorated to the
Termination Date.
c. The Company, at its expense, shall provide to
Employee for a period of thirty months after the Termination
Date medical and/or dental coverage under the medical and
dental plans maintained by the Company. 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
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.
e. For purposes of determining Employee's benefit
under the Brown Group, Inc. Supplemental Employment
Retirement Plan, an additional 2.5 years of Credited Service
shall be credited to the Employee's actual or deemed
Credited Service.
6. Termination at Any Time. Notwithstanding anything in
this Agreement to the contrary and in addition to any benefit
provided under Section 3.e. or 5.e. above, for purposes of
determining Employee's benefit under the Brown Group, Inc.
Supplemental Employment Retirement Plan, an additional 10 (ten)
years of Credited Service shall be credited to the Employee's
actual or deemed Credited Service. This provision shall continue
in effect after the Term has expired.
7. 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.
8. 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.
9. Release. Notwithstanding anything to the contrary
stated in this Agreement, no benefits will be paid 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 in the form
attached as Exhibit A.
10. Covenant Not to Compete. Benefits payable pursuant to
Sections 3.b, 3.c, and 3.e are subject to the following
restrictions.
a. Post-Termination Restrictions.
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 himself in a position following his
employment with Company in which the confidentiality of
Company's Confidential Information might somehow be
compromised.
ii. Accordingly, Employee agrees that, for
eighteen (18) months after a Termination Date described in
the second sentence of Section 2.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 shoe industry in the
United States in competition with the Company, for any
Competitor;
B. hold any executive- or managerial-level
position with any Competitor in the United States;
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
shoe industry in the United States;
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;
and
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.
b. Acknowledgment Regarding Restrictions. Employee
recognizes and agrees that the restraints contained in
Section 10.a. (both separately and in total) are reasonable
and should be fully enforceable in view of the high-level
positions Employee has had with the Company, the national
and international nature of both the Company's business and
competition in the shoe industry, and the Company's
legitimate interests in protecting its Confidential
Information and its customer goodwill and relationships.
Employee specifically hereby acknowledges and confirms that
he is willing and intends to, and will, abide fully by the
terms of Section 10.a. of this Agreement. Employee further
agrees that the Company would not have adequate protection
if Employee were permitted to work for its competitors in
violation of the terms of this Agreement since the Company
would be unable to verify whether (i) its Confidential
Information was being disclosed and/or misused, and
(ii) Employee was involved in diverting or helping to divert
the Company's customers and/or its customer goodwill.
c. Company's Right to Injunctive Relief. In the
event of a breach or threatened breach of any of Employee's
duties and obligations under the terms and provisions of
Section 10.a. of this Agreement, the Company shall be
entitled, in addition to any other legal or equitable
remedies it may have in connection therewith (including any
right to damages that it may suffer), to temporary,
preliminary and permanent injunctive relief restraining such
breach or threatened breach. Employee hereby expressly
acknowledges that the harm which might result to Company's
business as a result of noncompliance by Employee with any
of the provisions of Section 10.a. would be largely
irreparable. Employee specifically agrees that if there is
a question as to the enforceability of any of the provisions
of Section 10.a. hereof, Employee will not engage in any
conduct inconsistent with or contrary to such Section until
after the question has been resolved by a final judgment of
a court of competent jurisdiction. Employee undertakes and
agrees that if Employee breaches or threatens to breach the
Agreement, Employee shall be liable for any attorneys' fees
and costs incurred by Company in enforcing its rights
hereunder.
d. Employee Agreement to Disclose this Agreement.
Employee agrees to disclose, during the eighteen month
period following a Termination Date described in the second
sentence of Section 2.d, the terms of this Section 10 to any
potential future employer.
11. Confidential Information. The Employee acknowledges
and confirms that certain data and other information (whether in
human or machine readable form) that comes into his possession or
knowledge (whether before or after the date of this Employment
Agreement) and which was obtained from the Company, or obtained
by the Employee for or on behalf of the Company, and which is
identified herein is the secret, confidential property of the
Company (the "Confidential Information"). This Confidential
Information includes, but is not limited to:
a. lists or other identification of customers or
prospective customers of the Company (and key individuals
employed or engaged by such parties);
b. lists or other identification of sources or
prospective sources of the Company's products or components
thereof (and key individuals employed or engaged by such
parties);
c. all compilations of information, correspondence,
designs, drawings, files, formulae, lists, machines, maps,
methods, models, notes or other writings, plans, records,
regulatory compliance procedures, reports, specialized or
technical data, schematics, source code, object code,
documentation, and software used in connection with the
development, manufacture, fabrication, assembly, marketing
and sale of the Company's products;
d. financial, sales and marketing data relating to
the Company or to the industry or other areas pertaining to
the Company's activities and contemplated activities
(including, without limitation, manufacturing,
transportation, distribution and sales costs and non-public
pricing information);
e. equipment, materials, procedures, processes, and
techniques used in, or related to, the development,
manufacture, assembly, fabrication or other production and
quality control of the Company's products and services;
f. the Company's relations with its customers,
prospective customers, suppliers and prospective suppliers
and the nature and type of products or services rendered to
such customers (or proposed to be rendered to prospective
customers);
g. the Company's relations with its employees
(including, without limitation, salaries, job
classifications and skill levels); and
h. any other information designated by the Company to
be confidential, secret and/or proprietary (including
without limitation, information provided by customers or
suppliers of the Company).
Notwithstanding the foregoing, the term "Confidential
Information" shall not consist of any data or other information
which has been made publicly available or otherwise placed in the
public domain other than by the Employee in violation of this
Employment Agreement.
12. Certain Additional Payments by the Company.
a. Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event
it shall be determined that any payment or distribution by
the Company to or for the benefit of the Employee (whether
paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined
without regard to any additional payments required under
this Section) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any interest or penalties
are incurred by the Employee with respect to such excise tax
(such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Employee of all taxes
(including any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Employee retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this
Section 12.a., if it shall be determined that the Employee
is entitled to a Gross-Up Payment, but that the Payments do
not exceed 110 percent of the greatest amount (the "Reduced
Amount") that could be paid to the Employee such that the
receipt of Payments would not give rise to any Excise Tax,
then no Gross-Up Payment shall be made to the Employee, and
the Payments, in the aggregate, shall be reduced to the
Reduced Amount.
b. Subject to the provisions of Section 12.c., all
determinations required to be made under this Section 12,
including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be
made by Ernst & Young or such other certified public
accounting firm as may be designated by the Employee (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Employee within 15
business days of the receipt of notice from the Employee
that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the
Employee shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this
Section 12, shall be paid by the Company to the Employee
within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm
shall be binding upon the Company and the Employee. As a
result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should
have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section
12.c. and the Employee thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee.
c. The Employee shall notify the Company in writing
of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the
Employee is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Employee
shall not pay such claim prior to the expiration of the 30-
day period following the date on which the Employee gives
such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Employee in
writing prior to the expiration of such period that it
desires to contest such claim, the Employee shall:
i. give the Company any information reasonably
requested by the Company relating to such claim,
ii. take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including,
without limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company,
iii. cooperate with the Company in good faith in
order to effectively contest such claim, and
iv. permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Employee harmless,
on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto)
imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing
provisions of this Section 12.c., the Company shall control
all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such
claim and may, at its sole option, either direct the
Employee to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the
Employee agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the
Company directs the Employee to pay such claim and sue for a
refund, the Company shall advance the amount of such payment
to the Employee, on an interest-free basis and shall
indemnify and hold Employee harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such
advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of
the statute of limitations relating to payment of taxes for
the taxable year of the Employee with respect to which such
contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control
of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the
Employee shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
d. If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 12.c., the
Employee becomes entitled to receive any refund with respect
to such claim, the Employee shall (subject to the Company's
complying with the requirements of Section 12.c.) promptly
pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Employee of an
amount advanced by the Company pursuant to Section 12.c., a
determination is made that the Employee shall not be
entitled to any refund with respect to such claim and the
Company does not notify the Employee in writing of its
intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to
be paid.
13. Notice. All notices hereunder shall be in writing and
shall be deemed to have been duly given (a) when delivered
personally or by courier, or (b) on the third business day
following the mailing thereof by registered or certified mail,
postage prepaid, or (c) on the first business day following the
mailing thereof by overnight delivery service, in each case
addressed as set forth below:
a. If to the Company
Brown Group, Inc.
8300 Maryland Avenue
St. Louis, Missouri 63166-0029
Attention: Chief Executive Officer
b. If to Employee:
Brian C. Cook
4830 Morris Court
Waunakee, WI 53597
Any party may change the address to which notices are to be
addressed by giving the other party written notice in the manner
herein set forth.
14. Successors; Binding Agreement.
a. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business
and/or assets of the Company, upon or prior to such
succession, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
Company would have been required to perform it if no such
succession had taken place. A copy of such assumption and
agreement shall be delivered to Employee promptly after its
execution by the successor. Failure of the Company to
obtain such agreement upon or prior to the effectiveness of
any such succession shall be a breach of this Agreement and
shall entitle Employee to benefits from the Company in the
same amounts and on the same terms as Employee would be
entitled hereunder if Employee terminated his employment for
Good Reason. For purposes of the preceding sentence, the
date on which any such succession becomes effective shall be
deemed the Termination Date. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid
which executes and delivers the agreement provided for in
this Section 14.a. or which otherwise becomes bound by the
terms and provisions of this Agreement by operation of law.
b. This Agreement is personal to Employee and
Employee may not assign or delegate any part of his rights
or duties hereunder to any other person, except that this
Agreement shall inure to the benefit of and be enforceable
by Employee's legal representatives, executors,
administrators, heirs and beneficiaries.
15. Severability. If any provision of this Agreement or
the application thereof to any person or circumstance shall to
any extent be held to be invalid or unenforceable, the remainder
of this Agreement and the application of such provision to
persons or circumstances other than those as to which it is held
invalid or unenforceable shall not be affected thereby, and each
provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
16. Headings. The headings in this Agreement are inserted
for convenience of reference only and shall not in any way affect
the meaning or interpretation of this Agreement.
17. Counterparts. This Agreement may be executed in one or
more identical counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the
same instrument.
18. Waiver. Neither any course of dealing nor any failure
or neglect of either party hereto in any instance to exercise any
right, power or privilege hereunder or under law shall constitute
a waiver of such right, power or privilege or of any other right,
power or privilege or of the same right, power or privilege in
any other instance. Without limiting the generality of the
foregoing, Employee's continued employment without objection
shall not constitute Employee's consent to, or a waiver of
Employee's rights with respect to, any circumstances constituting
Good Reason. All waivers by either party hereto must be
contained in a written instrument signed by the party to be
charged therewith, and, in the case of the Company, by its duly
authorized officer.
19. Entire Agreement. This instrument constitutes the
entire agreement of the parties in this matter and shall
supersede any other agreement between the parties, oral or
written, concerning the same subject matter.
20. Amendment. This Agreement may be amended only by a
writing which makes express reference to this Agreement as the
subject of such amendment and which is signed by Employee and by
a duly authorized officer of the Company.
21. Governing Law. In light of Company's and Employee's
substantial contacts with the State of Missouri, the facts that
the Company is headquartered in Missouri and Employee resides in
and/or reports to Company management in Missouri, the parties'
interests in ensuring that disputes regarding the interpretation,
validity and enforceability of this Agreement are resolved on a
uniform basis, and Company's execution of, and the making of,
this Agreement in Missouri, the parties agree that: (i) any
litigation involving any noncompliance with or breach of the
Agreement, or regarding the interpretation, validity and/or
enforceability of the Agreement, shall be filed and conducted
exclusively in the state or federal courts in St. Louis City or
County, Missouri; and (ii) the Agreement shall be interpreted in
accordance with and governed by the laws of the State of
Missouri, without regard for any conflict of law principles.
IN WITNESS WHEREOF, Employee and the Company have executed
this Agreement as of the day and year first above written.
BROWN GROUP, INC.
By: /s/ Robert D. Pickle.
______________________________
Vice President, General Counsel
And Corporate Secretary
EMPLOYEE
By: /s/ Brian C. Cook
______________________________
Exhibit A
RELEASE
RELEASE (the "Release") dated _____________, 199__ between
Brian C. Cook ("Employee") and Brown Group, Inc., a New York
corporation (as further defined in Section 14 of the Severance
Agreement, the "Company").
WHEREAS, the Company and Employee are parties to a Severance
Agreement dated ____________, 1998 (the "Severance Agreement"),
which provides certain protection to Employee during management
transition and thereafter and in the event there is any change in
corporate structure which results in a change in control of the
Company.
WHEREAS, the execution of this Release is a condition
precedent to, and material inducement to, the Company's provision
of certain benefits under the Severance Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Mutual Promises. The Company undertakes the
obligations contained in the Severance Agreement, which are in
addition to any compensation to which Employee might otherwise be
entitled, in exchange for Employee's promises and obligations
contained herein. The Company's obligations are undertaken in
lieu of any other severance benefits.
