<PAGE>
As Filed with the Securities and Exchange Commission
On April 22, 1998
Registration Statement No. 333-28483
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST EFFECTIVE AMENDMENT NO. 1
to
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PAYLESS SHOESOURCE, INC.
(Exact Name of Registrant as Specified in its Charter)
Missouri 48-0674097
(State of Incorporation) (I.R.S. Employer Identification No.)
3231 E. 6th Street, Topeka, Kansas 66607-2207
(Address of Principal Executive Offices) (Zip Code)
PAYLESS SHOESOURCE, INC. PROFIT SHARING PLAN
and
PAYLESS SHOESOURCE, INC. PROFIT SHARING PLAN FOR
PUERTO RICO ASSOCIATES
(Full Title of Plan)
William J. Rainey
Senior Vice President and General Counsel
PAYLESS SHOESOURCE, INC.
3231 E. 6th Street
Topeka, Kansas 66607-2207
(913) 233-5171
(Name, Address and Telephone Number of Agent for Service)
1
<PAGE>
Part I
The Section 10(a) prospectus relating to the Payless ShoeSource, Inc. Profit
Sharing Plan, as amended (the "Payless Plan") and the Payless Shoe Source, Inc.
Profit Sharing Plan for Puerto Rico Associates, as amended (the "Payless Puerto
Rico Plan" and collectively with the Payless Plan, the "Plans") are omitted from
this Registration Statement pursuant to the Note to the Instructions to Part I
of Form S-8.
Part II
On January 30, 1998, Registrant caused the Trustee of the Payless Plan to create
a separate account under the Trust for the Payless Plan and to allocate to it an
amount equal to the account balances of its Puerto Rico associates previously
held under the Payless Plan, which account thereafter will be governed by the
Payless Puerto Rico Plan.
Information Required in the Registration Statement
Item 3. Incorporation of Documents by Reference.
The following documents filed with the Securities and Exchange
Commission (the "Commission") are hereby incorporated by reference:
(a) The Registrant's Annual Report on Form 10-K for the Fiscal Year
ended January 31, 1998, filed pursuant to Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) All other reports filed by the Registrant pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 since January 31, 1998.
(c) The description of the Registrant's Common Stock contained in the
Registrant's Registration Statement on Form 10 dated February 23, 1996, as
amended through April 15, 1996; and Registrant's Restated Articles of
Incorporation (incorporated herein by reference to Exhibit 3 of the Registrant's
Quarterly Report on Form 10-Q for the period ended May 4, 1996) including any
amendment or report filed for the purpose of updating such description.
In addition, all documents subsequently filed by the Registrant or the
Plans pursuant to Sections 13(a), 13(c), 14, and 15(d) of the Exchange Act prior
to the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, are incorporated by reference in this Registration Statement and are a
part hereof from the date of filing of such
2
<PAGE>
documents. Any statement contained herein or in a document all or a portion of
which is incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified and amended, to constitute part of
this Registration Statement.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
William J. Rainey, Senior Vice President and General Counsel of the
Registrant, has given an opinion to the Registrant opining as to the validity of
the Shares of Common Stock to be issued pursuant to the Plans. Mr. Rainey is
eligible to participate in the Payless Plan.
Item 6. Indemnification of Directors and Officers.
Registrant's Restated Articles of Incorporation provides that any
director or officer of the Registrant who is made a party to any action, suit or
proceeding in connection with services to the Registrant or its subsidiaries
will be indemnified against expenses, judgments, fines and amounts paid in
settlement to the maximum extent permitted by Missouri Law.
Section 351.355(l) of the General and Business Corporation Law of
Missouri ("MGBCL") provides that a corporation may indemnify a director,
officer, employee or agent of the corporation in any action, suit or proceeding
other than an action by or in the right of the corporation, against expenses
(including attorney's fees), judgments, fines and settlement amounts actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation and, with respect
to any criminal action, had no reasonable cause to believe his conduct was
unlawful. Section 351.355(2) of the MGBCL provides that the corporation may
indemnify any such person in any action or suit by or in the right of the
corporation against expenses (including attorneys' fees) and settlement amounts
actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
corporation, except that he may not be indemnified in respect of any matter in
which he has been adjudged liable for negligence or misconduct in the
performance of his duty to the corporation, unless authorized by the
3
<PAGE>
court. Section 351.355(3) of the MGBCL provides that a corporation shall
indemnify any such person against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the action, suit or proceeding
if he has been successful in the defense of such action, suit or proceeding and
if such action, suit or proceeding is one for which the corporation may
indemnify him under Section 351.355(l) or (2). Section 351.355(7) of the MGBCL
provides that a corporation shall have the power to give any further indemnity
to any such person, in addition to the indemnity otherwise authorized under
Section 351.355, provided such further indemnity is either (i) authorized,
directed or provided for in the articles of incorporation of the corporation or
any duly adopted amendment thereof or (ii) is authorized, directed or provided
for in any bylaw or agreement of the corporation which has been adopted by a
vote of the shareowners of the corporation, provided that no such indemnity
shall indemnify any person from or on account of such person's conduct which was
finally adjudged to have been knowingly fraudulent, deliberately dishonest or
willful. Section 351.355(8) of the MGBCL provides that a corporation may
purchase and maintain insurance on behalf of any such person.
The Registrant has entered into indemnification agreements with each
director and certain executive officers of the Registrant. Generally, each
indemnification agreement provides, among other things, (i) for indemnification
to the fullest extent permitted by law against all expenses, judgments, fines,
penalties incurred in connection with, and amounts paid in settlement of, any
claim against the indemnified party, provided it is determined pursuant to the
agreement that the indemnitee is entitled to be indemnified under the applicable
standard of conduct under the MGBCL; (ii) for advancement of expenses to the
indemnitee in connection with the indemnitee's defense of any threatened or
pending claim, provided that if it is determined pursuant to the agreement that
the indemnitee would not be permitted to be indemnified under applicable law,
the Registrant shall be entitled to be reimbursed by the indemnitee for all such
amounts previously paid; (iii) for the creation of a trust for the benefit of
the indemnitee in the event of a potential change in control of the Registrant
which shall be funded from time to time at the request of the indemnitee in an
amount sufficient to satisfy the Registrant's indemnification obligations under
the agreement; and (iv) that no legal action be brought and no cause of action
be asserted by or on behalf of the Registrant against the indemnitee after the
expiration of the earlier of the applicable statute of limitations or two years
after the date of accrual of such cause of action. Similar indemnification
agreements may be entered into from time to time with additional officers of the
Registrant. In addition, the Registrant has purchased a directors and officers
liability insurance policy.
Item 7. Exemption from Registration Claimed.
Not applicable.
4
<PAGE>
Item 8. Exhibits.
4.1 Restated Articles of Incorporation of Registrant (incorporated
herein by reference to Exhibit 3.1 of the Registration's
Quarterly Report on Form 10-Q for the period ended May 4,
1996).
4.2 Amended and Restated By-Laws of Registrant (incorporated
herein by reference to Exhibit 3.2 of the Registrant's Annual
Report on Form 10- K for Fiscal Year ended January 31, 1998).
4.3 Rights Agreement, dated as of April 2, 1996, between
Registrant and The Bank of New York, as Rights Agent, which
includes as Exhibit A thereto, the Form of Rights Certificate
(incorporated herein by reference to Exhibit 4.1 of the
Registrant's Registration Statement on Form 10 dated February
23, 1996, as amended through April 15, 1996 ("Registration
Statement")).
* 5 Determination letter dated November 25, 1997 with respect to
qualification of the Payless Plan under Section 401(a) of the
Internal Revenue Code
* 23.1 Consent of Arthur Andersen LLP.
* 23.2 Consent of Counsel (included in the opinion filed as Exhibit 5
to this Registration Statement)
* 24 Powers of Attorney
99.1 Payless ShoeSource, Inc. Profit Sharing Plan, as amended
through August 1, 1997 (incorporated herein by reference to
Exhibit 10.11 of the Registrant's Annual Report on Form 10-K
for Fiscal Year ended January 31, 1998).
* 99.2 Payless ShoeSource, Inc. Profit Sharing Plan for Puerto Rico
Associates, as amended.
* Filed Herewith
No opinion of counsel is being furnished because none of the shares of Common
Stock offered under the Plans are original issuance securities.
Item 9. Undertakings.
