Exhibit 10.2

 

 

 

 

FOOTSTAR

 

Employment Agreement for Craig Haines, Vice President, Controller
 

 

 

 

 

 

 

 

 

 

 

 

 

 

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FOOTSTAR

 

Employment Agreement for Craig Haines, Vice President, Controller
 

 

 

  Page

1.

Definitions 3 2. Term of Employment 4 3. Position, Duties and Responsibilities 4
4.

Base Salary

4 5.

Annual Incentive Awards

4 6. Employee Benefit Programs 5 7.

Reimbursement of Business and Other Expenses

5 8.

Termination of Employment

5 9.

Confidentiality; Cooperation with Regard to Litigation

8

10.

Non-competition

9 11. Non-solicitation of Employees 10 12 Remedies 11

13.

Resolution of Disputes

11

14.

Indemnification 11

15.

Deferred Compensation

11 16 Effect of Agreement on Other Benefits 11

17.

Assignability; Binding Nature 12 18

Representation

12

19.

Entire Agreement 12 20 Amendment or Waiver 12 21 Severability 12

22.

Survivorship

12

 

 

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FOOTSTAR

 

Employment Agreement for Craig Haines, Vice President, Controller
 

 

    Page 23

Beneficiaries/References

12

24.

Governing Law/Jurisdiction

12 25 Notices 12

26.

Headings 12 27 Counterparts 13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 ii

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EMPLOYMENT AGREEMENT

AGREEMENT, made and entered into as of the 30th day of December, 2005 by and
between Footstar, Inc., a Delaware corporation and Footstar Corporation, a Texas
Corporation (together with its successors and assigns permitted under this
Agreement, the “Company”), and Craig Haines (the “Executive”).

WITNESSETH:

WHEREAS, the Company desires to employ the Executive pursuant to an agreement
embodying the terms of such employment (this “Agreement”) and the Executive
desires to enter into this Agreement and to accept such employment, subject to
the terms and provisions of this Agreement;

NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein and for other good and valuable consideration, the receipt of which is
mutually acknowledged, the Company and the Executive (individually a “Party” and
together the “Parties”) agree as follows:

 

1.

Definitions.

 

(a)

“Base Salary” shall have the meaning set forth in Section 4 below.

 

(b)

“Board” shall mean the Board of Directors of the Company.

 

(c)

“Cause” shall have the meaning set forth in Section 8(c) below.

 

(d)

“Confidential Information” shall have the meaning set forth in Section 9(c)
below.

 

(e)

“Effective Date” shall have the meaning set forth in Section 2 below.

 

(f)

“1996 ICP” shall have the meaning set forth in Section 5(a) below.

 

(g)

“Kmart Agreement” shall mean the Amended and Restated Master Agreement made and
entered into as of August 24, 2005 by and between Kmart Corporation , the
Company and related entities.

 

(h)

“Plan of Reorganization” shall mean the “Debtors First Amended Joint Plan of
Reorganization” as it may be amended from time to time, filed in connection with
the Company’s cases under Chapter 11 of the U.S. Bankruptcy Code.

 

(i)

“Resignation Following No Offer of Comparable Employment” shall have the meaning
set forth in Section 8(d) below.

 

(j)

“Restriction Period” shall have the meaning set forth in Section 10 below.

 

(k)

“Severance Period” shall mean the period of 7 months following the termination
of the Executive’s employment.

 

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(l)

“Subsidiary” shall have the meaning set forth in Section 9(d) below.

 

(m)

“Term of Employment” shall have the meaning set forth in Section 2 below.

 

2.

Term of Employment.

The term of the Executive’s employment under this Agreement shall commence on
the date this agreement is fully executed subject only to the Company’s
emergence from bankruptcy pursuant to its Plan of Reorganization (the “Effective
Date”) and end on December 31, 2008 (the “Original Term of Employment”) or, if
sooner, the date Executive’s employment is terminated pursuant to Section 8.
Thereafter the Original Term of Employment shall be automatically renewed for
successive one-year terms (“Renewal Terms”) unless at least 60 days prior to the
expiration of the Original Term of Employment or any Renewal Term, either Party
notifies the other Party in writing that he or it is electing to terminate this
Agreement at the expiration of the then current Term of Employment. “Term of
Employment” shall mean the Original Term of Employment and all Renewal Terms. If
the Executive elects not to renew this Agreement, his employment termination
following the expiration of the Term of Employment shall be treated as a
voluntary termination pursuant to Section 8(e) below. If the Company elects not
to renew this Agreement, the Executive’s employment termination following the
expiration of the Term of Employment shall be treated as a termination without
Cause under Section 8(f) below.

 

3.

Position, Duties and Responsibilities.

Executive shall serve as a Vice President, Controller to the Company. Executive
shall have and perform such duties, responsibilities, and authorities as shall
be specified by the Company from time to time as are consistent with such
position and status. Executive shall devote all of his business time and
attention (except for periods of vacation or absence due to illness), and his
best efforts, abilities, experience, and talent to his position and the
businesses of the Company.

 

4.

Base Salary.

The Executive shall be paid an annualized salary, payable in accordance with the
regular payroll practices of the Company, of not less than $165,000.00, subject
to annual review for increase at the discretion of the Compensation Committee of
the Board (“Base Salary”).