2. Release of Claims; Agreement Not to File Suit.
a. Employee, for and on behalf of himself and his heirs,
beneficiaries, executors, administrators, successors,
assigns and anyone claiming through or under any of the
foregoing, agrees to, and does, remise, release and forever
discharge the Company and its subsidiaries and affiliates,
each of their shareholders, directors, officers, employees,
agents and representatives, and its successors and assigns
(collectively, the "Company Released Persons"), from any and
all matters, claims, demands, damages, causes of action,
debts, liabilities, controversies, judgments and suits of
every kind and nature whatsoever, foreseen or unforeseen,
known or unknown, which have arisen or could arise from
matters which occurred prior to the date of this Release,
which matters include without limitation: (i) the matters
covered by the Severance Agreement and this Release, (ii)
Employee's employment, and/or termination from employment
with the Company, and (iii) any claims which might otherwise
arise in the future as a result of arrangements or
agreements in effect as of the date of this Release or the
continuance of such arrangements and agreements.
b. Employee, for and on behalf of himself and his heirs,
beneficiaries, executors, administrators, successors,
assigns, and anyone claiming through or under any of the
foregoing, agrees that he will not file or otherwise submit
any charge, claim, complaint, or action to any agency,
court, organization, or judicial forum (nor will Employee
permit any person, group of persons, or organization to take
such action on his behalf) against any Company Released
Person arising out of any actions or non-actions on the part
of any Company Released Person arising before the date of
this Release or any action taken after the date of this
Release pursuant to the Severance Arrangement. Employee
further agrees that in the event that any person or entity
should bring such a charge, claim, complaint, or action on
his behalf, he hereby waives and forfeits any right to
recovery under said claim and will exercise every good faith
effort to have such claim dismissed.
c. The charges, claims, complaints, matters, demands,
damages, and causes of action referenced in Sections 2(a)
and 2(b) include, but are not limited to: (i) any breach of
an actual or implied contract of employment between Employee
and any Company Released Person, (ii) any claim of unjust,
wrongful, or tortuous discharge (including any claim of
fraud, negligence, retaliation for whistleblowing, or
intentional infliction of emotional distress), (iii) any
claim of defamation or other common law action, or (iv) any
claims of violations arising under the Civil Rights Act of
1964, as amended, 42 U.S.C. 2000e et seq., the Age
Discrimination in Employment Act, 29 U.S.C. 621 et seq.,
the Americans with Disabilities Act of 1990, 42 U.S.C.
12101 et seq., the Fair Labor Standards Act of 1938, as
amended, 29 U.S.C. 201 et seq., the Rehabilitation Act of
1973, as amended, 29 U.S.C. 701 et seq., or of the Missouri
Human Rights Act, 213.000 R.S. Mo. et seq., the Missouri
Service Letter Statute, 209.140 R.S. Mo. or any other
relevant federal, state, or local statutes or ordinances, or
any claims for pay, vacation pay, insurance, or welfare
benefits or any other benefits of employment with any
Company Released Person arising from events occurring prior
to the date of this Release other than those payments and
benefits specifically provided herein.
d. This Release shall not affect Employee's right to any
governmental benefits payable under any Social Security or
Worker's Compensation law now or in the future.
3. Release of Benefit Claims. Employee, for and on behalf
of himself and his heirs, beneficiaries, executors,
administrators, successors, assigns and anyone claiming through
or under any of the foregoing, further releases and waives any
claims for pay, vacation pay, insurance or welfare benefits or
any other benefits of employment with any Company Released Person
arising from events occurring prior to the date of this Release
other than claims to the payments and benefits specifically
provided for in the Severance Agreement.
4. Revocation Period; Knowing and Voluntary Agreement.
a. Employee acknowledges that he was given a copy of this
Agreement when the Severance Agreement was executed and he,
therefore, has been given a period of at least forty-five
(45) days to consider whether or not to accept this
Agreement. Furthermore, Employee may revoke this Agreement
for seven (7) days following its execution.
b. Employee represents, declares and agrees that he
voluntarily accepts the payments described above for the
purposes of making a full and final compromise, adjustment
and settlement of all potential claims hereinabove
described. Employee hereby acknowledges that he has been
advised of the opportunity to consult an attorney and that
he understands the Release and the effect of signing the
Release.
5. Severability. If any provision of this Release or the
application thereof to any person or circumstance shall to any
extent be held to be invalid or unenforceable, the remainder of
this Release and the application of such provision to persons or
circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby, and each provision
of this Release shall be valid and enforceable to the fullest
extent permitted by law.
6. Headings. The headings in this Release are inserted
for convenience of reference only and shall not in any way affect
the meaning or interpretation of this Release.
7. Counterparts. This Release may be executed in one or
more identical counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the
same instrument.
8. Entire Agreement. This Release and Related Severance
Agreement constitutes the entire agreement of the parties in this
matter and shall supersede any other agreement between the
parties, oral or written, concerning the same subject matter.
9. Governing Law. This Release shall be governed by, and
construed and enforced in accordance with, the laws of the State
of Missouri, without reference to the conflict of laws rules of
such State.
IN WITNESS WHEREOF, Employee and the Company have executed
this Release as of the day and year first above written.
BROWN GROUP, INC.
By:_________________________
EMPLOYEE
By:_________________________
Brian C. Cook
Exhibit 10(g)
SEVERANCE AGREEMENT
SEVERANCE AGREEMENT (the "Agreement") dated July 27,
1998 ("Effective Date") between Ronald A. Fromm ("Employee")
and Brown Group, Inc., a New York corporation (as further
defined in Section 13, the "Company").
WHEREAS, in order to accomplish its objectives, the
Company believes it is essential that members of its
Operating Committee, 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, 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, his covenant not to compete.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions.
a. "Cause" means (i) engaging by Employee in
willful misconduct which is materially injurious to the
Company; (ii) conviction of the Employee of a felony;
(iii) engaging by Employee in fraud, material
dishonesty or gross misconduct 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; or (v) habitual use by Employee of narcotics
or alcohol.
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.
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 shoes of more than $20,000,000 or is
reasonably expected to have 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 shoes.
f. "Good Reason," when used with reference to a
voluntary termination by Employee of his 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; or
(ii) a reduction in Employee's status, position,
responsibilities or duties.
g. "Term" means the period commencing on the
Effective Date and terminating three years after the
Effective Date; provided, however, that the Term shall
automatically be extended for successive additional one
year periods unless either party to this Agreement
provides the other party with notice of termination of
this Agreement at least six months prior to the
expiration of such one year periods.
h. "Termination Date" shall mean the effective
date as provided hereunder of the termination of
Employee's employment.
2. Termination During Term -- Change in Control
Severance Inapplicable.
a. Employee's employment may be terminated by
the Company 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.
b. Employee's employment may be terminated by
the Company 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 his 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 his
employment during the Term, but prior to a Change in
Control or more than 24 months after a Change in
Control, he shall notify Employer in writing if he
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.
3. Payments and Benefits Upon Termination During Term
- -- Change in Control Severance Inapplicable. To the extent
provided in Section 2 above, upon termination of his
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 to Employee
his base monthly salary at the highest rate in effect
at any time during the twelve months immediately
preceding the Termination Date (including his targeted
bonus in the current year) for the eighteen months
succeeding his Termination Date. Such amounts shall be
paid in accordance with the Company's regular pay
period policy for its employees.
c. The Company, at its expense, shall provide to
Employee for a period of eighteen months after the
Termination Date medical and/or dental coverage under
the medical and dental plans maintained by the Company.
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 eighteen 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
eighteen 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.
e. For purposes of determining Employee's
benefit under the Brown Group, Inc. Supplemental
Employment Retirement Plan, an additional 1.5 years of
Credited Service shall be credited to the Employee's
actual or deemed Credited Service.
4. Termination Within 24 Months After a Change in
Control Which Occurs During the Term.
a. Employee's employment may be terminated by
the Company 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.
b. Employee's employment may be terminated by
the Company 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 his employment with
the Company at any time.
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 his
employment within 24 months after a Change in Control
which occurs during the Term, he shall notify the
Company in writing if he 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 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 his
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 his Termination Date
an amount equal to 250 percent of the sum of (i) his
base annual salary at the highest rate in effect at any
time during the twelve months immediately preceding the
Termination Date, and (ii) his targeted bonus for the
current year. In addition, the Company shall pay to
Employee his targeted bonus payment for the year of
termination prorated to the Termination Date.
c. The Company, at its expense, shall provide to
Employee for a period of thirty months after the
Termination Date medical and/or dental coverage under
the medical and dental plans maintained by the Company.
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
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.
e. For purposes of determining Employee's
benefit under the Brown Group, Inc. Supplemental
Employment Retirement Plan, an additional 2.5 years of
Credited Service shall be credited to the Employee's
actual or deemed Credited Service.
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 paid 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
in the form attached as Exhibit A.
9. Covenant Not to Compete. Benefits payable
pursuant to Sections 3.b, 3.c, and 3.e are subject to the
following restrictions.
a. Post-Termination Restrictions.
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
himself in a position following his employment with
Company in which the confidentiality of Company's
Confidential Information might somehow be compromised.
ii. Accordingly, Employee agrees that, for
eighteen (18) months after a Termination Date described
in the second sentence of Section 2.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 shoe industry in
the United States in competition with the Company,
for any Competitor;
B. hold any executive- or
managerial-level position with any Competitor in
the United States;
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 shoe industry in
the United States;
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; and
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.
b. Acknowledgment Regarding Restrictions.
Employee recognizes and agrees that the restraints
contained in Section 9.a. (both separately and in
total) are reasonable and should be fully enforceable
in view of the high-level positions Employee has had
with the Company, the national and international nature
of both the Company's business and competition in the
shoe industry, and the Company's legitimate interests
in protecting its Confidential Information and its
customer goodwill and relationships. Employee
specifically hereby acknowledges and confirms that he
is willing and intends to, and will, abide fully by the
terms of Section 9.a. of this Agreement. Employee
further agrees that the Company would not have adequate
protection if Employee were permitted to work for its
competitors in violation of the terms of this Agreement
since the Company would be unable to verify whether
(i) its Confidential Information was being disclosed
and/or misused, and (ii) Employee was involved in
diverting or helping to divert the Company's customers
and/or its customer goodwill.
c. Company's Right to Injunctive Relief. In the
event of a breach or threatened breach of any of
Employee's duties and obligations under the terms and
provisions of Section 9.a. of this Agreement, the
Company shall be entitled, in addition to any other
legal or equitable remedies it may have in connection
therewith (including any right to damages that it may
suffer), to temporary, preliminary and permanent
injunctive relief restraining such breach or threatened
breach. Employee hereby expressly acknowledges that
the harm which might result to Company's business as a
result of noncompliance by Employee with any of the
provisions of Section 9.a. would be largely
irreparable. Employee specifically agrees that if
there is a question as to the enforceability of any of
the provisions of Section 9.a. hereof, Employee will
not engage in any conduct inconsistent with or contrary
to such Section until after the question has been
resolved by a final judgment of a court of competent
jurisdiction. Employee undertakes and agrees that if
Employee breaches or threatens to breach the Agreement,
Employee shall be liable for any attorneys' fees and
costs incurred by Company in enforcing its rights
hereunder.
d. Employee Agreement to Disclose this
Agreement. Employee agrees to disclose, during the
eighteen month period following a Termination Date
described in the second sentence of Section 2.d, the
terms of this Section 9 to any potential future
employer.
10. Confidential Information. The Employee
acknowledges and confirms that certain data and other
information (whether in human or machine readable form) that
comes into his possession or knowledge (whether before or
after the date of this Employment Agreement) and which was
obtained from the Company, or obtained by the Employee for
or on behalf of the Company, and which is identified herein
is the secret, confidential property of the Company (the
"Confidential Information"). This Confidential Information
includes, but is not limited to:
a. lists or other identification of customers or
prospective customers of the Company (and key
individuals employed or engaged by such parties);
b. lists or other identification of sources or
prospective sources of the Company's products or
components thereof (and key individuals employed or
engaged by such parties);
c. all compilations of information,
correspondence, designs, drawings, files, formulae,
lists, machines, maps, methods, models, notes or other
writings, plans, records, regulatory compliance
procedures, reports, specialized or technical data,
schematics, source code, object code, documentation,
and software used in connection with the development,
manufacture, fabrication, assembly, marketing and sale
of the Company's products;
d. financial, sales and marketing data relating
to the Company or to the industry or other areas
pertaining to the Company's activities and contemplated
activities (including, without limitation,
manufacturing, transportation, distribution and sales
costs and non-public pricing information);
e. equipment, materials, procedures, processes,
and techniques used in, or related to, the development,
manufacture, assembly, fabrication or other production
and quality control of the Company's products and
services;
f. the Company's relations with its customers,
prospective customers, suppliers and prospective
suppliers and the nature and type of products or
services rendered to such customers (or proposed to be
rendered to prospective customers);
g. the Company's relations with its employees
(including, without limitation, salaries, job
classifications and skill levels); and
h. any other information designated by the
Company to be confidential, secret and/or proprietary
(including without limitation, information provided by
customers or suppliers of the Company).