(a) The Registrant hereby undertakes:
5
<PAGE>
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement and to
include any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(d) Pursuant to Item 8(b) of Form S-8, in lieu of (i) an opinion of
counsel concerning the compliance of the Plans with the requirements of ERISA or
(ii) an Internal Revenue Service ("IRS") determination letter that the Payless
Plan, as amended, and the Payless Puerto Rico Plan, as amended, are qualified
under Section 401 of the Internal Revenue Code of 1986, as amended, the
undersigned Registrant
6
<PAGE>
hereby undertakes (i) to submit any amendments to the
Payless Plan to the IRS in a timely manner and to make all changes required by
the IRS to qualify the Plan, as amended and (ii) to submit the Payless Puerto
Rico Plan and any amendments thereto to the Puerto Rico Treasury Department
("Department") in a timely manner and to make all changes required by the
Department in order to qualify the Payless Puerto Rico Plan, as amended, under
Section 1165(e) of the Puerto Rico Internal Revenue Code.
7
<PAGE>
SIGNATURES
The Registrant. Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Amendment
No. 1 to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Topeka, State of Kansas, on the 22nd
day of April, 1998.
PAYLESS SHOESOURCE, INC.
By: /s/ William J. Rainey
Name: William J. Rainey
Title: Senior Vice President and
General Counsel
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Title Date
/s/Steven J. Douglass* Director, Chairman of the Board April 22, 1998
Steven J. Douglass and Chief Executive Officer
(Principal Executive Officer)
/s/Richard A. Jolosky* Director and President April 22, 1998
Richard A. Jolosky
/s/Ullrich E. Porzig* Senior Vice President and Chief April 22, 1998
Ullrich E. Porzig Financial Officer (Principal
Financial and Accounting Officer)
/s/Daniel Boggan, Jr.* Director April 22, 1998
Daniel Boggan, Jr.
/s/Howard R. Fricke* Director April 22, 1998
Howard R. Fricke
/s/Thomas A. Hays* Director April 22, 1998
Thomas A. Hays
/s/Mylle B. Mangum* Director April 22, 1998
Mylle B. Mangum
8
<PAGE>
/s/Michael E. Murphy* Director April 22, 1998
Michael E. Murphy
/s/Richard L. Stark* Director April 22, 1998
Richard L. Stark
* By: /s/ William J. Rainey
William J. Rainey
Attorney-in-Fact
The Plans. Pursuant to the requirements of the Securities Act of 1933, the
Retirement Committees of the Payless ShoeSource, Inc. Profit Sharing Plan and of
the Payless ShoeSource, Inc. Profit Sharing Plan for Puerto Rico Associates have
duly caused this Amendment No. 1 to Registration Statement to be signed on their
behalf by the undersigned, thereunto duly authorized, in the City of Topeka,
State of Kansas, on the 22nd day of April, 1998.
Payless ShoeSource, Inc. Profit Sharing Plan
Payless ShoeSource, Inc. Profit Sharing Plan for Puerto Rico Associates
By: /s/ Jeffrey A. Long
Name: Jeffrey A. Long
Title: Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated:
Signature Title Date
/s/Jed L. Norden* Member** April 22, 1998
Jed L. Norden
/s/William J. Rainey* Member** April 22, 1998
William J. Rainey
/s/Ullrich E. Porzig* Member** April 22, 1998
Ullrich E. Porzig
/s/Jeffrey A. Long* Member** April 22, 1998
Jeffrey A. Long
9
<PAGE>
_____________________ Member** April 22, 1998
Ronald A. Cooperman
*By: /s/ William J. Rainey
William J. Rainey,
Attorney-in-Fact
** Payless ShoeSource Profit Sharing Plan and Payless ShoeSource Profit
Sharing Plan for Puerto Rico Associates
10
<PAGE>
Exhibit List
4.1 Restated Articles of Incorporation of Registrant (incorporated
herein by reference to Exhibit 3.1 of the Registration's
Quarterly Report on Form 10-Q for the period ended May 4,
1996).
4.2 Amended and Restated By-Laws of Registrant (incorporated
herein by reference to Exhibit 3.2 of the Registrant's Annual
Report on Form 10- K for Fiscal Year ended January 31, 1998).
4.3 Rights Agreement, dated as of April 2, 1996, between
Registrant and The Bank of New York, as Rights Agent, which
includes as Exhibit A thereto, the Form of Rights Certificate
(incorporated herein by reference to Exhibit 4.1 of the
Registrant's Registration Statement on Form 10 dated February
23, 1996, as amended through April 15, 1996 ("Registration
Statement")).
* 5 Determination letter dated November 25, 1997 with respect to
qualification of the Payless Plan under Section 401(a) of the
Internal Revenue Code
* 23.1 Consent of Arthur Andersen LLP
* 24 Powers of Attorney
99.1 Payless ShoeSource, Inc. Profit Sharing Plan, as amended
through August 1, 1997 (incorporated herein by reference to
Exhibit 10.11 of the Registrant's Annual Report on Form 10-K
for Fiscal Year ended January 31, 1998).
* 99.2 Payless ShoeSource, Inc. Profit Sharing Plan for Puerto Rico
Associates, as amended.
* Filed Herewith
11
<PAGE>
EXHIBIT 5
INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
DISTRICT DIRECTOR
P. O. BOX 2508
CINCINNATI, OH 45201 Employer Identification Number:
48-0674097
Date: Nov 25 1997 DLN:
17007099287007
PAYLESS SHOESOURCE INC. Person to Contact:
C/O MICHEL A THOMPSON CINDY PERRY
LATHROP & GAGE LC Contact Telephone Number:
2345 GRAND BLVD (513) 241-5199
KANSAS CITY, MO 64108 Plan Name:
PROFIT SHARING PLAN
Plan Number: 002
Dear Applicant:
We have made a favorable determination on your plan, identified above,
based on the information supplied. Please keep this letter in your permanent
records.
Continued qualification of the plan under its present form will depend
on its effect in operation. (See section 1.401-1(b)(3) of the Income Tax
Regulations.) We will review the status of the plan in operation periodically.
The enclosed document explains the significance of this favorable
determination letter, points out some events that may affect the qualified
status of your employee retirement plan, and provides information on the
reporting requirements for your plan. It also describes some events that
automatically nullify it. It is very important that you read the publication.
This letter relates only to the status of your plan under the Internal
Revenue Code. It is not a determination regarding the effect of other federal or
local statutes.
This plan has been mandatorily disaggregated, permissively aggregated,
or restructured to satisfy the nondiscrimination requirements.
This plan satisfies the nondiscrimination in amount requirement of
section 1.401(a)(4)-1(b)(2) of the regulations on the basis of a design-based
safe harbor described in the regulations.
<PAGE>
This plan satisfies the nondiscriminatory current availability
requirements of section 1.401(a)(4)-4(b) of the regulations with respect to
those benefits, rights, and features that are currently available to all
employees in the plan's coverage group. For this purpose, the plan's coverage
group consists of those employees treated as currently benefitting for purposes
of demonstrating that the plan satisfies the minimum coverage requirements of
section 410(b) of the Code.
This plan also satisfies the requirements of section 1.401(a)(4)-4(b)
of the regulations with respect to the specific benefits, rights, or features
for which you have provided information.
Except as otherwise specified this letter may not be relied upon
with respect to whether the plan satisfies the qualification requirements as
amended by the Uruguay Round Agreements Act, Pub. L. 103-465 and by the Small
Business Job Protection Act of 1996 (SBJPA), Pub. L. 104-108, other than the
requirements of Code section 401(a)(26).
This letter considers the amendments required by the Tax Reform Act of
1986, except as otherwise specified in this letter.
The information on the enclosed addendum is an integral part of this
determination. Please be sure to read and keep it with this letter.
We have sent a copy of this letter to your representative as indicated
in the power of attorney.
If you have questions concerning this matter, please contact the person
whose name and telephone number are shown above.
Sincerely yours,
/s/ Ellen M. Murphy
ACTING DISTRICT DIRECTOR
Enclosures:
Publication 794
Reporting & Disclosure Guide
for Employee Benefit Plans
Addendum
<PAGE>
This determination is conditioned upon your adoption of the proposed
restated plan as submitted with you or your representative's letter dated
September 30 1997. The proposed plan should be adopted on or before the date
prescribed by the regulations under Code section 401(b).
