EXHIBIT 99.2
SETTLEMENT AGREEMENT AND RELEASES
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Xxxx Xxxxxxx Xxxxxxxx ("Xxxxxxxx") and Footstar, Inc. ("Footstar,"
the "Company" or the "Debtor") agree and covenant as follows:
1. Settlement of Claims
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(a) Except as otherwise expressly provided herein, Xx. Xxxxxxxx
hereby agrees to settle and dismiss with prejudice all claims he now has, has
asserted, or could have asserted, against Footstar and/or any of its direct or
indirect subsidiaries and any of their respective officers, directors, agents or
representatives.
(b) Except as otherwise expressly provided herein, Footstar hereby
agrees to settle and dismiss with prejudice all claims it now has, has asserted,
or could have asserted against Xx. Xxxxxxxx.
2. Consideration
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(a) Settlement Payments
(i) Footstar shall pay Xx. Xxxxxxxx the amount of two million
five hundred thousand dollars ($2,500,000) within thirty days after entry of an
order, in form and substance reasonably satisfactory to Xx. Xxxxxxxx and
Footstar (the "Settlement Order"), by the Bankruptcy Court approving this
Agreement ("Approval Date").
(ii) Footstar shall pay Xx. Xxxxxxxx an additional two million
five hundred thousand dollars ($2,500,000) on the later of (x) the effective
date of a Chapter 11 plan of reorganization or liquidation for Footstar, or (y)
one year from the Approval Date, but in no event later than eighteen months from
the Approval Date, provided, however, that the clause (ii) settlement payment
shall be secured by an irrevocable letter of credit issued by Fleet National
Bank, as Issuing Bank, pursuant to Footstar's Amended and Restated
Debtor-In-Possession Credit Agreement dated as of May 11, 2004, in favor of Xx.
Xxxxxxxx as its sole beneficiary in mutually acceptable form, which Footstar
will deliver to Xx. Xxxxxxxx at the Settlement Closing.
(b) Footstar shall pay the law firm of Xxxxx Xxxxxx Xxxxxxx & Bull
P.C., arbitration counsel for Xx. Xxxxxxxx, the amount of $100,000 at the
Settlement Closing.
(c) Acknowledgement of Termination Not "For Cause"
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Footstar agrees to issue to Xx. Xxxxxxxx at the Settlement Closing a
letter from the Company substantially in the form attached hereto as Exhibit A
acknowledging that Xx. Xxxxxxxx'x termination was not "for cause." Footstar
further agrees to promptly issue a press release substantially in the form
annexed hereto as Exhibit B and file an SEC Form 8K in accordance with paragraph
4 below.
(d) Art Work
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At the Settlement Closing, the Company agrees to deliver to Xx.
Xxxxxxxx, or his representative or agent, all pieces of art purchased by Xx.
Xxxxxxxx that are currently in the Company's possession.
3. Bankruptcy Court Approval
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(a) This Settlement Agreement and the performances required hereunder
are expressly made subject to entry of the Settlement Order and to the
Settlement Closing.
(b) Promptly upon the parties' execution of this Settlement
Agreement, Footstar shall apply to the Bankruptcy Court for approval of this
Agreement pursuant to 11 U.S.C.ss.105(a) and Rule 9019 of the Federal Rules of
Bankruptcy Procedure.
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(c) Footstar shall seek a determination that Rule 6004(g) shall not
apply to the Settlement Order or the Settlement Closing.
(d) Within 5 days following the Approval Date, the parties shall hold
a closing (the "Settlement Closing") at which Footstar shall deliver to Xx.
Xxxxxxxx (i) a letter of credit in accordance with paragraph 2(a)(ii), (ii) the
letter required under paragraph 2(c), (iii) the release required under paragraph
7(b), and (iv) the artwork referred to in paragraph 2(d). Footstar shall pay
Xxxxx Xxxxxx Xxxxxxx & Bull P.C. the amount required under paragraph 2(b); and
Xx. Xxxxxxxx shall deliver to Footstar the release required under paragraph
7(a).