 

5.

Other Awards.

(a)           Incentive Awards. The Executive shall participate in the Company’s
1996 Incentive Compensation Plan (the “1996 ICP”) under which he shall be
afforded the opportunity to earn no less than 30% of Base Salary per year if
targets are achieved or in a successor plan to the 1996 ICP that provides the
Executive with an equivalent opportunity. Measurement of Company performance and
payment of incentive awards shall be done seasonally and in accordance with the
Company’s practice with respect to the incentive awards for other senior-level
executives.

(b)           Retention Bonuses. The Executive shall receive $18,563.00 on each
July 1st and December 31st of 2006, 2007 and 2008 if the Executive continues to
be employed by the Company through the date such payments are due.

 

 

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(c)           Emergence Payments. If the Executive participated in the key
employee retention program, the Executive shall receive the amounts, if any,
approved and not yet paid under the Order entered in the U.S. Bankruptcy Court
on May 6, 2004, immediately upon the Company’s emergence from bankruptcy
pursuant to its Plan of Reorganization.
 

 

6.

Employee Benefit Programs.

During the Term of Employment, the Executive shall be entitled to participate in
such employee pension and welfare benefit plans and programs of the Company and
such perquisite programs as are made available to similarly situated executives
at the Company or to its employees generally, as such plans or programs may be
in effect from time to time, including, without limitation, health, medical,
dental, long-term disability, travel accident and life insurance plans,
participation in executive health, tax preparation and financial planning
programs.

 

7.

Reimbursement of Business and Other Expenses.

The Executive is authorized to incur reasonable expenses in carrying out his
duties and responsibilities under this Agreement, and the Company shall promptly
reimburse him for all such expenses, subject to documentation in accordance with
the Company’s policy.

 

8.

Termination of Employment.

(a)           Termination Due to Death. In the event the Executive’s employment
with the Company is terminated due to his death, his estate or his
beneficiaries, as the case may be, shall be entitled to and their sole remedies
under this Agreement shall be:

(i)            Base Salary through the date of death which shall be paid in a
single lump sum not later than 15 days following the Executive’s death;

 

(ii)           any incentive awards earned (but not yet paid), which shall be
paid in a single lump sum not later than 15 days following the Executive’s
death; and;

(iii)          other or additional benefits then due or earned in accordance
with applicable plans or programs of the Company including but not limited to
the STEP and stock option programs.

(b)           Termination by the Company due to Disability.

The Company may terminate the Executive’s employment on account of Disability.
For purposes of this Agreement, “Disability” means a condition that qualifies
the Executive to receive benefits under the Company’s Long-Term Disability Plan.
In the event the Executive’s employment with the Company is terminated due to
his Disability, then the Executive shall be entitled to and his sole remedies
under this Agreement shall be:

(i)            Base Salary through the date of employment termination, which
shall be paid in a single lump sum not later than 15 days following the
employment termination;

(ii)           any incentive awards earned (but not yet paid), which shall be
paid in a single lump sum not later than 15 days following the Executive’s
termination of employment; and

 

 

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(iii)          other or additional benefits then due or earned in accordance
with applicable plans or programs of the Company including but not limited to
the STEP and stock option programs.

(c)           Termination by the Company for Cause.

(i)          “Cause” shall mean:

(A)          the Executive’s willful and material breach of Sections 3, 9, 10 or
11 of this Agreement;

(B)          the Executive is convicted of any felony or a misdemeanor involving
moral turpitude; or

(C)          the Executive engages in conduct that constitutes gross neglect or
gross misconduct in carrying out his duties under this Agreement, resulting, in
either case, in a substantial loss to the Company or substantial damage to its
reputation.

(ii)           In the event the Company terminates the Executive’s employment
for Cause, he shall be entitled to and his sole remedies under this Agreement
shall be:

(A)          Base Salary through the date of the termination of his employment
for Cause, which shall be paid in a single lump sum not later than 15 days
following the Executive’s termination of employment;

(B)          any incentive awards earned (but not yet paid), which shall be paid
in a single lump sum not later than 15 days following the Executive’s
termination of employment; and

(C)          other or additional benefits then due or earned in accordance with
applicable plans or programs of the Company including but not limited to the
STEP and stock option programs.

(d)           Resignation Following No Offer of Comparable Employment. If the
Executive’s employment terminates at his initiative following an acquisition, by
any person or entity, of the business of the Company, whether by virtue of the
sale of the stock or assets of the Company where the Executive has not been
offered comparable employment from such person or entity, the Executive shall
have the same entitlements as provided in Section 8(f) below for a termination
without Cause. For purposes of this subsection “comparable employment” shall
mean employment where (i) Executive receives at least the same salary in effect
immediately prior to the acquisition, (ii) Executive is eligible for
substantially comparable employee benefits in the aggregate to the employee
benefits applicable immediately prior to the acquisition, including, without
limitation, equivalent severance benefits offered under this Agreement, life
insurance, and retirement benefits, (iii) Executive’s principal place of
employment that is not more than 35 miles from Executive’s principal place of
employment on the Effective Date.

(e)           Voluntary Termination. In the event of a termination of employment
by the Executive on his own initiative after delivery of 10 business days
advance written notice, other than a termination due to death, Disability, a
Resignation Following No Offer of Comparable Employment, the Executive shall
have the same entitlements as provided in Section 8(c)(ii) above for a
termination for Cause.