Notwithstanding the foregoing, the term "Confidential
Information" shall not consist of any data or other
information which has been made publicly available or
otherwise placed in the public domain other than by the
Employee in violation of this Employment Agreement.
11. Certain Additional Payments by the Company.
a. Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the
event it shall be determined that any payment or
distribution by the Company to or for the benefit of
the Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any
additional payments required under this Section) (a
"Payment") would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), or any interest or penalties
are incurred by the Employee with respect to such
excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Employee
shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after
payment by the Employee of all taxes (including any
interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Employee retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of
this Section 11.a., if it shall be determined that the
Employee is entitled to a Gross-Up Payment, but that
the Payments do not exceed 110 percent of the greatest
amount (the "Reduced Amount") that could be paid to the
Employee such that the receipt of Payments would not
give rise to any Excise Tax, then no Gross-Up Payment
shall be made to the Employee, and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
b. Subject to the provisions of Section 11.c.,
all determinations required to be made under this
Section 11, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving
at such determination, shall be made by Ernst & Young
or such other certified public accounting firm as may
be designated by the Employee (the "Accounting Firm")
which shall provide detailed supporting calculations
both to the Company and the Employee within 15 business
days of the receipt of notice from the Employee that
there has been a Payment, or such earlier time as is
requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for
the individual, entity or group effecting the Change of
Control, the Employee shall appoint another nationally
recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 11, shall be paid
by the Company to the Employee within five days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding
upon the Company and the Employee. As a result of the
uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant
to Section 11.c. and the Employee thereafter is
required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to
or for the benefit of the Employee.
c. The Employee shall notify the Company in
writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than
ten business days after the Employee is informed in
writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such
claim is requested to be paid. The Employee shall not
pay such claim prior to the expiration of the 30-day
period following the date on which the Employee gives
such notice to the Company (or such shorter period
ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies
the Employee in writing prior to the expiration of such
period that it desires to contest such claim, the
Employee shall:
i. give the Company any information
reasonably requested by the Company relating to
such claim,
ii. take such action in connection with
contesting such claim as the Company shall
reasonably request in writing from time to time,
including, without limitation, accepting legal
representation with respect to such claim by an
attorney reasonably selected by the Company,
iii. cooperate with the Company in good faith
in order to effectively contest such claim, and
iv. permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with
such contest and shall indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with
respect thereto) imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this
Section 11.c., the Company shall control all
proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct
the Employee to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner,
and the Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine;
provided, however, that if the Company directs the
Employee to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the
Employee, on an interest-free basis and shall indemnify
and hold Employee harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to
payment of taxes for the taxable year of the Employee
with respect to which such contested amount is claimed
to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Employee
shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
d. If, after the receipt by the Employee of an
amount advanced by the Company pursuant to
Section 11.c., the Employee becomes entitled to receive
any refund with respect to such claim, the Employee
shall (subject to the Company's complying with the
requirements of Section 11.c.) promptly pay to the
Company the amount of such refund (together with any
interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant
to Section 11.c., a determination is made that the
Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify
the Employee in writing of its intent to contest such
denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be
paid.
12. Notice. All notices hereunder shall be in writing
and shall be deemed to have been duly given (a) when
delivered personally or by courier, or (b) on the third
business day following the mailing thereof by registered or
certified mail, postage prepaid, or (c) on the first
business day following the mailing thereof by overnight
delivery service, in each case addressed as set forth below:
a. If to the Company
Brown Group, Inc.
8300 Maryland Avenue
St. Louis, Missouri 63166-0029
Attention: Chief Executive Officer
b. If to Employee:
Ronald A. Fromm
6665 Highland Drive
Windsor, WI 53598
Any party may change the address to which notices are to be
addressed by giving the other party written notice in the
manner herein set forth.
13. Successors; Binding Agreement.
a. The Company will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company, upon or
prior to such succession, to expressly assume and agree
to perform this Agreement in the same manner and to the
same extent that the Company would have been required
to perform it if no such succession had taken place. A
copy of such assumption and agreement shall be
delivered to Employee promptly after its execution by
the successor. Failure of the Company to obtain such
agreement upon or prior to the effectiveness of any
such succession shall be a breach of this Agreement and
shall entitle Employee to benefits from the Company in
the same amounts and on the same terms as Employee
would be entitled hereunder if Employee terminated his
employment for Good Reason. For purposes of the
preceding sentence, the date on which any such
succession becomes effective shall be deemed the
Termination Date. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid
which executes and delivers the agreement provided for
in this Section 13.a. or which otherwise becomes bound
by the terms and provisions of this Agreement by
operation of law.
b. This Agreement is personal to Employee and
Employee may not assign or delegate any part of his
rights or duties hereunder to any other person, except
that this Agreement shall inure to the benefit of and
be enforceable by Employee's legal representatives,
executors, administrators, heirs and beneficiaries.
14. Severability. If any provision of this Agreement
or the application thereof to any person or circumstance
shall to any extent be held to be invalid or unenforceable,
the remainder of this Agreement and the application of such
provision to persons or circumstances other than those as to
which it is held invalid or unenforceable shall not be
affected thereby, and each provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by
law.
15. Headings. The headings in this Agreement are
inserted for convenience of reference only and shall not in
any way affect the meaning or interpretation of this
Agreement.
16. Counterparts. This Agreement may be executed in
one or more identical counterparts, each of which shall be
deemed an original but all of which together shall
constitute one and the same instrument.
17. Waiver. Neither any course of dealing nor any
failure or neglect of either party hereto in any instance to
exercise any right, power or privilege hereunder or under
law shall constitute a waiver of such right, power or
privilege or of any other right, power or privilege or of
the same right, power or privilege in any other instance.
Without limiting the generality of the foregoing, Employee's
continued employment without objection shall not constitute
Employee's consent to, or a waiver of Employee's rights with
respect to, any circumstances constituting Good Reason. All
waivers by either party hereto must be contained in a
written instrument signed by the party to be charged
therewith, and, in the case of the Company, by its duly
authorized officer.
18. Entire Agreement. This instrument constitutes the
entire agreement of the parties in this matter and shall
supersede any other agreement between the parties, oral or
written, concerning the same subject matter.
19. Amendment. This Agreement may be amended only by
a writing which makes express reference to this Agreement as
the subject of such amendment and which is signed by
Employee and by a duly authorized officer of the Company.
20. Governing Law. In light of Company's and
Employee's substantial contacts with the State of Missouri,
the facts that the Company is headquartered in Missouri and
Employee resides in and/or reports to Company management in
Missouri, the parties' interests in ensuring that disputes
regarding the interpretation, validity and enforceability of
this Agreement are resolved on a uniform basis, and
Company's execution of, and the making of, this Agreement in
Missouri, the parties agree that: (i) any litigation
involving any noncompliance with or breach of the Agreement,
or regarding the interpretation, validity and/or
enforceability of the Agreement, shall be filed and
conducted exclusively in the state or federal courts in St.
Louis City or County, Missouri; and (ii) the Agreement shall
be interpreted in accordance with and governed by the laws
of the State of Missouri, without regard for any conflict of
law principles.
IN WITNESS WHEREOF, Employee and the Company have
executed this Agreement as of the day and year first above
written.
BROWN GROUP, INC.
By: /s/ Robert D. Pickle.
-------------------------------
Vice President, General Counsel
And Corporate Secretary
EMPLOYEE
By: /s/ Ronald A. Fromm
-------------------------------
Exhibit A
RELEASE
RELEASE (the "Release") dated _____________, 199__ between
Ronald A. Fromm ("Employee") and Brown Group, Inc., a New York
corporation (as further defined in Section 13 of the Severance
Agreement, the "Company").
WHEREAS, the Company and Employee are parties to a Severance
Agreement dated ____________, 1998 (the "Severance Agreement"),
which provides certain protection to Employee during management
transition and thereafter and in the event there is any change in
corporate structure which results in a change in control of the
Company.
WHEREAS, the execution of this Release is a condition
precedent to, and material inducement to, the Company's provision
of certain benefits under the Severance Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Mutual Promises. The Company undertakes the
obligations contained in the Severance Agreement, which are in
addition to any compensation to which Employee might otherwise be
entitled, in exchange for Employee's promises and obligations
contained herein. The Company's obligations are undertaken in
lieu of any other severance benefits.
2. Release of Claims; Agreement Not to File Suit.
a. Employee, for and on behalf of himself and his heirs,
beneficiaries, executors, administrators, successors,
assigns and anyone claiming through or under any of the
foregoing, agrees to, and does, remise, release and forever
discharge the Company and its subsidiaries and affiliates,
each of their shareholders, directors, officers, employees,
agents and representatives, and its successors and assigns
(collectively, the "Company Released Persons"), from any and
all matters, claims, demands, damages, causes of action,
debts, liabilities, controversies, judgments and suits of
every kind and nature whatsoever, foreseen or unforeseen,
known or unknown, which have arisen or could arise from
matters which occurred prior to the date of this Release,
which matters include without limitation: (i) the matters
covered by the Severance Agreement and this Release, (ii)
Employee's employment, and/or termination from employment
with the Company, and (iii) any claims which might otherwise
arise in the future as a result of arrangements or
agreements in effect as of the date of this Release or the
continuance of such arrangements and agreements.
b. Employee, for and on behalf of himself and his heirs,
beneficiaries, executors, administrators, successors,
assigns, and anyone claiming through or under any of the
foregoing, agrees that he will not file or otherwise submit
any charge, claim, complaint, or action to any agency,
court, organization, or judicial forum (nor will Employee
permit any person, group of persons, or organization to take
such action on his behalf) against any Company Released
Person arising out of any actions or non-actions on the part
of any Company Released Person arising before the date of
this Release or any action taken after the date of this
Release pursuant to the Severance Arrangement. Employee
further agrees that in the event that any person or entity
should bring such a charge, claim, complaint, or action on
his behalf, he hereby waives and forfeits any right to
recovery under said claim and will exercise every good faith
effort to have such claim dismissed.
c. The charges, claims, complaints, matters, demands,
damages, and causes of action referenced in Sections 2(a)
and 2(b) include, but are not limited to: (i) any breach of
an actual or implied contract of employment between Employee
and any Company Released Person, (ii) any claim of unjust,
wrongful, or tortuous discharge (including any claim of
fraud, negligence, retaliation for whistleblowing, or
intentional infliction of emotional distress), (iii) any
claim of defamation or other common law action, or (iv) any
claims of violations arising under the Civil Rights Act of
1964, as amended, 42 U.S.C. 2000e et seq., the Age
Discrimination in Employment Act, 29 U.S.C. 621 et seq.,
the Americans with Disabilities Act of 1990, 42 U.S.C.
12101 et seq., the Fair Labor Standards Act of 1938, as
amended, 29 U.S.C. 201 et seq., the Rehabilitation Act of
1973, as amended, 29 U.S.C. 701 et seq., or of the Missouri
Human Rights Act, 213.000 R.S. Mo. et seq., the Missouri
Service Letter Statute, 209.140 R.S. Mo. or any other
relevant federal, state, or local statutes or ordinances, or
any claims for pay, vacation pay, insurance, or welfare
benefits or any other benefits of employment with any
Company Released Person arising from events occurring prior
to the date of this Release other than those payments and
benefits specifically provided herein.
d. This Release shall not affect Employee's right to any
governmental benefits payable under any Social Security or
Worker's Compensation law now or in the future.
3. Release of Benefit Claims. Employee, for and on behalf
of himself and his heirs, beneficiaries, executors,
administrators, successors, assigns and anyone claiming through
or under any of the foregoing, further releases and waives any
claims for pay, vacation pay, insurance or welfare benefits or
any other benefits of employment with any Company Released Person
arising from events occurring prior to the date of this Release
other than claims to the payments and benefits specifically
provided for in the Severance Agreement.
4. Revocation Period; Knowing and Voluntary Agreement.
a. Employee acknowledges that he was given a copy of this
Agreement when the Severance Agreement was executed and he,
therefore, has been given a period of at least forty-five
(45) days to consider whether or not to accept this
Agreement. Furthermore, Employee may revoke this Agreement
for seven (7) days following its execution.
b. Employee represents, declares and agrees that he
voluntarily accepts the payments described above for the
purposes of making a full and final compromise, adjustment
and settlement of all potential claims hereinabove
described. Employee hereby acknowledges that he has been
advised of the opportunity to consult an attorney and that
he understands the Release and the effect of signing the
Release.
5. Severability. If any provision of this Release or the
application thereof to any person or circumstance shall to any
extent be held to be invalid or unenforceable, the remainder of
this Release and the application of such provision to persons or
circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby, and each provision
of this Release shall be valid and enforceable to the fullest
extent permitted by law.
6. Headings. The headings in this Release are inserted
for convenience of reference only and shall not in any way affect
the meaning or interpretation of this Release.
7. Counterparts. This Release may be executed in one or
more identical counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the
same instrument.
8. Entire Agreement. This Release and Related Severance
Agreement constitutes the entire agreement of the parties in this
matter and shall supersede any other agreement between the
parties, oral or written, concerning the same subject matter.
