10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X]	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended November 3, 2001
[  ]	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from  _____________     to _____________

Commission file number 1-2191

 
 
 

BROWN SHOE COMPANY, INC. (Exact name of registrant as specified in its charter)
New York (State or other jurisdiction of incorporation or organization)	43-0197190 (IRS Employer Identification Number)
8300 Maryland Avenue St. Louis, Missouri (Address of principal executive offices)	63105 (Zip Code)
(314) 854-4000 (Registrant's telephone number, including area code)
N/A (Former name, former address and former fiscal year, if changed since last report)

   Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.              Yes [x]   No [  ]

   As of December 1, 2001, 17,464,835 shares of the registrant's common stock were outstanding.
 
 

1

BROWN SHOE COMPANY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Thousands)
 

	(Unaudited)
	November 3, 2001			October 28, 2000			February 3, 2001
ASSETS
Current Assets
Cash and Cash Equivalents	$	25,152		$	44,634		$	50,491
Receivables		55,962			57,942			64,403
Inventories		445,065			444,355			427,830
Other Current Assets		23,157			26,979			20,008
Total Current Assets		549,336			573,910			562,732
Other Assets		87,587			80,125			86,732
Property and Equipment		251,566			247,235			245,608
Less Allowances for Depreciation       and Amortization		(162,685	)		(156,144	)		(155,003	)
		88,881			91,091			90,605
	$	725,804		$	745,126		$	740,069
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes Payable	$	85,000		$	59,000		$	66,500
Accounts Payable		109,748			141,292			127,887
Accrued Expenses		70,527			85,562			89,954
Income Taxes		2,464			8,606			1,850
Current Maturities of Long-Term Debt		28,550			10,000			10,000
Total Current Liabilities		296,289			304,460			296,191
Long-Term Debt and Capitalized    Lease Obligations		123,490			152,037			152,037
Other Liabilities		19,294			19,443			21,869
Shareholders' Equity
Common Stock		65,506			66,553			65,477
Additional Capital		47,836			47,465			46,578
Unamortized Value of Restricted Stock		(2,057	)		(2,596	)		(2,386	)
Accumulated Other Comprehensive Loss		(9,311	)		(7,915	)		(7,138	)
Retained Earnings		184,757			165,679			167,441
		286,731			269,186			269,972
	$	725,804		$	745,126		$	740,069

See Notes to Condensed Consolidated Financial Statements.
 
 

2

BROWN SHOE COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(Thousands, except per share)
 

	Thirteen Weeks Ended					Thirty-nine Weeks Ended
	November 3, 2001		October 28, 2000			November 3, 2001			October 28, 2000
Net Sales	$	462,361	$	463,312		$	1,340,578		$	1,277,216
Cost of Goods Sold		280,874		278,955			814,499			762,794
Gross Profit		181,487		184,357			526,079			514,422
Selling & Administrative Expenses		161,098		157,050			479,651			455,385
Interest Expense		4,827		4,747			15,591			13,326
Other (Income) Expense		312		(168	)		(1,665	)		(675	)
Earnings Before Income Taxes		15,250		22,728			32,502			46,386
Income Tax Provision		3,399		7,113			8,445			15,025
NET EARNINGS	$	11,851	$	15,615		$	24,057		$	31,361
BASIC EARNINGS PER     COMMON SHARE	$	.69	$	.88		$	1.40		$	1.76
DILUTED EARNINGS PER     COMMON SHARE	$	.68	$	.88		$	1.37		$	1.75
DIVIDENDS PER COMMON SHARE	$	.10	$	.10		$	.30		$	.30

See Notes to Condensed Consolidated Financial Statements.

3

BROWN SHOE COMPANY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Thousands)

	Thirty-nine Weeks Ended
	November 3, 2001			October 28, 2000
Net Cash Provided (Used) by Operating Activities	$	(11,966	)	$	(4,985	)
Investing Activities:
Capital expenditures		(18,031	)		(23,636	)
Other		2,181			906
Net Cash Used by Investing Activities		(15,850	)		(22,730	)
Financing Activities:
Increase in short-term notes payable		18,500			59,000
Principal payments of long-term debt		(10,000	)		(10,000	)
Payments for purchase of treasury stock		(2,630	)		(5,380	)
Proceeds from stock options exercised		1,847			13
Dividends paid		(5,240	)		(5,442	)
Net Cash Provided by Financing Activities		2,477			38,191
Increase (Decrease) in Cash and Cash Equivalents		(25,339	)		10,476
Cash and Cash Equivalents at Beginning of Period		50,491			34,158
Cash and Cash Equivalents at End of Period	$	25,152		$	44,634

See Notes to Condensed Consolidated Financial Statements.

4

BROWN SHOE COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 

Note A - Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and reflect all adjustments which management believes necessary (which include only normal recurring accruals) to present fairly the Company's financial condition, results of operations, and cash flows. These statements, however, do not include all information and footnotes necessary for a complete presentation of the Company's financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States.

The fiscal 2000 Condensed Consolidated Statements of Earnings have been reclassified to conform to the fiscal 2001 presentation, whereby royalty income, previously reflected in Other Income, has been reclassified to Net Sales.

The Company's business is subject to seasonal influences, and interim results may not necessarily be indicative of results which may be expected for any other interim period or for the year as a whole.

For further information refer to the consolidated financial statements and footnotes included in the Company's Annual Report and Form 10-K for the year ended February 3, 2001.

Note B - Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per common share for the periods ended November 3, 2001 and October 28, 2000 ($000's, except per share data):
 

	Thirteen Weeks Ended				Thirty-nine Weeks Ended
	November 3, 2001		October 28, 2000		November 3, 2001		October 28, 2000
Numerator:
Net earnings - Basic and Diluted	$	11,851	$	15,615	$	24,057	$	31,361
Denominator:
Weighted average shares        outstanding - - Basic		17,208		17,648		17,179		17,810
Effect of potentially dilutive securities		206		141		383		159
Weighted average shares        outstanding - - Diluted		17,414		17,789		17,562		17,969
Basic earnings per common share	$	.69	$	.88	$	1.40	$	1.76
Diluted earnings per common share	$	.68	$	.88	$	1.37	$	1.75

5

Note C - Comprehensive Income

Comprehensive Income includes all changes in equity except those resulting from investments by shareholders and distributions to shareholders.

The following table sets forth the reconciliation from Net Earnings to Comprehensive Income for the periods ended November 3, 2001 and October 28, 2000 (000's):
 

	Thirteen Weeks Ended						Thirty-nine Weeks Ended
	November 3, 2001			October 28, 2000			November 3, 2001			October 28, 2000
Net Earnings	$	11,851		$	15,615		$	24,057		$	31,361
Other Comprehensive Income:
Foreign Currency Translation Adjustment		(1,345	)		(1,163	)		(2,141	)		(1,881	)
Unrealized Gains (Losses) on        Derivative Instruments		226			-			(32	)		-
		(1,119	)		(1,163	)		(2,173	)		(1,881		)
Comprehensive Income	$	10,732		$	14,452		$	21,884		$	29,480

Note D - Business Segment Information

Applicable business segment information is as follows for the periods ended November 3, 2001 and October 28, 2000 (000's):
 

	Famous Footwear		Wholesale Operations		Naturalizer Retail			Other			Totals
Thirteen Weeks Ended November 3, 2001
External Sales	$	280,942	$	128,915	$	52,159		$	345		$	462,361
Intersegment Sales		86		44,548		-			119			44,753
Operating profit (loss)		14,189		12,308		(1,354	)		(4,386	)		20,757
Thirteen Weeks Ended October 28, 2000
External Sales	$	292,813	$	120,473	$	50,026		$	-		$	463,312
Intersegment Sales		-		46,666		-			-			46,666
Operating profit (loss)		22,257		9,798		(1,775	)		(2,955	)		27,325
Thirty-nine Weeks Ended November 3, 2001
External Sales	$	803,102	$	379,226	$	157,711		$	539		$	1,340,578
Intersegment Sales		128		120,973		-			166			121,267
Operating profit (loss)		23,781		37,326		(385	)		(13,414	)		47,308
Thirty-nine Weeks Ended October 28, 2000
External Sales	$	783,837	$	341,317	$	152,062		$	-		$	1,277,216
Intersegment Sales		-		136,061		-			-			136,061
Operating profit (loss)		46,757		23,364		(1,788	)		(9,104	)		59,229

 

6

Reconciliation of operating profit to earnings before income taxes (000's):
 

	Thirteen Weeks Ended					Thirty-nine Weeks Ended
	November 3, 2001		October 28, 2000			November 3, 2001			October 28, 2000
Total operating profit	$	20,757	$	27,325		$	47,308		$	59,229
Interest expense		4,827		4,747			15,591			13,326
Non-operating other (income) expense		680		(150	)		(785	)		(483	)
Earnings before income taxes	$	15,250	$	22,728		$	32,502		$	46,386

Operating profit represents gross profit less selling and administrative expenses and other operating income or expense. The "Other" segment includes Corporate selling and administrative expenses, which are not allocated to the operating units, and the Company's investment in Shoes.com, Inc., a footwear e-commerce company.
 

Note E - New Accounting Standards

On February 4, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." The statement establishes standards for recognition and measurement of derivatives and hedging activities. In adoption of this statement at the beginning of fiscal 2001, the Company recorded a cumulative transition adjustment to increase Other Comprehensive Income by $0.3 million (net of tax), to recognize the fair value of its derivative instruments. The Company expects to reclassify all of the transition adjustment into earnings in 2001.