 

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(f)            Termination Without Cause. In the event the Executive’s
employment with the Company is terminated without Cause (which termination shall
be effective as of the date specified by the Company in a written notice to the
Executive), other than due to death or Disability, or in the event there is a
Resignation Following No Offer of Comparable Employment (as defined above), then
subject to Sections 8(j) and 15 below, the Executive shall be entitled to and
his sole remedies under this Agreement shall be:

(i)            Base Salary through the date of termination of the Executive’s
employment, which shall be paid in a single lump sum not later than 15 days
following the Executive’s termination of employment;

(ii)           $95,000.00 payable in a cash lump sum promptly following the
Executive’s termination of employment plus a pro rata retention bonus determined
by multiplying the next scheduled retention bonus payable under Section 5(b) by
a fraction the numerator of which is the number of days the Executive is
employed since the previous retention bonus paid pursuant to Section 5(b) and
the denominator of which is the number of days between the last retention bonus
payment and the next scheduled retention bonus payment.;

(iii)          pro rata incentive award for any incomplete performance period of
the year in which the Executive’s employment termination occurs, assuming that
the Executive would have received award(s) equal to 100% of the target award for
such performance period for any incomplete performance period, which shall be
payable in a lump sum promptly (but in no event later than 15 days) after his
employment termination;

(iv)          immediate vesting of any matching grant under STEP and
distribution of all deferred shares and matching shares, without restrictions,
that are credited to Executive as of the date of employment termination;

(v)           immediate vesting of all outstanding stock options and the right
to exercise such stock options during the Severance Period or for the remainder
of the exercise period, if less;

(vi)          the balance of any incentive awards earned (but not yet paid),
which shall be paid in a single lump sum not later than 15 days following the
date of the Executive’s employment termination

(vii)         provided the Executive timely elects COBRA coverage, continuation
of medical and dental coverage during the Severance Period (or, if earlier,
until the time the Executive becomes eligible to participate in another group
plan providing such coverage by reason of subsequent employment) on the same
terms and conditions as described in this Agreement. The foregoing benefits
shall terminate at such time, if any, as the Executive begins participation in
the Company’s retiree medical program. If, during the period of coverage under
the first sentence of this subsection, (A) the Company’s medical and/or dental
plans or programs cease to exist including due to the Company’s (or a
successor’s) failure to maintain any such plan or program, or (B) if while the
Executive is participating in the retiree medical program, the Company
terminates such program, then for the remainder of such period, the Company
shall pay to the Executive a cash amount on an after-tax basis equal to the
Company’s cost of providing medical and dental coverage to the Executive prior
to the date the Executive’s employment terminated, as long as the Executive
provides evidence to the Company that he has actually obtained such coverage.
Such cash amount shall be paid to the Executive quarterly in advance of the date
the premiums are due;

 

 

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(viii)        continued life insurance coverage during the Severance Period
pursuant to the Company’s plans or, at the Company’s option, pursuant to an
election by the Executive to convert such life insurance to portable term
insurance. The Company shall pay the premiums associated with such insurance on
the same terms and conditions as described in this Agreement. The Executive
shall complete such paperwork and obtain such physical examinations as shall be
necessary for the Company to obtain any coverage under this paragraph. If,
during the Severance Period, the Executive becomes eligible to participate in
another group plan providing life insurance coverage by reason of subsequent
employment, the Executive’s entitlement under this subsection will terminate in
accordance with the transition of coverage provisions in the Company’s policies;
and

(ix)          other or additional benefits then due or earned in accordance with
applicable plans and programs of the Company.

(g)           No Mitigation; No Offset. In the event of any termination of
employment under this Section 8, the Executive shall be under no obligation to
seek other employment; amounts due the Executive under this Agreement shall not
be offset by any remuneration attributable to any subsequent employment that he
may obtain.

(h)           Nature of Payments. Any amounts due under this Section 8 are in
the nature of severance payments considered to be reasonable by the Company and
are not in the nature of a penalty.

(i)            Exclusivity of Severance Payments. Upon termination of the
Executive’s employment during the Term of Employment, he shall not be entitled
to any severance payments or severance benefits from the Company or any payments
by the Company on account of any claim by him of wrongful termination, including
claims under any federal, state or local human and civil rights or labor laws,
other than the payments and benefits provided in this Section 8.

(j)            Release of Employment Claims. The Executive agrees, as a
condition to receipt of the termination payments and benefits provided for in
this Section 8, that he will execute a release agreement, in a form reasonably
satisfactory to the Company, releasing any and all claims arising out of the
Executive’s employment (other than enforcement of this Agreement, the
Executive’s rights under any of the Company’s incentive compensation and
employee benefit plans and programs to which he is entitled under this
Agreement, and any claim for any tort for personal injury not arising out of or
related to his termination of employment).

(k)           Resignation as Officer or Director. The Executive shall be deemed
to resign as an officer of the Company (and as an officer or director of any
Subsidiary of the Company), if applicable, effective as of the date of any
employment termination, without any further action on his part. The Executive
agrees to execute any documents confirming such resignation.

 

9.

Confidentiality; Cooperation with Regard to Litigation.

