EXHIBIT 10.2

FIRST AMENDMENT TO TERM LOAN AGREEMENT

This FIRST AMENDMENT TO TERM LOAN AGREEMENT, dated as of December 19, 2007 (this
“First Amendment”), to the Term Loan Agreement referred to below, among
COLLECTIVE BRANDS FINANCE, INC., a Nevada corporation (formerly known as
“Payless ShoeSource Finance, Inc.”, the “Borrower”), COLLECTIVE BRANDS, INC., a
Delaware corporation (the “Parent”), the Lenders (as defined in the Term Loan
Agreement), CITICORP NORTH AMERICA, INC., as administrative agent and collateral
agent for the Lenders (in such capacity, the “Administrative Agent”) and
JPMORGAN CHASE BANK, N.A., as a Lender.

RECITALS

WHEREAS, the Borrower, the Parent, the Administrative Agent and the other
Lenders party to the Term Loan Agreement dated as of August 17, 2007 (the “Term
Loan Agreement”), desire to amend the Term Loan Agreement as set forth herein;
and

NOW THEREFORE, in consideration of the premises and the covenants and agreements
contained herein and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

Section 1.             Definitions. Capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Term Loan Agreement.

Section 2.             Amendments. The Term Loan Agreement is, effective as of
the Effective Date (as defined below), hereby amended as follows:

(a)           Section 1.1 (Defined Terms) of the Term Loan Agreement is hereby
amended by adding the following definitions in the appropriate alphabetical
order:

“Disregarded Entity” means any entity that, for U.S. federal tax purposes, is
disregarded as an entity separate from its owner or is otherwise fiscally
transparent.   

“First Amendment Effective Date” means the Effective Date as defined in the
First Amendment.

“Non-Domestic Restructuring” shall mean, (i) subject to the proviso set forth
below, (A) the creation of one or more holding companies (each a “Holding
Company”) that are both Foreign Subsidiaries owned directly by a Loan Party and
Wholly-Owned Restricted Subsidiaries of the Borrower, (B) the direct or indirect
transfer, contribution, dividend or sale of the Stock of certain Wholly-Owned
Foreign Subsidiaries of the Borrower to one or more of such Holding Companies or
Payless ShoeSource Canada, Inc. (“Payless Canada”), or (ii) subject to the
proviso set forth below, an internal reorganization and recapitalization among
the Loan Parties and certain Restricted Subsidiaries organized under the laws of
the United States or Canada to be completed after the Closing Date and on or
before January 31, 2008, unless such date is extended in writing by the
Administrative Agent (which extension shall not be for more than one additional
30 day period) pursuant to which, (a) a portion of the Target’s Voting Stock
(the “Transferred Stock”) will be transferred from the Borrower to one or more
of its Wholly-Owned Restricted Subsidiaries, (b) upon the completion of such
transfers of the Transferred Stock, the Target

 

 

 