The Company uses derivative financial instruments, primarily foreign exchange contracts and interest rate caps and swaps, to reduce its exposure to market risks from changes in foreign exchange rates and interest rates. These derivatives, designated as cash flow hedges, are used to hedge the procurement of footwear from foreign countries and the variability of cash flows paid on variable-rate debt. The terms of these instruments are generally less than one year. The effective portions of changes in the fair value of derivatives are recorded in Other Comprehensive Income and reclassified to earnings when the hedged item affects earnings. The ineffective portions of changes in the fair value of cash flow hedges are immediately recognized in earnings.

During the first nine months of fiscal 2001, changes in the fair value of derivatives and reclassifications from Other Comprehensive Income to earnings from the initial transition adjustment resulted in a decrease in Other Comprehensive Income of $32,000, net of tax (see Note C).
 
 

7

In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", effective for fiscal years beginning after December 15, 2001. Under the new standards, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the statement. Other intangible assets will continue to be amortized over their useful lives.

The Company will apply the new standards on accounting for goodwill and other intangible assets beginning in the first quarter of fiscal 2002. Application of the nonamortization provisions of the Statement is expected to result in an increase in net income in fiscal 2002 of approximately $1 million ($0.06 per share). During fiscal 2002, the Company will perform the first of the required impairment tests of goodwill and indefinite-lived intangible assets. The Company has not yet determined what the effect of the application of the new standard will be on the earnings and financial position of the Company.
 

Note F - Consolidation

The consolidated financial statements include the accounts of Brown Shoe Company, Inc. and its wholly-owned and majority-owned subsidiaries, after the elimination of intercompany accounts and transactions. Prior to the first quarter of 2001, the accounts of the Company's Brown Pagoda division were consolidated on a calendar year basis, which was approximately one month earlier than the rest of the Company. In the first quarter of 2001, this one-month reporting lag was eliminated to provide uniform reporting. As a result, the earnings for this division in the month of January, 2001 of $0.2 million were credited directly to Retained Earnings.
 

Note G - Condensed Consolidated Financial Information

Certain of the Company's debt is fully, unconditionally and jointly and severally guaranteed by certain wholly-owned domestic subsidiaries and the Canadian subsidiary of the Company. Accordingly, condensed consolidating balance sheets as of November 3, 2001 and October 28, 2000, and the related condensed consolidating statements of earnings and cash flows for the thirty-nine weeks period are provided. These condensed consolidating financial statements have been prepared using the equity method of accounting in accordance with the requirements for presentation of such information. Management believes this information, presented in lieu of complete financial statements for each of the guarantor subsidiaries, provides meaningful information to allow investors to determine the nature of the assets held by, and the operations and cash flows of, each of the consolidating groups.
 
 

8

CONDENSED CONSOLIDATING BALANCE SHEET
AS OF NOVEMBER 3, 2001

(Thousands)	Parent			Guarantor  Subsidiaries			Non-Guarantor  Subsidiaries			Eliminations			Consolidated  Totals
Assets
Current Assets
Cash and cash equivalents	$	637		$	15,207		$	9,308		$	-		$	25,152
Receivables		31,499			12,358			12,105			-			55,962
Inventories		54,003			397,386			738			(7,062	)		445,065
Other current assets (liabilities)		(8,030	)		25,051			1,889			4,247			23,157
Total Current Assets		78,109			450,002			24,040			(2,815	)		549,336
Other Assets		51,711			31,946			3,934			(4	)		87,587
Property and Equipment, net		14,635			73,145			1,101			-			88,881
Investment in Subsidiaries		306,586			33,091			-			(339,677	)		-
Total Assets	$	451,041		$	588,184		$	29,075		$	(342,496	)	$	725,804
Liabilities & Shareholders' Equity
Current Liabilities
Notes payable	$	85,000		$	-		$	-		$	-		$	85,000
Accounts payable		3,650			94,245			11,853			-			109,748
Accrued expenses		17,917			50,092			5,107			(2,589	)		70,527
Income taxes payable (receivable)		(1,124	)		506			2,385			697			2,464
Current maturities of        long-term debt		28,550			-			-			-			28,550
Total Current Liabilities		133,993			144,843			19,345			(1,892	)		296,289
Long-Term Debt and        Capitalized Lease Obligations		123,490			-			-			-			123,490
Other Liabilities (Assets)		19,824			(1,261	)		731			-			19,294
Intercompany Payable (Receivable)		(112,997	)		131,447			(22,637	)		4,187			-
Shareholders' Equity		286,731			313,155			31,636			(344,791	)		286,731
Total Liabilities and               Shareholders' Equity	$	451,041		$	588,184		$	29,075		$	(342,496	)	$	725,804

9

CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
THIRTY-NINE WEEKS ENDED NOVEMBER 3, 2001

(Thousands)	Parent			Guarantor  Subsidiaries			Non-Guarantor  Subsidiaries			Eliminations			Consolidated  Totals
Net Sales	$	195,834		$	1,164,179		$	191,512		$	(210,947	)	$	1,340,578
Cost of goods sold		131,470			724,927			166,676			(208,574	)		814,499
Gross profit		64,364			439,252			24,836			(2,373	)		526,079
Selling and administrative expenses		61,007			407,870			13,147			(2,373	)		479,651
Interest expense		15,459			15			117			-			15,591
Intercompany interest     (income) expense		(11,551	)		11,552			(1	)		-			-
Other (income) expense		(798	)		103			(970	)		-			(1,665	)
Equity in earnings of subsidiaries		(24,095	)		(13,437	)		-			37,532			-
Earnings Before Income Taxes		24,342			33,149			12,543			(37,532	)		32,502
Income tax provision		285			7,799			361			-			8,445
Net Earnings	$	24,057		$	25,350		$	12,182		$	(37,532	)	$	24,057

 

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THIRTY-NINE WEEKS ENDED NOVEMBER 3, 2001

(Thousands)	Parent			Guarantor  Subsidiaries			Non-Guarantor  Subsidiaries			Eliminations			Consolidated  Totals
Net Cash Provided (Used) by     Operating Activities	$	(15,284	)	$	(10,886	)	$	17,922		$	(3,718	)	$	(11,966	)
Investing Activities:
Capital expenditures		(2,164	)		(15,344	)		(523	)		-			(18,031	)
Other		2,181			-			-			-			2,181
Net Cash Provided (Used) by     Investing Activities		17			(15,344	)		(523	)		-			(15,850	)
Financing Activities:
Increase in short-term        notes payable		18,500			-			-			-			18,500
Principal payments of        long-term debt		(10,000	)		-			-			-			(10,000	)
Proceeds from stock        options exercised		1,847			-			-			-			1,847
Payments for purchase of        Treasury stock		(2,630	)		-			-			-			(2,630	)
Dividends paid		(5,240	)		-			-			-			(5,240	)
Intercompany financing		6,444			26,804			(43,166	)		9,918			-
Net Cash Provided (Used) by     Financing Activities		8,921			26,804			(43,166	)		9,918			2,477
Increase (Decrease) in Cash and     Cash Equivalents		(6,346	)		574			(25,767	)		6,200			(25,339	)
Cash and Cash Equivalents at     Beginning of Period		6,983			14,633			35,075			(6,200	)		50,491
Cash and Cash Equivalents at     End of Period	$	637		$	15,207		$	9,308		$	-		$	25,152

10

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF OCTOBER 28, 2000

(Thousands)	Parent			Guarantor  Subsidiaries			Non-Guarantor  Subsidiaries		Eliminations			Consolidated  Totals
Assets
Current Assets
Cash and cash equivalents	$	1,458		$	11,960		$	31,216	$	-		$	44,634
Receivables		28,069			15,390			14,483		-			57,942
Inventories		46,564			410,662			2		(12,873	)		444,355
Other current assets (liabilities)		(4,770	)		26,404			840		4,505			26,979
Total Current Assets		71,321			464,416			46,541		(8,368	)		573,910
Other Assets		49,469			30,380			280		(4	)		80,125
Property and Equipment, net		13,936			76,173			982		-			91,091
Investment in Subsidiaries		278,876			12,278			-		(291,154	)		-
Total Assets	$	413,602		$	583,247		$	47,803	$	(299,526	)	$	745,126
Liabilities & Shareholders' Equity
Current Liabilities
Notes payable	$	59,000		$	-		$	-	$	-		$	59,000
Accounts payable		4,289			124,388			12,615		-			141,292
Accrued expenses		21,813			54,253			6,673		2,823			85,562
Income taxes		5,611			1,042			1,802		151			8,606
Current maturities of        long-term debt		10,000			-			-		-			10,000
Total Current Liabilities		100,713			179,683			21,090		2,974			304,460
Long-Term Debt and        Capitalized Lease Obligations		152,037			-			-		-			152,037
Other Liabilities (Assets)		20,152			(734	)		25		-			19,443
Intercompany Payable (Receivable)		(128,486	)		124,225			14,410		(10,149	)		-
Shareholders' Equity		269,186			280,073			12,278		(292,351	)		269,186
Total Liabilities and               Shareholders' Equity	$	413,602		$	583,247		$	47,803	$	(299,526	)	$	745,126

 

11

CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
THIRTY-NINE WEEKS ENDED OCTOBER 28, 2000