This determination letter also applies to the members of the controlled group of
corporations adopting this plan.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Amendment No. 1 to registration statement on
Form S-8 of our report dated February 20, 1998, incorporated by reference in the
Payless ShoeSource, Inc. Form 10-K for the year ended January 31, 1998, and to
all references to our firm included in this registration statement.
/s/ARTHUR ANDERSEN LLP
St. Louis, Missouri
April 20, 1998
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Steven J. Douglass, Ullrich E. Porzig, and William J. Rainey, and each
or any one of them acting alone, as his true and lawful attorney-in-fact and
agent, with full power of substitution for him and in his name, place and stead,
in any and all capacities, to sign any and all registration statements,
amendments thereto and post-effective amendments thereto with respect to the
Payless ShoeSource, Inc. Profit Sharing Plan, as amended, and the Payless
ShoeSource, Inc. Profit Sharing Plan for Puerto Rico Associates, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises to perfect
and complete such filing(s), as fully to all the intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
Dated this 20th day of April, 1998
/s/ Steven J. Douglass
Steven J. Douglass
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Steven J. Douglass, Ullrich E. Porzig, and William J. Rainey, and each
or any one of them acting alone, as his true and lawful attorney-in-fact and
agent, with full power of substitution for him and in his name, place and stead,
in any and all capacities, to sign any and all registration statements,
amendments thereto and post-effective amendments thereto with respect to the
Payless ShoeSource, Inc. Profit Sharing Plan, as amended, and the Payless
ShoeSource, Inc. Profit Sharing Plan for Puerto Rico Associates, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises to perfect
and complete such filing(s), as fully to all the intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
Dated this 20th day of April, 1998
/s/ Richard A. Jolosky
Richard A. Jolosky
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Steven J, Douglass, Ullrich E, Porzig, and William J. Rainey, and each
or any one of them acting alone, as his true and lawful attorney-in-fact and
agent, with full power of substitution for him and in his name, place and stead,
in any and all capacities, to sign any and all registration statements,
amendments thereto and post-effective amendments thereto with respect to the
Payless ShoeSource, Inc. Profit Sharing Plan, as amended, and the Payless
ShoeSource, Inc. Profit Sharing Plan for Puerto Rico Associates, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises to perfect
and complete such filing(s), as fully to all the intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
Dated this 20th day of April, 1998
/s/ Howard R. Fricke
Howard R. Fricke
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Steven J. Douglass, Ullrich E. Porzig, and William J. Rainey, and each
or any one of them acting alone, as his true and lawful attorney-in-fact and
agent, with full power of substitution for him and in his name, place and stead,
in any and all capacities, to sign any and all registration statements,
amendments thereto and post-effective amendments thereto with respect to the
Payless ShoeSource, Inc. Profit Sharing Plan, as amended, and the Payless
ShoeSource, Inc. Profit Sharing Plan for Puerto Rico Associates, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises to perfect
and complete such filing(s), as fully to all the intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
Dated this 20th day of April, 1998
/s/ Thomas A. Hays
Thomas A. Hays
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Steven J. Douglass, Ullrich E. Porzig, and William J. Rainey, and each
or any one of them acting alone, as his true and lawful attorney-in-fact and
agent, with full power of substitution for him and in his name, place and stead,
in any and all capacities, to sign any and all registration statements,
amendments thereto and post-effective amendments thereto with respect to the
Payless ShoeSource, Inc. Profit Sharing Plan, as amended, and the Payless
ShoeSource, Inc. Profit Sharing Plan for Puerto Rico Associates, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises to perfect
and complete such filing(s), as fully to all the intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
Dated this 20th day of April, 1997
/s/ Michael E. Murphy
Michael E. Murphy
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Steven J, Douglass, Ullrich E. Porzig, and William J. Rainey, and each
or any one of them acting alone, as his true and lawful attorney-in-fact and
agent, with full power of substitution for him and in his name, place and stead,
in any and all capacities, to sign any and all registration statements,
amendments thereto and post-effective amendments thereto with respect to the
Payless ShoeSource, Inc. Profit Sharing Plan, as amended, and the Payless
ShoeSource, Inc. Profit Sharing Plan for Puerto Rico Associates, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises to perfect
and complete such filing(s), as fully to all the intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
Dated this 20th day of April, 1998
/s/ Richard L. Stark
Richard L. Stark
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Steven J, Douglass, Ullrich E. Porzig, and William J. Rainey, and each
or any one of them acting alone, as his true and lawful attorney-in-fact and
agent, with full power of substitution for him and in his name, place and stead,
in any and all capacities, to sign any and all registration statements,
amendments thereto and post-effective amendments thereto with respect to the
Payless ShoeSource, Inc. Profit Sharing Plan, as amended, and the Payless
ShoeSource, Inc. Profit Sharing Plan for Puerto Rico Associates, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises to perfect
and complete such filing(s), as fully to all the intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
Dated this 20th day of April, 1998
/s/ Daniel Boggan, Jr.
Daniel Boggan, Jr.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Steven J. Douglass, Ullrich E. Porzig, and William J. Rainey, and each
or any one of them acting alone, as his true and lawful attorney-in-fact and
agent, with full power of substitution for him and in his name, place and stead,
in any and all capacities, to sign any and all registration statements,
amendments thereto and post-effective amendments thereto with respect to the
Payless ShoeSource, Inc. Profit Sharing Plan, as amended, and the Payless
ShoeSource, Inc. Profit Sharing Plan for Puerto Rico Associates, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises to perfect
and complete such filing(s), as fully to all the intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute may lawfully do or cause to be
done by virtue thereof.
Dated this 20th day of April, 1998
/s/ Mylle B. Mangum
Mylle B. Mangum
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Jeffrey A. Long and William J. Rainey, and each or any one of them
acting alone, as his true and lawful attorney-in-fact and agent, with full power
of substitution for him and in his name, place and stead, in any and all
capacities, to sign any and all registration statements, amendments thereto and
post-effective amendments thereto with respect to the Payless ShoeSource, Inc.
Profit Sharing Plan, as amended, and the Payless ShoeSource, Inc. Profit Sharing
Plan for Puerto Rico Associates, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises to perfect and complete such filing(s), as
fully to all the intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute may lawfully do or cause to be done by virtue thereof.
Dated this 20th day of April, 1998
/s/ Jed L. Norden
Jed L. Norden
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Jeffrey A. Long and William J. Rainey, and each or any one of them
acting alone, as his true and lawful attorney-in-fact and agent, with full power
of substitution for him and in his name, place and stead, in any and all
capacities, to sign any and all registration statements, amendments thereto and
post-effective amendments thereto with respect to the Payless ShoeSource, Inc.
Profit Sharing Plan, as amended, and the Payless ShoeSource, Inc. Profit Sharing
Plan for Puerto Rico Associates, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises to perfect and complete such filing(s), as
fully to all the intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute may lawfully do or cause to be done by virtue thereof.
Dated this 20th day of April, 1998
/s/ Ullrich E. Porzig
Ullrich E. Porzig
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Jeffrey A. Long and William J. Rainey, and each or any one of them
acting alone, as his true and lawful attorney-in-fact and agent, with full power
of substitution for him and in his name, place and stead, in any and all
capacities, to sign any and all registration statements, amendments thereto and
post-effective amendments thereto with respect to the Payless ShoeSource, Inc.
Profit Sharing Plan, as amended, and the Payless ShoeSource, Inc. Profit Sharing
Plan for Puerto Rico Associates, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises to perfect and complete such filing(s), as
fully to all the intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute may lawfully do or cause to be done by virtue thereof.
Dated this 20th day of April, 1998
/s/ William J. Rainey
William J. Rainey
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Jeffrey A. Long and William J. Rainey, and each or any one of them
acting alone, as his true and lawful attorney-in-fact and agent, with full power
of substitution for him and in his name, place and stead, in any and all
capacities, to sign any and all registration statements, amendments thereto and
post-effective amendments thereto with respect to the Payless ShoeSource, Inc.
Profit Sharing Plan, as amended, and the Payless ShoeSource, Inc. Profit Sharing
Plan for Puerto Rico Associates, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises to perfect and complete such filing(s), as
fully to all the intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent, or his
substitute may lawfully do or cause to be done by virtue thereof.
Dated this 20th day of April, 1998
/s/ Jeffrey A. Long
Jeffrey A. Long
<PAGE>
<PAGE>
Exhibit 99.2
PAYLESS SHOESOURCE, INC.
