EXHIBIT 10.27
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement") dated April 22, 2005 and
effective as of the date of closing of the transactions contemplated by the
Securities Purchase Agreement dated March 14, 2005 (the "Securities Purchase
Agreement") made by and among ▇▇▇▇▇ Shoe Company, Inc. and Heritage Fund III,
L.P., Heritage Fund IIIA, L.P., Heritage Investors III, L.L.C. Bico Business
Trust, Pentland U.S.A., Inc., ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Footwear Holdings, LLC, ▇▇▇▇▇▇▇ Footwear Group
LLC, ▇▇▇▇▇▇▇ Footwear Acquisition LLC, ▇▇▇▇▇▇▇ Footwear Retail LLC, and ▇▇▇▇▇▇▇
Investment Corporation ("Effective Date") between ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("Employee")
and ▇▇▇▇▇ Shoe Company, Inc., a New York corporation (together with its
subsidiaries and as further defined in Section 13, the "Company").
WHEREAS, pursuant to the Securities Purchase Agreement, Company intends to
acquire all of the outstanding Limited Liability Company Units of ▇▇▇▇▇▇▇
Holdings Group, LLC ("▇▇▇▇▇▇▇") except for the Units held by ▇▇▇▇▇▇▇ Investment
Corporation ("BIC") and all of the outstanding shares of capital stock of BIC
held by Heritage;
WHEREAS, Employee is currently employed by ▇▇▇▇▇▇▇ or a subsidiary of
▇▇▇▇▇▇▇ (collectively "▇▇▇▇▇▇▇ Companies") and the Company wishes for the
Employee to continue as an employee of the ▇▇▇▇▇▇▇ Companies or of the Company
on the terms provided herein;
WHEREAS, Employee has been serving as the Chief Executive Officer of
▇▇▇▇▇▇▇ Footwear Group, LLC ("BFG") in a managerial capacity prior to the date
hereof;
WHEREAS, the Employee wishes to continue as an employee of the Company and
is willing to render services to the Company on the terms and conditions
hereinafter set forth;
WHEREAS, in order to accomplish its objectives, the Company believes it is
essential that members of its senior management, such as Employee, be encouraged
to remain with the Company during management transition and thereafter and in
the event there is any change in corporate structure which results in a Change
in Control;
WHEREAS, the Employee acknowledges that (i) the Company has spent
substantial money, time and effort over the years in developing and solidifying
its relationships with its customers throughout the world and in developing its
Confidential Information; (ii) under this Agreement, the Company is agreeing to
provide Employee with certain benefits based upon Employee's assurances and
promises contained herein not to divert the Company's customers' goodwill or to
put Employee in a position following Employee's employment with Company in which
the confidentiality of Company's Confidential Information might be compromised;
and
WHEREAS, Employee wishes to have the protection provided for in this
Agreement and, in exchange for such protection, is willing to give to the
Company, under certain circumstances, Employee's covenant not to compete, on the
terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein, and intending to be legally bound hereby, the parties
mutually agree as follows:
1. DEFINITIONS.
a. "Cause" means (i) engaging by Employee in willful misconduct
which is materially injurious to the Company or breaching a fiduciary duty
or legal or contractual obligation which is not cured within 10 days of
notice; (ii) conviction of the Employee of a felony or the conviction or
pleading nolo contendre to any misdemeanor relating to the affairs of the
Company and its affiliates; (iii) engaging by Employee in fraud, material
dishonesty or gross misconduct or gross negligence in connection with the
business of the Company; (iv) engaging by Employee in any act of moral
turpitude reasonably likely to materially and adversely affect the Company
or its business; (v) the failure of the Employee to follow the reasonable
direction of the Company regarding the Employee's material duties; or (vi)
the habitual use by Employee of narcotics or alcohol; provided that except
for category (ii) above Cause shall not exist unless and until the Company
has afforded Employee reasonably-detailed written notice of an intent to
terminate for Cause and the subsequent reasonable opportunity (upon at
least 5 days notice) to be heard on the issues with or through counsel at
a meeting of the Company's Chief Financial Officer, Senior Vice President
of Human Resources, and the General Counsel, and the Company then makes a
good faith determination that Cause exists.
b. "Change of Control" means (i) any person other than the Company
acquiring more than 25 percent of the Company's Common Stock through a
tender offer, exchange offer or otherwise; (ii) the liquidation or
dissolution of the Company following the sale of all or substantially all
of its assets; or (iii) the Company not being the surviving parent
corporation resulting from any merger or consolidation to which it has
been a party (other than a merger between the Company and a newly formed
shell corporation, the sole purpose and effect of which merger is to
reincorporate the Company in a jurisdiction other than New York and where
the surviving corporation in such merger assumes the obligations of the
Company hereunder).