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Stockholder will be a Wholly-Owned Domestic Subsidiary, (c) one or more of the
direct or indirect holders of the Target Stockholder will contribute the
Transferred Stock to one or more Wholly-Owned Restricted Subsidiaries in
exchange for a debenture, intercompany notes, equity and/or forward subscription
agreements, (d) any dividends or distributions with respect to the Transferred
Stock, to the extent paid in cash, shall be utilized to repay the debenture and
the intercompany notes, as applicable, or any accrued or unpaid interest
thereon, to make or grant intercompany loans to Wholly-Owned Restricted
Subsidiaries or to fund dividends with no less than 75% of the proceeds thereof
ultimately being received by a Loan Party; provided, however, the foregoing
transactions in clause (i) or (ii) above shall not constitute a “Non-Domestic
Restructuring”, unless (x) after giving effect to such transactions, no Default
or Event of Default shall have occurred and be continuing and (y) the following
conditions, as applicable, shall be satisfied at all times from and after the
consummation of such transactions: (1) in the case of clause (ii) only, the
Target Stockholder shall be a Guarantor and shall, pursuant to the Pledge and
Security Agreement, pledge 100% of its ownership interest in the Transferred
Stock to the Administrative Agent and shall grant to the Administrative Agent a
Lien on any of its other assets, (2) in the case of clause (ii) only, the
Borrower or another Loan Party shall pledge 100% of the Stock of any direct
Subsidiary that is a Disregarded Entity and that holds, directly or indirectly,
any Stock in the Target Stockholder, provided that such Disregarded Entity is
not an “investment company” governed by the Investment Company Act of 1940, as
amended, (3) any intercompany note or debenture payable to any Loan Party issued
in connection with a Non-Domestic Restructuring shall be pledged to the
Administrative Agent as additional Collateral under the Pledge and Security
Agreement, (4) in connection with the consummation of a Non-Domestic
Restructuring, no Loan Party shall be required to make any cash Investment in
any Holding Company or in the Target Stockholder or any Restricted Subsidiary
that holds, directly or indirectly, any Stock in the Target other than such
amounts required by statute or for initial capitalization in an amount not to
exceed $100,000 in each instance, (5) each Holding Company, the Target
Stockholder, PSS Canada Financial Management Corp., PSS Canada Financial
Services Corp., PSS Canada Holdings Corp. and Collective Canada Holdings Corp.
shall not incur any Indebtedness (other than the intercompany Indebtedness or
debenture described above) or Liens and shall not engage in any business or
activity (other than holding the Stock of its Subsidiaries, paying taxes,
dividends, distributions, interest or other business expenses, preparing reports
to Governmental Authorities and to its equity holders and holding directors and
shareholders meetings, preparing corporate records and other corporate
activities required to maintain its separate corporate, limited liability or
limited partnership structure) and (6) each Holding Company, the Target
Stockholder and any Subsidiary of the Borrower that holds, directly or
indirectly, any Stock in the Target Stockholder shall remain Wholly-Owned
Restricted Subsidiaries of the Borrower.

“Target Stockholder” means the holder of the Transferred Stock (as defined in
the definition of Non-Domestic Restructuring) after giving effect to the
Non-Domestic Restructuring.

(b)           The definition of “Investment” in Section 1.1 (Defined Terms) of
the Term Loan Agreement is hereby amended by deleting the last sentence and
inserting the following new sentence immediately following clause (d) thereof:

For purposes of determining the value of any Investment outstanding for purposes
of any subclause of Section 8.3 (Investments), such amount, when aggregated with
the amount of all other Investments made pursuant to such subclause, shall
deemed to be the amount of all such Investments when made, purchased or acquired
on or after the Closing Date less the amount of any returns received by the Loan
Parties after the Closing Date on such Investments (without duplication but not
to exceed the aggregate of the original amounts invested pursuant to such

 

 

 

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subclause) and, in the case of any Investments made pursuant to clauses (e)(v)
or (i)(B) of Section 8.3(Investments), less the amount of any returns received
by the Loan Parties after the Closing Date on any Investments in Qualified
Restricted Subsidiaries identified on Schedule 8.3.

(c)           Section 4.3 (Ownership of Subsidiaries) of the Term Loan Agreement
is hereby amended by deleting the first clause from inception through the words
“Closing Date,” and inserting the following as a new clause thereof:

Set forth on the Schedule 4.3 (Ownership of Subsidiaries) is a complete and
accurate list showing, as of the First Amendment Effective Date,

(d)           Section 4.4(a) (Financial Statements) of the Term Loan Agreement
is hereby amended by inserting the following clause immediately following the
parenthetical:

in the case of the Borrower and any Domestic Subsidiary, or, in the case of the
Financial Statements of any Foreign Subsidiary, have been prepared or maintained
in accordance with generally accepted accounting principles of its country of
origin and, in addition, have been prepared for consolidation in accordance with
GAAP

(e)           Section 4.12 (Investment Company Act) of the Term Loan Agreement
is deleted in its entirety and substituting the following in its place:

None of the Loan Parties is an “investment company,” or “promoter” or “principal
underwriter” for an “investment company,” as such terms are defined in the
Investment Company Act of 1940, as amended.

