bws10q3qex10_3.htm










  





  











  



 










Exhibit 10.3









EXPLANATORY NOTE: “*” INDICATES THE PORTION OF THIS EXHIBIT 


THAT HAVE BEEN OMITTED AND SEPARATELY FILED WITH 


THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.












BROWN SHOE COMPANY, INC.







INCENTIVE AND STOCK COMPENSATION PLAN OF 2002, as Amended and Restated as of May 22, 2008







PERFORMANCE AWARD AGREEMENT


Fiscal 2010 to 2012







THIS AWARD AGREEMENT, effective March 4, 2010, represents the grant of both Performance Shares (“Performance Shares”) and a Cash-Based Award (“Cash Award”) (collectively, the “Award”) by Brown Shoe Company, Inc. (“Company”) to the Participant named below, who has been selected by the Compensation Committee of the Company’s Board of Directors (the “Committee”) to participate in the 2010 to 2012 Performance Award Plan under the Incentive and Stock Compensation Plan of 2002, as Amended and Restated (the “Plan”) of Brown Shoe Company, Inc. (the “Company”).  Subject to the key terms set forth below and the attached General Terms and Conditions (dated as of May 2010), all of which constitute part of this Agreement, this Award provides:


 


Participant:


Performance Award, being a combination of the following:


Target Share Award- Number of Performance Shares: shares of Company common stock



Form of Payment: shares of Company common stock


Target Cash-Based Award: $



Form of Payment:  cash


Performance Period:  the Company’s Fiscal Years 2010 through 2012






Minimum Performance Level: As described on Attachment A.


Maximum Award Value:  150% of Target Award







IN WITNESS WHEREOF, the parties have caused this Agreement to be executed effective as of date(s) written below.















  





  











  













 





	 	BROWN SHOE COMPANY, INC.	 
	 	 	 	 
	
 

	
By: 

	/s/ Sarah Stephenson	 
	 	 	Sarah Stephenson, Vice President Total Rewards	 
	 	 	 	 
	 	 Date:	 May 14, 2010	 







 







 



	 Accepted:	 	 
	 	 Participant Signature	 
	 	 	 
	 Date:	 	 













  





  











  













PERFORMANCE AWARD 2010 to 2012


General Terms and Conditions (as of May 2010)







Incentive and Stock Compensation Plan of 2002,


as Amended and Restated as of May 22, 2008







The parties hereto agree as follows:




 


1.   Performance Period.  The Performance Period shall be as specified on the executed cover page of this Award.







2.   Value of Award.  The Award shall represent and have a Maximum Award Value as specified on the executed cover page of this Award.




 3.   Earning the Award; Certification of Performance and Percent Earned.  The Award shall be “earned” following the end of the Performance Period, as of the date the Committee shall determine and certify: (a) whether the Minimum Performance Level has been satisfied; (b) and if so, the percent of the Award that has been earned in accordance with the Performance Payoff Profile (on Attachment A) (the “Percent Earned”), but in no event  more than the Maximum Award Value; and provided that the determinations pursuant to (a) and (b) shall be subject to the Committee’s right to exercise its discretion to reduce the Company’s level of performance based on the quality of earnings.  All calculations as to the Performance Measures shall be subject to the Committee’s right, pursuant to Section 14.2 of the Plan, to make adjustments for unusual or nonrecurring events.


 


4.   Amount Payable and Payment of the Award.


 (a)    Unless this Award is sooner terminated in accordance with Section 5, an earned Award (as provided in Section 3) shall be payable within sixty (60) days following completion of the Performance Period.  Subject to Section 5(b) and in accordance with Section 5(c), this Award shall not be payable and shall be forfeited if Participant terminates employment with the Company prior to the date that the Award payment is made to the Participant.







(b)    The amount payable to the Participant shall be determined by multiplying the Percent Earned by the Target Award specified, subject to the Committee’s right to exercise discretion as provided in Section 12.







(c)    Unless otherwise specified on the executed cover page of this Award, payment of the earned Performance Shares shall be made in shares of the Company’s Common Stock, and payment of the earned Cash Award shall be made in cash.


 



5.   Termination Provisions.




(a)    If, pursuant to Section 3, the Committee certifies that the Minimum Performance Level has not been achieved, this Award shall immediately terminate and no longer be of any effect.


 


(b)    If Participant’s employment is terminated during the Performance Period by reason of death, Disability, Retirement or Early Retirement (as defined in the Plan), the Committee, in its sole discretion, shall determine whether the Participant (or Participant’s beneficiary in the event of death) shall be eligible to receive any payment under this Award.  If payment of this Award is approved by the Committee, such payment shall be pro-rated based on the number of full months of continued active employment by Participant during the Performance Period as a percent of the total number of months in the Performance Period; the amount payable shall be based on the Percent Earned; and payment shall be made pursuant to Section 4 at the same time as payment of other awards for the same performance period are made to other eligible participant who did not terminate employment during the Performance Period.  Notwithstanding the foregoing, in the event of Participant’s termination due to death or Disability, if approved by the Committee, such pro-rated payment may be made prior to expiration of the Performance Period, with calculation of and timing of the payment amount to be determined by the Committee.