4. Public Announcement
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By 4:30 p.m. on the first Monday, Tuesday, or Wednesday after the
Settlement Closing, Footstar shall issue a press release announcing that the
settlement was consummated and stating that in the Settlement Agreement the
Company acknowledged that Xx. Xxxxxxxx'x termination was not "for cause", for
distribution to such media as Footstar commonly makes public announcements of
material events affecting is business/operations. Such press release will be
substantially in the form annexed hereto as Exhibit B. Footstar shall further
promptly file an SEC Form 8K attaching both the press release and the approved
Settlement Agreement.
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5. Dismissal/Withdrawal of Pending Proceedings
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Promptly after the Settlement Closing, Xx. Xxxxxxxx shall cause the
arbitration proceeding commenced on October 15, 2003 by Xx. Xxxxxxxx pursuant to
the relevant provision in his employment agreement with Footstar (the
"Arbitration Proceeding") to be dismissed/withdrawn with prejudice, and Footstar
shall dismiss/withdraw with prejudice its counterclaims against Xx. Xxxxxxxx
therein. Xx. Xxxxxxxx shall also promptly apply to the United States District
Court for the Southern District of New York for dismissal with prejudice of the
petition filed on November 25, 2003 commencing a district court proceeding
seeking to stay the Arbitration Proceeding as to certain of Footstar's
counterclaims (the "District Court Petition").
6. Impact on D&O Coverage
----------------------
Notwithstanding anything in the AIG Agreement (1) to the contrary, in
consideration of the payments hereunder, Xxxxxxxx hereby releases all claims,
rights, causes of action, entitlements or otherwise to any proceeds of any
Directors and Officers or Executive and Organization Liability Insurance
Policies for any fees or costs incurred by Xxxxxxxx to defend any claims against
Xxxxxxxx in the past or in the future, including but not limited to, any claims,
rights, causes of action, entitlements or otherwise to such proceeds from
Executive and Organization Liability Insurance Policy number 000-00-00 issued by
Illinois National Insurance Company (the "AIG Policy") or pursuant to the
Settlement Agreement dated May 27, 2004 concerning the AIG Policy; provided,
however, that if Footstar does not exhaust the limit of the AIG Policy coverage,
Xx. Xxxxxxxx shall be entitled to share pro rata with other Insured Parties in
such remaining coverage.
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(1) AIG Agreement means the agreement between and among Footstar, AIG Technical
Services as agent for Illinois National Insurance Co. ("Illinois National")
and National Union Fire Insurance Company of Pittsburgh, PA ("National
Union") (collectively, the "Insurance Companies") and certain current or
former officers and directors of Footstar resolving inter alia a coverage
dispute.
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7. Releases
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(a) Except as to the obligations set forth in this Settlement
Agreement, effective upon the dismissal/withdrawal with prejudice of Footstar's
counterclaims in the Arbitration Proceeding, Xx. Xxxxxxxx and his heirs,
assigns, executors, administrators, transferees, and representatives release,
waive and forever discharge Footstar and its predecessors, successors,
representatives, assigns, subsidiaries, divisions, affiliates and directly or
indirectly controlled entities and each of their respective directors, officers
and employees, from any and all claims, demands, actions, causes of action,
suits, debts, damages, losses, judgments, obligations, costs, expenses,
attorneys' fees and any liabilities whatsoever that Xx. Xxxxxxxx ever had, now
has or in the future may have against Footstar, whether now known or unknown,
accrued or unaccrued, absolute or contingent, suspected or unsuspected,
determined or speculative, including but not limited to any claims asserted or
that could have been asserted in the Arbitration Proceeding or the District
Court Petition. At the Settlement Closing, Xx. Xxxxxxxx shall deliver a release
substantially in the form annexed hereto as Exhibit C.
(b) Except as to the obligations set forth in this Settlement
Agreement, effective upon the dismissal/withdrawal with prejudice of Xx.