(f)           Section 7.7 (Keeping of Books) of the Term Loan Agreement is
hereby amended by inserting the following clause at the end of the final
sentence thereof:

that is a Domestic Subsidiary, or, in the case of any Restricted Subsidiary that
is a Foreign Subsidiary, such books and records shall be kept in accordance with
the generally accepted accounting principles of its country of origin and, in
addition, have been prepared for consolidation in accordance with GAAP

(g)           Section 7.11 (Additional Collateral and Guaranties) of the Term
Loan Agreement is hereby amended by deleting clause (iii) thereof in its
entirety and substituting the following in its place:

(iii) the Loan Documents shall not require the creation or perfection of,
pledges of or security interests in, or the obtaining of title insurance or
legal opinions with respect to, any Excluded Assets, any Stock or Stock
Equivalents in, or assets of, any Domestic Subsidiary, all of the Stock of which
is held by a Non-U.S. Person, or any leaseholds, commercial tort claims, motor
vehicles or any other asset subject to certificates of title or letter of credit
rights (other than any such rights constituting “supporting obligations” as
defined in the UCC)

(h)           Section 8.1 (Indebtedness) of the Term Loan Agreement is hereby
amended by deleting the “and” after clause (l) thereof, replacing the period at
the end of clause (m) with “; and”, and inserting a new clause (n) immediately
following clause (m) thereof:

(n)      Intercompany Indebtedness owed by any Group Member to any other Group
Member in connection with or arising from or under a Non-Domestic Restructuring;

 

 

 

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(i)            Section 8.3(e) (Investments) of the Term Loan Agreement is hereby
amended by inserting the new clause (vi) immediately following clause (v)
thereof:

and (vi) by a Group Member in another Group Member in connection with or arising
from or under a Non-Domestic Restructuring

(j)            Section 8.4 (h) (Sale of Assets) of the Term Loan Agreement is
hereby amended by deleting the “and” after clause (ii) thereof and inserting the
following clause immediately following clause (iii) thereof:

and (iv) among Group Members in connection with or arising from or under a
Non-Domestic Restructuring

(k)           Section 8.5 (Restricted Payments) of the Term Loan Agreement is
hereby amended by deleting the “and” after clause (e) thereof, replacing the
period at the end of clause (f) with “; and”, and inserting a new clause (g)
immediately following clause (f) thereof:

(g)        Restricted Payments made by any Group Member to another Group Member
in connection with or arising from or under a Non-Domestic Restructuring.

(l)            Section 8.6 (Prepayment of Indebtedness) of the Term Loan
Agreement is hereby amended by deleting clause (c) thereof and substituting the
following: “(c) prepay any intercompany Indebtedness permitted under clauses
(g), (j) or (n) of Section 8.1 (Indebtedness),”.

(m)         Section 8.7 (Restriction on Fundamental Changes) of the Term Loan
Agreement is hereby amended by deleting the first clause from inception through
the words “Section 8.4 (Sale of Assets),” and inserting the following as a new
clause thereof:

Except in connection with Investments in Permitted Acquisitions made pursuant to
Section 8.3 (Investments), Asset Sales expressly permitted under Section 8.4
(Sale of Assets), and a Non-Domestic Restructuring,

(n)           Section 8.9 (Transactions with Affiliates) of the Term Loan
Agreement is hereby amended to read in its entirety as follows:

Other than as set forth on Schedule 8.9 or as necessary to effect a Non-Domestic
Restructuring, the Parent shall not, nor shall it permit Borrower or any
Restricted Subsidiary to effect any transaction with any of its respective
Affiliates that is not a Restricted Subsidiary on a basis less favorable to the
Borrower or such Restricted Subsidiary than would at the time be obtainable for
a comparable transaction in arms-length dealing with an unrelated third party.

(o)           Section 8.11 (Modification of Constituent Documents) of the Term
Loan Agreement is hereby amended is hereby amended to read in its entirety as
follows:

The Parent shall not, nor shall it permit any Restricted Subsidiary to, change
its capital structure (including in the terms of its outstanding Stock) or
otherwise amend its Constituent Documents, except (a) for changes and amendments
that do not materially affect the rights and privileges of any Restricted
Subsidiary and do not materially affect the interests of the Secured Parties
under the Loan Documents or in the Collateral and (b) as necessary to effect a
Non-Domestic Restructuring.