(Thousands)	Parent			Guarantor  Subsidiaries			Non-Guarantor  Subsidiaries			Eliminations			Consolidated  Totals
Net Sales	$	195,067		$	1,145,736		$	167,626		$	(231,213	)	$	1,277,216
Cost of goods sold		144,254			701,108			148,645			(231,213	)		762,794
Gross profit		50,813			444,628			18,981			-			514,422
Selling and administrative expenses		52,077			396,206			8,070			(968	)		455,385
Interest expense		13,258			55			13			-			13,326
Intercompany interest     (income) expense		(9,940	)		9,953			(13	)		-			-
Other (income) expense		(2,171	)		1,265			(737	)		968			(675	)
Equity in earnings of subsidiaries		(33,543	)		(11,069	)		-			44,612			-
Earnings Before Income Taxes		31,132			48,218			11,648			(44,612	)		46,386
Income tax provision (benefit)		(229	)		14,675			579			-			15,025
Net Earnings	$	31,361		$	33,543		$	11,069		$	(44,612	)	$	31,361

 

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THIRTY-NINE WEEKS ENDED OCTOBER 28, 2000

(Thousands)	Parent			Guarantor  Subsidiaries			Non-Guarantor  Subsidiaries			Eliminations			Consolidated  Totals
Net Cash Provided (Used) by     Operating Activities	$	6,289		$	(21,893	)	$	7,273		$	3,346		$	(4,985	)
Investing Activities:
Capital expenditures		(817	)		(22,324	)		(495	)		-			(23,636	)
Other		906			-			-			-			906
Net Cash Provided (Used) by     Investing Activities		89			(22,324	)		(495	)		-			(22,730	)
Financing Activities:
Increase in short-term        notes payable		59,000			-			-			-			59,000
Principal payments of        long-term debt		(10,000	)		-			-			-			(10,000	)
Proceeds from stock        options exercised		13			-			-			-			13
Payments for purchase of        treasury stock		(5,380	)		-			-			-			(5,380	)
Dividends paid		(5,442	)		-			-			-			(5,442	)
Intercompany financing		(51,962	)		51,623			3,685			(3,346	)		-
Net Cash Provided (Used) by of     Financing Activities		(13,771	)		51,623			3,685			(3,346	)		38,191
Increase (Decrease) in Cash and     Cash Equivalents		(7,393	)		7,406			10,463			-			10,476
Cash and Cash Equivalents at of     Beginning of Period		8,851			4,554			20,753			-			34,158
Cash and Cash Equivalents at     End of Period	$	1,458		$	11,960		$	31,216		$	-		$	44,634

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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

Quarter ended November 3, 2001 compared to the Quarter ended October 28, 2000

Consolidated net sales for the quarter ended November 3, 2001 were $462.4 million compared to $463.3 million in the quarter ended October 28, 2000. Net earnings of $11.9 million for the third quarter of 2001 compares to net earnings of $15.6 million in the third quarter of 2000. Diluted earnings per share was $.68 in the third quarter of 2001 compared to $.88 in the third quarter of 2000.

Famous Footwear 's sales decreased 4.1% during the third quarter of 2001 to $280.9 million. The decrease was driven by a 9.4% same-store-sales decline partially offset by five additional stores resulting in a total of 924 stores in operation. Famous Footwear had operating earnings for the third quarter of 2001 of $14.2 million compared to $22.3 million last year. The decrease in operating profitability was due to several factors including a slowdown in consumer traffic levels and corresponding declines in comparable store sales, as well as an inventory clearance program, which resulted in lower margins.

The Company's wholesale operations had net sales of $128.9 million during the third quarter of 2001 compared to $120.5 million last year. This sales increase was primarily due to higher sales of Naturalizer branded product as well as women's private label and licensed footwear, and children's footwear. Operating earnings of $12.3 million increased from $9.8 million in the third quarter of 2000 primarily as a result of the higher sales volume.

In the Company's Naturalizer Retail operations, including stores in both the United States and Canada, net sales increased 4.3% to $52.2 million in the third quarter of 2001. Same-store sales in the third quarter of 2001 increased 5.4% in the United States and 8.8% in Canada. The Company had 32 less stores in operation in the United States in 2001 and had 11 more stores in operation in Canada than in 2000. At the end of the third quarter of 2001, 477 stores were in operation including 319 stores in the United States and 158 stores in Canada. Total Naturalizer Retail operations achieved operating losses of $1.4 million in the third quarter of fiscal 2001 compared to losses of $1.8 million in 2000. The improvement was primarily due to the higher sales.

Consolidated gross profit as a percent of sales for the third quarter of 2001 decreased to 39.3% from 39.8% during the same period last year. This decrease was primarily due to lower margins in the Company's retail operations primarily as a result of a highly competitively promotional environment for Famous Footwear.
 
 

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Selling and administrative expenses as a percent of sales for the third quarter of 2001 increased to 34.8% from 33.9% for the same period last year. This increase was due to the lower sales in the quarter at Famous Footwear while expenses were relatively flat.

The consolidated tax rate was 22.3% of pre-tax income for the third quarter of 2001 compared to 31.3% last year. The decrease from last year's effective rate reflects a higher mix of offshore operating income, which is taxed at lower rates, for the quarter and projected for the year.
 

Nine Months ended November 3, 2001 compared to the Nine Months ended October 28, 2000

Consolidated net sales for the first nine months of 2001 were $1.341 billion, an increase of 5.0% from the first nine months of 2000 total of $1.277 billion. Net earnings of $24.1 million for the first nine months of 2001 compare to net earnings of $31.4 million for the first nine months of 2000, a decrease of 23.2%.

Sales at Famous Footwear for the first nine months of 2001 increased 2.5% to $803.1 million from the first nine months of last year, reflecting a 6.4% decrease in same-store sales offset by the effect of opening 53 new, larger and higher volume stores and the closing of 54 lower volume stores during 2001. Operating earnings for the first nine months of 2001 decreased 49.1% to $23.8 million due to lower same-store sales and an inventory clearance program that resulted in lower margins.

The Company's wholesale operations' net sales for the first nine months of 2001 increased 11.1% to $379.2 million from the same period last year. Operating earnings for the first nine months of 2001 of $37.3 million increased $14.0 million from the same period last year due primarily to the increased sales volume.

In the Company's Naturalizer Retail operations, net sales increased 3.7% to $157.7 million in the first nine months of 2001. Same-store sales increased 2.9% in the United States and 8.5% in Canada. Total Naturalizer Retail operations had operating losses of $0.4 million in the first nine months of 2001 compared to operating losses of $1.8 million in 2000. The improved operating performance was primarily due to the higher sales volume.

Consolidated gross profit as a percent of sales for the first nine months of 2001 decreased to 39.2% from 40.3% for the same period last year. This decrease was primarily due to lower margins at Famous Footwear reflecting higher promotional activities.

Selling and administrative expenses as a percent of sales for the first nine months of 2001 increased to 35.8% from 35.7% for the same period last year. This increase was primarily due to higher operating expenses at Famous Footwear offset partially by lower expenses at the Company's wholesale operations.
 
 

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Other income for the first nine months of 2001 consisted primarily of a gain on the sale of the Company airplane.

The consolidated tax rate was 26.0% of consolidated pre-tax income for the first nine months of 2001 compared to 32.4% for last year. The decrease from last year's effective rate reflects a higher mix of offshore operating income, which is taxed at lower rates, for the first nine months and projected for the year.
 

Fourth Quarter Charge

Subsequent to the end of the third quarter, the Company announced that it intended to take an after-tax charge in its fourth quarter of $29-$32 million. This charge relates to a series of initiatives, which include profitability-enhancing measures in the Naturalizer division which will lead to a more productive retail store base, the development of a shared services administrative platform, inventory utilization improvements, and more efficient logistics operations. These programs are expected to increase after-tax earnings by approximately $13 million in fiscal 2003 and $20 million by fiscal 2005. The fourth quarter charge is expected to include costs related to restructuring the Naturalizer division, severance costs, incremental inventory markdowns, management transition at Famous Footwear, and debt restructuring including the costs to call the Company's $100 million 9½% Senior Notes which were scheduled to mature in fiscal 2006.
 

Financial Condition

A summary of key financial data and ratios at the dates indicated is as follows:
 

	November 3, 2001	October 28,  2000	February 3, 2001
Working Capital (millions)	$253.0	$269.5	$266.5
Current Ratio	1.9:1	1.9:1	1.9:1
Total Debt as a Percentage   of Total Capitalization	45.3%	45.1%	45.8%

Cash used from operating activities for the first nine months of fiscal 2001 was $12.0 million versus cash usage of $5.0 million last year. This decrease resulted primarily from the lower earnings.
 
 

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The decrease in the ratio of total debt as a percentage of total capitalization at November 3, 2001, compared to the end of fiscal 2000, is due to higher shareholders' equity, offset partially by cash usage and resultant higher borrowings. At November 3, 2001, $85.0 million was borrowed and $1.5 million of letters of credit were outstanding under the Company's $165.0 million revolving bank Credit Agreement.

In November 2001, the Company received a commitment from Bank of America to underwrite a new revolving credit facility. In the Fourth Quarter of fiscal 2001, the Company expects to enter into a new $350 million Credit Agreement, which will replace the Company's current $165 million revolving bank Credit Agreement dated November 20, 2000. Borrowings under the new Credit Agreement will be secured by accounts receivable and inventory of the Company's domestic and Canadian subsidiaries. In addition, the Company announced its intention to call its $100 million 9½% Senior notes in the fourth quarter of fiscal 2001. Such notes were scheduled to mature in 2006. The total costs associated with this debt restructuring are approximately $5.0 million, aftertax, including the call premium and the write-off of deferred debt issuance costs.