9. Governing Law. This Release shall be governed by, and
construed and enforced in accordance with, the laws of the State
of Missouri, without reference to the conflict of laws rules of
such State.
IN WITNESS WHEREOF, Employee and the Company have executed
this Release as of the day and year first above written.
BROWN GROUP, INC.
By:-------------------------------
EMPLOYEE
By:-------------------------------
Ronald A. Fromm
Exhibit 10(h)
SEVERANCE AGREEMENT
SEVERANCE AGREEMENT (the "Agreement") dated July 27,
1998 ("Effective Date") between Gary M. Rich ("Employee")
and Brown Group, Inc., a New York corporation (as further
defined in Section 13, the "Company").
WHEREAS, in order to accomplish its objectives, the
Company believes it is essential that members of its
Operating Committee, 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, 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, his covenant not to compete.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions.
a. "Cause" means (i) engaging by Employee in
willful misconduct which is materially injurious to the
Company; (ii) conviction of the Employee of a felony;
(iii) engaging by Employee in fraud, material
dishonesty or gross misconduct 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; or (v) habitual use by Employee of narcotics
or alcohol.
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.
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 shoes of more than $20,000,000 or is
reasonably expected to have 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 shoes.
f. "Good Reason," when used with reference to a
voluntary termination by Employee of his 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; or
(ii) a reduction in Employee's status, position,
responsibilities or duties.
g. "Term" means the period commencing on the
Effective Date and terminating three years after the
Effective Date; provided, however, that the Term shall
automatically be extended for successive additional one
year periods unless either party to this Agreement
provides the other party with notice of termination of
this Agreement at least six months prior to the
expiration of such one year periods.
h. "Termination Date" shall mean the effective
date as provided hereunder of the termination of
Employee's employment.
2. Termination During Term -- Change in Control
Severance Inapplicable.
a. Employee's employment may be terminated by
the Company 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.
b. Employee's employment may be terminated by
the Company 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 his 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 his
employment during the Term, but prior to a Change in
Control or more than 24 months after a Change in
Control, he shall notify Employer in writing if he
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.
3. Payments and Benefits Upon Termination During Term
- -- Change in Control Severance Inapplicable. To the extent
provided in Section 2 above, upon termination of his
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 to Employee
his base monthly salary at the highest rate in effect
at any time during the twelve months immediately
preceding the Termination Date (including his targeted
bonus in the current year) for the eighteen months
succeeding his Termination Date. Such amounts shall be
paid in accordance with the Company's regular pay
period policy for its employees.
c. The Company, at its expense, shall provide to
Employee for a period of eighteen months after the
Termination Date medical and/or dental coverage under
the medical and dental plans maintained by the Company.
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 eighteen 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
eighteen 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.
e. For purposes of determining Employee's
benefit under the Brown Group, Inc. Supplemental
Employment Retirement Plan, an additional 1.5 years of
Credited Service shall be credited to the Employee's
actual or deemed Credited Service.
4. Termination Within 24 Months After a Change in
Control Which Occurs During the Term.
a. Employee's employment may be terminated by
the Company 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.
b. Employee's employment may be terminated by
the Company 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 his employment with
the Company at any time.
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 his
employment within 24 months after a Change in Control
which occurs during the Term, he shall notify the
Company in writing if he 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 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 his
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 his Termination Date
an amount equal to 250 percent of the sum of (i) his
base annual salary at the highest rate in effect at any
time during the twelve months immediately preceding the
Termination Date, and (ii) his targeted bonus for the
current year. In addition, the Company shall pay to
Employee his targeted bonus payment for the year of
termination prorated to the Termination Date.
c. The Company, at its expense, shall provide to
Employee for a period of thirty months after the
Termination Date medical and/or dental coverage under
the medical and dental plans maintained by the Company.
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
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.
e. For purposes of determining Employee's
benefit under the Brown Group, Inc. Supplemental
Employment Retirement Plan, an additional 2.5 years of
Credited Service shall be credited to the Employee's
actual or deemed Credited Service.
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 paid 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
in the form attached as Exhibit A.
9. Covenant Not to Compete. Benefits payable
pursuant to Sections 3.b, 3.c, and 3.e are subject to the
following restrictions.
a. Post-Termination Restrictions.
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
himself in a position following his employment with
Company in which the confidentiality of Company's
Confidential Information might somehow be compromised.
ii. Accordingly, Employee agrees that, for
eighteen (18) months after a Termination Date described
in the second sentence of Section 2.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 shoe industry in
the United States in competition with the Company,
for any Competitor;
B. hold any executive- or
managerial-level position with any Competitor in
the United States;
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 shoe industry in
the United States;
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; and
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.
b. Acknowledgment Regarding Restrictions.
Employee recognizes and agrees that the restraints
contained in Section 9.a. (both separately and in
total) are reasonable and should be fully enforceable
in view of the high-level positions Employee has had
with the Company, the national and international nature
of both the Company's business and competition in the
shoe industry, and the Company's legitimate interests
in protecting its Confidential Information and its
customer goodwill and relationships. Employee
specifically hereby acknowledges and confirms that he
is willing and intends to, and will, abide fully by the
terms of Section 9.a. of this Agreement. Employee
further agrees that the Company would not have adequate
protection if Employee were permitted to work for its
competitors in violation of the terms of this Agreement
since the Company would be unable to verify whether
(i) its Confidential Information was being disclosed
and/or misused, and (ii) Employee was involved in
diverting or helping to divert the Company's customers
and/or its customer goodwill.
c. Company's Right to Injunctive Relief. In the
event of a breach or threatened breach of any of
Employee's duties and obligations under the terms and
provisions of Section 9.a. of this Agreement, the
Company shall be entitled, in addition to any other
legal or equitable remedies it may have in connection
therewith (including any right to damages that it may
suffer), to temporary, preliminary and permanent
injunctive relief restraining such breach or threatened
breach. Employee hereby expressly acknowledges that
the harm which might result to Company's business as a
result of noncompliance by Employee with any of the
provisions of Section 9.a. would be largely
irreparable. Employee specifically agrees that if
there is a question as to the enforceability of any of
the provisions of Section 9.a. hereof, Employee will
not engage in any conduct inconsistent with or contrary
to such Section until after the question has been
resolved by a final judgment of a court of competent
jurisdiction. Employee undertakes and agrees that if
Employee breaches or threatens to breach the Agreement,
Employee shall be liable for any attorneys' fees and
costs incurred by Company in enforcing its rights
hereunder.
d. Employee Agreement to Disclose this
Agreement. Employee agrees to disclose, during the
eighteen month period following a Termination Date
described in the second sentence of Section 2.d, the
terms of this Section 9 to any potential future
employer.
10. Confidential Information. The Employee
acknowledges and confirms that certain data and other
information (whether in human or machine readable form) that
comes into his possession or knowledge (whether before or
after the date of this Employment Agreement) and which was
obtained from the Company, or obtained by the Employee for
or on behalf of the Company, and which is identified herein
is the secret, confidential property of the Company (the
"Confidential Information"). This Confidential Information
includes, but is not limited to:
a. lists or other identification of customers or
prospective customers of the Company (and key
individuals employed or engaged by such parties);
b. lists or other identification of sources or
prospective sources of the Company's products or
components thereof (and key individuals employed or
engaged by such parties);
c. all compilations of information,
correspondence, designs, drawings, files, formulae,
lists, machines, maps, methods, models, notes or other
writings, plans, records, regulatory compliance
procedures, reports, specialized or technical data,
schematics, source code, object code, documentation,
and software used in connection with the development,
manufacture, fabrication, assembly, marketing and sale
of the Company's products;
d. financial, sales and marketing data relating
to the Company or to the industry or other areas
pertaining to the Company's activities and contemplated
activities (including, without limitation,
manufacturing, transportation, distribution and sales
costs and non-public pricing information);
e. equipment, materials, procedures, processes,
and techniques used in, or related to, the development,
manufacture, assembly, fabrication or other production
and quality control of the Company's products and
services;
f. the Company's relations with its customers,
prospective customers, suppliers and prospective
suppliers and the nature and type of products or
services rendered to such customers (or proposed to be
rendered to prospective customers);
g. the Company's relations with its employees
(including, without limitation, salaries, job
classifications and skill levels); and
h. any other information designated by the
Company to be confidential, secret and/or proprietary
(including without limitation, information provided by
customers or suppliers of the Company).
Notwithstanding the foregoing, the term "Confidential
Information" shall not consist of any data or other
information which has been made publicly available or
otherwise placed in the public domain other than by the
Employee in violation of this Employment Agreement.
11. Certain Additional Payments by the Company.
a. Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the
event it shall be determined that any payment or
distribution by the Company to or for the benefit of
the Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any
additional payments required under this Section) (a
"Payment") would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), or any interest or penalties
are incurred by the Employee with respect to such
excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Employee
shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after
payment by the Employee of all taxes (including any
interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Employee retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of
this Section 11.a., if it shall be determined that the
Employee is entitled to a Gross-Up Payment, but that
the Payments do not exceed 110 percent of the greatest
amount (the "Reduced Amount") that could be paid to the
Employee such that the receipt of Payments would not
give rise to any Excise Tax, then no Gross-Up Payment
shall be made to the Employee, and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
b. Subject to the provisions of Section 11.c.,
all determinations required to be made under this
Section 11, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving
at such determination, shall be made by Ernst & Young
or such other certified public accounting firm as may
be designated by the Employee (the "Accounting Firm")
which shall provide detailed supporting calculations
both to the Company and the Employee within 15 business
days of the receipt of notice from the Employee that
there has been a Payment, or such earlier time as is
requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for
the individual, entity or group effecting the Change of
Control, the Employee shall appoint another nationally
recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 11, shall be paid
by the Company to the Employee within five days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding
upon the Company and the Employee. As a result of the
uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant
to Section 11.c. and the Employee thereafter is
required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to
or for the benefit of the Employee.
c. The Employee shall notify the Company in
writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than
ten business days after the Employee is informed in
writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such
claim is requested to be paid. The Employee shall not
pay such claim prior to the expiration of the 30-day
period following the date on which the Employee gives
such notice to the Company (or such shorter period
ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies
the Employee in writing prior to the expiration of such
period that it desires to contest such claim, the
Employee shall:
i. give the Company any information
reasonably requested by the Company relating to
such claim,
ii. take such action in connection with
contesting such claim as the Company shall
reasonably request in writing from time to time,
including, without limitation, accepting legal
representation with respect to such claim by an
attorney reasonably selected by the Company,
iii. cooperate with the Company in good faith
in order to effectively contest such claim, and
iv. permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with
such contest and shall indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with
respect thereto) imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this
Section 11.c., the Company shall control all
proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct
the Employee to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner,
and the Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine;
provided, however, that if the Company directs the
Employee to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the
Employee, on an interest-free basis and shall indemnify
and hold Employee harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to
payment of taxes for the taxable year of the Employee
with respect to which such contested amount is claimed
to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Employee
shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
d. If, after the receipt by the Employee of an
amount advanced by the Company pursuant to
Section 11.c., the Employee becomes entitled to receive
any refund with respect to such claim, the Employee
shall (subject to the Company's complying with the
requirements of Section 11.c.) promptly pay to the
Company the amount of such refund (together with any
interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant
to Section 11.c., a determination is made that the
Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify
the Employee in writing of its intent to contest such
denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be
paid.
12. Notice. All notices hereunder shall be in writing
and shall be deemed to have been duly given (a) when
delivered personally or by courier, or (b) on the third
business day following the mailing thereof by registered or
certified mail, postage prepaid, or (c) on the first
business day following the mailing thereof by overnight
delivery service, in each case addressed as set forth below:
a. If to the Company
Brown Group, Inc.
8300 Maryland Avenue
St. Louis, Missouri 63166-0029
Attention: Chief Executive Officer
b. If to Employee:
Gary M. Rich
442 Sheffield Estates Drive
St. Louis, MO 63141
Any party may change the address to which notices are to be
addressed by giving the other party written notice in the
manner herein set forth.
13. Successors; Binding Agreement.
a. The Company will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company, upon or
prior to such succession, to expressly assume and agree
to perform this Agreement in the same manner and to the
same extent that the Company would have been required
to perform it if no such succession had taken place. A
copy of such assumption and agreement shall be
delivered to Employee promptly after its execution by
the successor. Failure of the Company to obtain such
agreement upon or prior to the effectiveness of any
such succession shall be a breach of this Agreement and
shall entitle Employee to benefits from the Company in
the same amounts and on the same terms as Employee
would be entitled hereunder if Employee terminated his
employment for Good Reason. For purposes of the
preceding sentence, the date on which any such
succession becomes effective shall be deemed the
Termination Date. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid
which executes and delivers the agreement provided for
in this Section 13.a. or which otherwise becomes bound
by the terms and provisions of this Agreement by
operation of law.
b. This Agreement is personal to Employee and
Employee may not assign or delegate any part of his
rights or duties hereunder to any other person, except
that this Agreement shall inure to the benefit of and
be enforceable by Employee's legal representatives,
executors, administrators, heirs and beneficiaries.
