EXHIBIT 10.26
SEPARATION AGREEMENT
AND
GENERAL RELEASE
This is a Separation Agreement and General Release ("Separation Agreement") by
and between Xxx X. Xxxxx ("Employee") and Payless ShoeSource, Inc., its
subsidiaries, affiliates, successors, and assigns, and its agents and
representatives (collectively "PSS"). Employee is currently employed as
President under that certain Employment Agreement between PSS and Employee dated
as of May 29, 2001, (hereinafter the "Employment Agreement").
PSS wishes Employee's active employment to terminate February 2, 2002. In
consideration of the payments and mutual promises contained in this Separation
Agreement, PSS and Employee agree as follows:
1. Except as provided below, Employee will receive special salary
continuation payments, at Employee's current rate, on normal pay dates,
through February 2, 2003.
2. Employee's employment with PSS shall terminate, Employee's salary
continuation payments shall cease, and the term of the Employment
Agreement is hereby amended to terminate, all effective as of the close
of business February 2, 2003, or on such earlier date as Employee
commences full-time employment with an employer other than PSS. The
employer-employee relationship shall cease on such date, for all
purposes, including without limitation for purposes of all compensation
plans, all employee benefit plans, any retirement and supplemental
retirement plans, and all fringe benefit arrangements provided by PSS.
All payments and participation in all plans shall cease on such date,
including but not limited to the Medical Plan (except as provided by
COBRA), Life Insurance Plan, Long-Term Disability Plan, Profit Sharing
Plan, Deferred Compensation Plan, Deferred Compensation 401(k) Mirror
Plan, 1996 Stock Incentive Plan (and any such plan for all subsequent
years), Executive Incentive Compensation Plan (EICP) for fiscal year
2002 and all subsequent years, car allowance, and any other plan,
program, practice, or payment. The above notwithstanding, vacation
accrual shall cease as of February 2, 2002.
3. PSS agrees to pay Employee the following (Employee has been provided
with a document entitled "Transition Package," which contains estimates
of certain bonus payments based on Incentive plan targets and stock
option valuations based upon certain stock value assumptions. These are
estimates only, and PSS does not represent that these amounts will be
paid, and the actual amounts paid may be less than those stated):
(1) If Employee begins other employment prior to February 2, 2003,
payments under this Separation Agreement shall cease,
Employee's employment will terminate, and Employee will be
paid a lump sum (less legally required withholding for
applicable taxes) representing the equivalent of salary
payments from the date payments cease under this Separation
Agreement through May 31, 2004. If
Employee has not commenced other employment prior to February
2, 2003, then on or about February 2, 2003, Employee will be
paid the lump sum amount of Eight Hundred Fifty Thousand and
00/100 dollars ($850,000.00), less required withholding
representing the equivalent of salary payments (less required
withholding) from February 2, 2003 through May 31, 2004. Any
lump sum paid hereunder will not be subject to repayment or
reduction under Paragraph 5(d)(vi) of the Employment Agreement
provided Employee meets Employee's obligations under Paragraph
3 of the Employment Agreement as modified by Paragraph 5(ii)
below. Upon termination of payments under this Separation
Agreement, medical insurance conversion will be available as
provided in the applicable plan.
(2) PSS will also pay Employee on or about April 15, 2002, both
the annual and the long-term portion of Employee's fiscal 1999
- 2001 bonus, less required withholding.
(3) PSS will also pay Employee on or about April 15, 2003, a
prorated share of the long-term portion of the fiscal 2000 -
2002 bonus, less required withholding.
(4) PSS will also pay Employee on or about April 15, 2004, a
prorated share of the long-term portion of the fiscal 2001 -
2003 bonus, less required withholding.
(5) Employee will receive payment at termination for all unused
vacation granted as of February 2, 2002.
(6) All deferred compensation, if any, will be paid to Employee
according to the "Plan(s)" and election distribution schedule.
(7) The Employee's Payless Profit Sharing account will be paid out
according to the "Plan" and Employee will have the election to
roll over the account balances into another XXX/401(k) type
investment as long as Employee directs Payless ShoeSource to
transfer the funds directly to another investment vehicle
legally qualified to receive rollover distributions.
(8) The payments and other considerations set forth in Paragraphs
3(a), (b), (c), (d) and (e) above represent full satisfaction
of all payments and other consideration due Employee under
Employee's Employment Agreement and also includes additional
consideration in settlement of all claims which Employee may
have with respect to, arising out of or resulting from the
Employment Agreement, Employee's employment thereunder and the
termination thereof, and all potential claims listed in
Paragraph 10 below. Such payments are not made pursuant to any
employee welfare benefit plan as defined by the Employee
Retirement Income Security Act of 1974.