In May 2000, the Company announced a stock repurchase program under which the Company was authorized to repurchase up to 2 million shares of the Company's outstanding common stock. In the first nine months of fiscal 2001, the Company purchased 145,900 shares at a cost of $2.6 million under this authorization. Since the inception of this program, the Company has repurchased a total of 928,900 shares for approximately $11.3 million under this authorization.
 

Forward-Looking Statements

This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially. In Item 1 of the Company's fiscal 2000 Annual Report on Form 10-K, detailed risk factors that could cause variations in results to occur are listed and further described. Such description is incorporated herein by reference.
 
 

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ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

No material changes have taken place in the quantitative and qualitative information about market risk since the end of the most recent fiscal year. For further information, see Item 7A of the Company's Annual Report and Form 10-K for the year ended February 3, 2001.
 
 

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PART II - OTHER INFORMATION

Item 1 - Legal Proceedings

There have been no material developments during the quarter ended November 3, 2001 in the legal proceedings described in the Company's Annual Report on Form 10-K for the year ended February 3, 2001. Item 6 - Exhibits and Reports on Form 8-K
 

(a)	(3)	(a)	Restated Certificate of Incorporation of the Company, dated October 17, 2001, filed herewith.
		(b)	Bylaws of the Company as amended through March 2, 2000, incorporated herein by reference to Exhibit 3 to the Company's report on Form 10-K for the fiscal year ended January 29, 2000.
	(4)	(a) (ii)	Second Amendment to Rights Agreement between Brown Shoe Company, Inc., First Chicago Trust Company of New York, and EquiServe Trust Company, N.A., dated and effective as of December 6, 2001, filed herewith.
	(10)	(g)	Early Retirement and Consulting Agreement dated July 27, 2001, between the Company and Brian C. Cook, filed herewith.

(b)	Reports on Form 8-K:
	The Company filed no reports on Form 8-K during the quarter ended November 3, 2001.

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 

	BROWN SHOE COMPANY, INC.
Date:  December 17, 2001	/s/ Andrew M. Rosen
	Chief Financial Officer and Treasurer On Behalf of the Corporation as the  Principal Financial Officer

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EX-3

Exhibit (a)(3)(a)

RESTATED CERTIFICATE OF INCORPORATION

OF

BROWN SHOE COMPANY, INC.

Under Section 807 of the Business Corporation Law

 

        FIRST: The name of the corporation is  Brown Shoe Company, Inc.

        SECOND: The certificate of incorporation of the corporation was filed by the Department of State on  January 2, 1913.

        THIRD: The text of the certificate of incorporation of the corporation is hereby restated without further amendment or change to read as follows:

        FIRST:  The name of the Company shall be Brown Shoe Company, Inc. (hereinafter termed "Company").

        SECOND: The principal business office of the corporation is located in the City of New York, County of New York, State of New York.

        THIRD: The purpose or purposes of the Company are as follows:

        To manufacture, buy, sell and deal in leather and leather goods, boots, shoes, footwear, rubber and rubber goods of every kind, nature and description and all accessories thereto.

        As principal, agent, commission merchant or consignee, to acquire, by purchase or otherwise, own, hold, take on lease or in exchange, mortgage, lease, sell or otherwise dispose of any and all real and personal property, rights and privileges suitable or convenient for any of its purposes or businesses, and to acquire, by purchase or otherwise, own, hold, lease, mortgage, sell or otherwise dispose of, erect, construct, make, alter, enlarge, improve, and to aid or subscribe toward the construction, acquisition, or improvement of any factories, shops, store-houses, buildings and manufacturing and commercial establishments of every character, including all equipment, fixtures, machinery, implements and supplies necessary or incidental to, or connected with any of its purposes of businesses.

        To purchase, hold, sell assign, transfer, mortgage, pledge, or otherwise dispose of the shares of capital stock or any bonds, securities or evidences of indebtedness of any corporation, domestic or foreign, and to pay therefor (in whole or in part), in cash or other property, or by the issue and delivery of its own capital stock, bonds or other obligations, or of any other corporation, and to exercise in respect of any such shares of stock, bonds or other securities any and all rights, powers and privileges of individual owners or holders, including the right to vote thereon.
 

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        To acquire from time to time, in exchange for the shares of its capital stock, as the same may at any time now or hereafter exist, such property or shares of the capital stock of any other corporation or corporations as the Board of Directors shall deem of advantage to Brown, at such valuation as, in the judgment of said board, shall be fair and just.

        To purchase, retire, redeem, hold, re-issue and otherwise dispose of the shares of its stock or its bonds or other obligations in such amounts and in such manner and upon such terms as the Board of Directors may deem expedient in so far as may be permitted by law.

        To acquire, purchase, hold, use, sell, assign, lease, mortgage, or otherwise dispose of or turn to account letters patent of the United States or of any foreign country, inventions, patents, patent rights, licenses and privileges, improvements, trade-marks and trade-names, or pending applications therefor, or connected therewith, covering in whole or in part any and all articles manufactured or dealt in by it, or relating to, or useful in connection with any business that may at any time be carried on by it.

        To make, accept, endorse, execute and issue promissory notes, bills of exchange, bonds, debentures and other obligations, from time to time, for the purchase of property or for any purpose in or about its business, and to secure the payment of any such obligation by mortgage, pledge, deed of trust or otherwise.

        To do any or all the things herein set forth, and such other things as are incidental or conducive to the attainment of the above objects, to the same extent as natural persons might or could do, and in any part of the world, in so far as may be permitted by law.

        FOURTH: The aggregate number of shares which the Corporation shall have authority to issue is 101,000,000 of which 100,000,000 shares shall be Common Stock having a par value of $3.75 per share and 1,000,000 shares shall be Preferred Stock having a par value of $1.00 per share.

        1.   The Preferred Stock may be issued from time to time as follows:

        (a)  As shares of one or more series of Preferred Stock, with such serial designations as may be stated in the resolution or resolutions providing for the issue of such stock from time to time adopted by the Board of Directors; and in such resolutions providing for the issue of each particular series, the Board of Directors, to the fullest extent permitted by law, is expressly authorized to fix:

        (i)    the dividend rights of the particular series, including, without limitation, the annual dividend rate, whether dividends shall be cumulative or non-cumulative and, if cumulative, the date from which dividends shall be cumulative;

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        (ii)    the right, if any, of the Corporation to redeem shares of the particular series and the terms and conditions of such redemption;

        (iii)    the amounts per share which the particular series shall be entitled to receive in case of a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;

        (iv)    the voting power, if any, for the particular series and the terms and conditions under which such voting power may be exercised, provided that the shares of all series having voting power shall not have more than one vote each;

        (v)    the obligation, if any, of the Corporation to retire shares of such series pursuant to a sinking fund or fund of a similar nature or otherwise and the terms and conditions of such obligation;

        (vi)    the terms and conditions, if any, upon which shares of such series shall be convertible into, or exchangeable for, shares of Common Stock including the price or prices or the rate or rates of conversion or exchange and the terms of adjustment, if any; and

        (vii)    any other rights, preferences or limitations of the shares of such series consistent with the provisions hereof governing the Preferred Stock.

        (b)  In case the stated dividends and the amounts payable on liquidation are not paid in full, the shares of all series of the Preferred Stock shall share ratably in the payment of dividends, including accumulations, if any, in accordance with the sums which would be payable on said shares if all dividends were declared and paid in full, and in any distribution of assets other than by way of dividends in accordance with the sums which would be payable on such distribution if all sums payable were discharged in full.

        2.    The holders of the Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, but only out of surplus legally available for the payment of dividends, preferential cash dividends at the annual rate for each particular series theretofore fixed by the Board of Directors as hereinbefore provided. The holders of the Preferred Stock shall not be entitled to receive any dividends thereon other than the dividends referred to in this subdivision 2.

        3.    So long as any of the Preferred Stock shall remain outstanding, in no event shall any dividends whatsoever, whether in cash, stock or other property (except a dividend payable in Common Stock of the Company), be paid or declared, or any distribution be made on the Common Stock, nor shall any shares of the Common Stock be purchased, retired or otherwise acquired by the Corporation:

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        (a)    unless all accrued dividends on the Preferred Stock of all series shall have been paid and full dividends for the then current dividend period in respect of any shares of such stock which have cumulative dividend rights shall have been paid or declared and a sum sufficient for the payment thereof set apart; and

        (b)    unless, if at any time the Corporation is obligated to retire shares of any series of the Preferred Stock pursuant to a sinking fund or fund of a similar nature, all arrears in respect of the retirement of the Preferred Stock of all series shall have been made good; and

        (c)    except out of surplus legally available at the time for the payment of such dividends or for the purchase of such stock.

    Subject to the foregoing provisions and not otherwise, such dividends (payable either in cash, stock or other property) may be determined by the Board of Directors may be declared and paid from time to time on the Common Stock out of the remaining surplus of the Corporation legally available for the payment of dividends, and the Preferred Stock shall not be entitled to participate in any such dividend, whether payable in cash, stock or other property.