14. Severability. If any provision of this Agreement
or the application thereof to any person or circumstance
shall to any extent be held to be invalid or unenforceable,
the remainder of this Agreement and the application of such
provision to persons or circumstances other than those as to
which it is held invalid or unenforceable shall not be
affected thereby, and each provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by
law.
15. Headings. The headings in this Agreement are
inserted for convenience of reference only and shall not in
any way affect the meaning or interpretation of this
Agreement.
16. Counterparts. This Agreement may be executed in
one or more identical counterparts, each of which shall be
deemed an original but all of which together shall
constitute one and the same instrument.
17. Waiver. Neither any course of dealing nor any
failure or neglect of either party hereto in any instance to
exercise any right, power or privilege hereunder or under
law shall constitute a waiver of such right, power or
privilege or of any other right, power or privilege or of
the same right, power or privilege in any other instance.
Without limiting the generality of the foregoing, Employee's
continued employment without objection shall not constitute
Employee's consent to, or a waiver of Employee's rights with
respect to, any circumstances constituting Good Reason. All
waivers by either party hereto must be contained in a
written instrument signed by the party to be charged
therewith, and, in the case of the Company, by its duly
authorized officer.
18. Entire Agreement. This instrument constitutes the
entire agreement of the parties in this matter and shall
supersede any other agreement between the parties, oral or
written, concerning the same subject matter.
19. Amendment. This Agreement may be amended only by
a writing which makes express reference to this Agreement as
the subject of such amendment and which is signed by
Employee and by a duly authorized officer of the Company.
20. Governing Law. In light of Company's and
Employee's substantial contacts with the State of Missouri,
the facts that the Company is headquartered in Missouri and
Employee resides in and/or reports to Company management in
Missouri, the parties' interests in ensuring that disputes
regarding the interpretation, validity and enforceability of
this Agreement are resolved on a uniform basis, and
Company's execution of, and the making of, this Agreement in
Missouri, the parties agree that: (i) any litigation
involving any noncompliance with or breach of the Agreement,
or regarding the interpretation, validity and/or
enforceability of the Agreement, shall be filed and
conducted exclusively in the state or federal courts in St.
Louis City or County, Missouri; and (ii) the Agreement shall
be interpreted in accordance with and governed by the laws
of the State of Missouri, without regard for any conflict of
law principles.
IN WITNESS WHEREOF, Employee and the Company have
executed this Agreement as of the day and year first above
written.
BROWN GROUP, INC.
By: /s/ Robert D. Pickle
----------------------------------
Vice President, General Counsel
and Corporate Secretary
EMPLOYEE
By: /s/ Gary M. Rich
----------------------------------
Exhibit A
RELEASE
RELEASE (the "Release") dated _____________, 199__ between
Gary M. Rich ("Employee") and Brown Group, Inc., a New York
corporation (as further defined in Section 13 of the Severance
Agreement, the "Company").
WHEREAS, the Company and Employee are parties to a Severance
Agreement dated ____________, 1998 (the "Severance Agreement"),
which provides certain protection to Employee during management
transition and thereafter and in the event there is any change in
corporate structure which results in a change in control of the
Company.
WHEREAS, the execution of this Release is a condition
precedent to, and material inducement to, the Company's provision
of certain benefits under the Severance Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Mutual Promises. The Company undertakes the
obligations contained in the Severance Agreement, which are in
addition to any compensation to which Employee might otherwise be
entitled, in exchange for Employee's promises and obligations
contained herein. The Company's obligations are undertaken in
lieu of any other severance benefits.
2. Release of Claims; Agreement Not to File Suit.
a. Employee, for and on behalf of himself and his heirs,
beneficiaries, executors, administrators, successors,
assigns and anyone claiming through or under any of the
foregoing, agrees to, and does, remise, release and forever
discharge the Company and its subsidiaries and affiliates,
each of their shareholders, directors, officers, employees,
agents and representatives, and its successors and assigns
(collectively, the "Company Released Persons"), from any and
all matters, claims, demands, damages, causes of action,
debts, liabilities, controversies, judgments and suits of
every kind and nature whatsoever, foreseen or unforeseen,
known or unknown, which have arisen or could arise from
matters which occurred prior to the date of this Release,
which matters include without limitation: (i) the matters
covered by the Severance Agreement and this Release, (ii)
Employee's employment, and/or termination from employment
with the Company, and (iii) any claims which might otherwise
arise in the future as a result of arrangements or
agreements in effect as of the date of this Release or the
continuance of such arrangements and agreements.
b. Employee, for and on behalf of himself and his heirs,
beneficiaries, executors, administrators, successors,
assigns, and anyone claiming through or under any of the
foregoing, agrees that he will not file or otherwise submit
any charge, claim, complaint, or action to any agency,
court, organization, or judicial forum (nor will Employee
permit any person, group of persons, or organization to take
such action on his behalf) against any Company Released
Person arising out of any actions or non-actions on the part
of any Company Released Person arising before the date of
this Release or any action taken after the date of this
Release pursuant to the Severance Arrangement. Employee
further agrees that in the event that any person or entity
should bring such a charge, claim, complaint, or action on
his behalf, he hereby waives and forfeits any right to
recovery under said claim and will exercise every good faith
effort to have such claim dismissed.
c. The charges, claims, complaints, matters, demands,
damages, and causes of action referenced in Sections 2(a)
and 2(b) include, but are not limited to: (i) any breach of
an actual or implied contract of employment between Employee
and any Company Released Person, (ii) any claim of unjust,
wrongful, or tortuous discharge (including any claim of
fraud, negligence, retaliation for whistleblowing, or
intentional infliction of emotional distress), (iii) any
claim of defamation or other common law action, or (iv) any
claims of violations arising under the Civil Rights Act of
1964, as amended, 42 U.S.C. 2000e et seq., the Age
Discrimination in Employment Act, 29 U.S.C. 621 et seq.,
the Americans with Disabilities Act of 1990, 42 U.S.C.
12101 et seq., the Fair Labor Standards Act of 1938, as
amended, 29 U.S.C. 201 et seq., the Rehabilitation Act of
1973, as amended, 29 U.S.C. 701 et seq., or of the Missouri
Human Rights Act, 213.000 R.S. Mo. et seq., the Missouri
Service Letter Statute, 209.140 R.S. Mo. or any other
relevant federal, state, or local statutes or ordinances, or
any claims for pay, vacation pay, insurance, or welfare
benefits or any other benefits of employment with any
Company Released Person arising from events occurring prior
to the date of this Release other than those payments and
benefits specifically provided herein.
d. This Release shall not affect Employee's right to any
governmental benefits payable under any Social Security or
Worker's Compensation law now or in the future.
3. Release of Benefit Claims. Employee, for and on behalf
of himself and his heirs, beneficiaries, executors,
administrators, successors, assigns and anyone claiming through
or under any of the foregoing, further releases and waives any
claims for pay, vacation pay, insurance or welfare benefits or
any other benefits of employment with any Company Released Person
arising from events occurring prior to the date of this Release
other than claims to the payments and benefits specifically
provided for in the Severance Agreement.
4. Revocation Period; Knowing and Voluntary Agreement.
a. Employee acknowledges that he was given a copy of this
Agreement when the Severance Agreement was executed and he,
therefore, has been given a period of at least forty-five
(45) days to consider whether or not to accept this
Agreement. Furthermore, Employee may revoke this Agreement
for seven (7) days following its execution.
b. Employee represents, declares and agrees that he
voluntarily accepts the payments described above for the
purposes of making a full and final compromise, adjustment
and settlement of all potential claims hereinabove
described. Employee hereby acknowledges that he has been
advised of the opportunity to consult an attorney and that
he understands the Release and the effect of signing the
Release.
5. Severability. If any provision of this Release or the
application thereof to any person or circumstance shall to any
extent be held to be invalid or unenforceable, the remainder of
this Release and the application of such provision to persons or
circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby, and each provision
of this Release shall be valid and enforceable to the fullest
extent permitted by law.
6. Headings. The headings in this Release are inserted
for convenience of reference only and shall not in any way affect
the meaning or interpretation of this Release.
7. Counterparts. This Release may be executed in one or
more identical counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the
same instrument.
8. Entire Agreement. This Release and Related Severance
Agreement constitutes the entire agreement of the parties in this
matter and shall supersede any other agreement between the
parties, oral or written, concerning the same subject matter.
9. Governing Law. This Release shall be governed by, and
construed and enforced in accordance with, the laws of the State
of Missouri, without reference to the conflict of laws rules of
such State.
IN WITNESS WHEREOF, Employee and the Company have executed
this Release as of the day and year first above written.
BROWN GROUP, INC.
By:-----------------------------
EMPLOYEE
By:-----------------------------
Gary M. Rich
Exhibit 10(i)
SEVERANCE AGREEMENT
SEVERANCE AGREEMENT (the "Agreement") dated July 27, 1998
("Effective Date") between Harry E. Rich ("Employee") and Brown
Group, Inc., a New York corporation (as further defined in
Section 14, the "Company").
WHEREAS, in order to accomplish its objectives, the Company
believes it is essential that members of its Operating Committee,
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, 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, his
covenant not to compete.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions.
a. "Cause" means (i) engaging by Employee in willful
misconduct which is materially injurious to the Company;
(ii) conviction of the Employee of a felony; (iii) engaging
by Employee in fraud, material dishonesty or gross
misconduct 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; or (v) habitual use by Employee of
narcotics or alcohol.
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.
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
shoes of more than $20,000,000 or is reasonably expected to
have 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 11.
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 shoes.
f. "Good Reason," when used with reference to a
voluntary termination by Employee of his 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; or (ii) a reduction in
Employee's status, position, responsibilities or duties.
g. "Term" means the period commencing on the
Effective Date and terminating three years after the
Effective Date; provided, however, that the Term shall
automatically be extended for successive additional one year
periods unless either party to this Agreement provides the
other party with notice of termination of this Agreement at
least six months prior to the expiration of such one year
periods.
h. "Termination Date" shall mean the effective date
as provided hereunder of the termination of Employee's
employment.
2. Termination During Term -- Change in Control Severance
Inapplicable.
a. Employee's employment may be terminated by the
Company 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.
b. Employee's employment may be terminated by the
Company 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 his 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
Sections 3.a. and 6 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 Sections 3
and 6 below.
e. If Employee voluntarily terminates his employment
during the Term, but prior to a Change in Control or more
than 24 months after a Change in Control, he shall notify
Employer in writing if he 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 Sections 3
and 6 below. If such voluntary termination is for other
than Good Reason, then Employee shall be entitled only to
the payments specified in Sections 3.a. and 6 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 his 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 to Employee his
base monthly salary at the highest rate in effect at any
time during the twelve months immediately preceding the
Termination Date (including his targeted bonus in the
current year) for the eighteen months succeeding his
Termination Date. Such amounts shall be paid in accordance
with the Company's regular pay period policy for its
employees.
c. The Company, at its expense, shall provide to
Employee for a period of eighteen months after the
Termination Date medical and/or dental coverage under the
medical and dental plans maintained by the Company. 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 eighteen
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 eighteen 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.
e. For purposes of determining Employee's benefit
under the Brown Group, Inc. Supplemental Employment
Retirement Plan, an additional 1.5 years of Credited Service
shall be credited to the Employee's actual or deemed
Credited Service.
4. Termination Within 24 Months After a Change in Control
Which Occurs During the Term.
a. Employee's employment may be terminated by the
Company 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.
b. Employee's employment may be terminated by the
Company 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 his employment with the
Company at any time.
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 Sections 5.a. and
6 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
Sections 5 and 6 below.
e. If Employee voluntarily terminates his employment
within 24 months after a Change in Control which occurs
during the Term, he shall notify the Company in writing if
he 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 Sections 5 and 6 below. If such
voluntary termination is for other than Good Reason, then
Employee shall be entitled only to the payments specified in
Sections 5.a. and 6 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 his 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 his Termination Date an amount
equal to 250 percent of the sum of (i) his base annual
salary at the highest rate in effect at any time during the
twelve months immediately preceding the Termination Date,
and (ii) his targeted bonus for the current year. In
addition, the Company shall pay to Employee his targeted
bonus payment for the year of termination prorated to the
Termination Date.
c. The Company, at its expense, shall provide to
Employee for a period of thirty months after the Termination
Date medical and/or dental coverage under the medical and
dental plans maintained by the Company. 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
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.
e. For purposes of determining Employee's benefit
under the Brown Group, Inc. Supplemental Employment
Retirement Plan, an additional 2.5 years of Credited Service
shall be credited to the Employee's actual or deemed
Credited Service.
6. Termination at Any Time. Notwithstanding anything in
this Agreement to the contrary and in addition to any benefit
provided under Sections 3.e. or 5.e. above, for purposes of
determining Employee's benefit under the Brown Group, Inc.
Supplemental Employment Retirement Plan, an additional 10 (ten)
years of Credited Service shall be credited to the Employee's
actual or deemed Credited Service. This provision shall continue
in effect after the Term has expired.