c. "Competitor" shall mean any person, firm, corporation,
partnership or other entity which in its prior fiscal year had annual
gross sales volume or revenues of footwear of more than $20,000,000 or is
reasonably expected to have
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such sales or revenues in either the current fiscal year or the next
following fiscal year.
d. "Confidential Information" shall have the meaning set forth in
Section 10.
e. "Customer" shall mean any wholesale customer of the Company which
either purchased from the Company during the one (1) year immediately
preceding the Termination Date, or is reasonably expected by the Company
to purchase from the Company in the one (1) period immediately following
the Termination Date, more than $1,000,000 in footwear.
f. "Good Reason," when used with reference to a voluntary
termination by Employee of Employee's employment with the Company, shall
mean (i) a reduction in Employee's base salary as in effect on the date
hereof, or as the same may be increased from time to time; (ii) a material
reduction in Employee's status, position, responsibilities or duties, or
(iii) any change, without the Employee's consent, in the Employee's
principal office location to a location that is more than fifty (50) miles
from the Employee's principal office location.
g. "Term" means the period commencing on the Effective Date and
terminating three (3) years after the Effective Date; provided, however,
that the Term shall automatically be extended for successive additional
one year periods thereafter unless either party to this Agreement provides
the other party with notice of termination of this Agreement at least
thirty days prior to the expiration of the original three-year period or
any one-year period thereafter.
h. "Termination Date" shall mean the effective date as provided
hereunder of the termination of Employee's employment, for any reason,
including by death or disability, subject to the limitations set forth in
Section 2.f below.
2. TERMINATION DURING TERM -- CHANGE IN CONTROL SEVERANCE INAPPLICABLE.
a. The Company may terminate Employee's employment for Cause at any
time, effective upon the giving to Employee of a written notice of
termination specifying in detail the particulars of the conduct of
Employee deemed by the Company to justify such termination for Cause, and
otherwise acting in accordance with Section 1.a hereof.
b. The Company may terminate Employee's employment without Cause at
any time, effective upon the giving to Employee of a written notice of
termination specifying that such termination is without Cause.
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c. Employee may terminate Employee's employment with the Company at
any time.
d. Upon a termination by the Company of Employee's employment for
Cause during the Term, but prior to a Change in Control or more than 24
months after a Change in Control, Employee shall be entitled only to the
payments specified in Section 3.a. below. Upon a termination by the
Company of Employee's employment without Cause during the Term, but prior
to a Change in Control or more than 24 months after a Change in Control,
Employee shall be entitled to all of the payments and benefits specified
in Section 3 below.
e. If Employee voluntarily terminates Employee's employment during
the Term, but prior to a Change in Control or more than 24 months after a
Change in Control, Employee shall notify the Company in writing if
Employee believes the termination is for Good Reason. Employee shall set
forth in reasonable detail why Employee believes there is Good Reason. If
such termination is for Good Reason, Employee shall be entitled to all of
the payments and benefits specified in Section 3 below. If such voluntary
termination is for other than Good Reason, then Employee shall be entitled
only to the payments specified in Section 3.a. below.
f. If Employee's employment is terminated by virtue of Employee's
death or disability, then Employee shall be entitled only to the payments
specified in Section 3.a. below.
3. PAYMENTS AND BENEFITS UPON TERMINATION DURING TERM -- CHANGE IN CONTROL
SEVERANCE INAPPLICABLE. To the extent provided in Section 2 above, upon
termination of Employee's employment during the Term, but prior to a Change in
Control or more than 24 months after a Change in Control, Employee shall receive
the following payments and benefits:
a. The Company shall pay to Employee on the Termination Date (i) the
full base salary earned by employee through the Termination Date and
unpaid at the Termination Date, plus (ii) credit for any vacation earned
by Employee but not taken at the Termination Date, plus (iii) all other
amounts earned by Employee and unpaid as of the Termination Date.
b. The Company shall continue to pay the Employee's base monthly
salary at the highest rate in effect at any time during the twelve months
immediately preceding the Termination Date (including Employee's targeted
bonus in the current year) for the twelve months succeeding Employee's
Termination Date. Such amounts shall be paid in accordance with the
Company's regular pay period policy for its employees.
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c. The Company shall provide to Employee for a period of twelve
months after the Termination Date medical and/or dental coverage under the
medical and dental plans maintained by the Company (the Company will
continue to pay the Company's portion of such benefits and the Employee
will continue to pay the Employee's portion of such benefits). Upon
Employee's re-employment during such period, to the extent covered by the
new employer's plan, coverage under the Company's plan shall lapse.
