Business Context and Reporting Period
This Form 8-K Current Report was filed by Brown Shoe Company, Inc. on February 6, 2015, covering events that occurred on February 3, 2015. The filing details significant changes to the Company's Board of Directors and executive leadership, specifically the appointment of a new Chief Financial Officer and the election of a new director.
Key Financial Metrics
This filing does not contain financial performance data such as revenue, profit, cash flow, margins, debt, or liquidity. The document focuses exclusively on corporate governance and executive compensation arrangements.
Material Changes
- Board Expansion: The Board of Directors amended the Company's Bylaws to increase the number of directors from eleven to twelve.
- Director Election: Lori Greeley was elected to fill the newly created vacancy on the Board. Her term expires at the 2015 annual meeting of stockholders.
- CFO Departure: Russell C. Hammer, Senior Vice President and Chief Financial Officer, is terminating his employment effective February 13, 2015.
- CFO Appointment: Kenneth H. Hannah was appointed as Senior Vice President and Chief Financial Officer, effective February 16, 2015.
Management Commentary, Compensation, and Risks
Executive Compensation for Kenneth H. Hannah
- Base Salary: $625,000 annually.
- Cash Incentive: Target amount of 80% of base salary ($500,000), with a maximum of 200% of the target.
- Sign-on Bonus: $250,000, subject to full repayment if employment ends within two years due to resignation or termination for cause.
- Equity Awards:
- 25,000 shares of restricted stock (50% vesting after 4 years, 50% after 5 years).
- 16,667 stock options (50% vesting after 4 years, 50% after 5 years).
Severance and Change in Control Provisions
Mr. Hannah's severance agreement includes significant payouts contingent on termination without cause or "good reason":
- Standard Termination: 200% of base salary (including targeted bonus), prorated bonus, 18 months of medical coverage plus 6 months cash equivalent, and accelerated vesting of awards scheduled to vest over the next two years.
- Change in Control Termination: 300% of base salary (including targeted bonus), prorated bonus, 18 months of medical coverage plus 18 months cash equivalent, and immediate vesting of all restricted stock and options.
Risks and Contingencies
Mr. Hannah is subject to post-termination restrictions, including prohibitions on providing executive or consulting services to footwear industry competitors and interfering with customer relationships.
Investor Verification Checklist
- Verify the effective dates of the CFO transition (Hammer's departure on Feb 13, 2015; Hannah's start on Feb 16, 2015).
- Review the specific vesting schedules for the 25,000 restricted stock shares and 16,667 options granted to Mr. Hannah.
- Confirm the terms of the sign-on bonus repayment clause regarding the two-year employment threshold.
- Examine the definition of "Change in Control" within the attached Severance Agreement (Exhibit 10.1) to understand the trigger for the 300% payout.
- Check the Company's Proxy Statement dated April 16, 2014, for details on the standard director compensation package applicable to Lori Greeley.