7. 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.
8. 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.
9. Release. Notwithstanding anything to the contrary
stated in this Agreement, no benefits will be paid 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 in the form
attached as Exhibit A.
10. Covenant Not to Compete. Benefits payable pursuant to
Sections 3.b, 3.c, and 3.e are subject to the following
restrictions.
a. Post-Termination Restrictions.
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 himself in a position following his
employment with Company in which the confidentiality of
Company's Confidential Information might somehow be
compromised.
ii. Accordingly, Employee agrees that, for
eighteen (18) months after a Termination Date described in
the second sentence of Section 2.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 shoe industry in the
United States in competition with the Company, for any
Competitor;
B. hold any executive- or managerial-level
position with any Competitor in the United States;
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
shoe industry in the United States;
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;
and
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.
b. Acknowledgment Regarding Restrictions. Employee
recognizes and agrees that the restraints contained in
Section 10.a. (both separately and in total) are reasonable
and should be fully enforceable in view of the high-level
positions Employee has had with the Company, the national
and international nature of both the Company's business and
competition in the shoe industry, and the Company's
legitimate interests in protecting its Confidential
Information and its customer goodwill and relationships.
Employee specifically hereby acknowledges and confirms that
he is willing and intends to, and will, abide fully by the
terms of Section 10.a. of this Agreement. Employee further
agrees that the Company would not have adequate protection
if Employee were permitted to work for its competitors in
violation of the terms of this Agreement since the Company
would be unable to verify whether (i) its Confidential
Information was being disclosed and/or misused, and
(ii) Employee was involved in diverting or helping to divert
the Company's customers and/or its customer goodwill.
c. Company's Right to Injunctive Relief. In the
event of a breach or threatened breach of any of Employee's
duties and obligations under the terms and provisions of
Section 10.a. of this Agreement, the Company shall be
entitled, in addition to any other legal or equitable
remedies it may have in connection therewith (including any
right to damages that it may suffer), to temporary,
preliminary and permanent injunctive relief restraining such
breach or threatened breach. Employee hereby expressly
acknowledges that the harm which might result to Company's
business as a result of noncompliance by Employee with any
of the provisions of Section 10.a. would be largely
irreparable. Employee specifically agrees that if there is
a question as to the enforceability of any of the provisions
of Section 10.a. hereof, Employee will not engage in any
conduct inconsistent with or contrary to such Section until
after the question has been resolved by a final judgment of
a court of competent jurisdiction. Employee undertakes and
agrees that if Employee breaches or threatens to breach the
Agreement, Employee shall be liable for any attorneys' fees
and costs incurred by Company in enforcing its rights
hereunder.
d. Employee Agreement to Disclose this Agreement.
Employee agrees to disclose, during the eighteen month
period following a Termination Date described in the second
sentence of Section 2.d, the terms of this Section 10 to any
potential future employer.
11. Confidential Information. The Employee acknowledges
and confirms that certain data and other information (whether in
human or machine readable form) that comes into his possession or
knowledge (whether before or after the date of this Employment
Agreement) and which was obtained from the Company, or obtained
by the Employee for or on behalf of the Company, and which is
identified herein is the secret, confidential property of the
Company (the "Confidential Information"). This Confidential
Information includes, but is not limited to:
a. lists or other identification of customers or
prospective customers of the Company (and key individuals
employed or engaged by such parties);
b. lists or other identification of sources or
prospective sources of the Company's products or components
thereof (and key individuals employed or engaged by such
parties);
c. all compilations of information, correspondence,
designs, drawings, files, formulae, lists, machines, maps,
methods, models, notes or other writings, plans, records,
regulatory compliance procedures, reports, specialized or
technical data, schematics, source code, object code,
documentation, and software used in connection with the
development, manufacture, fabrication, assembly, marketing
and sale of the Company's products;
d. financial, sales and marketing data relating to
the Company or to the industry or other areas pertaining to
the Company's activities and contemplated activities
(including, without limitation, manufacturing,
transportation, distribution and sales costs and non-public
pricing information);
e. equipment, materials, procedures, processes, and
techniques used in, or related to, the development,
manufacture, assembly, fabrication or other production and
quality control of the Company's products and services;
f. the Company's relations with its customers,
prospective customers, suppliers and prospective suppliers
and the nature and type of products or services rendered to
such customers (or proposed to be rendered to prospective
customers);
g. the Company's relations with its employees
(including, without limitation, salaries, job
classifications and skill levels); and
h. any other information designated by the Company to
be confidential, secret and/or proprietary (including
without limitation, information provided by customers or
suppliers of the Company).
Notwithstanding the foregoing, the term "Confidential
Information" shall not consist of any data or other information
which has been made publicly available or otherwise placed in the
public domain other than by the Employee in violation of this
Employment Agreement.
12. Certain Additional Payments by the Company.
a. Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event
it shall be determined that any payment or distribution by
the Company to or for the benefit of the Employee (whether
paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined
without regard to any additional payments required under
this Section) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any interest or penalties
are incurred by the Employee with respect to such excise tax
(such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Employee of all taxes
(including any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Employee retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this
Section 12.a., if it shall be determined that the Employee
is entitled to a Gross-Up Payment, but that the Payments do
not exceed 110 percent of the greatest amount (the "Reduced
Amount") that could be paid to the Employee such that the
receipt of Payments would not give rise to any Excise Tax,
then no Gross-Up Payment shall be made to the Employee, and
the Payments, in the aggregate, shall be reduced to the
Reduced Amount.
b. Subject to the provisions of Section 12.c., all
determinations required to be made under this Section 12,
including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be
made by Ernst & Young or such other certified public
accounting firm as may be designated by the Employee (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Employee within 15
business days of the receipt of notice from the Employee
that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the
Employee shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this
Section 12, shall be paid by the Company to the Employee
within five days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm
shall be binding upon the Company and the Employee. As a
result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should
have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section
12.c. and the Employee thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee.
c. The Employee shall notify the Company in writing
of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the
Employee is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Employee
shall not pay such claim prior to the expiration of the 30-
day period following the date on which the Employee gives
such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Employee in
writing prior to the expiration of such period that it
desires to contest such claim, the Employee shall:
i. give the Company any information reasonably
requested by the Company relating to such claim,
ii. take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including,
without limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company,
iii. cooperate with the Company in good faith in
order to effectively contest such claim, and
iv. permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Employee harmless,
on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto)
imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing
provisions of this Section 12.c., the Company shall control
all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such
claim and may, at its sole option, either direct the
Employee to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the
Employee agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the
Company directs the Employee to pay such claim and sue for a
refund, the Company shall advance the amount of such payment
to the Employee, on an interest-free basis and shall
indemnify and hold Employee harmless, on an after-tax basis,
from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such
advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of
the statute of limitations relating to payment of taxes for
the taxable year of the Employee with respect to which such
contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control
of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the
Employee shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
d. If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 12.c., the
Employee becomes entitled to receive any refund with respect
to such claim, the Employee shall (subject to the Company's
complying with the requirements of Section 12.c.) promptly
pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Employee of an
amount advanced by the Company pursuant to Section 12.c., a
determination is made that the Employee shall not be
entitled to any refund with respect to such claim and the
Company does not notify the Employee in writing of its
intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to
be paid.
13. Notice. All notices hereunder shall be in writing and
shall be deemed to have been duly given (a) when delivered
personally or by courier, or (b) on the third business day
following the mailing thereof by registered or certified mail,
postage prepaid, or (c) on the first business day following the
mailing thereof by overnight delivery service, in each case
addressed as set forth below:
a. If to the Company
Brown Group, Inc.
8300 Maryland Avenue
St. Louis, Missouri 63166-0029
Attention: Chief Executive Officer
b. If to Employee:
Harry E. Rich
101 Fair Oaks
Ladue, MO 63124
Any party may change the address to which notices are to be
addressed by giving the other party written notice in the manner
herein set forth.
14. Successors; Binding Agreement.
a. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business
and/or assets of the Company, upon or prior to such
succession, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
Company would have been required to perform it if no such
succession had taken place. A copy of such assumption and
agreement shall be delivered to Employee promptly after its
execution by the successor. Failure of the Company to
obtain such agreement upon or prior to the effectiveness of
any such succession shall be a breach of this Agreement and
shall entitle Employee to benefits from the Company in the
same amounts and on the same terms as Employee would be
entitled hereunder if Employee terminated his employment for
Good Reason. For purposes of the preceding sentence, the
date on which any such succession becomes effective shall be
deemed the Termination Date. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid
which executes and delivers the agreement provided for in
this Section 14.a. or which otherwise becomes bound by the
terms and provisions of this Agreement by operation of law.
b. This Agreement is personal to Employee and
Employee may not assign or delegate any part of his rights
or duties hereunder to any other person, except that this
Agreement shall inure to the benefit of and be enforceable
by Employee's legal representatives, executors,
administrators, heirs and beneficiaries.
15. Severability. If any provision of this Agreement or
the application thereof to any person or circumstance shall to
any extent be held to be invalid or unenforceable, the remainder
of this Agreement and the application of such provision to
persons or circumstances other than those as to which it is held
invalid or unenforceable shall not be affected thereby, and each
provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
16. Headings. The headings in this Agreement are inserted
for convenience of reference only and shall not in any way affect
the meaning or interpretation of this Agreement.
17. Counterparts. This Agreement may be executed in one or
more identical counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the
same instrument.
18. Waiver. Neither any course of dealing nor any failure
or neglect of either party hereto in any instance to exercise any
right, power or privilege hereunder or under law shall constitute
a waiver of such right, power or privilege or of any other right,
power or privilege or of the same right, power or privilege in
any other instance. Without limiting the generality of the
foregoing, Employee's continued employment without objection
shall not constitute Employee's consent to, or a waiver of
Employee's rights with respect to, any circumstances constituting
Good Reason. All waivers by either party hereto must be
contained in a written instrument signed by the party to be
charged therewith, and, in the case of the Company, by its duly
authorized officer.
19. Entire Agreement. This instrument constitutes the
entire agreement of the parties in this matter and shall
supersede any other agreement between the parties, oral or
written, concerning the same subject matter.
20. Amendment. This Agreement may be amended only by a
writing which makes express reference to this Agreement as the
subject of such amendment and which is signed by Employee and by
a duly authorized officer of the Company.
21. Governing Law. In light of Company's and Employee's
substantial contacts with the State of Missouri, the facts that
the Company is headquartered in Missouri and Employee resides in
and/or reports to Company management in Missouri, the parties'
interests in ensuring that disputes regarding the interpretation,
validity and enforceability of this Agreement are resolved on a
uniform basis, and Company's execution of, and the making of,
this Agreement in Missouri, the parties agree that: (i) any
litigation involving any noncompliance with or breach of the
Agreement, or regarding the interpretation, validity and/or
enforceability of the Agreement, shall be filed and conducted
exclusively in the state or federal courts in St. Louis City or
County, Missouri; and (ii) the Agreement shall be interpreted in
accordance with and governed by the laws of the State of
Missouri, without regard for any conflict of law principles.
IN WITNESS WHEREOF, Employee and the Company have executed
this Agreement as of the day and year first above written.
BROWN GROUP, INC.
By: /s/ Robert D. Pickle.
--------------------------------
Vice President, General Counsel
And Corporate Secretary
EMPLOYEE
By: /s/ Harry E. Rich
------------------------------
Exhibit A
RELEASE
RELEASE (the "Release") dated _____________, 199__ between
Harry E. Rich ("Employee") and Brown Group, Inc., a New York
corporation (as further defined in Section 14 of the Severance
Agreement, the "Company").
WHEREAS, the Company and Employee are parties to a Severance
Agreement dated ____________, 1998 (the "Severance Agreement"),
which provides certain protection to Employee during management
transition and thereafter and in the event there is any change in
corporate structure which results in a change in control of the
Company.
WHEREAS, the execution of this Release is a condition
precedent to, and material inducement to, the Company's provision
of certain benefits under the Severance Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Mutual Promises. The Company undertakes the
obligations contained in the Severance Agreement, which are in
addition to any compensation to which Employee might otherwise be
entitled, in exchange for Employee's promises and obligations
contained herein. The Company's obligations are undertaken in
lieu of any other severance benefits.