PROFIT SHARING PLAN
FOR PUERTO RICO ASSOCIATES
Effective January 1, 1997
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1 Definitions.........................................................1
1.01 Accounts...................................................1
1.02 After-Tax Contributions....................................1
1.03 Allocation Pay Amount......................................2
1.04 Associate..................................................2
1.05 Authorized Leave of Absence................................3
1.06 Before-Tax Contributions...................................3
1.07 Beneficiary................................................3
1.08 Board......................................................3
1.09 Code.......................................................3
1.10 Committee..................................................3
1.11 Company or Payless.........................................3
1.12 Company Accounts...........................................3
1.13 Company Matching Contributions.............................4
1.14 Company Profit Sharing Contributions.......................4
1.15 Effective Date.............................................4
1.16 Employer or Payless PR ....................................4
1.17 ERISA......................................................4
1.18 Fiduciary..................................................4
1.19 Fiscal Year................................................4
1.20 Group......................................................4
1.21 Hour of Service............................................4
1.22 Investment Fund............................................5
1.23 May Plan...................................................5
1.24 Member.....................................................5
1.25 Member Accounts............................................5
1.26 Member After-Tax Accounts..................................5
1.27 Member Before-Tax Accounts.................................5
1.28 Member Contributions.......................................5
1.29 Military Service...........................................5
1.30 Net Profits................................................6
1.31 Pay........................................................6
1.32 Plan.......................................................6
1.33 Plan Year..................................................6
1.34 Prior Plan.................................................6
1.35 Qualified Domestic Relations Order.........................6
1.36 Retirement.................................................6
1.37 Social Security Wage Base..................................7
1.38 Total and Permanent Disability or Disability...............7
1.39 Transferred Accounts.......................................7
i
<PAGE>
1.40 Trust Agreement............................................7
1.41 Trust Fund.................................................7
1.42 Trustee....................................................7
1.43 Unit.......................................................7
1.44 Unit Value.................................................7
1.45 Valuation Date.............................................7
1.46 Year of Service............................................7
1.47 Vesting Service............................................8
SECTION 2 Membership..........................................................9
2.01 Conditions of Eligibility..................................9
2.02 No Dual Memberships.......................................11
2.03 Re-Employment.............................................11
SECTION 3 Company Contributions..............................................11
3.01 Amount of Company Profit Sharing Contribution.............11
3.02 Amount of Company Matching Contribution...................11
3.03 Allocation of Company Contributions.......................12
3.04 Profit Sharing Allocation Formula.........................12
3.05 Investment of the Company Contribution....................13
3.06 Return of Company Contributions...........................13
SECTION 4 Member Contributions...............................................13
4.01 Procedure for Making Contributions.......................13
4.02 Limitations on Before-Tax Contributions..................15
4.03 Distributions of Excess Deferrals........................18
4.04 Limitations on After-Tax Contributions...................19
4.05 Limitations on Company Matching Contributions............19
4.06 Aggregate Limitations....................................19
SECTION 5 Investment Provisions.............................................19
5.01 Investment Funds.........................................19
5.02 Investment Direction.....................................20
SECTION 6 Accounts..........................................................21
6.01 Member Accounts..........................................21
6.02 Company Accounts.........................................21
6.03 Maintenance of Accounts..................................21
6.04 Valuation of Accounts....................................21
6.05 Member Statements........................................21
6.06 Shares of The May Department Stores Company ("May
Stock") in the May Common Stock Fund.....................21
6.07 Shares of Payless Stock Received in Respect of May
Stock....................................................23
6.08 Shares of Payless ShoeSource, Inc. ("Payless Stock")
ii
<PAGE>
in the Payless Common Stock Fund.........................23
6.09 Vesting in Member and Company Accounts...................24
SECTION 7 Expenses..........................................................28
7.01 Administrative Expenses..................................28
SECTION 8 Withdrawals During Employment.....................................28
8.01 Withdrawals Prohibited Unless Specifically
Authorized...............................................28
8.02 Authorized Withdrawals...................................28
SECTION 9 Benefits Upon Retirement, Death, Disability, or Termination of
Employment........................................................30
9.01 Benefits.................................................30
9.02 Beneficiary..............................................30
SECTION 10 Payment of Benefits...............................................31
10.01 Time of Payment..........................................31
10.02 Form of Payment..........................................32
10.03 Indirect Payment of Benefits.............................32
10.04 Inability to Find Member.................................32
10.05 Commencement of Benefit Distribution to Member...........32
10.06 Commencement of Benefit Distribution to
Beneficiary..............................................33
10.07 Commencement of Benefit Distribution to Alternate
Payee....................................................33
SECTION 11 Permitted Rollover of Plan Distributions..........................34
11.01 Rollover Permitted.......................................34
11.02 Definitions..............................................34
SECTION 12 Limit on Contributions to the Plan................................35
12.01 Limit on Contributions...................................35
12.02 Special Definitions......................................35
12.03 General..................................................37
12.04 Adjustment for Excessive Annual Additions................37
12.05 Limitation Imposed by Code Section (401)(a)(17)..........38
SECTION 13 Administration of the Plan........................................39
13.01 Plan Administrator.......................................39
13.02 Delegation of Authority..................................39
13.03 Committee and Subcommittees..............................39
13.04 Accounts and Reports.....................................41
13.05 Non-Discrimination.......................................41
SECTION 14 Management of the Trust Fund.......................................41
14.01 Use of the Trust Fund..............................41
iii
<PAGE>
14.02 Trustees...........................................41
14.03 Investments and Reinvestments......................41
SECTION 15 Certain Rights and Obligations of Employers and Members............42
15.01 Disclaimer of Employer Liability...................42
15.02 Employer-Associate Relationship....................43
15.03 Binding Effect.....................................43
15.04 Corporate Action...................................43
15.05 Claim and Appeal Procedure.........................43
SECTION 16 Non-Alienation of Benefits.........................................44
16.01 Provisions With Respect to Assignment and Levy.....44
16.02 Alternate Application..............................44
SECTION 17 Amendments.........................................................44
17.01 Company's Rights...................................44
17.02 Procedure to Amend.................................45
17.03 Provision Against Diversion........................45
SECTION 18 Termination........................................................45
18.01 Right to Terminate.................................45
18.02 Withdrawal of an Employer..........................45
18.03 Distribution in Event of Termination of Trust......45
18.04 Administration in Event of Continuance of Trust....46
18.05 Merger, Consolidation or Transfer..................46
SECTION 19 Construction.......................................................46
19.01 Applicable Law.....................................46
19.02 Gender and Number..................................46
iv
<PAGE>
PAYLESS SHOESOURCE, INC.
PROFIT SHARING PLAN FOR PUERTO RICO ASSOCIATES
INTRODUCTION
Effective April 1, 1996, Payless ShoeSource, Inc. ("Payless") withdrew
from and ceased to be a participating Employer in the May Department Stores
Company Profit Sharing Plan (the "May Plan") and established the Payless
ShoeSource, Inc. Profit Sharing Plan (the "Payless Plan"). The Payless Plan, as
adopted, covered eligible Associates employed in Puerto Rico by Payless
ShoeSource of Puerto Rico, Inc. ("Payless PR"). The Payless Plan provides for
(1) a Company Contribution in an amount to be determined by the Company's Board
of Directors and allocated to eligible Plan Members and (2) if elected by the
Member, Member contributions determined on either a before-tax or after-tax
basis.
Now, Payless intends to spin off the portion of the Payless Plan
covering Associates employed by Payless PR and to establish a new Plan, both
effective January 1, 1997, to be adopted by Payless PR as an adopting Employer
under Section 1.16. The terms and provisions of the new Plan established by
Payless to accept the spin-off are substantially identical to the terms and
provisions of the Payless Plan, as amended and restated. Such amendment and
restatement, both as to the Payless Plan and in connection with this Plan,
applied only to Associates who were employed by an Employer on or after the
effective date(s) of the respective amended provisions, and the rights and
benefits of persons thereunder were to be determined solely in accordance with
the provisions of the Plan in effect on the date an Associate's employment was
or is terminated.
The terms and provisions of this new Plan are as follows:
SECTION 1
Definitions
1.01 Accounts means the Company Accounts and Member Accounts
established under Section 6.
1.02 After-Tax Contributions means Member Contributions which are not
Before-Tax Contributions and which are made by the Member in accordance with
Section 4.01(a).