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(9) PSS's obligations to pay the amounts referred to in this
Paragraph 3 are hereby expressly made subject to Employee's
compliance with Employee's obligations hereunder, including,
without limitation, the terms of Paragraphs 5, 11 and 12.
(10) PSS agrees that it will respond to inquiries concerning
Employee's former employment only by confirming Employee's
employment status, period of employment and titles, except as
may otherwise be consented to by Employee. Employee agrees to
direct all inquiries concerning Employee's employment with PSS
to Xxxx Xxxxxx and/or Xxxxxx Xxxxxxxx.
(11) At any time during the November 19 - December 3, 2001, window
period provided pursuant to PSS "Trading in Securities"
policy, and at any time after February 28, 2002, and on or
prior to the date of termination of payments to Employee under
this Separation Agreement, Employee will have the right to (i)
exercise all previously vested stock options which have not
heretofore been exercised, and (ii) receive all shares of
restricted stock granted to Employee in which Employee has
vested.
(12) PSS and Employee agree to honor the terms of the
Indemnification Agreement between PSS and Employee pursuant to
the terms of that agreement and PSS agrees specifically to
provide Employee with such indemnification with respect to the
lawsuits entitled Home Shopping Network, Inc. v. Xxx Xxxxx and
Payless ShoeSource, Inc. and Xxx X. Xxxxx and Payless
ShoeSource, Inc. v. Home Shopping Network, Inc. PSS and
Employee further agree that any rights Employee may have under
the Change of Control Agreement dated March 22, 2000, are
hereby extinguished. PSS represents to Employee that
termination of Employee's employment has not been effected in
contemplation of any contingency contained in that Change of
Control Agreement.
(13) PSS will provide outplacement services for Employee to be
coordinated by PSS Human Resources Department. Employee must
commence utilizing the outplacement services no later than
thirty (30) days following February 2, 2002, or the right to
such services shall cease.
(14) Employee will be paid an additional lump sum payment equal to
the difference between the closing price of a share of PSS
stock on February 1, 2002, and $53.25 multiplied by 65,000
(less legally required withholding for applicable taxes),
provided that such payment shall in no case exceed $195,000.
4. Federal, state, and local taxes shall be withheld by PSS from the
payments hereunder which are required by law, as determined in PSS'
sole discretion, in accordance with the W-4 filed by Employee. Employee
agrees to pay any and all taxes found to be owed from payments made
pursuant to this Separation Agreement and to hold PSS harmless from
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any claims, assessments, demands, penalties and interest owed, or found
to be owed, including reasonable attorney fees, as a result of any
payment made pursuant to this Separation Agreement.
5. Payless hereby releases Employee from all of Employee's obligations
under the Employment Agreement (including any amendments to said
agreement), except for
(i) Employee's post-termination obligations under Paragraph 6 of
the Employment Agreement, which obligations shall remain in
full force and effect;
(ii) Employee's post-termination obligations under Paragraph 3 of
the Employment Agreement, which obligations shall remain in
full force and effect until February 2, 2003, rather than May
31, 2004, as provided in the Employment Agreement; and
(iii) Employee's post-termination obligations under Paragraph 9 of
the Employment Agreement.
6. In the event of Employee's death before all amounts payable hereunder
have been paid, the balance shall be paid to Employee's estate less any
required withholding.
7. Employee hereby expressly acknowledges having been advised to and given
an opportunity to discuss all aspects of this Separation Agreement with
an attorney before signing it and Employee further acknowledges that
Employee has consulted with an attorney or, in the alternative, has
freely and voluntarily elected not to consult with an attorney prior to
signing this Separation Agreement.
8. Employee understands that Employee has forty-five (45) days from
November 17, 2001, to consider the meaning and effect of this
Separation Agreement, and has elected to execute this Separation
Agreement on the date indicated below. Employee agrees that any
changes, whether material or not, to this Separation Agreement do not
restart the running of the forty-five (45) day period.
9. Employee acknowledges that Employee has been informed in writing of (i)
the class, unit, or group of individuals eligible to receive separation
payments, (ii) the eligibility factors for such payments and any time
limits to elect such payments, and (iii) the job titles and ages of all
individuals eligible to receive separation payments and of all
individuals in the same organizational unit who are not eligible to
receive such payments. Employee further acknowledges that this
information is provided with this Separation Agreement as Attachment 1,
and is incorporated herein by reference.