 


(c)    Except as provided in subsection 5(b), a Participant shall be eligible for payment of the earned Award, as specified in Section 3, only if the Participant remains continuously employed by the Company from the date of this Agreement, through the end of the Performance Period and continuing thereafter until the date the Awards is actually paid.







6.   Dividends.  The Participant shall have no right to any dividends that may be paid with respect to shares of Company stock until any such shares are vested.







7.   Change in Control.  If a Participant is employed by the Company on the date of a Change in Control, subject to Article 2.7 and Article 13 of the Plan, in the event of the occurrence of a Change in Control, unless otherwise specifically prohibited under applicable laws, or by the rules and regulations of any governing governmental agencies or national securities exchange, the Award shall be deemed to have been fully earned for the entire Performance Period and fully vested as of the effective date of the Change in Control; and based upon an assumed achievement of all relevant targeted performance goals, the Award shall be payable in the amounts or at the level provided by the above-referenced provisions of the Plan within thirty (30) days following the effective date of the Change in Control







8.   Recapitalization.  Subject to Article 4.2 of the Plan, in the event that there is any change in corporate capitalization, such as a stock split, or a corporate transaction, such as any merger, consolidation, separation including a spin-off, or other distribution of stock or property of the Company, any reorganization (whether or not such reorganization comes within the definition of such term in Code 368) or any partial or complete liquidation of the Company, such adjustment shall be made in the number and class and/or price of the Company’s Common Stock subject to this Award, as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights; provided, however, that the number of Performance Shares subject to this Award shall always be a whole number.







9.   Tax Withholding.  The Committee shall have the power and the right to deduct or withhold, or require the Participant or beneficiary to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes, domestic or foreign, required by law or regulation to be withheld with respect to any taxable event arising as a result of the Award.  In satisfaction of such requirements, subject to the approval of the Committee, the Participant may elect, within an election period specified by the Company, to satisfy the withholding requirement, in whole or in part, by having the Company withhold from the payment of the Award: (a) shares of Company Common Stock having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be withheld on the transaction (“Withholding Amount”); and/or (b) cash equal to the Withholding Amount on the Cash component; (c) a combination of (a) and (b).  All such elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.


 


10.   Clawback.  Any payouts will be subject to recovery if it is determined that the Participant personally and knowingly engaged in practices that materially contributed to the circumstances that led to the restatement of the Company’s financial statements.







11.   Nontransferability.  This Agreement as well as the rights granted thereunder may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.







12.   Administration.


(a)    This Award and the rights of the Participant hereunder are subject to all terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan.  It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Agreement, all of which shall be binding upon the Participant.







(b)    If there is any inconsistency between the terms of this Award and the terms of the Plan, the Plan’s terms shall completely supersede and replace the conflicting terms of this Agreement.  All capitalized terms shall have the meanings ascribed to them in the Plan, unless specifically set forth otherwise herein.







13.   Miscellaneous


(a)    This Agreement shall not confer upon the Participant any right to continuation of employment by the Company, nor shall this Agreement interfere in any way with the Company’s right to terminate his or her employment at any time.


 


(b)    The Committee and/or the Company’s Board of Directors may terminate, amend, or modify the Plan; provided, however, that no such termination, amendment, or modification of the Plan may in any way adversely affect the Participant’s rights under this Agreement without the Participant’s written consent.


 


(c)    This Agreement shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.


 


(d)    To the extent not preempted by Federal law, this Agreement shall be construed in accordance with and governed by the substantive laws of the State of Missouri without regard to conflicts of laws principles, which might otherwise apply.  Any litigation arising out of, in connection with, or concerning any aspect of the Plan or this Agreement shall be conducted exclusively in the State or Federal courts in Missouri.










  





  











  








ATTACHMENT A


to Brown Shoe Company, Inc.


Performance Award Agreement-


for Performance Period of Fiscal Years 2010-2012




 




1.   PERFORMANCE MEASURES


 


The Performance Measures for this Award shall be:  (a) Cumulative Adjusted EPS and (b) Adjusted EBITDA as a Percentage of Average Net Assets.







Each of these Performance Measures is a non-GAAP measure, to be calculated with respect to the Performance Period, based on the following:


 


(i)Cumulative Adjusted EPS - cumulative consolidated diluted earnings per share for the period, as adjusted (i.e. increased or decreased) for special charges and recoveries;


 


(ii)Adjusted EBITDA - Earnings Before Interest, Taxes, Depreciation and Amortization for the period, as adjusted for special charges and recoveries;


 


(iii)Net Assets - represents the month-end average of net assets during a period, where net assets are working capital, net property and equipment, and net capitalized software.


 


(iv)Adjusted EBITDA as a Percent of Net Assets  (referenced as “Adjusted EBITDA as a % Net Assets” in the payoff profile) – represents the average of the three annual calculations during the Performance Period of Adjusted EBITDA as a Percent of Net Assets.