2. Release of Claims; Agreement Not to File Suit.
a. Employee, for and on behalf of himself and his heirs,
beneficiaries, executors, administrators, successors,
assigns and anyone claiming through or under any of the
foregoing, agrees to, and does, remise, release and forever
discharge the Company and its subsidiaries and affiliates,
each of their shareholders, directors, officers, employees,
agents and representatives, and its successors and assigns
(collectively, the "Company Released Persons"), from any and
all matters, claims, demands, damages, causes of action,
debts, liabilities, controversies, judgments and suits of
every kind and nature whatsoever, foreseen or unforeseen,
known or unknown, which have arisen or could arise from
matters which occurred prior to the date of this Release,
which matters include without limitation: (i) the matters
covered by the Severance Agreement and this Release, (ii)
Employee's employment, and/or termination from employment
with the Company, and (iii) any claims which might otherwise
arise in the future as a result of arrangements or
agreements in effect as of the date of this Release or the
continuance of such arrangements and agreements.
b. Employee, for and on behalf of himself and his heirs,
beneficiaries, executors, administrators, successors,
assigns, and anyone claiming through or under any of the
foregoing, agrees that he will not file or otherwise submit
any charge, claim, complaint, or action to any agency,
court, organization, or judicial forum (nor will Employee
permit any person, group of persons, or organization to take
such action on his behalf) against any Company Released
Person arising out of any actions or non-actions on the part
of any Company Released Person arising before the date of
this Release or any action taken after the date of this
Release pursuant to the Severance Arrangement. Employee
further agrees that in the event that any person or entity
should bring such a charge, claim, complaint, or action on
his behalf, he hereby waives and forfeits any right to
recovery under said claim and will exercise every good faith
effort to have such claim dismissed.
c. The charges, claims, complaints, matters, demands,
damages, and causes of action referenced in Sections 2(a)
and 2(b) include, but are not limited to: (i) any breach of
an actual or implied contract of employment between Employee
and any Company Released Person, (ii) any claim of unjust,
wrongful, or tortuous discharge (including any claim of
fraud, negligence, retaliation for whistleblowing, or
intentional infliction of emotional distress), (iii) any
claim of defamation or other common law action, or (iv) any
claims of violations arising under the Civil Rights Act of
1964, as amended, 42 U.S.C. 2000e et seq., the Age
Discrimination in Employment Act, 29 U.S.C. 621 et seq.,
the Americans with Disabilities Act of 1990, 42 U.S.C.
12101 et seq., the Fair Labor Standards Act of 1938, as
amended, 29 U.S.C. 201 et seq., the Rehabilitation Act of
1973, as amended, 29 U.S.C. 701 et seq., or of the Missouri
Human Rights Act, 213.000 R.S. Mo. et seq., the Missouri
Service Letter Statute, 209.140 R.S. Mo. or any other
relevant federal, state, or local statutes or ordinances, or
any claims for pay, vacation pay, insurance, or welfare
benefits or any other benefits of employment with any
Company Released Person arising from events occurring prior
to the date of this Release other than those payments and
benefits specifically provided herein.
d. This Release shall not affect Employee's right to any
governmental benefits payable under any Social Security or
Worker's Compensation law now or in the future.
3. Release of Benefit Claims. Employee, for and on behalf
of himself and his heirs, beneficiaries, executors,
administrators, successors, assigns and anyone claiming through
or under any of the foregoing, further releases and waives any
claims for pay, vacation pay, insurance or welfare benefits or
any other benefits of employment with any Company Released Person
arising from events occurring prior to the date of this Release
other than claims to the payments and benefits specifically
provided for in the Severance Agreement.
4. Revocation Period; Knowing and Voluntary Agreement.
a. Employee acknowledges that he was given a copy of this
Agreement when the Severance Agreement was executed and he,
therefore, has been given a period of at least forty-five
(45) days to consider whether or not to accept this
Agreement. Furthermore, Employee may revoke this Agreement
for seven (7) days following its execution.
b. Employee represents, declares and agrees that he
voluntarily accepts the payments described above for the
purposes of making a full and final compromise, adjustment
and settlement of all potential claims hereinabove
described. Employee hereby acknowledges that he has been
advised of the opportunity to consult an attorney and that
he understands the Release and the effect of signing the
Release.
5. Severability. If any provision of this Release or the
application thereof to any person or circumstance shall to any
extent be held to be invalid or unenforceable, the remainder of
this Release and the application of such provision to persons or
circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby, and each provision
of this Release shall be valid and enforceable to the fullest
extent permitted by law.
6. Headings. The headings in this Release are inserted
for convenience of reference only and shall not in any way affect
the meaning or interpretation of this Release.
7. Counterparts. This Release may be executed in one or
more identical counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the
same instrument.
8. Entire Agreement. This Release and Related Severance
Agreement constitutes the entire agreement of the parties in this
matter and shall supersede any other agreement between the
parties, oral or written, concerning the same subject matter.
9. Governing Law. This Release shall be governed by, and
construed and enforced in accordance with, the laws of the State
of Missouri, without reference to the conflict of laws rules of
such State.
IN WITNESS WHEREOF, Employee and the Company have executed
this Release as of the day and year first above written.
BROWN GROUP, INC.
By: -----------------------------
EMPLOYEE
By: ---------------------------
Harry E. Rich
Exhibit 10(j)
SEVERANCE AGREEMENT
SEVERANCE AGREEMENT (the "Agreement") dated July 27,
1998 ("Effective Date") between David H. Schwartz
("Employee") and Brown Group, Inc., a New York corporation
(as further defined in Section 13, the "Company").
WHEREAS, in order to accomplish its objectives, the
Company believes it is essential that members of its
Operating Committee, 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, 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, his covenant not to compete.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions.
a. "Cause" means (i) engaging by Employee in
willful misconduct which is materially injurious to the
Company; (ii) conviction of the Employee of a felony;
(iii) engaging by Employee in fraud, material
dishonesty or gross misconduct 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; or (v) habitual use by Employee of narcotics
or alcohol.
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.
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 shoes of more than $20,000,000 or is
reasonably expected to have 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 shoes.
f. "Good Reason," when used with reference to a
voluntary termination by Employee of his 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; or
(ii) a reduction in Employee's status, position,
responsibilities or duties.
g. "Term" means the period commencing on the
Effective Date and terminating three years after the
Effective Date; provided, however, that the Term shall
automatically be extended for successive additional one
year periods unless either party to this Agreement
provides the other party with notice of termination of
this Agreement at least six months prior to the
expiration of such one year periods.
h. "Termination Date" shall mean the effective
date as provided hereunder of the termination of
Employee's employment.
2. Termination During Term -- Change in Control
Severance Inapplicable.
a. Employee's employment may be terminated by
the Company 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.
b. Employee's employment may be terminated by
the Company 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 his 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 his
employment during the Term, but prior to a Change in
Control or more than 24 months after a Change in
Control, he shall notify Employer in writing if he
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.
3. Payments and Benefits Upon Termination During Term
- -- Change in Control Severance Inapplicable. To the extent
provided in Section 2 above, upon termination of his
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 to Employee
his base monthly salary at the highest rate in effect
at any time during the twelve months immediately
preceding the Termination Date (including his targeted
bonus in the current year) for the eighteen months
succeeding his Termination Date. Such amounts shall be
paid in accordance with the Company's regular pay
period policy for its employees.
c. The Company, at its expense, shall provide to
Employee for a period of eighteen months after the
Termination Date medical and/or dental coverage under
the medical and dental plans maintained by the Company.
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 eighteen 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
eighteen 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.
e. For purposes of determining Employee's
benefit under the Brown Group, Inc. Supplemental
Employment Retirement Plan, an additional 1.5 years of
Credited Service shall be credited to the Employee's
actual or deemed Credited Service.
4. Termination Within 24 Months After a Change in
Control Which Occurs During the Term.
a. Employee's employment may be terminated by
the Company 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.
b. Employee's employment may be terminated by
the Company 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 his employment with
the Company at any time.
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 his
employment within 24 months after a Change in Control
which occurs during the Term, he shall notify the
Company in writing if he 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 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 his
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 his Termination Date
an amount equal to 250 percent of the sum of (i) his
base annual salary at the highest rate in effect at any
time during the twelve months immediately preceding the
Termination Date, and (ii) his targeted bonus for the
current year. In addition, the Company shall pay to
Employee his targeted bonus payment for the year of
termination prorated to the Termination Date.
c. The Company, at its expense, shall provide to
Employee for a period of thirty months after the
Termination Date medical and/or dental coverage under
the medical and dental plans maintained by the Company.
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
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.
e. For purposes of determining Employee's
benefit under the Brown Group, Inc. Supplemental
Employment Retirement Plan, an additional 2.5 years of
Credited Service shall be credited to the Employee's
actual or deemed Credited Service.
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 paid 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
in the form attached as Exhibit A.
9. Covenant Not to Compete. Benefits payable
pursuant to Sections 3.b, 3.c, and 3.e are subject to the
following restrictions.
a. Post-Termination Restrictions.
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
himself in a position following his employment with
Company in which the confidentiality of Company's
Confidential Information might somehow be compromised.
ii. Accordingly, Employee agrees that, for
eighteen (18) months after a Termination Date described
in the second sentence of Section 2.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 shoe industry in
the United States in competition with the Company,
for any Competitor;
B. hold any executive- or
managerial-level position with any Competitor in
the United States;
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 shoe industry in
the United States;
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; and
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.
b. Acknowledgment Regarding Restrictions.
Employee recognizes and agrees that the restraints
contained in Section 9.a. (both separately and in
total) are reasonable and should be fully enforceable
in view of the high-level positions Employee has had
with the Company, the national and international nature
of both the Company's business and competition in the
shoe industry, and the Company's legitimate interests
in protecting its Confidential Information and its
customer goodwill and relationships. Employee
specifically hereby acknowledges and confirms that he
is willing and intends to, and will, abide fully by the
terms of Section 9.a. of this Agreement. Employee
further agrees that the Company would not have adequate
protection if Employee were permitted to work for its
competitors in violation of the terms of this Agreement
since the Company would be unable to verify whether
(i) its Confidential Information was being disclosed
and/or misused, and (ii) Employee was involved in
diverting or helping to divert the Company's customers
and/or its customer goodwill.
c. Company's Right to Injunctive Relief. In the
event of a breach or threatened breach of any of
Employee's duties and obligations under the terms and
provisions of Section 9.a. of this Agreement, the
Company shall be entitled, in addition to any other
legal or equitable remedies it may have in connection
therewith (including any right to damages that it may
suffer), to temporary, preliminary and permanent
injunctive relief restraining such breach or threatened
breach. Employee hereby expressly acknowledges that
the harm which might result to Company's business as a
result of noncompliance by Employee with any of the
provisions of Section 9.a. would be largely
irreparable. Employee specifically agrees that if
there is a question as to the enforceability of any of
the provisions of Section 9.a. hereof, Employee will
not engage in any conduct inconsistent with or contrary
to such Section until after the question has been
resolved by a final judgment of a court of competent
jurisdiction. Employee undertakes and agrees that if
Employee breaches or threatens to breach the Agreement,
Employee shall be liable for any attorneys' fees and
costs incurred by Company in enforcing its rights
hereunder.
d. Employee Agreement to Disclose this
Agreement. Employee agrees to disclose, during the
eighteen month period following a Termination Date
described in the second sentence of Section 2.d, the
terms of this Section 9 to any potential future
employer.
10. Confidential Information. The Employee
acknowledges and confirms that certain data and other
information (whether in human or machine readable form) that
comes into his possession or knowledge (whether before or
after the date of this Employment Agreement) and which was
obtained from the Company, or obtained by the Employee for
or on behalf of the Company, and which is identified herein
is the secret, confidential property of the Company (the
"Confidential Information"). This Confidential Information
includes, but is not limited to:
a. lists or other identification of customers or
prospective customers of the Company (and key
individuals employed or engaged by such parties);
b. lists or other identification of sources or
prospective sources of the Company's products or
components thereof (and key individuals employed or
engaged by such parties);
c. all compilations of information,
correspondence, designs, drawings, files, formulae,
lists, machines, maps, methods, models, notes or other
writings, plans, records, regulatory compliance
procedures, reports, specialized or technical data,
schematics, source code, object code, documentation,
and software used in connection with the development,
manufacture, fabrication, assembly, marketing and sale
of the Company's products;
d. financial, sales and marketing data relating
to the Company or to the industry or other areas
pertaining to the Company's activities and contemplated
activities (including, without limitation,
manufacturing, transportation, distribution and sales
costs and non-public pricing information);
e. equipment, materials, procedures, processes,
and techniques used in, or related to, the development,
manufacture, assembly, fabrication or other production
and quality control of the Company's products and
services;
f. the Company's relations with its customers,
prospective customers, suppliers and prospective
suppliers and the nature and type of products or
services rendered to such customers (or proposed to be
rendered to prospective customers);
g. the Company's relations with its employees
(including, without limitation, salaries, job
classifications and skill levels); and
h. any other information designated by the
Company to be confidential, secret and/or proprietary
(including without limitation, information provided by
customers or suppliers of the Company).
Notwithstanding the foregoing, the term "Confidential
Information" shall not consist of any data or other
information which has been made publicly available or
otherwise placed in the public domain other than by the
Employee in violation of this Employment Agreement.