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10. Employee hereby fully releases and forever discharges PSS, its past or
present parent, subsidiaries, affiliates, successors and assigns, and
its or their respective officers, directors, shareholders, employees,
agents, insurers, and representatives (collectively the "Released
Parties"), from any and all claims, demands, liabilities or obligations
(including attorney's fees), whether known or unknown, discovered or
undiscovered, matured or unmatured, which have arisen between Employee
and the Released Parties including, but not limited to, any claim of
discrimination or any other claim arising out of Employee's employment
with PSS, which have arisen up to the date of this Separation
Agreement. Employee agrees not to xxx or bring any action before any
regulatory body or agency against any of the Released Parties with
respect to such claims, demands, liabilities or obligations. Employee
waives Employee's right to file any charge, complaint or other action,
nor will Employee seek, claim entitlement to, or accept any relief or
recovery from any charge, complaint or other action before any federal,
sate or local administrative agency or court against the Released
Parties. As part of this general release, Employee specifically waives
any and all rights or claims which Employee might have under Title VII
of the Civil Rights Act of 1964, as amended, the Civil Rights Act of
1991, the Age Discrimination in Employment Act of 1967, as amended by
the Older Worker's Benefit Protection Act of 1990, the Americans with
Disabilities Act of 1990, the Family and Medical Leave Act of 1993, any
and all state or local civil/human rights laws and any other similar
laws, and any similar state, local or municipal statutes. For purposes
of the Age Discrimination in Employment Act ("ADEA") only, this
Separation Agreement does not affect the EEOC's right and
responsibilities to enforce the ADEA, nor does this Separation
Agreement prohibit Employee from filing a charge under the ADEA with
the EEOC or participating in any investigation or proceeding conducted
by the EEOC.
11. Employee and PSS agree to treat the facts of this Separation Agreement
in a confidential manner and will not disclose the terms herein to any
third party and, specifically, the parties will not:
(i) orally, or in writing, make any public statements, the intent
of which is to bring Employee or PSS or its interests,
methods, officers, directors or employees into disrepute; and
(ii) disclose the fact of this Separation Agreement or any of its
terms to any person not a family member (including any friend,
acquaintance or current or potential business associate),
except (a) as required by law (upon advice of counsel
reflected in a written opinion of counsel which has been
provided to PSS in advance), (b) in Employee's income tax
returns, (c) to any financial planner, accountant or other
agent whose knowledge thereof is necessary in
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order to prepare such income tax returns (and then only upon
such financial planner's, accountant's or other agent's
agreement to be bound by the terms of this Section), and (d)
to any attorney representing Employee concerning this
Separation Agreement.
12. Employee acknowledges and agrees that the "Confidential Information"
provisions of Paragraph 6 of the Employment Agreement continue to apply
to Employee after Employee's resignation and that Employee has reviewed
and reaffirms that obligation. Employee also acknowledges that Employee
has signed copies of PSS's confidential information policy, which
policy by its terms continues to apply to Employee after termination of
employment, and agrees that such policy continues to apply to Employee
after Employee's resignation.
13. This Separation Agreement sets forth all of the agreements between PSS
and Employee concerning Employee's employment and concerning Employee's
resignation, and all prior agreements are hereby incorporated herein.
This Separation Agreement may not be amended, except in writing signed
by both of the parties hereto.
14. Should Employee fail to meet the obligations undertaken by Employee
pursuant to this Separation Agreement, PSS shall have no further
obligations under this Separation Agreement, including but not limited
to payment of the amounts set forth in Paragraph 3. In addition, PSS
shall have the right to recover from Employee any and all monies paid
and the full value of any benefits extended to Employee pursuant to
this Separation Agreement and may take any legal action necessary to
enforce this Separation Agreement and/or recover damages to PSS caused
by Employee's breach of this Separation Agreement, including reasonable
attorney fees, unless prohibited from doing so by local, state or
federal law.
15. This Separation Agreement shall be interpreted in accordance with the
plain meaning of its terms and not strictly for or against any of the
parties hereto. Kansas law shall govern the validity, effect, and
interpretation of this Separation Agreement. This Separation Agreement
is to be enforced at least in part in Shawnee County, Kansas, and venue
for any action to enforce this Separation Agreement shall be in the
Kansas District Court for Shawnee County, Kansas.
16. Should any provision of this Separation Agreement be declared or be
determined by any court of competent jurisdiction to be illegal,
invalid, or unenforceable, the legality, validity, and enforceability
of the remaining parts, terms or provisions shall not be affected
thereby, and said illegal, unenforceable, or invalid part, term or
provision shall be deemed not be part of this Separation Agreement.
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17. Employee agrees to close out Employee's business relationship with PSS
in a professional and responsible manner, including contact with
personnel both within and outside PSS, and acknowledges that failure to
do so shall invalidate the payments specified above.
