PAYLESS SHOESOURCE, INC.
STOCK OWNERSHIP PLAN
(as amended January 1, 2007)
1. PURPOSE AND
EFFECT OF PLAN
The purpose of the
Plan is to provide associates, including executive officers, an
opportunity to purchase Common Stock of Payless ShoeSource, Inc.
(the “Company”) through payroll deductions at a
discount on a tax deferred basis. It is believed that this will
help attract, motivate and retain highly qualified and talented
associates who are important to the Company’s success. The
Plan is also intended to offer equity ownership in the Company to
associates to encourage them to enhance the value of the Company
and therefore the price of the Company’s Common Stock and the
shareowners’ return.
The Plan is
intended to comply with Code section 423 and to be a “tax
conditioned plan” within the meaning of SEC
Rule 16b-3(c).
2. SHARES
RESERVED FOR THE PLAN
There shall be
reserved for issuance and purchase by Eligible Associates under the
Plan an aggregate of 2,000,000 shares of Common Stock, subject to
adjustment as provided in Section 16. Shares purchased for the
Plan shall be purchased in the open market or in private
transactions, or a combination thereof.
Where indicated by
initial capital letters, the following terms shall have the
following meanings:
ACT: The
Securities Exchange Act of 1934.
BASE COMPENSATION:
The regular earnings of an Eligible Associate (before withholding
or other deductions), including overtime, after any salary
reduction contributions pursuant to elections under a plan subject
to Code sections 125 or 401(k) and excluding bonuses and any other
special payments; provided, that the Committee may expand or narrow
the definition of Base Compensation from time to time so long as
such definition is consistent with the requirements of
Section 423 of the Code.
BOARD: The Board
of Directors of the Company.
BUSINESS DAY: Each
day on which shares of Common Stock are or could be traded on the
New York Stock Exchange, or such other definition as the Committee
may from time to time specify.
CODE: The Internal
Revenue Code of 1986, as amended, or any subsequently enacted
federal revenue law. A reference to a particular section of the
Code shall include a reference to any regulations issued under the
section and to the corresponding section of any subsequently
enacted federal revenue law.
COMMITTEE: The
committee established pursuant to Section 13 to be responsible
for the general administration of the Plan.
COMMON STOCK: The
Company’s common stock, $.01 par value.
COMPANY: Payless
ShoeSource, Inc., a Missouri corporation, provided, that
immediately after the effective time of the Merger such term shall
mean Payless ShoeSource, Inc. (formerly Payless ShoeSource
Holdings, Inc.), a Delaware corporation, and any successor by
merger, consolidation or otherwise.
ELIGIBLE
ASSOCIATE: Each employee, including each executive officer, of the
Company and its domestic Subsidiaries who meet the eligibility
requirements of Section 4.
EMPLOYER: A
Participating Company that is the employer of a
Participant.
ENROLLMENT
PROCEDURE: The procedure specified from time to time by the
Committee to enable an Eligible Associate to participate in the
Plan and to authorize payroll deductions pursuant to
Section 5.
FAIR MARKET VALUE:
The weighted average price per share paid for all shares purchased
on the date in question with respect to a determination of the
Purchase Price of Common Stock purchased other than from the
Company by an independent trustee or purchasing agent in
arms-length transactions. For all other purposes, Fair Market Value
shall mean the average of the reported lowest and highest sales
prices per share for the Common Stock on the New York Stock
Exchange on the date in question, or, if there are no such sales on
that date, the reported lowest and highest sales prices per share
for the Common Stock on the New York Stock Exchange for the last
Business Day prior to the date in question for which sales of the
Common Stock were reported.
INVESTMENT
ACCOUNT: The account established for each Participating Associate
to hold Common Stock purchased under the Plan pursuant to
Section 5.
INVESTMENT DATE:
The date on which the shares of Common Stock are purchased for the
Plan.
“MERGER”
means the merger of Payless Merger Corp., a Missouri corporation
and wholly-owned subsidiary of Payless ShoeSource, Inc. (formerly
Payless ShoeSource Holdings, Inc.), a Delaware corporation, with
the Company, pursuant to an Agreement and Plan of Merger among the
Company, Payless Merger Corp. and Payless ShoeSource, Inc.
(formerly Payless ShoeSource Holdings, Inc.).
PARENT: Any
corporation (other than the Company) in an unbroken chain of
corporations ending with the Company if, as of an Investment Date,
each of the corporations other than the Company owns stock
possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such
chain.
PARTICIPATING
COMPANIES: The Company and its domestic Subsidiaries.
PARTICIPANT OR
PARTICIPATING ASSOCIATE: Eligible Associates who elect to
participate in the Plan pursuant to Section 5.
PAYROLL DEDUCTION
ACCOUNT: The account established for a Participating Associate to
hold payroll deductions pursuant to Section 5.
PLAN: The
“Payless ShoeSource, Inc. Stock Ownership Plan,” as set
forth herein and as amended from time to time.
PURCHASE PRICE:
The price for each whole and fractional share of Common Stock,
including those purchased by dividend reinvestment, which shall be
95% of the Fair Market Value of such whole or fractional share on
the Investment Date; provided, however, the Committee may change
such purchase price so long as the purchase price is not lower than
the lesser of (i) 85% of the Fair Market Value of the Common
Stock on the first day of the applicable purchase period, and
(ii) 85% of the Fair Market Value of the Common Stock on the
Investment Date.