Xxxxxxxx'x claims against Footstar in the Arbitration Proceeding and the
District Court Petition, Footstar and its predecessors, successors,
representatives, assigns, subsidiaries, divisions, affiliates and directly or
indirectly controlled entities release, waive and forever discharge Xx. Xxxxxxxx
and his heirs, assigns, executors, administrators, transferees, and
representatives from any and all claims, demands, actions, causes of action,
suits, debts, damages, losses, judgments, obligations, costs, expenses,
attorneys' fees and any liabilities whatsoever that Footstar ever had, now has
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or in the future may have against Xx. Xxxxxxxx, whether now known or unknown,
accrued or unaccrued, absolute or contingent, suspected or unsuspected,
determined or speculative, including but not limited to any claims asserted or
that could have been asserted in the Arbitration Proceeding or the District
Court Petition. At the Settlement Closing, Footstar shall deliver to Xx.
Xxxxxxxx a release substantially in the form annexed hereto as Exhibit D.
(c) Between the date of this Agreement and the Approval Date, neither
party shall take any action against the other party with respect to any of the
claims it herein releases, including but not limited to Policy No. 000-00-00 and
000-00-00 for the policy periods December 1, 2001 to December 1, 2002 and
December 1, 2002 to December 1, 2003 respectively, unless and until such time as
the United States Bankruptcy Court disapproves this Agreement submitted to it
for approval by Footstar pursuant to Paragraph 3(b) in which case this Agreement
will be void and of no further effect.
8. Counterparts
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This Settlement Agreement may be executed in counterparts and shall
be effective when each party has executed one such counterpart.
9. Entire Agreement
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This Settlement Agreement contains the final and entire agreement
between the parties hereto and supercedes all prior discussions between the
parties. The parties shall not be bound by any terms, conditions, statements,
covenants, representations or warranties, whether oral or written, which are not
explicitly incorporated by reference herein, except for such terms, conditions,
statements, covenants, representations and warranties as may be contained in
agreements or documents duly executed after the date hereof in furtherance of
this Settlement Agreement.
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10. Governing Law
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This Agreement shall be governed by the laws of the State of New
York. Any disputes or controversies which arise under or in connection with this
Agreement will be decided exclusively by the United States Bankruptcy Court for
the Southern District of New York.
11. Cooperative Drafting and Construction
-------------------------------------
Each party has cooperated in the drafting and preparation of this
Agreement. Hence, this Agreement shall not be construed against any party on the
basis that one or more Parties was the principal draftsman. The headings are for
the convenience of the Parties and are not to be used in construing the meaning
of any provision of this Agreement.
12. Independent Legal Advice
------------------------
The parties acknowledge that they have each been advised by their own
independently selected counsel and other advisors in connection with this
Settlement Agreement and enter into this Agreement solely on the basis of that
advice and on the basis of their own independent investigation of all of the
facts, laws and circumstances material to this Agreement or any provision
thereof, and not in any manner or to any degree based upon any statement or
omission by any other party and/or its counsel.
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13. Successors and Assigns
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No party hereto shall assign its obligations under this Settlement
Agreement without the prior written consent of the other party, which consent
shall not be unreasonably withheld or delayed. Except as otherwise provided
herein, this Agreement shall be binding on and inure to the benefit of each of
the Parties and their respective heirs, personal representatives, executors,
successors and assigns.
BY EXECUTING THIS AGREEMENT, EACH OF THE PARTIES ACKNOWLEDGES THAT IT HAS READ
THIS AGREEMENT AND UNDERSTANDS ITS TERMS AND PROVISIONS.
Dated: June 1, 2004 XXXX XXXXXXX XXXXXXXX
/s/ Xxxxxx Xxxxxxxx
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Dated: June 1, 2004 FOOTSTAR, INC., in its Corporate Capacity
and as Debtor-in-Possession
By /s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx
Its President and Chief Executive Officer
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EXHIBIT A
ACKNOWLEDGMENT LETTER
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[FOOTSTAR LETTERHEAD]
[DATE]
Xxxx Xxxxxxx Xxxxxxxx
[ADDRESS]
Footstar, Inc. hereby acknowledges that your termination by the
Company in September, 2003 was not "for cause."
