INDEMNIFICATION AGREEMENT
AGREEMENT,
dated as of the 4th day of September, 2007, between Collective Brands, Inc.,
a
Delaware corporation (the "Company") and Xxxxxxx X. Xxxxx (the
"Indemnitee").
WHEREAS,
it is essential to the Company to retain and attract as directors and officers
the most capable persons available; and
WHEREAS,
Indemnitee is a director or officer of the Company; and
WHEREAS,
both the Company and Indemnitee recognize the increased risk of litigation
and
other claims being asserted against directors and officers of public companies
in today's environment; and
WHEREAS,
basic protection against undue risk of personal liability of directors and
officers heretofore has been provided through insurance coverage providing
reasonable protection at reasonable cost, and Indemnitee has relied on the
availability of such coverage; but as a result of substantial changes in the
marketplace for such insurance it generally has become more difficult to obtain
such insurance on terms providing reasonable protection at reasonable cost;
and
WHEREAS,
the Delaware legislature, in recognition of the need to secure the continued
service of competent and experienced people in senior corporate positions and
to
assure that they will be able to exercise judgment without fear of personal
liability so long as they fulfill the basic duties of honesty, care and good
faith, has so enacted Section 145 of The Delaware General Corporation Law (the
"DGCL"), which empowers the Company to indemnify its officers, directors,
employees and agents and expressly provides that the indemnification provided
by
the statute is not exclusive; and
WHEREAS,
the Certificate of Incorporation of the Company requires the Company to
indemnify and advance expenses to its directors and officers to the fullest
extent now or hereafter authorized or permitted by law and authorizes the
Company to enter into agreements providing for such indemnification and
advancement of expenses; and
WHEREAS,
in recognition of the fact that the Indemnitee continues to serve as a director
or officer of the Company, in part in reliance on the aforesaid By-laws, and
of
the fact of Indemnitee's need for substantial protection against personal
liability in order to enhance Indemnitee's continued service to the Company
in
an effective manner, and in part to provide Indemnitee with specific contractual
assurance that the protection promised by such Certificate of Incorporation
will
be available to Indemnitee (regardless of, among other things, any amendment
to
or revocation of such Certificate of Incorporation or any change in the
composition of the Company's Board of Directors or any acquisition transaction
relating to the Company), and due to the possibility that the Company's
directors' and officers' liability insurance coverage could at some future
time
become inadequate, the Company wishes to provide in this Agreement for the
indemnification of, and the advancing of expenses to, Indemnitee to the fullest
extent (whether partial or complete) now or hereafter authorized or permitted
by
law and as set forth in this Agreement, and, to the extent insurance is
maintained, for the continued coverage of Indemnitee under the Company's
directors' and officers' liability insurance policies,
NOW,
THEREFORE, in consideration of the premises and of Indemnitee continuing to
serve the Company directly or, at its request, with another enterprise, and
intending to be legally bound hereby, the parties hereto agree as follows:
1.
CERTAIN
DEFINITIONS:
(1)
“Approved
Law Firm” shall mean any law firm (i) located in New York or Delaware, (ii)
having 50 or more attorneys and (iii) rated "av" by Xxxxxxxxxx-Xxxxxxx Law
Directory; provided, however, that such law firm shall not, for a five- year
period prior to the Indemnifiable Event, have been engaged by the Company,
an
Acquiring Person or the Indemnitee.
(2)
“Applicable
Standard of Conduct” shall mean the standard established by Section 145(a)-(b)
of the DGCL.
(3)
“Board
of
Directors” shall mean the Board of Directors of the Company.