1
<PAGE>
1.03 Allocation Pay Amount means with respect to each eligible Member,
(a) one (1) times the amount of Pay as defined in Section 1.31 up to the Social
Security Wage Base ("SSWB") for the Plan Year, plus (b) two (2) times the amount
of such Pay in excess of the SSWB for the Plan Year. Notwithstanding any
provision of this Section 1.02 or of Section 3.03 to the contrary, in no event
shall the percentage of Members' Pay to be allocated for any year below the SSWB
be less than fifty percent (50%) of the percentage of Pay allocated with respect
to Members' Pay in excess of the SSWB, nor may the latter percentage of Pay
(above the SSWB) exceed the former percentage of Pay (below the SSWB) by more
than 5.7% (or such other percentage as may be the maximum permitted differential
under Code Section 401(1) from time to time).
In determining each eligible Member's Allocation Pay Amount, only Pay
received during the part of the Plan Year the Member is eligible for the Company
Contribution feature of the Plan, pursuant to Section 2, shall be considered,
and the SSWB to be applied for such Member shall be proportionally prorated if
such eligibility is for less than a full Plan Year.
Notwithstanding the foregoing, for the 1996 Plan Year, only Pay
received after the Plan's Effective Date shall be considered and the SSWB shall
be prorated accordingly.
Further, notwithstanding the foregoing, with respect to any Plan Year
for which applying the definition of Allocation Pay Amount set forth above
would cause the allocation made pursuant to Section 3.03 to violate the
permitted disparity limitations of Treas. Reg. ss. 1.401(l)-2, Allocation Pay
Amount shall be adjusted to permit Section 3.03 to operate in compliance with
the limitations of Treas. Reg. ss. 1.401(l)2.
1.04 Associate means any person employed by Payless PR who receives Pay
from Payless PR. The term Associate also may include, based upon the express
written determination of the Company or the Committee, a U.S. citizen employed,
at the request of the Company or the Employer, by a member of the Group (defined
in Section 1.20) to the extent such employee otherwise qualifies for membership
under Section 2, in which case such Group member shall be deemed to be an
"Employer" hereunder, as to such person or persons only. Employees in
departments operated by others under lease or license shall be deemed Associates
for the purposes of this Plan but only in those cases approved by the Committee
in its discretion where the lessees or licensees shall have requested
participation hereunder and shall have agreed in writing to assume their
respective equitable proportions of the contributions payable to the Trustee as
provided under this Plan. The term "Associate" shall not include (i) any person
covered under a collective bargaining agreement unless and until the Employer
and the collective bargaining representatives so agree, (ii) any non-resident
alien, and (iii) any "leased employee" within the meaning of Code Section
414(n)(2). The term
2
<PAGE>
"Associate" may include, where appropriate, Associates of Payless or other
related Employers who are transferred to the Employer or as otherwise may be
necessary or appropriate in construing the Plan under applicable law.
1.05 Authorized Leave of Absence means any leave of absence authorized
by the Employer under rules established by the Employer.
1.06 Before-Tax Contributions means contributions which the Member
elects (in accordance with Section 4.01(b)) to have the Employer make directly
to the Plan on behalf of the Member, which election shall constitute an election
under Code Section 401(k)(2)(A). The "Member's Before-Tax Contributions" shall
refer to Before-Tax Contributions made to the Plan by the Employer on behalf of
the Member.
1.07 Beneficiary means the person or persons entitled under Section
9.02 to receive any payments payable under this Plan on account of a Member's
death.
1.08 Board means the Board of Directors of the Company.
1.09 Code means the U.S. Internal Revenue Code of 1986, as amended from
time to time, but only to the extent incorporated into the applicable provisions
of the Puerto Rico Internal Revenue Code of 1994 (the "Act"). Any references
herein to Code Sections which have not been incorporated into the Act and which
conflict with the Act shall be void and of no effect hereunder. Any references
herein to specific Code Sections or regulations thereunder shall be construed as
and deemed to be references to the corresponding sections of the Act or
regulations thereunder, as applicable.
1.10 Committee means the Retirement Committee comprised of three or
more members as determined and appointed from time to time by the Board. Unless
determined otherwise by the Board, the Committee shall constitute the Retirement
Committee of the Payless ShoeSource, Inc. Profit Sharing Plan from time to time.
1.11 Company or Payless means Payless ShoeSource, Inc. and any other
organization which may be a successor to it.
1.12 Company Accounts means accounts reflecting the portion of each
Member's interest in the Investment Funds which are attributable to Company
Matching Contributions ("Company Matching Accounts") and to Company Profit
Sharing Contributions ("Company Profit Sharing Accounts") and to any
contributions made by an Employer under Prior Plans, as well as to any income
and/or earnings attributable to such Company Contributions and Prior Plan
contributions.
3
<PAGE>
1.13 Company Matching Contributions means contributions made by the
Company, based on a Member's Before-Tax and/or After Tax Contributions, pursuant
to Section 3.02.
1.14 Company Profit Sharing Contributions means discretionary
contributions made by the Company, based on Net Profits, pursuant to Section
3.01.
1.15 Effective Date means January 1, 1997 provided, however, that those
provisions of the Payless Plan which were included in its amendment and
restatement effective generally August 1, 1997 but with other effective dates as
set out therein, only shall be effective hereunder as of August 1, 1997 or such
other date(s) as are contained in the Payless Plan.
1.16 Employer or Payless PR means Payless ShoeSource of Puerto Rico,
Inc. and any other entity affiliated with the Company which elects, with the
consent of the Company, to participate herein.
1.17 ERISA means the Employee Retirement Income Security Act of 1974,
as amended from time to time, to the extent applicable to the Plan.
1.18 Fiduciary means the Trustee, each of the members of the Committee
described in Section 13, and any investment manager designated pursuant to
Section 14.
1.19 Fiscal Year means the Company's Fiscal Year.
1.20 Group means the Company, the Employer, and any other company which
is related to the Company or Employer as a member of a controlled group of
corporations in accordance with Code Section 414(b), or as a trade or business
under common control in accordance with Code Section 414(c). For the purposes of
the Plan, for determining whether or not a person is an employee of the Group
and the period of employment of such person, each such other company shall be
included in the "Group" only for such period or periods during which such other
company is a member with the Company or Employer of a controlled group or under
common control. In determining Hours of Service, Years of Service and Vesting
Service for all purposes hereunder, employment with any member of the Group
shall be included.
1.21 Hour of Service means any hour for which an Associate (including a
leased employee) is directly or indirectly compensated, or entitled to
compensation, by the Company or the Employer for any of the following:
(a) the performance of duties during the applicable
computation period;
4
<PAGE>
(b) a period during which no duties are performed
(irrespective of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability), layoff, jury
duty, Military Service, or Authorized Leave of Absence;
(c) a period for which back pay is awarded or agreed to,
provided that no Hour of Service has been credited under subsection (a) or (b)
with respect to the same period.
Hours of Service and applicable computation periods shall be determined
in accordance with the requirements of 29 C.F.R. ss. 2530.200b.
1.22 Investment Fund means any fund for investment of contributions as
described in Section 5.01.
1.23 May Plan means The May Department Stores Company Profit Sharing
Plan.
1.24 Member means any person included in the membership of this Plan as
provided in Section 2.
1.25 Member Accounts means the Member Before-Tax Accounts and the
Member After-Tax Accounts.
1.26 Member After-Tax Accounts means the Member Accounts with respect
to a Member's After-Tax Contributions.
1.27 Member Before-Tax Accounts means the Member Accounts with respect
to a Member's Before-Tax Contributions.
1.28 Member Contributions means the Member's Before-Tax Contributions
and After-Tax Contributions.
1.29 Military Service means any period of obligatory military service
with the Armed Forces of the United States of America, or voluntary service in
lieu of such obligatory service, provided that the Associate returns to active
employment with the Employer within the period during which the Employer would
be required to reemploy the Associate under Federal law. Notwithstanding any
provision of this Plan to the contrary, contributions, benefits and service
credit with respect to qualified Military Service will be provided in accordance
with Code Section 414(v).