(a)           During the Term of Employment and thereafter, the Executive shall
not, without the prior written consent of the Company, disclose to anyone except
in good faith in the ordinary course of business to a person who will be advised
by the Executive to keep such information confidential or make use of any

 

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 Confidential Information, except when required to do so by legal process, by
any governmental agency having supervisory authority over the business of the
Company or by any administrative or legislative body (including a committee
thereof) that requires him to divulge, disclose or make accessible such
information. In the event that the Executive is so ordered, he shall give prompt
written notice to the Company in order to allow the Company the opportunity to
object to or otherwise resist such order.

(b)           During the Term of Employment and thereafter, Executive shall not
disclose the existence or contents of this Agreement beyond what is disclosed in
the proxy statement or documents filed with the government unless and to the
extent such disclosure is required by law, by a governmental agency, or in a
document required by law to be filed with a governmental agency or in connection
with enforcement of his rights under this Agreement. In the event that
disclosure is so required, the Executive shall give prompt written notice to the
Company in order to allow the Company the opportunity to object to or otherwise
resist such requirement. This restriction shall not apply to such disclosure by
him to members of his immediate family, his tax, legal or financial advisors,
any lender, or tax authorities, or to potential future employers (but in the
case of disclosure to future employers disclosure shall be limited to what is
necessary to inform the employer of the scope of this covenant to the extent
this document is not publicly available), each of whom shall be advised not to
disclose such information.

(c)           “Confidential Information” shall mean all information that is not
known or available to the public concerning the business of the Company or any
Subsidiary relating to any of their products, product development, trade
secrets, customers, suppliers, finances, and business plans and strategies. For
this purpose, information known or available generally within the trade or
industry of the Company or any Subsidiary shall be deemed to be known or
available to the public. Confidential Information shall include information that
is, or becomes, known to the public as a result of a breach by the Executive of
the provisions of Section 9(a) above.

(d)           “Subsidiary” shall mean any corporation controlled directly or
indirectly by the Company and any affiliate of the Company.

(e)           The Executive agrees to cooperate with the Company, during the
Term of Employment and thereafter (including following the Executive’s
termination of employment for any reason), by making himself available to
testify on behalf of the Company or any Subsidiary or affiliate of the Company,
in any action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, and to assist the Company, or any Subsidiary or affiliate of the
Company, in any such action, suit, or proceeding, by providing information and
meeting and consulting with the Board or its representatives or counsel, or
representatives or counsel to the Company, or any Subsidiary or affiliate of the
Company, as requested. The Company agrees to reimburse the Executive, on an
after-tax basis, for all reasonable expenses actually incurred in connection
with his provision of testimony or assistance.

 

10.

Non-competition

(a)           During the Restriction Period (as defined in Section 10(b) below),
the Executive shall not engage in Competition with the Company or any
Subsidiary. “Competition” shall mean engaging in any activity, except as
provided below, for a Competitor of the Company or any Subsidiary, whether as an
employee, consultant, principal, agent, officer, director, partner, shareholder
(except as a less than one percent shareholder of a publicly traded company) or
otherwise; provided, however, that this provision shall not apply if the

 

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 Company ceases to do business (including through a sale of all or substantially
all of the assets of the Company to Kmart as contemplated by the Kmart
Agreement) and there is no successor to the Company otherwise. A “Competitor”
shall mean (i) Payless ShoeSource, Wal-Mart, Foot Locker, Lady Foot Locker,
Kids’ Foot Locker, Kohl’s, Rite Aid, Target, and J. C. Penney (and any successor
or successors thereto), or (ii) the portion of any other corporation or other
entity or start-up corporation or entity that is engaged in the Discount Retail
Footwear Business within fifty (50) miles of any Discount Retail Footwear
Business outlet in the United States of the Company or any Subsidiary, provided
that a corporation or entity described in clause (ii) above shall not be deemed
to be a Competitor if the Executive shall not either directly or indirectly
oversee, manage or otherwise engage in the activities of such corporation or
entity’s division or unit engaged in the Discount Retail Footwear Business. If
the Executive commences employment or becomes a consultant, principal, agent,
officer, director, partner, or shareholder of any entity that is not a
Competitor at the time the Executive initially becomes employed or becomes a
consultant, principal, agent, officer, director, partner, or shareholder of the
entity, future activities of such entity shall not result in a violation of this
provision unless (x) such activities were contemplated at the time the Executive
initially became employed or becomes a consultant, principal, agent, officer,
director, partner, or shareholder of the entity (and the contemplation of such
activities was known to the Executive) or (y) the Executive commences directly
or indirectly overseeing, managing or otherwise engaging in the activities which
are competitive with the activities of the Company or Subsidiary. For purposes
of the foregoing, “Discount Retail Footwear Business” shall mean a group of four
or more stores which primarily sells discount footwear.

(b)           For the purposes of this Section 10 and Section 11 below,
“Restriction Period” shall mean the period beginning with the Effective Date and
ending with:

(i)            in the case of a termination of the Executive’s employment
without Cause or a Resignation Following No Offer of Comparable Employment, the
Severance Period;

(ii)           in the case of a termination of the Executive’s employment for
Cause or voluntary termination of employment, the first anniversary of such
termination.