(4)
A
“Change
of Control” shall be deemed to have occurred upon:
(A) The
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A)
the
then-outstanding shares of common stock of the Company (the “Outstanding Company
Common Stock”) or (B) the combined voting power of the then-outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided,
however,
that,
for purposes of this Section 1(d), none of the following shall constitute a
Change of Control: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any affiliated
company, (iv) any acquisition by any corporation pursuant to a transaction
that
complies with Sections 1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C) or (v) any
acquisition by the Company which, by reducing the number of shares of
Outstanding Company Common Stock or Outstanding Company Voting Securities,
increases the proportionate number of shares of Outstanding Company Common
Stock
or Outstanding Company Voting Securities beneficially owned by any Person to
20%
or more of the Outstanding Company Common Stock or Outstanding Company Voting
Securities; provided,
however,
that, if
such Person shall thereafter become the beneficial owner of any additional
shares of Outstanding Company Common Stock or Outstanding Company Voting
Securities and beneficially owns 20% or more of either the Outstanding Company
Common Sock or the Outstanding Company Voting Securities, then such additional
acquisition shall constitute a Change of Control; or
(B) The
cessation, for any reason, of individuals who, as of the date hereof, constitute
the Board (the “Incumbent Board”) to constitute at least a majority of the
Board; provided,
however,
that
any individual becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company’s stockholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual
or
threatened solicitation of proxies or consents by or on behalf of a Person
other
than the Board; or
(C) The
consummation of a reorganization, merger, consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
“Business Combination”), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities that
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50%,
respectively, of the then-outstanding shares of common stock and the combined
voting power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation that, as a result of such transaction, owns the Company or all
or
substantially all of the Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities, as the case may be, (ii)
no
Person (excluding any corporation resulting from such Business Combination
or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then-outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then-outstanding voting securities of such
corporation, except to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement or of the action of the Board providing for such Business Combination;
or
(D) The
approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company.
(5)
AClaim@
shall
mean any threatened, pending or completed action, suit or proceeding, or any
inquiry or investigation, whether conducted by the Company or any other party,
that Indemnitee in good faith believes might lead to the institution of any
such
action, suit or proceeding, whether civil, criminal, administrative,
investigative or other.
(6)
AExpenses@
shall
include attorneys' fees and all other costs, expenses and obligations paid
or
incurred in connection with investigating, defending, being a witness in or
participating in (including on appeal), or preparing to defend, be a witness
in
or participate in, any Claim relating to any Indemnifiable Event, together
with
interest, computed at the Company's average cost of funds for short-term
borrowings, accrued from the date of payment of such expense to the date
Indemnitee receives reimbursement therefor.
(7)
AIndemnifiable
Event@
shall
mean any event or occurrence related to the fact that Indemnitee is or was
a
director, officer, employee, agent or fiduciary of the Company, or is or was
serving at the request of the Company as a director, officer, employee, trustee,
agent or fiduciary of another corporation of any type or kind, domestic or
foreign, partnership, joint venture, trust, employee benefit plan or other
enterprise, or by reason of anything done or not done by Indemnitee in any
such
capacity. Without limitation of any indemnification provided hereunder, an
Indemnitee serving (i) another corporation, partnership, joint venture or trust
of which 20 percent or more of the voting power or residual economic interest
is
held, directly or indirectly, by the Company, or (ii) any employee benefit
plan
of the Company or any entity referred to in clause (i), in any capacity shall
be
deemed to be doing so at the request of the Company.
(8)
AReviewing
Party@
shall be
(i) the Board of Directors acting by majority vote of directors who are not
parties to the particular Claim with respect to which Indemnitee is seeking
indemnification, even through less than a quorum, or (ii) by a committee of
such
directors designated by a majority vote of such directors, even though less
than
a quorum, or (iii) if there are no such directors, or if such directors so
direct, (A) by independent legal counsel in a written opinion that
indemnification is proper in the circumstances because the indemnification
is
not precluded by circumstances described in the last sentence of Section 2
of
this Agreement and the Applicable Standard of Conduct set forth in Section
145
of the DGCL has been met by the Indemnitee or (B) the shareholders upon a
finding that the Indemnitee has met the Applicable Standard of Conduct referred
to in clause (iii)(A) of this definition.
(9)
AVoting
Securities@
shall
mean any securities of the Company which vote generally in the election of
directors.
2.