Additionally, the Company shall make a cash lump sum payment in an amount
equal to the sum of (i) and (ii) below:
(i) The fair market value (determined as of the
Termination Date) of that number of shares of non-vested restricted
stock of the Company held by the Employee which would have vested
within the twelve-month period following the Employee's Termination
Date had the Employee remained employed with the Company; plus
(ii) With respect to each non-vested option to purchase
Company stock held by the Employee which would have vested within
the twelve-month period following the Employee's Termination Date
had the Employee remained employed with the Company, the excess, if
any, of the fair market value (determined as of the Termination
Date) of the Company stock subject to such option over the exercise
price of such option.
Employee's participation in and/or coverage under all other employee
benefit plans, programs or arrangements sponsored or maintained by the
Company shall cease effective as of the Termination Date.
d. The Company shall pay the reasonable costs of outplacement
services selected by the Company for twelve months after the Termination
Date.
4. TERMINATION WITHIN 24 MONTHS AFTER A CHANGE IN CONTROL WHICH OCCURS
DURING THE TERM.
a. The Company may terminate Employee's employment for Cause at any
time, effective upon the giving to Employee of written notice of
termination specifying in detail the particulars of the conduct of
Employee deemed by the Company to justify such termination for Cause, and
otherwise acting in accordance with Section 1.a hereof.
b. The Company may terminate Employee's employment without Cause at
any time, effective upon the giving to Employee of a written notice of
termination specifying that such termination is without Cause.
c. Employee may terminate Employee's employment with the Company at
any time.
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d. Upon a termination by the Company of Employee's employment for
Cause within 24 months after a Change in Control which occurs during the
Term, Employee shall be entitled only to the payments specified in Section
5.a. below. Upon a termination by the Company of Employee's employment
without Cause within 24 months after a Change in Control which occurs
during the Term, Employee shall be entitled to all of the payments and
benefits specified in Section 5 below.
e. If Employee voluntarily terminates Employee's employment within
24 months after a Change in Control which occurs during the Term, Employee
shall notify the Company in writing if the Employee believes the
termination is for Good Reason, setting forth in reasonable detail why
Employee believes there is Good Reason for such termination. If such
termination is for Good Reason, Employee shall be entitled to all of the
payments and benefits specified in Section 5 below. If such voluntary
termination is for other than Good Reason, then Employee shall be entitled
only to the payments specified in Section 5.a. below.
5. PAYMENTS AND BENEFITS UPON TERMINATION WITHIN 24 MONTHS AFTER A CHANGE
IN CONTROL WHICH OCCURS DURING TERM. To the extent provided in 4 above, upon
termination of Employee's employment within 24 months after a Change in Control
which occurs during the Term, Employee shall receive the following payments and
benefits:
a. The Company shall pay to Employee on the Termination Date (i) the
full base salary earned by Employee through the Termination Date and
unpaid at the Termination Date, plus (ii) credit for any vacation earned
by Employee but not taken at the Termination Date, plus (iii) all other
amounts earned by Employee and unpaid as of the Termination Date.
b. The Company shall pay to Employee in a lump sum not later than 30
days after her Termination Date an amount equal to 300 percent of the sum
of (i) Employee's base annual salary at the highest rate in effect at any
time during the twelve months immediately preceding the Termination Date,
and (ii) Employee's targeted bonus for the current year. In addition, the
Company shall pay Employee's targeted bonus payment for the year of
termination, prorated to the Termination Date.
c. The Company shall provide to Employee for a period of thirty-six
months after the Termination Date medical and/or dental coverage under the
medical and dental plans maintained by the Company (the Company will
continue to pay the Company's portion of such benefits and the Employee
will continue to pay the Employee's portion of such benefits). Upon
Employee's re-employment during such period, to the extent covered by the
new employer's plan, coverage under the Company's plan shall lapse.
Employee's participation in and/or coverage under all other employee
benefit plans, programs or arrangements
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sponsored or maintained by the Company shall cease effective as of the
Termination Date.
d. The Company shall pay the reasonable costs of outplacement
services selected by the Company for twelve months after the Termination
Date.
6. MITIGATION OR REDUCTION OF BENEFITS. Employee shall not be required to
mitigate the amount of any payment provided for in Section 3 or Section 5 by
seeking other employment or otherwise. Except as otherwise specifically set
forth herein, the amount of any payment or benefits provided in Section 3 or
Section 5 shall not be reduced by any compensation or benefits or other amounts
paid to or earned by Employee as the result of employment by another employer
after the Termination Date or otherwise.