(c)           Separate Covenants. In consideration of the Company’s entering
into this Agreement, the Executive shall execute Confidentiality and
Non-Competition Agreement between the Company and the Executive attached hereto
as Exhibit A. The covenants contained in Sections 9, 10 and 11 hereof,
collectively, are separate and independent of the covenants contained in such
agreement. In the event that Sections 9, 10 and 11 of this Agreement and the
Confidentiality and Non-Competition Agreement shall conflict, the Company shall
get the benefit of the provision that affords it the greatest protection.

 

11.

Non-solicitation of Employees.

For the one (1) year period following the termination of the Executive’s
employment (or, if longer, until the expiration of the Restriction Period), the
Executive shall not (i) induce employees of the Company or any Subsidiary to
terminate their employment or (ii) directly or indirectly hire any employee of
the Company or any Subsidiary or any person who was employed by the Company or
any Subsidiary within 180 days of such hiring. This covenant shall cease to
apply if the Company ceases to do business (including through a sale of all or
substantially all of the assets of the Company to Kmart as contemplated by the
Company’s Master Agreement with Kmart Corporation) and there is no successor to
the Company otherwise.

 

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12.

Remedies.

In addition to whatever other rights and remedies the Company may have at equity
or in law, if the Executive breaches any of the provisions contained in Sections
9, 10 or 11 above, the Company (a) shall have the right to immediately terminate
all payments and benefits due under this Agreement and (b) shall have the right
to seek injunctive relief. The Executive acknowledges that such a breach would
cause irreparable injury and that money damages would not provide an adequate
remedy for the Company.

 

13.

Resolution of Disputes.

Any disputes arising under or in connection with this Agreement, other than
seeking injunctive relief under Section 12, shall be resolved by binding
arbitration, to be held at an office closest to the Company’s principal offices
in accordance with the rules and procedures of the American Arbitration
Association, except that disputes arising under or in connection with Sections
9, 10 and 11 above shall be submitted to the federal or state courts in the
State of New Jersey. Judgment upon the award rendered by the arbitrator(s) may
be entered in any court having jurisdiction thereof.

 

14.

Indemnification.

(a)           Company Indemnity. The Company agrees that if the Executive is
made a party, or is threatened to be made a party, to any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
“Proceeding”), by reason of the fact that he is or was a director, officer or
employee of the Company or any Subsidiary or is or was serving at the request of
the Company or any Subsidiary as a director, officer, member, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether or not the
basis of such Proceeding is the Executive’s alleged action in an official
capacity while serving as a director, officer, member, employee or agent, the
Executive shall be indemnified and held harmless by the Company to the fullest
extent authorized by the Company’s certificate of incorporation or bylaws (which
certificate or incorporation or bylaws shall be amended prior to the Effective
Date of the Plan of Reorganization to provide for the indemnification of
officers) or, if greater, by the laws of the State of Delaware.

(b)           Liability Insurance. The Company agrees to continue and maintain a
directors and officers’ liability insurance policy covering the Executive to the
extent the Company provides such coverage for its other executive officers.

 

15.

Deferred Compensation.

Notwithstanding anything to the contrary in this Agreement, payments hereunder
will be deferred until 6 months after employment terminates to the extent
necessary to satisfy Section 409A of the Code.

 

16.

Effect of Agreement on Other Benefits.

Except as specifically provided in this Agreement, the existence of this
Agreement shall not be interpreted to preclude, prohibit or restrict the
Executive’s participation in any other employee benefit or other plans or
programs in which he currently participates.

 

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17.

Assignability; Binding Nature.

This Agreement shall be binding upon and inure to the benefit of the Parties and
their respective successors, heirs (in the case of the Executive) and permitted
assigns. No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred in connection with the sale or transfer of all or
substantially all of the assets of the Company, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company and such assignee or transferee assumes the liabilities, obligations and
duties of the Company, as contained in this Agreement, either contractually or
as a matter of law. No rights or obligations of the Executive under this
Agreement may be assigned or transferred by the Executive other than his rights
to compensation and benefits, which may be transferred only by will or operation
of law, except as provided in Section 23 below.

 

18.

Representation.

The Parties represent and warrant that each are fully authorized and empowered
to enter into this Agreement and that the performance of their respective
obligations under this Agreement will not violate any agreement between such
Party and any other person, firm or organization.

 

19.

Entire Agreement.

This Agreement contains the entire understanding and agreement between the
Parties concerning the subject matter hereof and supersedes all prior
agreements, understandings, discussions, negotiations and undertakings, whether
written or oral, between the Parties with respect thereto.

 

20.

Amendment or Waiver.

No provision in this Agreement may be amended unless such amendment is agreed to
in writing and signed by the Executive and an authorized officer of the Company.
No waiver by either Party of any breach by the other Party of any condition or
provision contained in this Agreement to be performed by such other Party shall
be deemed a waiver of a similar or dissimilar condition or provision at the same
or any prior or subsequent time. Any waiver must be in writing and signed by the
Executive or an authorized officer of the Company, as the case may be.

 

21.

Severability.

The provisions of this Agreement are severable and the invalidity of any one or
more provisions shall not affect the validity of any other provision. In the
event that a court of competent jurisdiction shall determine that any provision
of this Agreement or the application thereof is unenforceable in whole or in
part because of the duration or scope thereof, the parties hereto agree that
said court in making such determination shall have the power to reduce the
duration and scope of such provision to the extent necessary to make it
enforceable, and that the Agreement in its reduced form shall be valid and
enforceable to the full extent permitted by law.