5
<PAGE>
1.30 Net Profits means the consolidated net profits of the Company for
any given Fiscal Year, determined by generally accepted accounting principles
except that (i) no deduction or provision shall be made for any federal, state
or other taxes measured by net income. nor for any contributions to the Trust or
to any other pension or profit sharing plan, and (ii) there shall be excluded
any proceeds from life insurance of which the Company or the Employer is
beneficiary (whether paid in a single sum or otherwise) and any gains or losses
on the sale of capital assets. Such term shall also mean any accumulated and
undistributed Net Profits (as defined in the preceding sentence) earned in prior
Fiscal Years to the extent that such accumulated and undistributed Net Profits
constitute surplus of the Company and its subsidiaries available for
contributions hereunder.
1.31 Pay means the aggregate of (i) all regular pay, commissions,
overtime pay, cash incentives, and prizes and cash awards, plus (ii) amounts
which the Associate elects to have the Employer contribute directly to the Plan
on the Associate's behalf in accordance with Section 4.01(b). Pay shall include
any amounts not otherwise includable in the Member's taxable income pursuant to
Code Section 125. Pay shall not include amounts for a pension, a retirement
allowance, a retainer or a fee under contract, deferred compensation (including
amounts deferred under the Deferred Compensation Plan of Payless ShoeSource,
Inc.), severance pay, distributions from this Plan or items of extraordinary
income including but not limited to amounts resulting from the exercise of stock
options, spinoff cash, spinoff stock and restricted stock awards. Pay in excess
of $150,000 shall be disregarded, although such amount shall be adjusted at the
same time and in such manner as permitted under Code Section 415(d).
1.32 Plan means this Payless ShoeSource, Inc. Profit Sharing Plan for
Puerto Rico Associates, as amended from time to time.
1.33 Plan Year means a calendar year ending each December 31.
1.34 Prior Plan means The May Department Stores Company Profit Sharing
Plan, the Volume Shoe Corporation Profit Sharing Plan, the Payless ShoeSource,
Inc. Profit Sharing Plan and such other qualified plan as may be so designated
by the Committee.
1.35 Qualified Domestic Relations Order means a "qualified domestic
relations order" as that term is defined in Code Section 414(p), provided that
such order was entered on or after January 1, 1985.
1.36 Retirement means a Member's termination of employment on or after
age 55 with at least five (5) Years of Service, as of which date the Member's
benefit shall be nonforfeitable.
6
<PAGE>
1.37 Social Security Wage Base means, with respect to each Plan Year,
the maximum amount of wages which are subject to tax in such year under the
Federal Old Age, Survivors and Disability Insurance System.
1.38 Total and Permanent Disability or Disability means the total
incapacity of a Member for the continued performance of regular active
employment with an Employer, which disability is expected to be permanent, as
determined by the Committee, provided that a Member shall not be considered
totally and permanently disabled for purposes of this Plan unless he qualifies
for disability benefits under Title 11 of the Federal Social Security Act.
1.39 Transferred Accounts means Member and Company Accounts
transferred from a Prior Plan.
1.40 Trust Agreement means the agreement or agreements provided for in
Section 14, as amended from time to time.
1.41 Trust Fund means all the assets of the Investment Funds, including
assets transferred from a Prior Plan, which are held in one or more trusts by
the Trustee or Trustees for the purposes of this Plan.
1.42 Trustee means the corporation(s), person or persons which may at
any time be acting as Trustee or Trustees under the Trust Agreement.
1.43 Unit means one of the units representing an interest in an
Investment Fund as provided in Section 6.03.
1.44 Unit Value means the value of each Unit in an Investment Fund as
of the Valuation Date as determined pursuant to Section 6.04.
1.45 Valuation Date means the last day of each calendar month or such
other date or dates as may be established by the Committee from time to time.
1.46 Year of Service for purposes of determining eligibility under
Section 2 means a year of employment during which the Associate has been paid
for not less than 1,000 Hours of Service for an Employer. An Associate shall be
credited with a year of employment on each anniversary date of his commencement
of employment with an Employer. Periods of temporary illness, temporary layoff,
Military Service, and Authorized Leaves of Absence shall not be deemed as
breaking continuity of employment and shall be counted in determining Years of
Service. The term "Year of Service" shall also include an employment year during
which, except to the extent otherwise provided in Treasury Regulations, a
"leased employee" within the meaning of Code Section 414(n) has been paid for
not less than 1,000 Hours of Service for the
7
<PAGE>
Employer even though during such period the leased employee was not an Associate
as defined in Section 1.04. The term "Year of Service" shall include any period
required to be included by the Family and Medical Leave Act of 1993. The extent
to which service with another organization, part or all of whose business
operations are acquired by the Company (or by an Employer), shall be credited as
"Years of Service" hereunder or as "Vesting Service" under Section 1.47 shall be
determined by the Company or by the Committee on a case-by-case basis.
1.47 Vesting Service for purposes of determining a Member's vested
interest under Section 6.09 is based on "elapsed time" and is to be determined
in accordance with the following definitions:
(a) "Employment Commencement Date" means the date upon which
an Associate first performs an Hour of Service for the Employer.
(b) "Hour of Service" means an hour for which an Associate is
paid or entitled to payment for the performance of duties for the Employer.
(c) "Period of Service" means a period beginning on the
Associate's Employment Commencement Date (or Reemployment Commencement Date, as
the case may be) and ending on his Severance from Service Date.
(d) "Severance from Service Date" means the earlier to occur
of:
(i) the date upon which an Associate terminates
employment with the Employer (either voluntarily or involuntarily),
retires or dies; or
(ii) the first anniversary of the date upon which the
Associate was first absent from service with the Employer (with or
without pay) for any other reason (i.e., vacation, sickness,
disability, leave of absence or layoff).
Notwithstanding the foregoing, the Severance from Service Date of an Associate
who is absent from service with the Employer beyond the first anniversary of the
first day of such absence on account of maternity or paternity (as described in
Code ss.ss. 410(a)(5)(E) or 411(a)(6)(E)) shall be the second anniversary of the
first day of such absence; and the period of time between such first and second
anniversaries shall not be treated as a Period of Service or as a Period of
Severance.
(e) "Period of Severance" means a period beginning on an
Associate's Severance from Service Date and ending upon the Associate's
Reemployment Commencement Date.
8
<PAGE>
(f) "Reemployment Commencement Date" means the first date,
following a Severance from Service Date, upon which the Associate performs an
Hour of Service for the Employer.
(g) "Service Spanning Rules." In determining whether or not an
Associate has completed a twelve month Period of Service for purposes of
vesting, the following Periods of Severance shall be treated as Periods of
Service:
(i) If an Associate terminates employment with the
Employer (either voluntarily or involuntarily) or retires, and then
performs an Hour of Service within the twelve month period beginning on
the Severance from Service Date, such Period of Severance shall be
treated as a Period of Service; and
(ii) If an Associate terminates employment with the
Employer (either voluntarily or involuntarily) or retires during an
absence from service of twelve months or less for any reason other than
a termination or retirement, and then performs an Hour of Service
within a period of twelve months from the date the Employee was first
absent from service, the Period of Severance shall be treated as a
Period of Service.
SECTION 2
Membership
2.01 Conditions of Eligibility.
(a) Each Associate who on the day before the Effective Date of
this Plan is a Member of or is eligible to be a Member of the Payless Plan or
who would be eligible to become a Member of the Payless Plan on January 1, 1997
if the Employer had continued to be a participating Employer under the Payless
Plan shall be a Member of this Plan entitled to make Member Contributions
pursuant to Section 4 and eligible to share in Company Contributions pursuant to
Section 3.
(b) From the Effective Date to July 31, 1997, each other
Associate shall be eligible to become a Member of this Plan as follows:
(i) When an Associate has completed one Year of
Service and attained age 21, he shall be eligible to make Member
Contributions pursuant to Section 4 hereof, commencing on the first day
of the month coincident with or following the date he has met these
eligibility requirements.
9
<PAGE>
(ii) When an Associate has completed two Years of
Service and attained age 21, he shall be eligible to share in Company
Profit Sharing Contributions pursuant to Section 3 of this Plan,
effective as of the first day of the month coincident with or following
the date he satisfies the requirements of this subparagraph (ii).
(c) Commencing August 1, 1997, each Associate shall be
eligible to become a Member of the Plan when the Associate has completed one
Year of Service and attained age 21, with membership to commence as of the first
day of the month coincident with or following the date he has met these
eligibility requirements. Such Associate shall be eligible:
(i) to make Member Contributions pursuant to Section
4;
(ii) to share in Company Matching Contributions
pursuant to Section 3.02;
(iii) to share in Company Profit Sharing
Contributions, if any, pursuant to Section 3.01.