11. Certain Additional Payments by the Company.
a. Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the
event it shall be determined that any payment or
distribution by the Company to or for the benefit of
the Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any
additional payments required under this Section) (a
"Payment") would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), or any interest or penalties
are incurred by the Employee with respect to such
excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Employee
shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after
payment by the Employee of all taxes (including any
interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Employee retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of
this Section 11.a., if it shall be determined that the
Employee is entitled to a Gross-Up Payment, but that
the Payments do not exceed 110 percent of the greatest
amount (the "Reduced Amount") that could be paid to the
Employee such that the receipt of Payments would not
give rise to any Excise Tax, then no Gross-Up Payment
shall be made to the Employee, and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
b. Subject to the provisions of Section 11.c.,
all determinations required to be made under this
Section 11, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving
at such determination, shall be made by Ernst & Young
or such other certified public accounting firm as may
be designated by the Employee (the "Accounting Firm")
which shall provide detailed supporting calculations
both to the Company and the Employee within 15 business
days of the receipt of notice from the Employee that
there has been a Payment, or such earlier time as is
requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for
the individual, entity or group effecting the Change of
Control, the Employee shall appoint another nationally
recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 11, shall be paid
by the Company to the Employee within five days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding
upon the Company and the Employee. As a result of the
uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant
to Section 11.c. and the Employee thereafter is
required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to
or for the benefit of the Employee.
c. The Employee shall notify the Company in
writing of any claim by the Internal Revenue Service
that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than
ten business days after the Employee is informed in
writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such
claim is requested to be paid. The Employee shall not
pay such claim prior to the expiration of the 30-day
period following the date on which the Employee gives
such notice to the Company (or such shorter period
ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies
the Employee in writing prior to the expiration of such
period that it desires to contest such claim, the
Employee shall:
i. give the Company any information
reasonably requested by the Company relating to
such claim,
ii. take such action in connection with
contesting such claim as the Company shall
reasonably request in writing from time to time,
including, without limitation, accepting legal
representation with respect to such claim by an
attorney reasonably selected by the Company,
iii. cooperate with the Company in good faith
in order to effectively contest such claim, and
iv. permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with
such contest and shall indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with
respect thereto) imposed as a result of such
representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this
Section 11.c., the Company shall control all
proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct
the Employee to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner,
and the Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine;
provided, however, that if the Company directs the
Employee to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the
Employee, on an interest-free basis and shall indemnify
and hold Employee harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to
payment of taxes for the taxable year of the Employee
with respect to which such contested amount is claimed
to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Employee
shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
d. If, after the receipt by the Employee of an
amount advanced by the Company pursuant to
Section 11.c., the Employee becomes entitled to receive
any refund with respect to such claim, the Employee
shall (subject to the Company's complying with the
requirements of Section 11.c.) promptly pay to the
Company the amount of such refund (together with any
interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant
to Section 11.c., a determination is made that the
Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify
the Employee in writing of its intent to contest such
denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be
paid.
12. Notice. All notices hereunder shall be in writing
and shall be deemed to have been duly given (a) when
delivered personally or by courier, or (b) on the third
business day following the mailing thereof by registered or
certified mail, postage prepaid, or (c) on the first
business day following the mailing thereof by overnight
delivery service, in each case addressed as set forth below:
a. If to the Company
Brown Group, Inc.
8300 Maryland Avenue
St. Louis, Missouri 63166-0029
Attention: Chief Executive Officer
b. If to Employee:
David H. Schwartz
732 The Hamptons Lane
Town and Country, MO 63017-5901
Any party may change the address to which notices are to be
addressed by giving the other party written notice in the
manner herein set forth.
13. Successors; Binding Agreement.
a. The Company will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company, upon or
prior to such succession, to expressly assume and agree
to perform this Agreement in the same manner and to the
same extent that the Company would have been required
to perform it if no such succession had taken place. A
copy of such assumption and agreement shall be
delivered to Employee promptly after its execution by
the successor. Failure of the Company to obtain such
agreement upon or prior to the effectiveness of any
such succession shall be a breach of this Agreement and
shall entitle Employee to benefits from the Company in
the same amounts and on the same terms as Employee
would be entitled hereunder if Employee terminated his
employment for Good Reason. For purposes of the
preceding sentence, the date on which any such
succession becomes effective shall be deemed the
Termination Date. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid
which executes and delivers the agreement provided for
in this Section 13.a. or which otherwise becomes bound
by the terms and provisions of this Agreement by
operation of law.
b. This Agreement is personal to Employee and
Employee may not assign or delegate any part of his
rights or duties hereunder to any other person, except
that this Agreement shall inure to the benefit of and
be enforceable by Employee's legal representatives,
executors, administrators, heirs and beneficiaries.
14. Severability. If any provision of this Agreement
or the application thereof to any person or circumstance
shall to any extent be held to be invalid or unenforceable,
the remainder of this Agreement and the application of such
provision to persons or circumstances other than those as to
which it is held invalid or unenforceable shall not be
affected thereby, and each provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by
law.
15. Headings. The headings in this Agreement are
inserted for convenience of reference only and shall not in
any way affect the meaning or interpretation of this
Agreement.
16. Counterparts. This Agreement may be executed in
one or more identical counterparts, each of which shall be
deemed an original but all of which together shall
constitute one and the same instrument.
17. Waiver. Neither any course of dealing nor any
failure or neglect of either party hereto in any instance to
exercise any right, power or privilege hereunder or under
law shall constitute a waiver of such right, power or
privilege or of any other right, power or privilege or of
the same right, power or privilege in any other instance.
Without limiting the generality of the foregoing, Employee's
continued employment without objection shall not constitute
Employee's consent to, or a waiver of Employee's rights with
respect to, any circumstances constituting Good Reason. All
waivers by either party hereto must be contained in a
written instrument signed by the party to be charged
therewith, and, in the case of the Company, by its duly
authorized officer.
18. Entire Agreement. This instrument constitutes the
entire agreement of the parties in this matter and shall
supersede any other agreement between the parties, oral or
written, concerning the same subject matter.
19. Amendment. This Agreement may be amended only by
a writing which makes express reference to this Agreement as
the subject of such amendment and which is signed by
Employee and by a duly authorized officer of the Company.
20. Governing Law. In light of Company's and
Employee's substantial contacts with the State of Missouri,
the facts that the Company is headquartered in Missouri and
Employee resides in and/or reports to Company management in
Missouri, the parties' interests in ensuring that disputes
regarding the interpretation, validity and enforceability of
this Agreement are resolved on a uniform basis, and
Company's execution of, and the making of, this Agreement in
Missouri, the parties agree that: (i) any litigation
involving any noncompliance with or breach of the Agreement,
or regarding the interpretation, validity and/or
enforceability of the Agreement, shall be filed and
conducted exclusively in the state or federal courts in St.
Louis City or County, Missouri; and (ii) the Agreement shall
be interpreted in accordance with and governed by the laws
of the State of Missouri, without regard for any conflict of
law principles.
IN WITNESS WHEREOF, Employee and the Company have
executed this Agreement as of the day and year first above
written.
BROWN GROUP, INC.
By: /s/ Robert D. Pickle.
-------------------------------
Vice President, General Counsel
and Corporate Secretary
EMPLOYEE
By: /s/ David H. Schwartz
-------------------------------
Exhibit A
RELEASE
RELEASE (the "Release") dated _____________, 199__ between
David H. Schwartz ("Employee") and Brown Group, Inc., a New York
corporation (as further defined in Section 13 of the Severance
Agreement, the "Company").
WHEREAS, the Company and Employee are parties to a Severance
Agreement dated ____________, 1998 (the "Severance Agreement"),
which provides certain protection to Employee during management
transition and thereafter and in the event there is any change in
corporate structure which results in a change in control of the
Company.
WHEREAS, the execution of this Release is a condition
precedent to, and material inducement to, the Company's provision
of certain benefits under the Severance Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Mutual Promises. The Company undertakes the
obligations contained in the Severance Agreement, which are in
addition to any compensation to which Employee might otherwise be
entitled, in exchange for Employee's promises and obligations
contained herein. The Company's obligations are undertaken in
lieu of any other severance benefits.
2. Release of Claims; Agreement Not to File Suit.
a. Employee, for and on behalf of himself and his heirs,
beneficiaries, executors, administrators, successors,
assigns and anyone claiming through or under any of the
foregoing, agrees to, and does, remise, release and forever
discharge the Company and its subsidiaries and affiliates,
each of their shareholders, directors, officers, employees,
agents and representatives, and its successors and assigns
(collectively, the "Company Released Persons"), from any and
all matters, claims, demands, damages, causes of action,
debts, liabilities, controversies, judgments and suits of
every kind and nature whatsoever, foreseen or unforeseen,
known or unknown, which have arisen or could arise from
matters which occurred prior to the date of this Release,
which matters include without limitation: (i) the matters
covered by the Severance Agreement and this Release, (ii)
Employee's employment, and/or termination from employment
with the Company, and (iii) any claims which might otherwise
arise in the future as a result of arrangements or
agreements in effect as of the date of this Release or the
continuance of such arrangements and agreements.
b. Employee, for and on behalf of himself and his heirs,
beneficiaries, executors, administrators, successors,
assigns, and anyone claiming through or under any of the
foregoing, agrees that he will not file or otherwise submit
any charge, claim, complaint, or action to any agency,
court, organization, or judicial forum (nor will Employee
permit any person, group of persons, or organization to take
such action on his behalf) against any Company Released
Person arising out of any actions or non-actions on the part
of any Company Released Person arising before the date of
this Release or any action taken after the date of this
Release pursuant to the Severance Arrangement. Employee
further agrees that in the event that any person or entity
should bring such a charge, claim, complaint, or action on
his behalf, he hereby waives and forfeits any right to
recovery under said claim and will exercise every good faith
effort to have such claim dismissed.
c. The charges, claims, complaints, matters, demands,
damages, and causes of action referenced in Sections 2(a)
and 2(b) include, but are not limited to: (i) any breach of
an actual or implied contract of employment between Employee
and any Company Released Person, (ii) any claim of unjust,
wrongful, or tortuous discharge (including any claim of
fraud, negligence, retaliation for whistleblowing, or
intentional infliction of emotional distress), (iii) any
claim of defamation or other common law action, or (iv) any
claims of violations arising under the Civil Rights Act of
1964, as amended, 42 U.S.C. 2000e et seq., the Age
Discrimination in Employment Act, 29 U.S.C. 621 et seq.,
the Americans with Disabilities Act of 1990, 42 U.S.C.
12101 et seq., the Fair Labor Standards Act of 1938, as
amended, 29 U.S.C. 201 et seq., the Rehabilitation Act of
1973, as amended, 29 U.S.C. 701 et seq., or of the Missouri
Human Rights Act, 213.000 R.S. Mo. et seq., the Missouri
Service Letter Statute, 209.140 R.S. Mo. or any other
relevant federal, state, or local statutes or ordinances, or
any claims for pay, vacation pay, insurance, or welfare
benefits or any other benefits of employment with any
Company Released Person arising from events occurring prior
to the date of this Release other than those payments and
benefits specifically provided herein.
d. This Release shall not affect Employee's right to any
governmental benefits payable under any Social Security or
Worker's Compensation law now or in the future.
3. Release of Benefit Claims. Employee, for and on behalf
of himself and his heirs, beneficiaries, executors,
administrators, successors, assigns and anyone claiming through
or under any of the foregoing, further releases and waives any
claims for pay, vacation pay, insurance or welfare benefits or
any other benefits of employment with any Company Released Person
arising from events occurring prior to the date of this Release
other than claims to the payments and benefits specifically
provided for in the Severance Agreement.
4. Revocation Period; Knowing and Voluntary Agreement.
a. Employee acknowledges that he was given a copy of this
Agreement when the Severance Agreement was executed and he,
therefore, has been given a period of at least forty-five
(45) days to consider whether or not to accept this
Agreement. Furthermore, Employee may revoke this Agreement
for seven (7) days following its execution.
b. Employee represents, declares and agrees that he
voluntarily accepts the payments described above for the
purposes of making a full and final compromise, adjustment
and settlement of all potential claims hereinabove
described. Employee hereby acknowledges that he has been
advised of the opportunity to consult an attorney and that
he understands the Release and the effect of signing the
Release.
5. Severability. If any provision of this Release or the
application thereof to any person or circumstance shall to any
extent be held to be invalid or unenforceable, the remainder of
this Release and the application of such provision to persons or
circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby, and each provision
of this Release shall be valid and enforceable to the fullest
extent permitted by law.
6. Headings. The headings in this Release are inserted
for convenience of reference only and shall not in any way affect
the meaning or interpretation of this Release.
7. Counterparts. This Release may be executed in one or
more identical counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the
same instrument.
8. Entire Agreement. This Release and Related Severance
Agreement constitutes the entire agreement of the parties in this
matter and shall supersede any other agreement between the
parties, oral or written, concerning the same subject matter.
9. Governing Law. This Release shall be governed by, and
construed and enforced in accordance with, the laws of the State
of Missouri, without reference to the conflict of laws rules of
such State.
IN WITNESS WHEREOF, Employee and the Company have executed
this Release as of the day and year first above written.
BROWN GROUP, INC.
By:-----------------------------
EMPLOYEE
By:----------------------------
David H. Schwartz
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<PERIOD-END> AUG-01-1998
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0
0
<COMMON> 67,682
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<TOTAL-LIABILITY-AND-EQUITY> 684,160
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