 

 

 

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(p)           Section 8.12 (Modification of Related Documents) of the Term Loan
Agreement is hereby amended is hereby amended to read in its entirety as
follows:

The Parent shall not, nor shall it permit any Restricted Subsidiary to, alter,
rescind, terminate, amend, supplement, waive or otherwise modify any provision
of any Related Document (except (a) for modifications that do not materially
affect the rights and privileges of any Restricted Subsidiary under such Related
Document and that do not materially affect the interests of the Secured Parties
under the Loan Documents or in the Collateral and (b) as necessary to effect a
Non-Domestic Restructuring).

 

Section 3.

Affirmation and Acknowledgment of the Borrower.

The Borrower hereby ratifies and confirms all of its Obligations to the
Administrative Agent and the Lenders, including, without limitation, the Term
Loans, and the Borrower hereby affirms its absolute and unconditional promise to
pay to the Lenders all indebtedness, obligations and liabilities in respect of
the Term Loans and all other amounts due under the Term Loan Agreement and the
other Loan Documents as amended hereby. The Borrower hereby confirms that the
Obligations are and remain secured pursuant to the Loan Documents and pursuant
to all other instruments and documents executed and delivered by the Borrower as
security for the Obligations.

 

Section 4.

No Other Waivers, Amendments or Consents.

Except to the extent amended hereby, the Term Loan Agreement shall remain
unchanged and in full force and effect. The waiver and consents contained herein
shall not extend beyond the terms expressly set forth herein for such waiver and
consents, nor impair any right or power accruing to the Administrative Agent or
the Lenders with respect to any other Default or Event of Default or any Default
or Event of Default which occurs after the date hereof. Nothing in this First
Amendment is intended or shall be construed to be a novation of any Obligations
or any part of the Term Loan Agreement or any of the other Loan Documents or to
affect, modify or impair the continuity or perfection of the Lenders’ Liens
under the Term Loan Agreement and Loan Documents.

 

Section 5.

Representations, Warranties and Covenants.

To induce the undersigned Lenders to enter into this First Amendment, the
Borrower and Parent hereby warrant, represent and covenant to and with to the
Lenders and the Administrative Agent that: (a) this First Amendment has been
duly authorized, executed and delivered by the Borrower and Parent; (b) this
First Amendment and the Term Loan Agreement as amended hereby constitute legal,
valid and binding obligations of the Borrower and Parent, enforceable in
accordance with their respective terms; (c) after giving effect to this First
Amendment, no Default or Event of Default has occurred and is continuing as of
this date; (d) no approval or consent of, or filing with, any governmental
agency or authority is required to make valid and legally binding the execution,
delivery or performance by the Borrower and Parent of this First Amendment or
the Term Loan Agreement as amended hereby; and (e) after the First Amendment
Effective Date, the Borrower or Parent shall provide written notice to the
Administrative Agent not less than three Business Days prior to the commencement
of a Non-Domestic Restructuring (excluding any transactions in connection with a
Non-Domestic Restructuring that were commenced after the Closing Date and prior
to the First Amendment Effective Date).

Section 6.             Conditions to Effectiveness. This First Amendment shall
become effective on the date (the “Effective Date”) when the following
conditions precedent shall have been satisfied:

 

 

 

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(a)          Certain Documents.       The Administrative Agent, for the benefit
of the Lenders, shall have received (a) one or more counterparts of this First
Amendment, duly executed, completed and delivered by the Borrower, the Parent,
the Administrative Agent and the Lenders and (b) a fully executed amendment to
the Pledge and Security Agreement, in the form attached hereto as Exhibit A.