PURCHASE PERIOD:
That period specified by the Committee during which payroll
deductions shall be accumulated for the purchase of
Common
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Stock under the
Plan; provided, that such period shall not have a duration that
exceeds the limitations provided in Section 423(b)(7) of the
Code.
RULE 16B-3:
Rule 16b-3 of the Securities and Exchange Commission
promulgated under the Act, as now and hereafter amended.
SUBSIDIARY OR
SUBSIDIARIES: Any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, as of
an Investment Date, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more
of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
TRUSTEE: The
trustee of the Plan designated by the Committee as provided in
Section 13.
Participation in
the Plan shall be open to each associate of a Participating Company
(including each executive officer of the Company) who has been
continuously employed by one or more Participating Companies for at
least six months; provided, that the Committee may establish such
other or different employment requirements as it may deem
appropriate so long as such other or different requirements are
consistent with the provisions of Section 423 of the Code. For
purposes of this section any break in service of less than
thirty-one days shall not be deemed to constitute a discontinuance
of employment, unless the Committee shall otherwise
provide.
No director of the
Company or of any its Subsidiaries who is not an associate shall be
eligible to participate in the Plan.
5. ELECTION TO
PARTICIPATE; METHOD OF PURCHASE; INVESTMENT ACCOUNTS;
DIVIDENDS
5.1 ELECTION TO
PARTICIPATE. Each Eligible Associate may become a Participant
effective on the first day of any Month coincident with or
following the date the Participant becomes an Eligible Associate by
complying with the Enrollment Procedure authorizing specified
regular payroll deductions from the Participant’s Base
Compensation. Such regular payroll deductions shall be subject to a
minimum deduction of $5.00 per weekly pay period and $10.00 per
bi-weekly pay period and a maximum deduction of $480.00 per weekly
pay period and $960.00 per bi-weekly pay period; provided, that the
Committee may increase or decrease such minimum and maximum
deductions from time to time. All regular payroll deductions shall
be credited to the Payroll Deduction Account that the Company has
established in the name of the Participant.
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5.2 PURCHASE OF
COMMON STOCK. Each Participating Associate having eligible funds in
the Participant’s Payroll Deduction Account on an Investment
Date shall be deemed, without any further action, to have purchased
the number of shares which the eligible funds in the
Participant’s Payroll Deduction Account could purchase at the
Purchase Price on that Investment Date. All shares purchased shall
be maintained by the Trustee in separate Investment Accounts for
Participating Associates. Fractional shares will be allocated to
accounts under the Plan unless the Committee otherwise provides;
provided that share certificates shall only be issued for whole
shares. If fractional shares are not allocated to accounts under
the Plan, amounts that otherwise would have been applied to the
purchase of fractional shares will continue to be held for the
Participant and be applied towards the purchase of shares on the
last day of the next Purchase Period.
5.3 TIMING AND
MANNER OF PURCHASE. The Committee shall designate Purchase Periods
during which funds shall be accumulated in Payroll Deduction
Accounts for the purchase of Common Stock. Until otherwise
specified the Purchase Periods shall consist of each Month in a
year. The Investment Date shall occur during an interval
immediately following the end of each Purchase Period having such
duration as the Committee shall from time to time specify, provided
that until the Committee otherwise specifies, such interval shall
be the ten Business Days immediately following the end of the
Purchase Period. However, nothing contained in this Plan shall
authorize the Committee, the Company or any affiliate of the
Company to exercise any direct or indirect control or influence
over the times when, or the prices at which, the Trustee or its
independent agent may purchase the Common Stock for the Plan, the
amounts of the Common Stock to be purchased, the manner in which
the Common Stock is to be purchased, or the selection of a broker
or dealer (other than the Trustee) through which purchases may be
executed; provided, that the Company, the Committee and affiliates
of the Company, shall not be deemed to have such control or
influence solely because the Committee revises not more than once
in any three month period the basis for determining the amount of
the Company’s contributions to the Plan, the basis for
determining the frequency of the Company’s allocations to the
Plan, or any formula in the Plan that determines the amount or
timing of shares to be purchased by the Trustee.
5.4 DIVIDENDS AND
OTHER DISTRIBUTIONS. All cash dividends paid with respect to the
whole and fractional shares of the Common Stock and shares so
purchased shall be reinvested in Common Stock on the immediately
following Investment Date and added to the shares held for a
Participating Associate in the Participant’s Investment
Account. Stock dividends and stock splits received by the Plan will
be credited to Participants having Common Stock allocated to their
Investment Account to the extent that they are attributable to such
allocated Common Stock. Property, other than shares of Common Stock
or
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cash, received
by the Trustee as a distribution with respect to Common Stock
allocated to Participant Common Stock accounts will be distributed
in kind to Participants in proportion to the number of shares of
Common Stock contained in their Investment Account.
5.5 STOCK
PURCHASES. The Trustee shall effect purchases of Common Stock on
the open market or in private transactions. Purchases shall be made
using total amounts contained in all Payroll Deduction Accounts
immediately preceding the purchase. The Company will pay the
difference between the Purchase Price and the price at which such
shares are purchased for the Plan on or prior to the required
closing date for the purchase. Expenses incurred in the purchase of
shares shall also be paid by the Company.
5.6 PAYMENT OF
DEDUCTIONS TO THE TRUSTEE. Participating Companies shall pay to the
Trustee or to the order of the Trustee payroll deductions made
during a Month prior to the time required for the closing of
purchases of Common Stock for the Plan, as directed by the
Committee
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