        4.    No holder of shares of Preferred Stock of any series shall be entitled as such, as a matter of right, to subscribe for or purchase any part of any new or additional issue of stock of any class whatsoever of the Corporation, or of securities convertible into stock of any class whatsoever, whether now or hereafter authorized, or whether issued for cash or other consideration or by way of dividend.

        5.    In the event of a liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, then, before any distribution or payment shall be made to the holders of the Common Stock, the holders of each series of the Preferred Stock shall be entitled to be paid in cash the applicable liquidation price per share fixed at the time of the original authorization of the issue of shares of each such series and, in the case of each share of the Preferred Stock having cumulative dividend rights, an amount, computed at the annual dividend rate for the series of which the particular share is a part, from the date on which dividends on such share became cumulative to the date fixed for such distribution or payment, less the aggregate amount of all dividends theretofore and on such distribution or payment date paid thereon. If such payment shall have been made in full to the holders of the Preferred Stock, the remaining assets and funds of the Corporation shall be distributed among the holders of the Common Stock.

        FIFTH: The name of the registered agent of the Company is CT Corporation System and the address of the registered agent is 111 Eighth Avenue, New York, New York 10011.

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        The address to which the Secretary of State shall mail a copy of process in any action or proceeding against the corporation which may be served on him is c/o CT Corporation System, 111 Eighth Avenue, New York, New York 10011.

        SIXTH. The duration of the Company shall be perpetual.

        SEVENTH. The number of directors of the Company shall be not less than 7 nor more than 21, divided into three classes. At each annual election the term of one class of directors shall expire, and the successors of the directors of such class shall be elected for a term of three years. Each class shall consist of such number of directors as may be provided in the by-laws of the Company; provided, however, that at least one-fourth in number of the directors of the Company shall be elected annually.

        EIGHTH. The directors shall have power among other things:

        (a)    From time to time, to determine whether, and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the Company, or any of them, shall be open to the inspection of stockholders; and no stockholders shall have any right to inspect any book or account or document of the Company except as conferred by the statutes of New York, or authorized by the directors;

        (b)    Subject to the provisions of the aforesaid "Business Corporation Law," to hold their meetings either within or without the State of New York, and to have one or more offices, and to keep the books of the Company (except the stock and transfer books) outside the State of New York, and at such place or places, as may from time to time be a designated by them;

        (c)    To provide by the by-laws, or otherwise, for the selection, from among their own number, of an executive committee, of such number as they may from time to time designate, and to delegate to such executive committee all or any of the powers of the board of directors, when the board is not in session, provided that such delegation of power is not contrary to law;

        (d)    To appoint such other standing committees as they may determine, with such powers as shall be conferred by them or as may be authorized by the by-laws; and

        (e)    To appoint officers of the Company, including one or more vice-presidents, one or more assistant treasurers, and one or more assistant secretaries, and to provide that the persons so appointed shall have, and may exercise, all or any of the powers of the president, of the treasurer and of the secretary, respectively.

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        NINTH. No mortgage, lien or encumbrance of any kind upon any part of the real or personal property, assets, effects, undertaking or goodwill of the Company, shall be created or be valid or effective unless the same shall have been previously authorized by the consent of the holders of at least three-fourths in interest of the outstanding Common Stock of the Company, given in person or by proxy, either in writing or at an annual meeting or at a special meeting called for that purpose; but this prohibition shall not be deemed or construed to apply to, nor shall it operate to prevent the giving of purchase money mortgages, or other purchase money liens on property to be hereafter acquired by the Company, or the acquiring of property subject to mortgages, liens and encumbrances thereon then existing, nor to the pledging by the Company as security for loans made to it in the regular and current conduct of its business of notes or accounts receivable or other liquid assets or of any stocks, bonds or other securities owned by it.

        TENTH. No contract or other transaction between the Company and any other corporation shall be affected by the fact that the directors of this Company are interested in or are directors or officers of such other corporation, and any director individually may be a party to or may be interested in any contract or transaction of this Company; and no contract or transaction of this Company with any person or persons, firm or association shall be affected by the fact that any director or directors of this Company is a party to or interested in such contract or transaction, or in any way connected with such person or persons, firm or association, provided that the interest in any such contract or other transaction of any such director shall be fully disclosed and that such contract or other transaction shall be authorized or ratified by the vote of a sufficient number of directors of the Company not so interested; and each and every person who may become a director of this Company is hereby relieved from any liability that might otherwise exist from contracting with the Company for the benefit of himself or any firm, association or corporation in which he may be in any wise interested.

        ELEVENTH. Subject always to the by-laws made by the stockholders, the board of directors may make by-laws, and from time to time, may alter, amend or repeal any by-laws made by them; but any by-laws made by the board of directors may be altered, amended or repealed by the stockholders at any annual meeting, or at any special meeting, provided notice of such proposed alteration or repeal be included in the notice of meeting.

        TWELFTH. The Board of Directors of the Corporation, when evaluating any offer of another person to (a) make a tender or exchange offer for any equity security of the Corporation, (b) merge or consolidate the Corporation with another corporation, or (c) purchase or otherwise acquire all or substantially all of the properties and assets of the Corporation, may in connection with the exercise of its judgment in determining what is in the best interests of the Corporation and its Stockholders, give due consideration to all relevant factors, including without limitation the social and economic effects on the employees, customers, suppliers and other constituencies of the Corporation and its subsidiaries and on the communities in which the Corporation and its subsidiaries operate or are located.

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        THIRTEENTH. No director of the Corporation shall be liable to the Corporation or its shareholders for monetary damages for any beach of his duties as a director, provided that this Article Thirteenth shall not eliminate or limit any liability arising out of a judgment or other final determination adverse to the director which establishes that (a) his acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law; (b) he personally gained in fact a financial profit or other advantage to which he was not legally entitled; or (c) his acts violated Section 719 of the New York Business Corporation Law. This Article Thirteenth shall not eliminate or limit the liability of a director for any act or omission occurring prior to the effective date of its adoption. No repeal or modification of this Article Thirteenth, directly or by adoption of an inconsistent provision in this Certificate of Incorporation, shall be effective with respect to any cause of action, suit, claim or other matter arising out of or relating to any act or omission occurring prior to such repeal or modification.

        FOURTH: The restatement of the certificate of incorporation herein certified was authorized by the Board of Directors of the corporation.
 
 
 

Signed on October 17, 2001
 
 

 

  /s/ Michael Oberlander Michael Oberlander Vice President, General Counsel andCorporate Secretary 7

EX-4

Exhibit (4) (a) (ii)

SECOND AMENDMENT TO RIGHTS AGREEMENT

            This Second Amendment, dated and effective as of December 6, 2001 (the "Second Amendment"), is entered into by and among Brown Shoe Company, Inc., a New York corporation (the "Company"), First Chicago Trust Company of New York, a New York corporation ("First Chicago"), and EquiServe Trust Company, N.A. ("EquiServe"), and amends the Rights Agreement dated as of March 7, 1996, as amended by the Amendment dated July 8, 1997, effective as of August 11, 1997, (the "Rights Agreement") between the Company and the Rights Agent named therein.

            WHEREAS, the Company and First Chicago are currently parties to the Rights Agreement, pursuant to which First Chicago serves as Rights Agent;

            WHEREAS, First Chicago intends to resign as Rights Agent and the Company intends to appoint EquiServe to succeed First Chicago as Rights Agent; and

            WHEREAS, EquiServe wishes to accept the appointment as successor Rights Agent and the parties hereto wish to make certain changes to the Rights Agreement to facilitate this succession.

            NOW, THEREFORE, in consideration of the premises and mutual agreements herein set forth, the Company, First Chicago and EquiServe hereby agree as follows:

            1.   Amendment to Section 21 of the Rights Agreement. Section 21. Change of Rights Agent of the Rights Agreement is amended by deleting the fifth sentence of such section (beginning with "Any successor Rights Agent, whether ....") and replacing it with the following:

                "Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation, limited liability company or trust company organized and doing business under the laws of the United States or any state, in good standing, which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and which has, individually or combined with an affiliate, at the time of its appointment as Rights Agent a combined capital and surplus of at least $100 million."

            2.   Resignation of Rights Agent. Pursuant to the newly amended Section 21, the Company does hereby accept the resignation of First Chicago as Rights Agent and First Chicago hereby acknowledges that it has notified Company of its resignation as Rights Agent under the Rights Agreement, such resignation to be effective as of 12:01 a.m., Eastern Daylight time, December 7, 2001.

            3.   Appointment of EquiServe as Successor Rights Agent. The Company hereby appoints EquiServe as successor Rights Agent under the Rights Agreement, effective as of 12:01 a.m., Eastern Daylight time, December 7, 2001, and EquiServe hereby accepts such appointment, subject to all the terms and conditions of the Rights Agreement, as amended hereby.

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            4.   Further Amendment to Rights Agreement. The parties hereto agree that the Rights Agreement shall be further amended as provided below, effective as of the date of this Second Amendment except as may otherwise be provided below:

1. From and after the time that the appointment of EquiServe as successor Rights Agent is effective all references to Boatmen's Trust Company or First Chicago as Rights Agent shall be deemed to refer to EquiServe as successor Rights Agent. From and after the effective date of this Second Amendment, all references to the Rights Agreement shall be deemed to refer to the Rights Agreement as amended by this Second Amendment.
2. Section 26. Notices of the Rights Agreement is amended by deleting the name and address of First Chicago and substituting the following: EquiServeTrust Company, N.A. Attention: Stock Transfer Department, Mail Stop 4694, P.O. Box 2536, Jersey City, New Jersey 07303-2536.