Very truly yours,
FOOTSTAR, INC.
By____________________________
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EXHIBIT B
PRESS RELEASE
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Footstar, Inc. announced today that the Bankruptcy Court overseeing
its Chapter 11 case approved a settlement with former Chairman and Chief
Executive Officer X. X. "Mickey" Xxxxxxxx of disputes relating to the Company's
termination of Xx. Xxxxxxxx'x services on September 12, 2003. Footstar
acknowledged that Xx. Xxxxxxxx'x termination was not "for cause".
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EXHIBIT C
GENERAL RELEASE BY XXXX XXXXXXX XXXXXXXX
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This General Release is made by Xxxx Xxxxxxx Xxxxxxxx ("Xxxxxxxx") in
favor of Footstar, Inc. ("Footstar" or the "Debtor") pursuant to the Settlement
Agreement and Releases ("Settlement Agreement") entered between Xx. Xxxxxxxx and
Footstar on June 1, 2004.
1. Xx. Xxxxxxxx and his heirs, assigns, executors, administrators,
transferees, and representatives release, waive and forever discharge Footstar
and its predecessors, successors, representatives, assigns, subsidiaries,
divisions, affiliates and directly or indirectly controlled entities and each of
their respective directors, officers and employees, from any and all claims,
demands, actions, causes of action, suits, debts, damages, losses, judgments,
obligations, costs, expenses, attorneys' fees and any liabilities whatsoever
that Xx. Xxxxxxxx ever had, now has or in the future may have against Footstar,
whether now known or unknown, accrued or unaccrued, absolute or contingent,
suspected or unsuspected, determined or speculative, including but not limited
to any claims asserted or that could have been asserted in the Arbitration
Proceeding (as defined in the Settlement Agreement) or the District Court
Petition (as defined in the Settlement Agreement). Xx. Xxxxxxxx covenants and
agrees that he will never institute or prosecute any claims, demands, or causes
of action released herein against the Releasees or any of them. It is agreed and
understood that this is a GENERAL RELEASE, which shall inure to the benefit of
and be binding upon the successors and assigns of the parties hereto.
Notwithstanding anything contained in this paragraph, this release shall not
apply to the Releasees' obligations under the Settlement Agreement and Releases
entered into by the parties on June 1, 2004.
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2. The release contained in the foregoing paragraph shall be
effective and binding upon the execution of the Release by Xx. Xxxxxxxx. Nothing
contained herein, however, shall negate, modify, restrict, limit or effect in
any way, whatsoever, Xx. Xxxxxxxx'x waiver and release as provided for in
paragraph 7(a) of the Settlement Agreement.
3. The Debtor agrees that it has executed the Release knowingly and
voluntarily, that it has reviewed the Release with its counsel, that it fully
understands its terms, conditions and limitations, and that the individual
executing this Release has the authority to do so on behalf of the Debtor.
4. The invalidity, illegality or unenforceability of any provision
herein pursuant to judicial decree or otherwise shall not affect the validity or
enforceability of any other provision of this Release, all of which shall remain
in full force and effect.
5. To the extent not inconsistent with the terms and conditions of
this Release, the terms and conditions of the Settlement Agreement are
integrated herein.
6. This Release and the Settlement Agreement together contain the
entire release and agreement being executed in favor of Footstar, and neither
may be amended, supplemented or modified except by written instrument executed
by Xx. Xxxxxxxx and Footstar. Xx. Xxxxxxxx expressly warrants that in executing
this Release no promises or representations of any kind or character have been
made by either of the parties or by anyone acting on their behalf, except as are
stated in this Release and the Settlement Agreement.
7. This Release shall inure to the benefit of, and shall be binding
upon, the successors and/or assigns of the parties.