(d) Effective January 1, 1998, each Associate who was eligible
as of December 31, 1997, or who becomes eligible to become a Member thereafter,
shall be deemed to have elected to make a three percent (3%) Before-Tax
Contribution pursuant to Section 4.01(b), commencing with the first paycheck
received on or after the later of January 1, 1998, or the first day of the month
coincident with or following the date he met the foregoing eligibility
requirements. Notwithstanding this "deemed" election, an Associate or Member may
elect pursuant to procedures established by the Committee to not make, or to
suspend making, said three percent (3%) automatic Before-Tax Contribution, or
pursuant to Section 4.01(a) or (b) to make an After-Tax or a Before- Tax
Contribution of an amount other than three percent (3%).
(e) All Years of Service with an Employer including the
Company and Years of Service with The May Department Stores Company ("May")
while the Employer was part of the Group which included May are counted toward
eligibility, provided that, if an Associate has a 1-year break in service before
satisfying the Plan's condition of eligibility under Section 2.01(b)(i), service
with an Employer or May before such break will not be taken into account. For
the purposes of this Section 2.01, "break in service" means a 12 consecutive
month period during which the Associate does not complete more than 500 Hours of
Service with the Employer, and/or May while part of the Group.
10
<PAGE>
2.02 No Dual Memberships. Notwithstanding anything in this Plan to the
contrary, when and as an Employer is obligated, pursuant to an agreement with
any group or association which represents an Associate, to contribute to any
plan involving pensions or other qualified deferred compensation, such Associate
shall not be eligible for membership in this Plan. If such Associate has
Accounts in this Plan, such Accounts shall continue to be revalued as of each
succeeding Valuation Date pursuant to Section 6.04.
2.03 Re-Employment. A former Member who has retired or has otherwise
terminated employment and is rehired shall become a Member on the first day of
the calendar month coinciding with or next following the date of his rehire.
SECTION 3
Company Contributions
3.01 Amount of Company Profit Sharing Contribution. The Company may
contribute to the Trust, as of the end of each Plan Year, a percentage of its
Net Profits as a Company Profit Sharing Contribution. The amount of such
contribution, if any, shall be determined by the Board of Directors in its
discretion. Any such contribution shall be made as soon as practicable after the
close of the Company's Fiscal Year. All such contributions advanced to the Plan
by the Company shall be reimbursed to the Company by the Employer.
For the Plan Year ended December 31, 1997, the Company Profit Sharing
Contribution shall be made for the seven month period ended July 31, 1997, such
that the amount contributed to this Plan and to the Payless Plan for such period
shall be equal to 2 1/2% of Net Profits for the period February 2, 1997 through
August 30, 1997. For the period August 1, 1997 through December 31, 1997, the
Company has replaced the Company Profit Sharing Contribution with a Company
Matching Contribution in the amount of 2 1/2% of Net Profits for the period
August 31, 1997 through January 31, 1998.
3.02 Amount of Company Matching Contribution. Effective August 1, 1997,
and for Plan Years commencing thereafter, the Company, in its discretion, shall
contribute to the Trust, as of the end of each Plan Year, such that the amount
contributed to this Plan and to the Payless Plan shall be equal to 2 1/2% of Net
Profits, until determined otherwise by the Board of Directors, in the form of a
Company Matching Contribution. The total amount of such contribution shall be
allocated in proportion to the amount that each Member's Contributions under
Sections 4.01(a) and (b), up to a total of 5% of such Member's Pay for a Plan
Year, bears to the total amount of all Member Contributions up to 5% of such
Members' Pay for a Plan Year. Such Company Matching Contribution shall be
determined and paid to the Trustee as
11
<PAGE>
soon as practicable after the close of each Fiscal Year and shall be reimbursed
to the Company by the Employer when paid.
For the Plan Year ended December 31, 1997, the Company Matching
Contribution shall be in an amount which shall equal 2 1/2% of Net Profits for
the period August 31, 1997 through January 31, 1998.
3.03 Allocation of Company Contributions. The Company Contributions
shall be allocated only to the Company Accounts of Members who are employed by
the Employer on the last day of the Plan Year and on behalf of Members whose
employment has terminated during the Plan Year by reason of Retirement, death or
Disability. Company Profit Sharing Contributions shall be credited to eligible
Members' Company Profit Sharing Contribution Accounts. Company Profit Sharing
Contributions allocated prior to or as of July 31, 1997 shall be fully vested;
Company Profit Sharing Contributions allocated thereafter shall be subject to
the vesting provisions of Section 6.09. Company Matching Contributions shall be
allocated, based on annual Member Contributions up to 5% of Pay, to the Member's
Company Matching Contribution Account, subject to the vesting provisions of
Section 6.09 and to the withdrawal penalty provisions of Section 8.02(a). No
Company Matching Contribution shall be made with respect to a Member Before-Tax
Contribution in excess of the Code Section 402(g) limit, as referred to in
Section 4.01(h) and as revised from time to time.
3.04 Profit Sharing Allocation Formula. The Company Profit Sharing
Contribution, if any, shall be allocated to all Members eligible to share in the
contribution according to the ratio that each Member's Allocation Pay Amount for
the Plan Year bears to the total Allocation Pay Amount for all eligible Members
for the Plan Year. For this purpose the term "eligible Members" includes Members
in both the Payless Plan and this Plan.
Notwithstanding the foregoing paragraph, for the Plan Year ended
December 31, 1997, the allocation made to the Company Profit Sharing
Contribution Account of each eligible Member who was employed by the Employer on
December 31, 1997 shall be the amount determined applying the allocation formula
set forth in the preceding paragraph for Members eligible during January,
February, March, April, May, June and July of 1997, based on the Allocation Pay
of all such Members during said period. The amounts of such contributions shall
be subject to applicable limitations, if any, imposed by the Code and the Act.
In no event shall an allocation be made under Sections 3.03 or 3.04 in
excess of an amount permitted by Code Section 401(a)(4) and the Regulations
pursuant thereto.
12
<PAGE>
3.05 Investment of the Company Contribution. The amounts allocated to
each Member pursuant to Section 3.03 shall be credited to his Company Accounts
and invested in one or more of the Investment Funds described in Section 5.01
and in the percentages designated by the Member in the investment election filed
pursuant to Section 5.02 effective for the most recent December 31.
3.06 Return of Company Contributions.
(a) If a Company or Employer Contribution is made to the Trust
because of a good faith mistake of fact, then, within one year of the date of
payment of such Company contribution to the Trust, the Company and/or the
Employer shall have the right (i) to recover an amount equal to the excess of
(A) the amount of such Company contribution over (B) the amount that would have
been contributed had a mistake of fact not occurred, or (ii) to allow all or a
portion of such amount to remain in the Plan, to be forfeited and applied to or
allocated with other forfeitures at the end of such Plan Year.
(b) Each contribution made to the Trust shall be made on the
condition that it is currently deductible by the Employer under Code Section 404
for the taxable year with respect to which the contribution is made. If a
contribution subsequently is determined, whether in whole or in part, not to be
currently deductible as provided in the preceding sentence, then, within one
year of the date of disallowance of the deduction of such Company Contribution,
an amount equal to the disallowed deduction shall be returned to the Company
and/or Employer, as applicable.
(c) Earnings attributable to a contribution that is returned
pursuant to Subsection (a) or (b) above shall not be withdrawn, but losses
attributable thereto shall reduce the amount returned to the Company and/or
Employer.
SECTION 4
Member Contributions
4.01 Procedure for Making Contributions.
(a) After-Tax Contributions. Subject to any limitations set
forth in the Act from time to time, each Member may designate, pursuant to
procedures established by the Company, and contribute to the Plan an amount
equal to not less than 1% nor more than 15% (in whole percentage points) of his
Pay, or a flat dollar amount of not less than $2.00 and not more than $10.00 per
Pay period, subject to any further limitations imposed by the Company in its
discretion; provided, however, that any Before-Tax Contributions made on behalf
of the Member shall reduce by the percentage or dollar amount which he elects to
have contributed pursuant to Section
13
<PAGE>
4.01(b)(i), the percentage or dollar amount of Pay that the Member may
contribute pursuant to this Section 4.01(a).