 

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22.

Survivorship.

The respective rights and obligations of the Parties hereunder shall survive any
termination of the Executive’s employment to the extent necessary to the
intended preservation of such rights and obligations.

 

23.

Beneficiaries/References.

The Executive shall be entitled, to the extent permitted under any applicable
law, to select and change a beneficiary or beneficiaries to receive any
compensation or benefit payable hereunder following the Executive’s death by
giving the Company written notice thereof. In the event of the Executive’s death
or a judicial determination of his incompetence, reference in this Agreement to
the Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative.

 

24.

Governing Law/Jurisdiction.

This Agreement shall be governed by and construed and interpreted in accordance
with the laws of New Jersey without reference to principles of conflict of laws,
except insofar as the Delaware General Corporation Law, federal laws and
regulations may be applicable. Subject to Section 13, the Company and the
Executive hereby consent to the jurisdiction of any or all of the following
courts for purposes of resolving any dispute under this Agreement: (i) the
United States District Court for New Jersey, (ii) any of the courts of the State
of New Jersey, or (iii) any other court having jurisdiction. The Company and the
Executive further agree that any service of process or notice requirements in
any such proceeding shall be satisfied if the rules of such court relating
thereto have been substantially satisfied. The Company and the Executive hereby
waive, to the fullest extent permitted by applicable law, any objection which it
or he may now or hereafter have to such jurisdiction and any defense of
inconvenient forum.

 

25.

Notices.

Any notice given to a Party shall be in writing and shall be deemed to have been
given when delivered personally or sent by certified or registered mail, postage
prepaid, return receipt requested, duly addressed to the Party concerned at the
address indicated below or to such changed address as such Party may
subsequently give such notice of:

 

If to the Company:

Footstar, Inc.

933 MacArthur Boulevard

Mahwah, New Jersey 07430

Attention: General Counsel

 

 

If to the Executive:

Craig Haines
[insert contact info]

 

26.

Headings.

The headings of the sections contained in this Agreement are for convenience
only and shall not be deemed to control or affect the meaning or construction of
any provision of this Agreement.

 

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27.

Counterparts.

This Agreement may be executed in one or more counterparts. Once executed this
Agreement shall be in full force and effect without further corporate action
subject only to the Company’s emergence from bankruptcy pursuant to its Plan of
Reorganization

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.

 

  FOOTSTAR, INC      

 

By:

/s/ Dale W. Hilpert

 

Name:

Dale W. Hilpert

 

Title:

Chairman, President and CEO

 

 

  FOOTSTAR CORPORATION      

 

By:

/s/ Dale W. Hilpert

 

Name:

Dale W. Hilpert

 

Title:

Chairman, President and CEO

 

 

  EXECUTIVE    

 

/s/ Craig Haines

 

Name:

Craig Haines

 

Title:

Chairman, President and CEO

 

 

 

 

 

 

 

 

 

 

 

 

 

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EXHIBIT A

FOOTSTAR CORPORATION
and
FOOTSTAR, INC.

CONFIDENTIALITY AND
NON-COMPETITION AGREEMENT

This Agreement among Footstar Corporation, a Texas corporation, Footstar Inc., a
Delaware corporation, (together “Footstar”), and the employee executing this
Agreement below (“Executive”) is made and effective this _____day
of______________, 2005 (the “Effective Date”).

WHEREAS, Executive is critical to the success and operation of Footstar’s
Meldisco business segment, which primarily engages in the procurement, sales and
marketing of footwear in leased premises located in Kmart and/or Sears stores;

WHEREAS, Footstar desires to ensure the continued availability of the
Executive’s services and to protect itself against solicitations of employment
of the Executive from Kmart Corporation and/or Sears, Roebuck and Co., their
parents, subsidiaries, affiliates and successors (collectively, “Kmart”).

WHEREAS, the loss of the Executive to Kmart thereof will potentially jeopardize
Meldisco’s business model;

WHEREAS, Footstar has filed a plan of reorganization with the Bankruptcy Court
for the Southern District of New York, where it has filed a Chapter 11 case,
seeking approval of the Footstar Compensation Plan 2006-2008, including, without
limitation, retention bonuses, severance benefits and authorization for an
annual bonus program in respect of fiscal year 2006-2008, as may be applicable
to the Executive and certain other executives (collectively, the “Retention
Incentives”) (those benefits applicable to Executive are identified in the
Employment Agreement between Executive and Footstar dated December __, 2005 (the
“Employment Agreement”); and

WHEREAS, Executive’s execution of this Agreement is a condition to Executive’s
participation in the Retention Incentives applicable to Executive (as identified
in the Employment Agreement).

NOW, THEREFORE, in consideration of Executive’s eligibility for participation in
the Retention Incentives, Executive’s continued employment with Footstar and the
mutual covenants, understandings, representations, warranties, undertakings and
promises hereinafter set forth, and intending to be legally bound thereby,
Footstar and Executive agree as follows:

 

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1.             The Retention Incentives applicable to Executive (as identified
in the Employment Agreement) shall not be effective unless this Agreement is
executed and delivered by the Executive and Footstar.