(b)         Representations and Warranties; No Defaults. The Administrative
Agent, for the benefit of the Lenders, shall have received a certificate of a
Responsible Officer of the Borrower certifying that both before and after giving
effect to this First Amendment:

(i)            each of the representations and warranties set forth in Article
IV (Representations and Warranties) of the Term Loan Agreement and in the other
Loan Documents shall be true and correct in all material respects on and as of
the Effective Date with the same effect as though made on and as of such date,
except to the extent such representations and warranties expressly relate to an
earlier date, in which case such representation and warranties shall have been
true and correct as of such earlier date; provided, however, that references
therein to the Term Loan Agreement shall be deemed to refer to the Term Loan
Agreement as amended by this First Amendment; provided, further, however, that
the representations and warranties expressly related to the accuracy of the
Schedules (other than Schedule 4.3) to the Term Loan Agreement shall be true and
correct in all material respects as of August 17, 2007; and

(ii)          no Default or Event of Default shall have occurred and be
continuing, either on the date hereof or on the Effective Date.

(c)           Fees. The Administrative Agent shall have received, for the
benefit of the Lenders, the fees payable pursuant to the Fee Letter, dated the
dated hereof, entered into between the Administrative Agent and the Borrower.

 

Section 7.

Reimbursement of Expenses.

As provided in Section 11.3 (Costs and Expenses) of the Term Loan Agreement, the
Borrower hereby agrees to reimburse the Administrative Agent on demand for all
reasonable fees and reasonable out-of-pocket costs and expenses (including
without limitation the reasonable and actual fees and expenses of its counsel)
incurred by the Administrative Agent in connection with the negotiation,
documentation and consummation of this First Amendment and the other documents
executed in connection herewith and the transactions contemplated hereby.

 

Section 8.

Governing Law.

THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK FOR CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SAID
STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

 

Section 9.

Headings.

Section headings in this First Amendment are included herein for convenience of
reference only and shall not constitute a part of this First Amendment for any
other purposes.

 

Section 10.

Severability of Provisions.

 

 

 

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Any provision of this First Amendment which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction. To the extent permitted by applicable law, the
Borrower and Parent hereby waives any provision of law that renders any
provision hereof prohibited or unenforceable in any respect.

 

Section 11.

Counterparts.

This First Amendment may be executed in any number of several counterparts, all
of which shall be deemed to constitute but one original and shall be binding
upon all parties, their successors and permitted assigns. Delivery of an
executed signature page of this First Amendment by facsimile transmission or
electronic transmission shall be as effective as delivery of a manually executed
counterpart hereof.

 

Section 12.

Entire Agreement.

The Term Loan Agreement as amended through this First Amendment embodies the
entire agreement between the parties hereto relating to the subject matter
thereof and supersedes all prior agreements, representations and understandings,
if any, relating to the subject matter thereof.

 

Section 13.

No Strict Construction.

The parties hereto have participated jointly in the negotiation and drafting of
this First Amendment. In the event an ambiguity or question of intent or
interpretation arises, this First Amendment shall be construed as if drafted
jointly by the parties hereto and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this First Amendment.

 

Section 14.

Waiver of Jury Trial.

EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING WITH RESPECT TO THIS FIRST AMENDMENT OR ANY OTHER LOAN DOCUMENT.

 

Section 15.

No Third Party Reliance.

This First Amendment is solely for the benefit of the parties signatory hereto,
their successors and permitted assigns. No waiver, consent or amendment pursuant
to this First Amendment may be relied upon by any third parties.

 

[Signature Pages to follow]

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be
executed by their respective officers or representatives thereunto duly
authorized, as of the date first above written.

 

COLLECTIVE BRANDS FINANCE, INC.

as Borrower

COLLECTIVE BRANDS, INC.

as a Loan Party

PAYLESS SHOESOURCE, INC., a Missouri corporation

as a Loan Party

PAYLESS SHOESOURCE DISTRIBUTION, INC.

as a Loan Party

 

 

By:

/s/ Ullrich E. Porzig

 

Name:

Ullrich E. Porzig

 

Its:

Authorized Representative

 

 

 

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CITICORP NORTH AMERICA, INC.,

as Administrative Agent and Lender

 

 

By:

/s/ Michael Schadt

 

Name:

Michael Schadt

 

Title:

Vice President

 

 

 

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JPMORGAN CHASE BANK, N.A.,

as Lender

 

 

By:

/s/ Patrick J. Fravel

 

Name:

Patrick J. Fravel

 

Title:

Vice President