18. Employee is eligible for re-hire by PSS. If Employee is offered and
accepts employment with PSS prior to the end of Employee's Employment
Agreement, any payments remaining to be paid under the Separation
Agreement shall cease.
19. This Separation Agreement shall be binding upon Employee and Employee's
heirs, successors and assigns, and upon PSS and its successors and
assigns.
20. No payment hereunder shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, levy or
charge, and any attempt to so assign or otherwise encumber such payment
shall be void. However, any valid garnishments, assignments or court
ordered wage withholding orders received prior to payment of the
amounts due pursuant to this Separation Agreement, will be executed by
PSS as required by applicable law or procedure.
21. Employee acknowledges that the right to receive payments hereunder is
not secured by an particular assets of PSS, but is an unfunded
obligation of PSS.
22. The parties further hereby agree that this Separation Agreement shall
not be construed as an admission by either party of any liability
whatsoever, or as an admission of any violation of the rights of either
party, violation of any order, law statute, duty, or contract,
whatsoever against either party or any other person, or of any order,
law statute, duty or contract on the part of PSS, its employees, or
agents, or related companies or their employees or agents.
23. Employee agrees to cooperate with and be readily available to PSS or
its General Counsel, as PSS may reasonably request, to assist it in any
matter, including litigation or potential litigation, over which
Employee may have knowledge, information or expertise. Employee further
agrees that Employee will not at any time discuss any matter concerning
PSS with anyone adverse or potentially adverse to PSS on any matter
including employment claims or customer claims, without the prior
written consent of Counsel for PSS. However, if required by a
governmental regulatory agency or self-regulatory agency to provide
testimony or information regarding the Company, Employee will cooperate
with said regulatory agency. If compelled to testify by a validly
served subpoena or by regulatory authority, Employee will testify
truthfully as to all matters concerning Employee's employment at PSS.
If a regulatory agency or self-regulatory agency contacts Employee
regarding the Company or if Employee receives a subpoena or other court
or legal process relating in any way to the Company, or any present or
former Company customer or employee, Employee immediately will give the
General Counsel
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for the Company prior notice and shall be available to be interviewed
concerning the subject of such contact.
24. Employee understands that Employee may revoke this Separation Agreement
at any time during a period of seven (7) days following the day
Employee executes this Separation Agreement and said Separation
Agreement shall not become effective or enforceable until the
revocation period has expired. Any revocation within this period must
be submitted, in writing to PSS and state: "I hereby revoke my
acceptance of our Separation Agreement and General Release." Said
revocation must be personally delivered to Xxxxxxx X. Xxxxxx, Senior
Vice President, General Counsel, or Employer's designee, or mailed to
Payless ShoeSource, Inc., X.X. Xxx 0000, Xxxxxx, Xxxxxx 00000, and
postmarked within seven (7) days of the execution of this Separation
Agreement.
/s/ Xxx X. Xxxxx December 13, 2001
------------------ -----------------
Xxx X. Xxxxx Date
Payless ShoeSource, Inc.
By: /s/ Xxxxxx Xxxxxxxx December 13, 2001
--------------------------------- -----------------
Date
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ATTACHMENT 1
INFORMATION REGARDING JOB ELIMINATIONS
The decisional unit is all members of the Senior Management Committee. All
persons selected for termination by virtue of elimination of their positions in
the Senior Management Committee are selected for this program. The following is
a list of the age and job title of persons who were and were not selected for
termination.
PERSONS NOT SELECTED FOR TERMINATION
JOB TITLE AGE
--------- ---
Chairman & Chief Executive Officer 52
Executive Vice President - Operations 46
Senior Vice President - Human Resources 58
Senior Vice President - Financial Services & CFO 56
Senior Vice President - General Counsel 55
Division Senior Vice President - Administration 46
Senior Vice President - Retail Operations 43
Senior Vice President / GMM - Childrens'/Mens 47
Senior Vice President - Merchandise Distribution / Planning 46
Senior Vice President - Marketing 39
Senior Vice President / GMM - Parade 46
Senior Vice President / GMM - Accessories 48
Senior Vice President - Retail Operations Div. A 47
Senior Vice President - Retail Operations - International 47
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PERSONS SELECTED FOR TERMINATION
JOB TITLE AGE
--------- ---
President 49
Senior Vice President / GMM - Women's 46
Senior Vice President - Trend Merchandising 48
Senior Vice President - IS & Logistics 53
Senior Vice President - Corporate Development 52
Senior Vice President - Managing Director PSSI 48
Senior Vice President - Retail Operations Div. B 55
Senior Vice President - Retail Operations Div. K 63
Senior Vice President - Retail Operations Div. L 51
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