BASIC
INDEMNIFICATION ARRANGEMENT. If Indemnitee was, is or becomes at any time a
party to, or witness or other participant in, or is threatened to be made a
party to, or witness or other participant in, a Claim by reason of (or arising
in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee
to the fullest extent now or hereafter authorized or permitted by law as soon
as
practicable but in any event no later than 30 days after written demand is
presented to the Company, against any and all Expenses, judgments, fines
(including excise taxes assessed against an Indemnitee with respect to an
employee benefit plan), penalties and amounts paid in settlement (including
all
interest, assessments and other charges paid or payable in connection with,
or
in respect of, such Expenses, judgments, fines, penalties or amounts paid in
settlement) of such Claim. If so requested by Indemnitee, the Company shall
advance (within two business days of such request) any and all Expenses to
Indemnitee (an "Expense Advance"). Notwithstanding anything in this Agreement
to
the contrary, (i) Indemnitee shall not be entitled to indemnification pursuant
to this Agreement in any action in which the Indemnitee=s
conduct
has been finally adjudged to have been knowingly fraudulent, deliberately
dishonest or willful misconduct; (ii) in any derivative action in which
Indemnitee has been finally adjudged to be liable to the Company, unless and
only to the extent that the Court of Chancery or the court in which the
proceeding was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
the
Indemnitee is fairly and reasonably entitled to indemnity for such expenses
as
the court shall deem proper, and (iii) prior to a Change in Control Indemnitee
shall not be entitled to indemnification pursuant to this Agreement in
connection with any Claim initiated by Indemnitee against the Company or any
director or officer of the Company unless the Company has joined in or consented
to the initiation of such Claim.
3.
PAYMENT.
Notwithstanding the provisions of Section 2, the obligations of the Company
under Section 2 (which shall in no event be deemed to preclude any right to
indemnification to which Indemnitee may be entitled under Section 145(c) of
the
DGCL) shall be subject to the condition that the Reviewing Party shall have
authorized such indemnification in the specific case by having determined that
the indemnification is not precluded by circumstances described in the last
sentence of Section 2 of this Agreement and Indemnitee is permitted to be
indemnified under the Applicable Standard of Conduct set forth in Section
145(a)-(b) of the DGCL. The Company shall promptly call a meeting of the Board
of Directors with respect to a Claim and agrees to use its best efforts to
facilitate a prompt determination by the Reviewing Party with respect to the
Claim. Indemnitee shall be afforded the opportunity to make submissions to
the
Reviewing Party with respect to the Claim. The obligation of the Company to
make
an Expense Advance pursuant to Section 2 shall be subject to the condition
that,
if, when and to the extent that the Reviewing Party determines that Indemnitee
would not be permitted to be so indemnified under Section 2 and applicable
law,
the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees
and undertakes to the full extent required by Section 145(e) of the DGCL to
reimburse the Company) for all such amounts theretofore paid; provided, however,
that if Indemnitee has commenced legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be indemnified
under applicable law, any determination made by the Reviewing Party that
Indemnitee would not be permitted to be indemnified under applicable law shall
not be binding and Indemnitee shall not be required to reimburse the Company
for
any Expense Advance until a final judicial determination is made with respect
thereto (as to which all rights of appeal therefrom have been exhausted or
lapsed). If there has been no determination by the Reviewing Party or if the
Reviewing Party determines that Indemnitee substantively would not be permitted
to be indemnified in whole or in part under applicable law, Indemnitee shall
have the right to commence litigation in any court in the State of Delaware
having subject matter jurisdiction thereof and in which venue is proper seeking
an initial determination by the court or challenging any such determination
by
the Reviewing Party or any aspect thereof, and the Company hereby consents
to
service of process and to appear in any such proceeding. Any determination
by
the Reviewing Party otherwise shall be conclusive and binding on the Company
and
Indemnitee.
4.
