1
EXHIBIT 99.13
INDEMNIFICATION AGREEMENT
AGREEMENT, dated as of 20th day of April, 1998, between Payless
ShoeSource, Inc., a Delaware corporation (the "Company") and
______________________________________ (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 Bylaws, 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
2
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:
(a) "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.
(b) "Applicable Standard of Conduct" shall mean the standard
established by Section 145(a)-(b) of the DGCL.
(c) "Board of Directors" shall mean the Board of Directors of the
Company.
(d) "Change in Control" shall be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended [the "Act"]), other than a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or a
corporation owned directly or indirectly by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Company representing 20 percent or
more of the total voting power represented by the Company's then outstanding
Voting Securities (such person being hereinafter referred to as an "Acquiring
Person"), or (ii) during any 24-consecutive-month period, individuals who at
the beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or
2
3
nomination for election by the Company's shareholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute a
majority thereof, or (iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 80 percent of the total voting power represented by
the Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (iv) the shareholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company (in one transaction or a series of
transactions) of all or substantially all of the Company's assets.
(e) "Claim" 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.
(f) "Expenses" 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.
(g) "Indemnifiable 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.
3
4
(h) "Potential Change" in Control shall be deemed to have occurred if
(i) the Company enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control; (ii) any person (including the
Company) publicly announces an intention to take or to consider taking actions
which if consummated would constitute a Change in Control; (iii) any person,
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned, directly or indirectly, by
the shareholders of the Company in substantially the same proportions as their
ownership of stock of the Company, who is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing 9.5 percent
or more of the combined voting power of the Company's then outstanding Voting
Securities, increases his beneficial ownership of such securities by five
percentage points or more over the percentage so owned by such person; or (iv)
the Board of Directors adopts a resolution to the effect that, for purposes of
this Agreement, a Potential change in Control has occurred.
(i) "Reviewing 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.
(j) "Voting 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
4
5
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
5
6
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. ESTABLISHMENT OF TRUST. In the event of a Potential Change in
Control, the Company shall, upon written request by Indemnitee, create a trust
for the benefit of Indemnitee and from time to time upon written request of
Indemnitee shall fund such trust in an amount sufficient to satisfy any and all
Expenses reasonably anticipated at the time of each such request to be incurred
in connection with investigating, preparing for and defending any Claim
relating to an Indemnifiable Event, and any and all judgments, fines, penalties
and settlement amounts of any and all Claims relating to an Indemnifiable Event
from time to time actually paid or
6
7
claimed, reasonably anticipated or proposed to be paid. The amount or
amounts to be deposited in the trust pursuant to the foregoing funding
obligation shall be determined by the Reviewing Party, in any case in which the
special, independent counsel referred to above is involved. The terms of the
trust shall provide that upon a Change in Control (i) the trust shall not be
revoked or the principal thereof invaded, without the written consent of the
Indemnitee, (ii) the trustee shall advance, within two business days of a
request by the Indemnitee, any and all Expenses to the Indemnitee (and the
Indemnitee hereby agrees to reimburse the trust under the circumstances under
which the Indemnitee would be required to reimburse the Company under Section 3
hereof), (iii) the trust shall continue to be funded by the Company in
accordance with the funding obligation set forth above, (iv) the trustee shall
promptly pay to Indemnitee all amounts for which Indemnitee shall be entitled
to indemnification pursuant to this Agreement or otherwise, and (v) all
unexpended funds in such trust shall revert to the Company upon a final
determination by the Reviewing Party or a court of competent jurisdiction, as
the case may be, that Indemnitee has been fully indemnified under the terms of
this Agreement. The trustee shall be an institutional trustee with a highly
regarded, national reputation chosen by Indemnitee. Nothing in this Section 5
shall relieve the Company of any of its obligations under this Agreement.
6. 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.
7. 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
8
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
8
9
14. 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.
15. 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.
16. 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.
17. 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.
18. 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.
19. 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.
20. EFFECTIVE TIME. This Agreement shall become effective as of the
effective time (the "Effective Time") of the merger between Payless
ShoeSource,
9
10
Inc. and Payless Missouri Corp., each Missouri corporations. The contractual
rights of Indemnitee with respect to Indemnifiable Events occurring before
the Effective Time are governed by the Indemnification Agreement (the "Prior
Agreement") between Indemnitee and Payless ShoeSource, Inc., a Missouri
corporation, 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, under the Prior Agreement
with respect to such Indemnifiable Events.
IN WITNESS WHEREOF, the Company and Indemnitee have executed this
Agreement as of the date first above written.
PAYLESS SHOESOURCE, INC.
By: ____________________________
________________________________
[Indemnitee]
10