            5.     Miscellaneous.

1. Except as otherwise expressly provided, or unless the context otherwise requires, all terms used herein have the meanings assigned to them in the Rights Agreement.
2. Each party hereto waives any requirement under the Rights Agreement that any additional notice be provided to it pertaining to the matters covered by this Second Amendment.
3. This Second Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which counterparts shall together constitute but one and the same document.

[The remainder of this page intentionally left blank.]

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            IN WITNESS WHEREOF, the parties have caused this Second Amendment to be duly executed as of the day and year first written above.
 
 

            Brown Shoe Company, Inc.

            By: /s/ Andrew M. Rosen
            Name: Andrew M. Rosen
            Title: Senior Vice President, Chief Financial Officer and
                            Treasurer
 
 

            First Chicago Trust Company of New York
            By: /s/ Michael J. Foley
            Name: Michael J. Foley
            Title: Chief Marketing Officer
 
 

            EquiServe Trust Company, N.A.
            By: /s/ Thomas A. Ferrari
            Name: Thomas A. Ferrari
            Title: Senior Managing Director
 

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EX-10

Exhibit (10) (g)

EARLY RETIREMENT AND CONSULTING AGREEMENT

                THIS EARLY RETIREMENT AND CONSULTING AGREEMENT (the "Agreement"), made and entered into as of the 27^th day of July, 2001 (the "Effective Date"), by and between BROWN SHOE COMPANY, INC., a New York corporation (the "Company"), and BRIAN C. COOK ("Executive").

                WITNESSETH THAT:

                WHEREAS, Executive currently serves as Executive Vice President of the Company, as well as President of Famous Footwear, a division of the Company;

                WHEREAS, Executive is desirous of stepping down as Executive Vice President of the Company and President of Famous Footwear and retiring prior to age 65 and Executive shall voluntarily retire as an employee of the Company, effective on such date as is mutually agreeable to the Company and Executive, but no later than February 1, 2002 (the "Retirement Date");

                WHEREAS, Executive possesses skills and leadership experience which the Company is desirous of calling upon from time to time for a period not to exceed the forty-eight month period following the Retirement Date; and

                WHEREAS, Executive is willing to provide his skills and the benefit of his leadership from time to time during such period following the Retirement Date as a consultant to the Company.

                NOW, THEREFORE, in consideration of the mutual undertakings contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive agree as follows:

                1. Engagement as Consultant. The Company shall retain Executive as a consultant for the period commencing on the first day after the Retirement Date through the end of the forty-eight (48) month period following the Retirement Date (the "Consulting Period"). During the Consulting Period, Executive shall be an independent contractor. Executive and the Company acknowledge that while Executive will step down as Executive Vice President of the Company and President of Famous Footwear as of his 62^nd birthday, he may still remain as an active employee of the Company after such date and the Consulting Period will not begin until the day after the Retirement Date.

                2. Consulting Duties. The Chief Executive Officer and/or the Chairman of the Board of Directors may from time to time request Executive to furnish his services as a consultant. Such services shall include:

                    (a) consultation concerning the management and overall policy and strategic direction of the businesses of the Company and the financial consequences thereof;

                    (b) assisting with the transition of leadership at Famous Footwear and maintaining and expanding relationships with vendors;

                    (c) consultation regarding real estate strategies, which may include site visits to current and prospective store locations;

                    (d) consultation and strategizing regarding merchandising practices and inventory management; and

                    (e) consultation with respect to special projects designated by the Chief Executive Officer and/or the Chairman of the Board of the Company.

Executive shall not be required to hold himself available for consulting services at any fixed time, but shall be "available on a reasonable basis." Executive's presence shall not be required at any particular office or place in order to render his consulting services unless such services could not reasonably be performed in another location or by telephone or letter. For purposes of this Agreement, "available on a reasonable basis" shall mean, for each 12-month period during the Consulting Period, either: (i) up to a total of 100 days, or (ii) 8 days per month during each month of the 12-month period.

                    3. Consulting Fee. Subject to the terms of this Agreement, the Company shall pay Executive a per month consulting fee during the Consulting Period, in each case payable on the last day of the month, in accordance with the following schedule:
 

Month	Consulting Fee Per Month
Months 1-18	$47,917
Months 19-34	$40,000
Months 35-48	$20,000

Executive and the Company acknowledge that it is in both their best interests for Executive to step down as Executive Vice President of the Company and President of Famous Footwear on August 23, 2001 (his 62nd birthday). When Executive does step down as Executive Vice President of the Company and President of Famous Footwear and if he does not at that time retire as an employee of the Company, Executive shall assume the duties of "special assistant" to the Chairman of the Company at the same salary that he was paid as Executive Vice President of the Company and President of Famous Footwear and Executive and the Company agree that the length of time (in months) that the Executive is no longer serving as Executive Vice President of the Company and President of Famous Footwear prior to the Retirement Date shall be deducted from the Consulting Period. (For illustrative purposes, when Executive steps down as Executive Vice President of the Company and President of Famous Footwear as of August 23, 2001 and if he retires as an employee on February 1, 2002, then 5 months will be deducted from the Consulting Period and the Consulting Period will end forty-one (41) months after the Retirement Date. If, however, after Executive steps down as Executive Vice President of the Company and President of Famous Footwear on August 23, 2001, he officially retires as an employee of the

2

Company prior to February 1, 2002, the Consulting Period will begin the day after the Retirement Date.)

                    4. Annual Bonus. Subject to the terms of this Agreement, during the Consulting Period, Executive shall receive three fiscal year bonuses as follows:
 

Fiscal Year	Payment Date	Amount*
2001	No later than April, 2002	The greater of (i) the amount actually earned pursuant to the terms of the Company's bonus plan (not to exceed the maximum amount available to Executive thereunder), or (ii) $150,000.
2002	No later than April, 2003	The greater of (i) the amount actually earned pursuant to the terms of the Company's bonus plan (not to exceed the target amount available to Executive thereunder), or (ii) $125,000.
2003	No later than April, 2004	The greater of (i) the amount actually earned pursuant to the terms of the Company's bonus plan (not to exceed the target amount available to Executive thereunder), or (ii) $100,000.

*For purposes of determining the bonus amount actually earned for each of three bonuses under the terms of the Company's bonus plan during the Consulting Period, Executive's base salary amount in effect while he was employed by the Company will not be used. Instead, solely for purposes of applying the terms of the Company's bonus plan to determine the bonus amount to which Executive is entitled, Executive's "base salary" for each fiscal year shall be deemed to be an amount equal to the sum of the consulting fees paid for the last full month preceding the end of the fiscal year for which the bonus is being paid, multiplied by 12.                     5. Long-Term Incentive Payments. Subject to the terms of this Agreement, during the Consulting Period, Executive shall be eligible to receive a long-term incentive cash payment for each of the three performance periods specified below in the table. The three payments will not be made pursuant to awards granted under the Brown Shoe Company, Inc. Incentive and Stock Compensation Plan (the "Incentive Plan"), but the amount of each payment will be based on the achievement of the performance targets established by the Board of Directors of the Company for the corresponding performance periods under the Incentive Plan. In consideration of the foregoing, Executive acknowledges and agrees that all long-term incentive awards which have been granted to him under the Incentive Plan with respect to the performance periods specified below are hereby canceled and forfeited in all respects as of the Effective Date and the Company shall have no obligation to honor such awards. Further, Executive acknowledges that any long-term incentive cash payment to which he may be entitled

3

under this Section 5 shall only be paid in the form of cash and not shares of Company common stock. The three long-term incentive payments that Executive is eligible to receive pursuant to this Section 5 shall be made in accordance with the following terms and conditions:
 

Performance Period	Number of Performance Shares/Units Granted	Form of Payment/Payment Amount	Payment Date
Fiscal Years 99-01	Same number as originally awarded by Company pursuant to Incentive Plan for performance period	Cash payment equal to (i) the number of performance shares/units earned over performance period, taking into consideration the extent to which the applicable performance targets established for the performance period under the Incentive Plan have been achieved, multiplied by (ii) the Fair Market Value (as defined in the Incentive Plan) of one share of the Company's common stock as of the date immediately preceding the date on which such cash payment is made to Executive	Payment no later than April 30, 2002
Fiscal Years 00-02	Same number as originally awarded by Company pursuant to Incentive Plan for performance period	Cash payment determined pursuant to same formula described above	Payment no later than April 30, 2003
Fiscal Years 01-03	Same number as originally awarded by Company pursuant to Incentive Plan for performance period	Cash payment determined pursuant to same formula described above	Payment no later than April 30, 2004

                    6. Pension Benefits. As of the Retirement Date, pension payments to which Executive is entitled under the Brown Shoe Company, Inc. Retirement Plan and the Brown Shoe Company, Inc. Executive Retirement Plan (the "SERP") shall be determined, and paid, in accordance with the terms of the plans, except that, solely for purposes of calculating retirement benefits under the SERP, Executive shall receive an additional 10 years of service as provided in the agreement dated October, 1997.