7. EMPLOYEE EXPENSES AFTER CHANGE IN CONTROL. If Employee's employment is
terminated by the Company within 24 months after a Change in Control which
occurs during the Term and there is a dispute with respect to this Agreement,
then all Employee's costs and expenses (including reasonable legal and
accounting fees) incurred by Employee (a) to defend the validity of this
Agreement, (b) if Employee's employment has been terminated for Cause, to
contest such termination, (c) to contest any determinations by the Company
concerning the amounts payable by the Company under this Agreement, or (d) to
otherwise obtain or enforce any right or benefit provided to Employee by this
Agreement, shall be paid by the Company if Employee is the prevailing party.
8. RELEASE. Notwithstanding anything to the contrary stated in this
Agreement, no benefits will be payable pursuant to Sections 3 and 5 except under
Sections 3.a. and 5.a. prior to execution by Employee of a release to the
Company substantially in the form attached as Exhibit A; provided the Company
must execute such release if Employee executes such release and Company must
provide all such benefits if Employee executes such release.
9. COVENANT NOT TO COMPETE.
a. NON-COMPETITION AGREEMENT.
i. Employee acknowledges that (i) the Company has spent
substantial money, time and effort over the years in developing and
solidifying its relationships with its customers throughout the world and
in developing its Confidential Information; (ii) under this Agreement, the
Company is agreeing to provide Employee with certain benefits based upon
Employee's assurances and promises contained herein not to divert the
Company's customers' goodwill or to put Employee in a position following
Employee's employment with Company in which the confidentiality of
Company's Confidential Information might be compromised.
Page 7
ii. Accordingly, Employee agrees that, during Employee's
employment with the Company and for a period of thirty-six (36) months
after a Termination Date described in the second sentence of Section 2.d
or 4.d, Employee will not, directly or indirectly, on Employee's own
behalf or on behalf of any other person, firm, corporation or entity
(whether as owner, partner, consultant, employee or otherwise):
A. provide any executive- or managerial-level services
in the footwear industry in the United States in competition with
the Company;
B. hold any executive- or managerial-level position with
any Competitor;
C. engage in any research and development activities or
efforts for a Competitor, whether as an employee, consultant,
independent contractor or otherwise, to assist the Competitor in
competing in the footwear industry;
D. cause or attempt to cause any Customer to divert,
terminate, limit, modify or fail to enter into any existing or
potential relationship with the Company;
E. cause or attempt to cause any shoe supplier or
manufacturer of the Company to divert, terminate, limit, modify or
fail to enter into any existing or potential relationship with the
Company;
F. solicit, entice, employ or seek to employ, in the
shoe industry, any executive- or managerial-level employee of, or
any consultant or advisor to, the Company; and
G. communicate in any way that negatively reflects upon,
or disparages in any way, or induces or encourages others to
disparage in any way, the Company, its services, its products, or
any of its current or former directors, officers, employees or
agents, or the Company's practices, policies or strategies;
provided that, if Employee wishes to participate in a bona fide
opportunity in conflict with Sub-sections 9.a.ii.A-E hereof: (1) Employee
shall provide the General Counsel of the Company with advance, written
notice of such opportunity, (2) the Company shall then have fifteen (15)
days to object to such participation, (3) if the Company does not inform
Employee of its objection in writing within the fifteen (15) day period,
the Company shall waive any rights with respect to Sub-sections
9.a.ii.A-E, but (4) if the Company expresses an objection, Employee shall
refrain from participation in such opportunity and the
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Company shall pay seventy-five percent (75%) of Employee's base monthly
salary at the highest rate in effect at any time during the twelve months
immediately preceding the Termination Date throughout the remainder of the
period specified in Sub-section 9.a.ii hereof. In no event shall Employee
receive such payments with respect to any period during which Employee is
receiving severance payments as the result of a termination without Cause
or for Good Reason. In addition, in conjunction with Employee's
obligations pursuant to Section 9.a.ii.G, the Company agrees that no
officer or director of the Company (or the Company through any official
channels) may communicate in any way that negatively reflects upon, or
disparages in any way, or induces or encourages others to disparage in any
way, the Employee at any time through the third anniversary of the
Termination Date; provided, however, that information communicated about
Employee during the course of litigation or in connection with any
government agency inquiry, hearing or complaint process shall not be
deemed to be negative or disparaging for purposes of this Agreement.