2. Executive acknowledges that during the course of his/her employment with
Footstar, he/she necessarily has had and will have access to and make use of
proprietary information and confidential records of Footstar, its parents,
subsidiaries and affiliates (collectively, referred to herein as “the Company”).
Executive agrees that he/she shall not during his/her employment or at any time
thereafter, directly or indirectly, use for his/her own purpose or for the
benefit of any person or entity other than the Company, nor otherwise disclose,
any proprietary information to any individual or entity, unless such disclosure
has been authorized by the Company or is otherwise required by law. Executive
understands that the term “proprietary information” is information that was or
will be developed or created by or on behalf of the Company, including without
limitation, by the Executive in the course of his/her work for the Company, or
which became or will become known by or was or is conveyed to the Company, which
has commercial value in the Company’s business. By way of illustration, but not
limitation, “proprietary information” includes, (a) information concerning any
product, technology, technique or procedure employed by the Company or under
development by or being tested by the Company; (b) information concerning the
Company’s policies, prices, systems, methods of operations, files, contractual
arrangements or customers; (c) the Company’s trade secrets and other “know how”
(d) information concerning the structure or content of the Company’s databases;
(e) information relating to the Company’s computer software, computer systems,
pricing or marketing methods, sales margins, capital structure, operating
results, or business plans; (f) infor mation concerning the Company’s
advertisers; (g) information concerning the Company’s suppliers; (h) product and
service information and future development plans; (i) information concerning the
Company’s finances, including without limitation financial results, financing,
and ownership of the Company; (j) information regarding the compensation of
other executives or of consultants to the Company; (k) any information which is
generally regarded as confidential or proprietary in any line of business
engaged in by the Company; and (l)   all written, graphic and other material
relating to any of the foregoing.

Executive understands that information that is not novel or copyrighted or
patented may nonetheless be proprietary information. The term “proprietary
information” shall not include information generally available to and known by
the public or information that is or becomes available to Executive on a
non-confidential basis from a source other than the Company or the Company’s
directors, officers, executives, partners, principals or agents (other than as a
result of a breach of any obligation of confidentiality).

3.             Executive shall not during his/her employment or at any time
thereafter, except as required by law, directly or indirectly publish, make
known or in any fashion disclose any confidential records to, or permit any
inspection or copying of confidential records by, any individual or entity other
than in the course of such individual’s or entity’s employment or retention by
the Company. For purposes hereof, “confidential records” means all Company
records, correspondence, memoranda, files, manuals, books, lists, financial,

 

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 operating or marketing records, magnetic, optical, or electronic or other media
or equipment of any kind which may be in Executive’s possession or control or
accessible to Executive which contain any proprietary information. Executive
agrees that all confidential records shall be and remain the sole property of
the Company during Executive’s employment with the Company and thereafter.

4.             Upon the termination of Executive’s employment, or at any earlier
time as may be requested by the Company, Executive agrees to deliver to the
Company all documents, computer disks, tapes and electronic media, together with
all copies thereof (whether or not such material constitute proprietary
information or confidential records) obtained in the course of his/her
employment.

5.             Executive acknowledges and recognizes the highly competitive
nature of the Company’s business and that access to the Company’s confidential
records and proprietary information renders Executive special and unique within
the Company’s industry. In consideration of Executive’s continued employment by
the Company and participation in the Retention Incentives applicable to
Executive (as identified in the Employment Agreement), Executive agrees that
during his/her employment by the Company and for a period expiring twelve (12)
months following the earlier of (i) the termination of Executive’s employment
with the Company for any reason, or (ii) the termination or expiration of the
Amended Master Agreement between Footstar, Inc. and Kmart Corporation, entered
into as of August 24, 2005 (the “Restriction Period”), either for
himself/herself or as a principal, agent, stockholder, director, officer,
member, partner, employee, independent contractor, or consultant of any firm,
corporation or association, or for any other person or entity:

(a)           Executive will not attempt to or own, manage, finance, operate,
control, advise, assist, provide services to or otherwise engage or participate
in any manner in the procurement, sale or marketing of footwear, or the
operation of a footwear business, in each case by or for Kmart or within any
Kmart store.

(b)           Executive shall not directly or indirectly interfere with or
disrupt the relationship, contractual or otherwise, between the Company and (i)
Kmart or (ii) any of the Company’s vendors, suppliers or distributors.

(c)           Executive shall not (i) directly or indirectly solicit or
encourage any of the employees, agents, consultants or representatives of the
Company to terminate his, her, or its relationship with the Company, or (ii)
directly or indirectly solicit or encourage any of the employees, agents,
consultants or representatives of the Company to become employees, agents,
representatives or consultants of any other person or entity.

 

6.             During the Restriction Period, Executive agrees that upon the
earlier of Executive’s (a) negotiating with any Competitor (as defined below)
concerning the possible employment of Executive by the Competitor, (b) receiving
an offer of employment from a Competitor, or (c) becoming employed by a
Competitor, Executive will (x) immediately provide notice to the Company of such
circumstances and (y) provide copies of this Agreement to the Competitor.
Executive acknowledges that the Company may provide notice to a Competitor of
Executive’s obligations under this Agreement. For purposes of this Agreement,
“Competitor” shall mean any entity (other than the Company) that engages,
directly or indirectly, in the procurement, sale or marketing of footwear, or
the operation of a footwear business, in each case by or for Kmart or within any
Kmart store.