                    7. Restricted Stock and Stock Options. All transfer and forfeiture restrictions on any shares of restricted stock held by Executive as of the Retirement Date shall lapse on such date. With respect to each non-vested option to purchase Company stock held by Executive on the Retirement Date, the Company shall make a cash lump sum payment to Executive in an amount equal to the excess, if any, of the fair market value of the Company
 
 

4

stock subject to such option, determined as of the close of business on the Retirement Date (or, if the Retirement Date is not a business day, then the next business day), over the exercise price of such option. After Executive shall have received such lump sum payment, all such non-vested options shall be cancelled as of the Retirement Date.

                    8. Medical and Dental Benefits. Until Executive attains age 65, the Company shall provide Executive and his dependents with medical and dental benefits consistent with the medical and dental benefits being provided to Executive and his dependents immediately prior to the Retirement Date.

                    9. Perquisites. Executive shall be entitled:

                        (a) to receive reimbursement from the Company during the Consulting Period for outside office space in an amount not to exceed $2,000 per month;

                        (b) to keep his office furniture and furnishings from his present office;

                        (c) to receive and utilize until he attains age 65 a Product Discount Card; and

                        (d) to receive reimbursement from the Company during the Consulting Period for any club food minimums owed to any club in which Executive was a member immediately prior the Retirement Date.

                    10. Death or Permanent Disability. In the event of the death or permanent disability (as determined by the Company in good faith) of Executive during the Consulting Period, the Company's obligation to provide the payments, benefits and perquisites described in this Agreement shall cease as of the date of such death or permanent disability; provided, however, monthly consulting fees shall continue to be paid in accordance with the schedule set forth in Section 3 hereof until the earlier of (i) the end of the calendar year in which such death or permanent disability occurs, or (ii) the end of the Consulting Period, and any undistributed pension benefits shall be paid in accordance with the terms of the plans. In the event of death, any monthly consulting fees payable as provided in this Section 10 shall be made to Executive's designated beneficiary, or if Executive leaves no designated beneficiary, to his estate.

                    11. Covenant Not to Compete. Payments made pursuant to Sections 3, 4 and 5 hereof are subject to the following restrictions:

                        (a) Restrictions.

                            (i) Executive acknowledges that (A) the Company has spent substantial money, time and effort over the years in developing and solidifying its relationships with its Customers (as defined below) throughout the world and in developing its Confidential Information (as defined in Section 12 hereof); and (B) under this Agreement, the Company is agreeing to provide Executive with certain benefits based upon Executive's assurances and

5

promises contained herein not to divert the Company's Customers' goodwill or to put himself in a position following his employment with the Company in which the confidentiality of the Company's Confidential Information might somehow be compromised.

                            (ii) Accordingly, Executive agrees that, during the Consulting Period and for thirty-six (36) months thereafter, Executive will not, directly or indirectly, on Executive's own behalf or on behalf of any other person, firm, corporation or entity (whether as owner, partner, consultant, employee or otherwise):

                                (A) provide any executive- or managerial-level services in the shoe industry in the United States in competition with the Company, for any Competitor (as defined below)

                                (B) hold any executive- or managerial-level position with any Competitor in the United States;

                                (C) engage in any research and development activities or efforts for a Competitor, whether as an employee, consultant, independent contractor or otherwise, to assist the Competitor in competing in the shoe industry in the United States;

                                (D) cause or attempt to cause any Customer to divert, terminate, limit, modify or fail to enter into any existing or potential relationship with the Company;

                                (E) cause or attempt to cause any shoe supplier or manufacturer of the Company to divert, terminate, limit, modify or fail to enter into any existing or potential relationship with the Company;

                                (F) solicit, entice, employ or seek to employ, in the shoe industry, any executive- or managerial-level executive of, or any consultant or advisor to, the Company; and

                                (G) communicate in any way that negatively reflects upon, or disparages in any way, or induces or encourages others to disparage in any way, the Company, its services, its products, or any of its current or former directors, officers, employees or agents, or the Company's practices, policies or strategies.

For purposes of this Agreement, "Competitor" shall mean any person, firm, corporation, partnership or other entity for which, in its prior fiscal year, the wholesale or retail footwear business accounted for at least 2% of his or its total business. Provided, however, that for the thirty-six (36) months after the Consulting Period, for purposes of subsections (A), (B) and (C) above, the term "Competitor" shall only refer to direct competitors of the Company in the retail shoe industry. In addition, for purposes of this Agreement, "Customer" shall mean any wholesale customer of the Company which purchased, or is reasonably expected to purchase, from the Company during, or within one (1) year immediately following the expiration of, the
 
 

6

Consulting Period more than $1,000,000 in shoes.

                    (b) Acknowledgment Regarding Restrictions. Executive recognizes and agrees that the restraints contained in Section 11.(a) (both separately and in total) are reasonable and should be fully enforceable in view of the high-level positions Executive has had with the Company, the national and international nature of both the Company's business and competition in the shoe industry, and the Company's legitimate interests in protecting its Confidential Information and its Customer goodwill and relationships. Executive specifically hereby acknowledges and confirms that he is willing and intends to, and will, abide fully by the terms of Section 11.(a) of this Agreement. Executive further agrees that the Company would not have adequate protection if Executive were permitted to work for its Competitors in violation of the terms of this Agreement since the Company would be unable to verify whether (i) its Confidential Information was being disclosed and/or misused, and (ii) Executive was involved in diverting or helping to divert the Company's Customers and/or its Customer goodwill.

                    (c) Company's Right to Injunctive Relief. In the event of a breach or threatened breach of any of Executive's duties and obligations under the terms and provisions of Section 11.(a) of this Agreement, the Company shall be entitled, in addition to any other legal or equitable remedies it may have in connection therewith (including any right to damages that it may suffer), to temporary, preliminary and permanent injunctive relief restraining such breach or threatened breach. Executive hereby expressly acknowledges that the harm which might result to the Company's business as a result of noncompliance by Executive with any of the provisions of Section 11.(a) would be largely irreparable. Executive specifically agrees that if there is a question as to the enforceability of any of the provisions of Section 11.(a) hereof, Executive will not engage in any conduct inconsistent with or contrary to such Section until after the question has been resolved by a final judgment of a court of competent jurisdiction. Executive undertakes and agrees that if Executive breaches or threatens to breach the Agreement, Executive shall be liable for any attorneys' fees and costs incurred by Company in enforcing its rights hereunder.

                    (d) Executive Agreement to Disclose this Agreement. So long as the terms of this Section 11 are in effect, Executive agrees to disclose such terms to any potential future employer.

            12. Confidential Information. Executive acknowledges and confirms that certain data and other information (whether in human or machine readable form) that comes into his possession or knowledge (whether before or after the date of this Agreement) and which was obtained from the Company, or obtained by Executive for or on behalf of the Company, and which is identified herein is the secret, confidential property of the Company (the "Confidential Information"). This Confidential Information includes, but is not limited to:

                    (a) lists or other identification of customers or prospective customers of the Company (and key individuals employed or engaged by such parties);

                    (b) lists or other identification of sources or prospective sources of the

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Company's products or components thereof (and key individuals employed or engaged by such parties);

                    (c) all compilations of information, correspondence, designs, drawings, files, formulae, lists, machines, maps, methods, models, notes or other writings, plans, records, regulatory compliance procedures, reports, specialized or technical data, schematics, source code, object code, documentation, and software used in connection with the development, manufacture, fabrication, assembly, marketing and sale of the Company's products;

                    (d) financial, sales and marketing data relating to the Company or to the industry or other areas pertaining to the Company's activities and contemplated activities (including, without limitation, manufacturing, transportation, distribution and sales costs and non-public pricing information);

                    (e) equipment, materials, procedures, processes, and techniques used in, or related to, the development, manufacture, assembly, fabrication or other production and quality control of the Company's products and services;

                    (f) the Company's relations with its customers, prospective customers, suppliers and prospective suppliers and the nature and type of products or services rendered to such customers (or proposed to be rendered to prospective customers);

                    (g) the Company's relations with its employees (including, without limitation, salaries, job classifications and skill levels); and

                    (h) any other information designated by the Company to be confidential, secret and/or proprietary (including without limitation, information provided by customers or suppliers of the Company).

Notwithstanding the foregoing, the term "Confidential Information" shall not consist of any data or other information which has been made publicly available or otherwise placed in the public domain other than by Executive in violation of this Agreement.

                13. Waiver and Release. As a condition precedent to the Company's obligations under this Agreement, concurrently with the execution of this Agreement, Executive shall execute the release attached hereto as Exhibit A (the "Release"). In the event Executive exercises his right to revoke the Release within seven (7) days after the execution thereof, all of the terms and conditions of this Agreement shall be deemed null and void and of no force and effect and the Company and Executive shall have no obligation to honor the terms of this Agreement.

                14. Taxes. Executive acknowledges that, during the Consulting Period, he will not be an "employee" (or person of similar status) of the Company or any of its affiliates for purposes of the Internal Revenue Code of 1986, as amended (the "Code") or the Employee Retirement Income Security Act of 1974, as amended. Executive acknowledges that he will not

8

be paid any "wages" (as defined in the Code) in respect of the consulting services. As such, Executive shall be responsible for the payment of any and all required federal, state and local taxes incurred, or to be incurred, in connection with any amounts payable to Executive under this Agreement.

                15. Miscellaneous.

                    (a) Notices. Any notice to be given by either party hereunder shall be in writing and shall be deemed to have been duly given if delivered or mailed, certified or registered mail, postage prepaid, as follows:

                If to the Company:

                Brown Shoe Company, Inc.
                8300 Maryland Avenue
                St. Louis, MO 63166-0029
                Attention: Chief Executive Officer

                If to Executive

                Brian C. Cook
                4830 Morris Court
                Waunakee, WI 53597

Any party may change the address to which notices are to be addressed by giving the other party written notice in the manner herein set forth.