CHANGE
IN
CONTROL. If there is a Change in Control (other than a Change in Control which
has been approved by a majority of the Board of Directors who were directors
immediately prior to such Change in Control) then (i) all determinations by
the
Company pursuant to the first sentence of Section 3 hereof and Section 145(d)
of
the DGCL shall be made by independent legal counsel in a written opinion
pursuant to Section 145(d) of the DGCL and (ii) with respect to all matters
thereafter arising concerning the rights of Indemnitee to indemnity payments
and
Expense Advances under this Agreement or any other agreement or By-law of the
Company now or hereafter in effect relating to Claims for Indemnifiable Events
(including, but not limited to, any such legal opinion provided under Section
145 (d) of the DGCL) the Company (including the Board of Directors) shall seek
legal advice from (and only from) special, independent counsel selected by
Indemnitee and approved by the Company (which approval shall not be unreasonably
withheld), and who has not otherwise performed services for the Company (or
any
subsidiary of the Company) or an Acquiring Person (or any affiliate or associate
of such Acquiring Person) or Indemnitee within the last five years (other than
in connection with such matters). Unless Indemnitee has theretofore selected
counsel pursuant to this Section 4 and such counsel has been approved by the
Company, any Approved Law Firm selected by Indemnitee shall be deemed to be
approved by the Company. Such counsel, among other things, shall render its
written opinion to the Company, the Board of Directors and Indemnitee as to
whether and to what extent the Indemnitee would be permitted to be indemnified
under applicable law. The Company agrees to pay the reasonable fees of the
special, independent counsel referred to above and to fully indemnify such
counsel against any and all expenses (including attorneys' fees), claims,
liabilities and damages arising out of or relating to this Agreement or its
engagement pursuant hereto. As used in this Agreement, the terms "affiliate"
and
"associate" shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Act and in effect on the
date of this Agreement.
5.
INDEMNIFICATION
FOR ADDITIONAL EXPENSES. The Company shall indemnify Indemnitee against any
and
all expenses (including attorneys' fees) and, if requested by Indemnitee, shall
(within two business days of such request) advance such expenses to Indemnitee,
which are reasonably incurred by Indemnitee in connection with any claim
asserted or action brought by Indemnitee for (i) indemnification or advance
payment of Expenses by the Company under this Agreement or any other agreement
or By-law of the Company now or hereafter in effect relating to Claims for
Indemnifiable Events and/or (ii) recovery under any directors' and officers'
liability insurance policies maintained by the Company, regardless of whether
Indemnitee ultimately is determined to be entitled to such indemnification,
advance expense payment or insurance recovery, as the case may be.
6.
PARTIAL
INDEMNITY, ETC. If Indemnitee is entitled under any provision of this Agreement
to indemnification by the Company for a portion of the Expenses, judgments,
fines, penalties and amounts paid in settlement of a Claim but not, however,
for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover,
notwithstanding any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in defense of any
or
all Claims relating in whole or in part to an Indemnifiable Event or in defense
of any issue or matter therein, including dismissal without prejudice,
Indemnitee shall be indemnified, to the extent permitted by law, against all
Expenses incurred in connection with such Indemnifiable Event.
7.
BURDEN
OF
PROOF. In connection with any determination by the Reviewing Party or otherwise
as to whether Indemnitee is entitled to be indemnified hereunder the burden
of
proof shall be on the Company to establish that Indemnitee is not so
entitled.
8.
NO
PRESUMPTION. For purposes of this Agreement, the termination of any claim,
action, suit or proceeding, whether civil or criminal, by judgment, order,
settlement (whether with or without court approval) or conviction, or upon
a
plea of nolo contendere, or its equivalent, shall not create a presumption
that
Indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is not
permitted by applicable law.
9.
NONEXCLUSIVITY,
ETC. The rights of the Indemnitee hereunder shall be in addition to any other
rights Indemnitee may have under the Certificate of Incorporation of the
Company, the DGCL, or otherwise. To the extent that a change in the DGCL
(whether by statute or judicial decision) permits greater indemnification by
agreement than would be afforded currently under the Certificate of
Incorporation of the Company and this Agreement, it is the intent of the parties
hereto that Indemnitee shall enjoy by this Agreement the greater benefits so
afforded by such change.
10.
LIABILITY
INSURANCE. To the extent the Company maintains an insurance policy or policies
providing directors' and officers' liability insurance, Indemnitee shall be
covered by such policy or policies, in accordance with its or their terms,
to
the maximum extent of the coverage available for any director or officer of
the
Company.