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8. This Release shall be deemed made under and shall be governed by
the substantive laws of the State of New York.
9. The prevailing party in any preceding arising out of or related to
the enforcement of this Release shall be awarded its costs, expenses and
reasonable attorneys' fees.
Dated: New York, New York
June 1, 2004
XXXX XXXXXXX XXXXXXXX
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EXHIBIT D
GENERAL RELEASE BY FOOTSTAR, INC.
---------------------------------
This General Release ("Release") is made by Footstar, Inc.
("Footstar" or the "Debtor") in favor of Xxxx Xxxxxxx Xxxxxxxx ("Xxxxxxxx")
pursuant to the Settlement Agreement and Releases ("Settlement Agreement")
entered into between Footstar and Xx. Xxxxxxxx on June 1, 2004 .
1. Footstar and its predecessors, successors, representatives,
assigns, subsidiaries, divisions, affiliates and directly or indirectly
controlled entities release, waive and forever discharge Xx. Xxxxxxxx and his
heirs, assigns, executors, administrators, transferees, and representatives from
any and all claims, demands, actions, causes of action, suits, debts, damages,
losses, judgments, obligations, costs, expenses, attorneys' fees and any
liabilities whatsoever that Footstar ever had, now has or in the future may have
against Xx. Xxxxxxxx, whether now known or unknown, accrued or unaccrued,
absolute or contingent, suspected or unsuspected, determined or speculative,
including but not limited to any claims asserted or that could have been
asserted in the Arbitration Proceeding (as defined in the Settlement Agreement )
or the district court proceeding (as defined in the Settlement Agreement).
Releasors represent and warrant that they have not assigned, encumbered,
subrogated or otherwise disposed of any right or interest, or any part thereof,
in the Released Claims which are released and discharged hereby. Releasors
covenant and agree that they will never institute or prosecute any claims,
demands, or causes of action released herein against the Releasees or any of
them. It is agreed and understood that this is a GENERAL RELEASE, which shall
inure to the benefit of and be binding upon the successors and assigns of the
parties hereto. Notwithstanding anything contained in this paragraph, this
release shall not apply to the Releasees' obligations under the Settlement
Agreement and Releases entered into by the parties on June 1, 2004.
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2. The release contained in the foregoing paragraph shall be
effective and binding upon the execution of the Release by the Footstar. Nothing
contained herein, however, shall negate, modify, restrict, limit or effect in
any way, whatsoever, the Debtor's waiver and release as provided for in
paragraph 8(b) of the Settlement Agreement.
3. The Debtor agrees that it has executed the Release knowingly and
voluntarily, that it has reviewed the Release with its counsel, that it fully
understands its terms, conditions and limitations, and that the individual
executing this Release has the authority to do so on behalf of the Debtor.
4. The invalidity, illegality or unenforceability of any provision
herein pursuant to judicial decree or otherwise shall not affect the validity or
enforceability of any other provision of this Release, all of which shall remain
in full force and effect.
5. To the extent not inconsistent with the terms and conditions of
this Release, the terms and conditions of the Settlement Agreement are
integrated herein.
6. This Release and the Settlement Agreement together contain the
entire release and agreement being executed in favor of Xx. Xxxxxxxx, and
neither may be amended, supplemented or modified except by written instrument
executed by the Debtor and Xx. Xxxxxxxx. The Debtor expressly warrants that in
executing this Release no promises or representations of any kind or character
have been made by either of the parties or by anyone acting on their behalf,
except as are stated in this Release and the Settlement Agreement.
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7. This Release shall inure to the benefit of, and shall be binding
upon, the successors and/or assigns of the parties.
8. This Release shall be deemed made under and shall be governed by
the substantive laws of the State of New York.
9. The prevailing party in any preceding arising out of or related to
the enforcement of this Release shall be awarded his or its costs, expenses and
reasonable attorneys' fees.
Dated: New York, New York
June 1, 2004
FOOTSTAR, INC.
By:
-----------------------------------
Name:
Title:
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