                    (b) Successors; Binding Agreement.

                        (i) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, upon or prior to such succession, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. A copy of such assumption and agreement shall be delivered to Executive promptly after its execution by the successor. Failure of the Company to obtain such agreement upon or prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Subsection 15.(b)(i) or which otherwise becomes bound by the terms and provisions of this Agreement by operation of law.

                        (ii) This Agreement is personal to Executive and Executive may not assign or delegate any part of his rights or duties hereunder to any other person, except

9

that this Agreement shall inure to the benefit of, and be enforceable by, Executive's legal representatives, executors, administrators, heirs and beneficiaries.

                    (c) Severability. If any provision of this Agreement, or the application thereof to any person or circumstance, shall to any extent be held to be invalid or unenforceable, the remainder of this Agreement and the application of such provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

                    (d) Headings. The headings in this Agreement are inserted for convenience of reference only and shall not in any way affect the meaning of interpretation of this Agreement.

                    (e) Counterparts. This Agreement may be executed in one or more identical counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

                    (f) Waiver. Neither any course of dealing nor any failure or neglect of either party hereto in any instance to exercise any right, power or privilege hereunder or under law shall constitute a waiver of such right, power or privilege or of any other right, power or privilege or of the same right, power or privilege in any other instance. All waivers by either party hereto must be contained in a written instrument signed by the party to be charged therewith, and, in the case of the Company, by its duly authorized officer.

                    (g) Entire Agreement. This instrument constitutes the entire agreement of the parties in this matter and shall supersede any other agreement, including, but not limited to, the Severance Agreement dated July 27, 1998 (the "Severance Agreement"), between the parties, oral or written, concerning the same subject matter. As a result thereof, Executive agrees and acknowledges that, as of the Effective Date of this Agreement, the Severance Agreement shall be deemed terminated and of no further force and effect, and that the Company shall have no obligation whatsoever to provide any payments or benefits to Executive described in the Severance Agreement.

                    (h) Amendment. This Agreement may be amended only by a writing which makes express reference to this Agreement as the subject of such amendment and which is signed by Executive and by a duly authorized officer of the Company.

                        (i) Governing Law. In light of the Company's and Executive's substantial contacts with the State of Missouri, the fact that the Company is headquartered in Missouri and Executive resides in and/or reports to Company management in Missouri, the parties' interests in ensuring that disputes regarding the interpretation, validity and enforceability of this Agreement are resolved on a uniform basis, and the Company's execution of, and the making of, this Agreement in Missouri, the parties agree that: (a) any litigation involving any noncompliance with or breach of the Agreement, or regarding the interpretation, validity and/or

10

enforceability of the Agreement, shall be filed and conducted exclusively in the state or federal courts in St. Louis City or County, Missouri; and (b) the Agreement shall be interpreted in accordance with and governed by the laws of the State of Missouri, without regard for any conflict of law principles.

                IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of the 27^th day of July, 2001.

                                                                                    BROWN SHOE COMPANY, INC.

                                                                                    By:    /s/ Ronald A. Fromm
                                                                                    Name: Ronald A. Fromm
                                                                                    Title: Chairman, Chief Executive Officer and President

                                                                                      EXECUTIVE

                                                                                    By:_/s/ Brian C. Cook__________________________
                                                                                            Brian C. Cook
 
 

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Exhibit A

RELEASE

                RELEASE (the "Release") dated as of the Retirement Date (as defined in the Consulting Agreement as defined below) by and between Brian C. Cook ("Executive") and Brown Shoe Company, Inc., a New York corporation (the "Company").

                WITNESSETH THAT:

                WHEREAS, the Company and Executive are parties to an Early Retirement and Consulting Agreement dated July 27, 2001 (the "Consulting Agreement"); and

                WHEREAS, the execution of this Release is a condition precedent to, and material inducement to, the Company's obligations under the Consulting Agreement.

                NOW, THEREFORE, the parties hereto agree as follows:

                1. Mutual Promises. The Company undertakes the obligations contained in the Consulting Agreement in exchange for Executive's promises and obligations contained herein.

                2. Release of Claims; Agreement Not to File Suit.

a. Executive, for and on behalf of himself and his heirs, beneficiaries, executors, administrators, successors, assigns and anyone claiming through or under any of the foregoing, agrees to, and does, remise, release and forever discharge the Company and its subsidiaries and affiliates, each of their shareholders, directors, officers, employees, agents and representatives, and its successors and assigns (collectively, the "Company Released Persons"), from any and all matters, claims, demands, damages, causes of action, debts, liabilities, controversies, judgments and suits of every kind and nature whatsoever, foreseen or unforeseen, known or unknown, which have arisen or could arise from matters which occurred prior to the date of this Release, which matters include without limitation: (i) the matters covered by this Release or the Consulting Agreement, (ii) Executive's employment and/or termination from employment with the Company, and (iii) any claims which might otherwise arise in the future as a result of arrangements or agreements in effect as of the date of this Release or the continuance of such arrangements and agreements.

b. Executive, for and on behalf of himself and his heirs, beneficiaries, executors, administrators, successors, assigns, and anyone claiming through or under any of the foregoing, agrees that he will not file or otherwise submit any charge, claim, complaint, or action to any agency, court, organization, or judicial forum (nor will Executive permit
 
 

any person, group of persons, or organization to take such action on his behalf) against any Company Released Person arising out of any actions or non-actions on the part of any Company Released Person arising before the date of this Release. Executive further agrees that in the event that any person or entity should bring such a charge, claim, complaint, or action on his behalf, he hereby waives and forfeits any right to recovery under said claim and will exercise every good faith effort to have such claim dismissed.

c. The charges, claims, complaints, matters, demands, damages, and causes of action referenced in Sections 2(a) and 2(b) include, but are not limited to: (i) any breach of an actual or implied contract of employment between Executive and any Company Released Person, (ii) any claim of unjust, wrongful, or tortuous discharge (including any claim of fraud, negligence, retaliation for whistleblowing, or intentional infliction of emotional distress), (iii) any claim of defamation or other common law action, or (iv) any claims of violations arising under the Civil Rights Act of 1964, as amended, 42 U.S.C. §2000e et seq., the Age Discrimination in Employment Act, 29 U.S.C. §621 et seq., the Americans with Disabilities Act of 1990, 42 U.S.C. §12101 et seq., the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. §201 et seq., the Rehabilitation Act of 1973, as amended, 29 U.S.C. §701 et seq., or of the Missouri Human Rights Act, §213.000 R.S. Mo. et seq., the Missouri Service Letter Statute, §209.140 R.S. Mo. or any other relevant federal, state, or local statutes or ordinances, or any claims for pay, vacation pay, insurance, or welfare benefits or any other benefits of employment with any Company Released Person arising from events occurring prior to the date of this Release other than those payments and benefits specifically provided herein.

d. This Release shall not affect Executive's right to any governmental benefits payable under any Social Security or Worker's Compensation law now or in the future.

                3. Release of Benefit Claims. Executive, for and on behalf of himself and his heirs, beneficiaries, executors, administrators, successors, assigns and anyone claiming through or under any of the foregoing, further releases and waives any claims for pay, vacation pay, insurance or welfare benefits or any other benefits of employment with any Company Released Person arising from events occurring prior to the date of this Release other than claims to the payments and benefits specifically provided for in the Consulting Agreement.

                4. Revocation Period; Knowing and Voluntary Agreement.

a. Executive acknowledges that he has been given a period of at least twenty-one (21) days from the date of receipt of this Release to consider whether or not to accept this Release. Furthermore, Executive may revoke this Release for seven (7) days following its execution.

b. Executive represents, declares and agrees that he voluntarily accepts the payments described in the Consulting Agreement for purposes of making a full and final
 

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compromise, adjustment and settlement of all potential claims hereinabove described. Executive hereby acknowledges that he has been advised of the opportunity to consult an attorney and that he understands the Release and the effect of signing the Release.                 5. Severability. If any provision of this Release or the application thereof to any person or circumstance shall to any extent be held to be invalid or unenforceable, the remainder of this Release and the application of such provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each provision of this Release shall be valid and enforceable to the fullest extent permitted by law.

                6. Headings. The headings in this Release are inserted for convenience of reference only and shall not in any way affect the meaning or interpretation of this Release.

                7. Counterparts. This Release may be executed in one or more identical counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

                8. Entire Agreement. This Release and Consulting Agreement constitutes the entire agreement of the parties in this matter and shall supersede any other agreement between the parties, oral or written, concerning the same subject matter.

                9. Governing Law. This Release shall be governed by, and construed and enforced in accordance with, the laws of the State of Missouri, without reference to the conflict of laws rules of such State.

                IN WITNESS WHEREOF, Executive and the Company have executed this Release as of the day and year first above written.

                                                                                        BROWN SHOE COMPANY, INC.

                                                                                        By: __/s/ Ronald A. Fromm______________________
                                                                                        Name: Ronald A. Fromm
                                                                                        Title: Chairman, Chief Executive Officer and President

                                                                                          EXECUTIVE

                                                                                        By:    /s/ Brian C. Cook _________________________
                                                                                                Brian C. Cook
 
 

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