11.
PERIOD
OF
LIMITATIONS. No legal action shall be brought and no cause of action shall
be
asserted by or on behalf of the Company or any affiliate of the Company against
Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual
of
such cause of action, and any claim or cause of action of the Company or any
affiliate shall be extinguished and deemed released unless asserted by the
timely filing of a legal action within such two-year period; provided, however,
that if any shorter period of limitations is otherwise applicable to any such
cause of action, such shorter period shall govern.
12.
AMENDMENTS,
ETC. No supplement, modification or amendment of this Agreement shall be binding
unless executed in writing by both of the parties hereto. No waiver of any
of
the provisions of this Agreement shall be effective unless in writing and no
written waiver shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar) nor shall such waiver constitute
a
continuing waiver.
13.
SUBROGATION.
In the event of payment under the Agreement, the Company shall be subrogated
to
the extent of such payment to all of the rights of recovery of Indemnitee,
who
shall execute all papers required and shall do everything that may be necessary
to secure such rights, including the execution of such documents necessary
to
enable the Company effectively to bring suit to enforce such
rights.
14.
NO
DUPLICATION OF PAYMENTS. The Company shall not be liable under this Agreement
to
make any payment in connection with any Claim made against Indemnitee to the
extent Indemnitee has otherwise actually received payment (under any insurance
policy, By-law or otherwise) of the amounts otherwise indemnifiable
hereunder.
15.
SPECIFIC
PERFORMANCE. The parties recognize that if any provision of this Agreement
is
violated by the Company, Indemnitee may be without an adequate remedy at law.
Accordingly, in the event of any such violation, the Indemnitee shall be
entitled, if Indemnitee so elects, to institute proceedings, either in law
or at
equity, to obtain damages, to enforce specific performance, to enjoin such
violation, or to obtain any relief or any combination of the foregoing as
Indemnitee may elect to pursue.
16.
BINDING
EFFECT, ETC. This Agreement shall be binding upon, inure to the benefit of,
and
be enforceable by, the parties hereto and their respective successors (including
any direct or indirect successor by purchase, merger, consolidation or otherwise
to all or substantially all of the business and/or assets of the Company),
assigns, spouses, heirs, and personal and legal representatives. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve
as
an officer or director of the Company or of any other enterprise at the
Company's request.
17.
SEVERABILITY.
The provisions of this Agreement shall be severable if any of the provisions
hereof (including any provision within a single section, paragraph or sentence)
are held by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable, and the remaining provisions shall remain enforceable to the
fullest extent permitted by law.
18.
GOVERNING
LAW. This Agreement shall be governed by, and be construed and enforced in
accordance with, the laws of the State of Delaware applicable to contracts
made
and to be performed in such state without giving effect to the principles of
conflicts of laws.
19.
EFFECTIVE
TIME. This Agreement shall become effective as of the date first above written.
The contractual rights of Indemnitee with respect to Indemnifiable Events
occurring before the Effective Time are governed by the Indemnification
Agreement between Indemnitee and Payless ShoeSource, Inc., a Missouri
corporation or Collective Brands, Inc., a Delaware corporation, if any, (the
APrior
Agreements@)
and
Indemnitee shall have no rights under this Agreement with respect to such
Indemnifiable Events. The contractual rights of Indemnitee with respect to
Indemnifiable Events occurring after the Effective Time are governed by this
Agreement, and Indemnitee shall have no rights against Payless ShoeSource,
Inc.,
a Missouri corporation or Collective Brands, Inc., a Delaware corporation,
under
any Prior Agreements with respect to such Indemnifiable Events.
IN
WITNESS WHEREOF, the Company and Indemnitee have executed this Agreement as
of
the date first above written.
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| By: | /s/ Xxxxxxx X. Xxxxx | |
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| Xxxxxxx X. Xxxxx | ||
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| By: | /s/ Xxx X. Xxxxx | |
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Name: Xxx
X. Xxxxx
Title: Senior
Vice President - Human Resources
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