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 will have and 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
Employee 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, among
other things, the Company would, among other things, 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 (except as
specified in the final paragraph of Section 9.a), 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 seek 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
Page 9
competent jurisdiction; provided the Company contemporaneously makes the
payments specified in Section 9.a.
d. EMPLOYEE AGREEMENT TO DISCLOSE THIS AGREEMENT. Employee agrees to
disclose, during the twelve-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 Employee's 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
Page 10
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
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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;
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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 ▇▇▇ 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 ▇▇▇ 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
Page 13
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:
▇▇▇▇▇ Shoe Company, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
b. If to Employee:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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. 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 Employee's 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.
Page 14
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. 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 a duly authorized officer (except if in
accordance with the final paragraph of Section 9.a which specifically affords
the Company the opportunity to assert or waive certain rights).
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. PREVIOUS EMPLOYMENT AGREEMENTS. Employee represents that the execution
and delivery of this Agreement and Employee's employment with the Company do not
violate any previous employment agreement or other contractual obligation of
Employee. The Employee has, prior to entering into this Agreement, terminated
any previous employment agreement or other contractual obligation with any other
employer. Specifically, Employee agrees and understands that the Employment
Agreement dated May 20, 2003 by and between Employee and BFG ("Employment
Agreement") shall terminate as of the closing under the Securities Purchase
Agreement, and Employee shall not be entitled to any payments or benefits under
such Employment Agreement.
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 the Company's and Employee's substantial
contacts with the State of Missouri, the facts that the Company is headquartered
in Missouri and Employee will perform Employee's services 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 County, Missouri; and
(ii) the Agreement shall be interpreted in accordance with
Page 15
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.
▇▇▇▇▇ SHOE COMPANY, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------
EMPLOYEE
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Page 16
EXHIBIT 10.27
Exhibit A
RELEASE
THIS RELEASE (the "Release") dated _____________ between ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
("Employee") and ▇▇▇▇▇ Shoe Company, 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 _____________, 2004 and effective as of ______________, 200_ (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. RELEASES OF CLAIMS; AGREEMENTS NOT TO FILE SUIT.
a. Employee, for and on behalf of Employee and Employee's 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; provided, however, that this
RELEASE
Section 2(a) shall not apply to any claims to the payments and benefits
specifically provided for in the Severance Agreement or, subject to the
terms of the Severance Agreement, the payments or benefits to which
Employee, by reason of the termination of Employee's employment, may be
entitled under any employee benefit plan (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974) other than a
severance pay plan.
b. Employee, for and on behalf of Employee and Employee's heirs,
beneficiaries, executors, administrators, successors, assigns, and anyone
claiming through or under any of the foregoing, agrees that she 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
Employee's 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 Agreement. Employee further agrees that
in the event that any person or entity should bring such a charge, claim,
complaint, or action on Employee's behalf, Employee 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. Section 2000e et seq., the Age
Discrimination in Employment Act, 29 U.S.C. Section 621 et seq., the
Americans with Disabilities Act of 1990, 42 U.S.C. Section 12101 et seq.,
the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. Section 201 et
seq., the Rehabilitation Act of 1973, as amended, 29 U.S.C. Section 701 et
seq., or of the Missouri Human Rights Act, Section 213.000 R.S. Mo. et
seq., the Missouri Service Letter Statute, Section 209.140 R.S. Mo., The
Massachusetts Fair Employment Practice Act, MGL Ch. 151B, Sections 1-10;
the Massachusetts Equal Rights Act, MGL, Ch. 93, Section 102; the
Wisconsin Fair Employment Act (WFEA), Wis. Stat. Sections 111.31-111.395,
or any other relevant federal, state, or local statutes or ordinances, the
right to recovery in any suit brought by the Equal Employment Opportunity
Commission, the Missouri Human Rights Commission, the Massachusetts Human
Rights Commission or the Wisconsin Equal Rights Division on behalf of the
Employee, 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
Page 2
RELEASE
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 Employee and
Employee's 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 Employee has been given a period of at least
forty-five (45) days to consider whether or not to accept this Release.
Furthermore, Employee may revoke this Release for seven (7) days following
its execution.
b. Employee represents, declares and agrees that Employee 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 Employee has been
advised of the opportunity to consult an attorney and that Employee
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.
Page 3
RELEASE
8. ENTIRE AGREEMENT. This Release and the related Severance Agreement
constitute 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 of such State and the parties agree that any
litigation involving this Release, or regarding the interpretation, validity
and/or enforceability of this Release, shall be filed and conducted exclusively
in the state or federal courts in St. Louis County, Missouri.
IN WITNESS WHEREOF, Employee and the Company have executed this Release as
of the day and year first above written.
▇▇▇▇▇ SHOE COMPANY, INC.
By:_____________________________
EMPLOYEE
By:_____________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Page 4