2.   MINIMUM PERFORMANCE LEVEL


 


Cumulative Adjusted EPS of $ * over the Performance Period







3.   PERFORMANCE PAYOFF PROFILE


 


Matrix for Three Year Performance Share Plan (2010-2012)







Interpolation shall be used to determine the percent of the Award payable in the event the Company’s Cumulative Adjusted EPS or Adjusted EBITDA as a % of Net Assets does not fall directly on one of the ranks listed in the chart below.







Brown Shoe Company


 


3 Year Performance Plan (2010 – 2012 Plan Year)


 


Cumulative Adjusted EPS – the cumulative diluted earnings per share (as adjusted for special items) over the three-year measurement period.


 


Adjusted EBITDA – earnings before interest, taxes, depreciation and amortization, adjusted for non-recurring items.


 


Net Assets – average monthly net assets, where net assets are net property and equipment, capitalized software and working capital.


 


3 Year measurement period EBITDA as a % of Net Assets would be the average of each of the respective 3 year EBITDA as a % of Net Assets calculations.


 


 




  





  











  






Adjusted EBITDA as a % Net Assets


 



	
Greater Than

	
*%

	  	
55.0%

	
66.7%

	
78.3%

	
90.0%

	
101.7%

	
113.3%

	
125.0%

	
137.5%

	
150.0%

	
150.0%

	
150.0%


	  	
*%

	  	
52.5%

	
64.2%

	
75.8%

	
87.5%

	
99.2%

	
110.8%

	
122.5%

	
135.0%

	
147.5%

	
150.0%

	
150.0%


	  	
*%

	  	
50.0%

	
61.7%

	
73.3%

	
85.0%

	
96.7%

	
108.3%

	
120.0%

	
132.5%

	
145.0%

	
150.0%

	
150.0%


	  	
*%

	  	
47.5%

	
59.2%

	
70.8%

	
82.5%

	
94.2%

	
105.8%

	
117.5%

	
130.0%

	
142.5%

	
150.0%

	
150.0%


	  	
*%

	  	
45.0%

	
56.7%

	
68.3%

	
80.0%

	
91.7%

	
103.3%

	
115.0%

	
127.5%

	
140.0%

	
150.0%

	
150.0%


	  	
*%

	  	
42.5%

	
54.2%

	
65.8%

	
77.5%

	
89.2%

	
100.8%

	
112.5%

	
125.0%

	
137.5%

	
150.0%

	
150.0%


	  	
*%

	  	
40.0%

	
51.7%

	
63.3%

	
75.0%

	
86.7%

	
98.3%

	
110.0%

	
122.5%

	
135.0%

	
147.5%

	
150.0%


	  	
*%

	  	
37.5%

	
49.2%

	
60.8%

	
72.5%

	
84.2%

	
95.8%

	
107.5%

	
120.0%

	
132.5%

	
145.0%

	
150.0%


	  	
*%

	  	
35.0%

	
46.7%

	
58.3%

	
70.0%

	
81.7%

	
93.3%

	
105.0%

	
117.5%

	
130.0%

	
142.5%

	
150.0%


	  	
*%

	  	
32.5%

	
44.2%

	
55.8%

	
67.5%

	
79.2%

	
90.8%

	
102.5%

	
115.0%

	
127.5%

	
140.0%

	
150.0%


	  	
*%

	  	
30.0%

	
41.7%

	
53.3%

	
65.0%

	
76.7%

	
88.3%

	
100.0%

	
112.5%

	
125.0%

	
137.5%

	
150.0%


	  	
*%

	  	
25.0%

	
36.7%

	
48.3%

	
60.0%

	
71.7%

	
83.3%

	
95.0%

	
107.5%

	
120.0%

	
132.5%

	
145.0%


	  	
*%

	  	
20.0%

	
31.7%

	
43.3%

	
55.0%

	
66.7%

	
78.3%

	
90.0%

	
102.5%

	
115.0%

	
127.5%

	
140.0%


	  	
*%

	  	
15.0%

	
26.7%

	
38.3%

	
50.0%

	
61.7%

	
73.3%

	
85.0%

	
97.5%

	
110.0%

	
122.5%

	
135.0%


	
Less Than

	
*%

	  	
10.0%

	
21.7%

	
33.3%

	
45.0%

	
56.7%

	
68.3%

	
80.0%

	
92.5%

	
105.0%

	
117.5%

	
130.0%


	  	  	  	  	  	  	  	  	  	  	  	  	  	  
	  	  	  	
*

	
*

	
*

	
*

	
*

	
*

	
*

	
*

	
*

	
*

	
*


	  	  	  	
70%

	
75%

	
80%

	
85%

	
90%

	
95%

	
100%

	
105%

	
110%

	
115%

	
120%







 


 



	 	 	 	 Cumulative Adjusted EPS
	 	 	 	 
	 2010	*	 	 3 Year Plan
	 2011	* 	 	 3 Year Plan
	 2012	* 	 	 3 Year Plan
	 	*	 	 





 


 


 



	   Cumulative Adjusted EPS Target: $*	 
	   Adjusted EBITDA as a % of Net Assets Target: *%