 

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7.             Executive understands that the provisions of this Agreement limit
his/her ability to earn a livelihood in a business similar to the business of
the Company, but permit him to engage in any footwear business that is not
within any Kmart store or operated by or for Kmart or does not otherwise involve
Kmart. Accordingly, Executive agrees and hereby acknowledges that the
consideration provided by Executive’s continued employment by the Company and
participation in the applicable Retention Incentives is sufficient to justify
the restrictions contained in such provisions. Executive further agrees and
acknowledges that (i) such provisions are reasonable as to time and scope of
activity to be restrained so as to protect the business interests of the
Company, (ii) such provisions are not unduly burdensome to Executive and (iii)
that he/she will not assert in any forum that such provisions prevent Executive
from earning a living or otherwise are void or unenforceable or should be held
void or unenforceable.

8.             Executive acknowledges and agrees that, by virtue of his/her
position, services, and access to and use of confidential records and
proprietary information, any violation by Executive of any of the undertakings
contained in this Agreement would cause the Company immediate, substantial and
irreparable injury for which it has no adequate remedy at law. Accordingly,
Executive agrees and consents to the entry of an injunction or other equitable
relief by a court of competent jurisdiction restraining any violation or
threatened violation of any undertaking contained in this Agreement. Executive
waives posting of any bond otherwise necessary to secure such injunction or
other equitable relief. Rights and remedies provided for in this Agreement are
cumulative and shall be in addition to rights and remedies otherwise available
to the Company under any other agreement or applicable law.

9.             If any provision of this Agreement, or any part thereof, is held
to be invalid or unenforceable because of the scope or duration of or the area
covered by such provision, Executive and the Company agree that the court making
such determination shall reduce the scope, duration and/or area of such
provision (and shall substitute appropriate provisions for any such invalid or
unenforceable provisions) in order to make such provision enforceable to the
fullest extent permitted by law and/or shall delete specific words and phrases,
and such modified provision shall then be enforceable and shall be enforced. In
the event that any court determines that the time period or the area, or both,
are unreasonable and that any of the covenants is to that extent invalid or
unenforceable, the parties hereto agree that such covenants will remain in full
force and effect, first, for the greatest time period, and second, in the
greatest geographical area that would not render them unenforceable. If any
provision of this Agreement is held to be invalid or unenforceable, the
remaining provisions of this agreement shall nonetheless survive and be enforced
to the fullest extent permitted by law.

10.           Executive represents that his/her entry into and performance of
all the terms of this Agreement and of his/her responsibilities as an Executive
of Footstar does not and will not breach any confidentiality or other agreement
or obligation, whether written or oral, that he/she has with or to any third
party.

 

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11.           This Agreement will be governed by and construed according to the
laws of the State of New Jersey as applied to agreements among New Jersey
residents entered into and to be performed entirely within New Jersey. Any
action arising under this Agreement shall be commenced in a state or federal
court sitting in the State of New Jersey. Footstar and Executive hereby waive
any objection which either now or hereafter have to such jurisdiction and any
defense of inconvenient forum.

12.           This Agreement sets forth the entire agreement and understanding
between Footstar and Executive relating to the subject matter hereof and
supersedes and merges all prior discussions between the parties. No modification
of or amendment to this Agreement, nor any waiver of any rights under this
Agreement, will be effective unless made in writing signed by the party to be
charged. Any subsequent change or changes in Executive’s duties, salary or
compensation will not affect the validity or scope of this Agreement. 

13.           This Agreement will be binding upon Executive’s heirs, executors,
administrators, and other legal representatives and will be for the benefit of
Footstar, its successors and its assigns.

14.           Executive agrees that this Agreement shall be enforceable by, and
may be assigned by Footstar Inc. or Footstar Corporation to, any purchaser of
all or substantially all of their respective businesses or assets, any successor
to Footstar Inc. or Footstar Corporation, or any assignee thereof (whether
direct or indirect, by purchase, merger, consolidation or otherwise). This
Agreement may not be assigned by Executive.

15.           The provisions of this Agreement shall survive the termination of
Executive’s employment, any other agreements in connection therewith. The
provisions of this Agreement shall also survive the termination of Footstar’s
Chapter 11 case filed in the Bankruptcy Court.

16.           Executive agrees and understands that nothing in this Agreement
shall confer any right with respect to continuation of employment with Footstar,
nor shall it interfere in any way with Executive’s right or Footstar’s right to
terminate Executive’s employment at any time, for any reason, with or without
cause. In addition, Executive agrees that this Agreement does not purport to set
forth all of the terms and conditions of Executive’s employment, and that as an
Executive with Footstar, Executive has obligations to Footstar which are not set
forth in this Agreement.

17.           No waiver by Footstar of any breach of this Agreement shall be a
waiver of any preceding or subsequent breach. No waiver by Footstar of any right
under this Agreement shall be construed as a waiver of any other right.

 

 

Executive:     Footstar:             By: Craig M. Haines   By: Dale W. Hilpert  
        Print Name: Craig M. Haines   Print Name: Dale W. Hilpert          
Title: Vice President, Controller   Date: 1/05/2006           Date:        

 

 

 

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