(b) Before-Tax Contributions. (i) Subject to the limitations
set forth , each Member may elect that his Employer shall contribute directly
to the Fund an amount equal to a whole percentage of his Pay, not less than
1% greater than such percentage as may be determined from time to time by the
Company, or a flat dollar amount of not less than $2.00 and not more than $10.00
per Pay period, which amount shall be his Before-Tax Contribution. The maximum
Before-Tax Contribution by a Member who is determined to be a Highly Compensated
Employee under Section 4.02, for the Plan Year in question, may be further
restricted or limited by the Company or the Committee from time to time.
(ii) Commencing January 1, 1998, pursuant to Section
2.01(d), each eligible Member shall be deemed to have elected to make a
three percent (3%) Before-Tax Contribution, unless the Member elects
otherwise in accordance with procedures established by the Committee.
(c) Notwithstanding any election in accordance with Section
4.01 (b), if the Committee at any time determines that all or any portion of the
Member's Before-Tax Contributions should be treated as After-Tax Contributions
in order for the Before-Tax Contribution provisions of the Plan to quality as a
"qualified cash or deferred arrangement" for purposes of Section 1165(e) of the
Puerto Rico Internal Revenue Code of 1994 ("Act"), or if the Actual Deferral
Percentage standards set forth in the Act are not met at the end of the Plan
Year; then the Committee, in its sole and absolute discretion, (i) may, in
accordance with Section 4.02(b) below, limit the amount which shall be
contributed by the Employer as Before-Tax Contributions after the date of such
determination on behalf of all or any portion of the Members and (ii) shall
distribute any excess Before-Tax Contributions made with respect to the Plan
Year to the affected Members as soon as practicable after the end of the Plan
Year.
(d) The Employer shall (i) deduct a Member's After-Tax
Contributions from the Pay of the Member in such installments as the Employer my
deem appropriate, (ii) contribute a Member's Before-Tax Contributions on behalf
of the Member, and (iii) reduce the Pay that is paid to the Member directly in
cash by an amount equal to the Member's Before-Tax Contributions in such
installments as the Employer shall deem appropriate. The amounts so deducted and
so contributed shall be paid by the Employer to the Trustee not later than 15
days following the end of the month with respect to which such amounts are to be
so deducted and contributed or within such shorter period of time as may be
designated under the Code, ERISA or related regulations. The Employer may, from
time to time, make estimated contribution payments to the Trustee during each
month.
14
<PAGE>
(e) Effective with the first payroll period paid in any
calendar month, or as of such other effective time as may be determined by the
Committee, a Member may elect to change the rate of his After-Tax Contributions
to any other rate permitted by Subsection (a) of this Section 4.01 and may elect
to change the amount to be contributed by the Employer directly to the Trust
Fund as Before-Tax Contributions to an amount equal to an amount permitted by
Subsection (b) of this Section 4.01 with respect to such contributions to be
made after the effective date of the election, pursuant to procedures
established by the Committee.
(f) Not later than 15 days prior to the beginning of a payroll
period of a Member, or not later than such other date as may be determined by
the Committee, such Member may elect, pursuant to procedures established by the
Committee, (i) to suspend making After-Tax Contributions and (ii) that the
Employer should suspend making Before-Tax Contributions on his behalf, all as of
the beginning of such payroll period. As of the first day of any calendar month
after the date of such suspension(s) and with at least 15 days' prior notice, or
as of such other date and with such notice as may be determined by the
Committee, such Member may elect (i) to resume making After-Tax Contributions
and (ii) that the Employer shall resume making Before-Tax Contributions on his
behalf, by indicating any amount of contributions permitted under Subsection (a)
and designating an amount equal to any amount of Pay as Before-Tax Contributions
that is permitted under Subsection (b) hereof.
(g) Contributions pursuant to this Section 4.01 shall be
credited to Member Accounts.
(h) Notwithstanding any election in accordance with paragraph
(b) of this Section 4.01, the total amount of a Member's Before-Tax
Contributions for any calendar year shall not exceed $7,500 or 10% of the
Member's annual Pay or such other amount as may be adjusted from time to time
under applicable Puerto Rico law (the "Deferral Limit"). If a Member reaches the
Deferral Limit, the Committee can direct that all or any portion of such
Member's Contributions during such year shall be After-Tax Contributions
regardless of such Member's elections pursuant to Sections 4.01(a) and 4.01(b).
4.02 Limitations on Before-Tax Contributions.
(a) Notwithstanding the foregoing provisions of this Section
4, the Committee shall limit the amount of Before-Tax Contributions made on
behalf of each "Highly Compensated Employee" (as hereinafter defined) to the
extent necessary to ensure that either of the following tests is satisfied:
15
<PAGE>
(i) The "Actual Deferral Percentage" (as hereinafter
defined) of the group of eligible Highly Compensated Employees is not
more than the Actual Deferral Percentage of all other eligible
Associates ("non-Highly Compensated Employees") multiplied by 1.25; or
(ii) The excess of the Actual Deferral Percentage for
the group of eligible Highly Compensated Employees over that of all
other eligible Associates is not more than two percentage points, and
the Actual Deferral Percentage for the group of eligible Highly
Compensated Employees is not more than the Actual Deferral Percentage
of all other eligible Associates multiplied by 2.0.
(iii) Effective January 1, 1997 to the extent
permitted by the Act, the Actual Deferral Percentage for non-Highly
Compensated Employees used in satisfying the tests set forth in (i)
and/or (ii) above may be, for any Plan Year, the Actual Deferral
Percentage for non-Highly Compensated Employees for the immediately
preceding Plan Year, as determined by the Company in the manner
permitted by law.
For the purposes of this Section 4.02, Section 4.04 and Section 4.05,
"eligible" means eligible to be a Member of this Plan pursuant to Section
2.01(b)(1).
For purposes of Sections 4.02, 4.04 and 4.05, the term "Highly
Compensated Employee" shall mean any employee whose Pay is greater than the Pay
of two-thirds of all eligible employees, taking into account only Pay which is
considered for the purpose of Section 4.01.
For purposes of this Section 4.02, the term "Actual Deferral
Percentage" shall mean, for a specified group of Associates for a Plan Year, the
average of the ratios (calculated separately for each person in such group) of
(i) The aggregate of the Before-Tax Contributions
(and such other contributions which, in accordance with applicable
rules and regulations promulgated under the Act, may be aggregated with
such Before-Tax Contributions for purposes of demonstrating compliance
with the requirements of the Act) which are actually payable to the
Trust on behalf of each such Associate, to
(ii) Such Associate's Pay for such Plan Year.
In the event it is determined prior to any payroll period that the
amount of Before-Tax Contributions elected to be made thereafter would cause the
limitation prescribed in this Section 4.02 to be exceeded, the amount of
Before-Tax Contributions
16
<PAGE>
allowed to be made on behalf of Highly Compensated Employees (and/or such other
Members as the Committee may prescribe) shall be reduced to a rate determined by
the Committee, and any elections of future Before-Tax Contributions which exceed
the rate determined by the Committee shall be deemed to be After-Tax
Contributions for the remainder of the Plan Year, notwithstanding the
limitations on contribution rate changes in Section 4.01(e). Except as is
hereinafter provided, the Members to whom such reduction is applicable and the
amount of such reduction shall be determined pursuant to such uniform and
nondiscriminatory rules as the Committee shall prescribe.
(b) Notwithstanding the provisions of the foregoing paragraph,
with respect to any Plan Year in which Before-Tax Contributions on behalf of
Highly Compensated Employees exceed the applicable limit set forth in this
Section 4.02, the Committee shall reduce the amount of the excess Before-Tax
Contributions made on behalf of the Highly Compensated Employees (by reducing
such contributions in order of Actual Deferral Percentages beginning with the
highest), and shall distribute such excess Before-Tax Contributions (along with
earnings attributable to such excess Before-Tax Contributions, as determined
pursuant to such rules and regulations as shall be prescribed by the Internal
Revenue Service) to the affected Highly Compensated Employees as soon as
practicable after the end of such Plan Year, and in all events prior to the end
of the next following Plan Year. Effective January 1, 1997, any excess
Before-Tax Contributions to be returned to Highly Compensated Employees shall be
calculated (i.e., reduced) and distributed by first reducing the Before-Tax
Contributions of the Highly Compensated Employees with the largest dollar
amount(s) of Before-Tax Contributions (rather than with the highest
Percentage(s)) to the extent required or permitted under the Act.
In lieu of such distribution of excess Before-Tax Contributions, the
Committee may, to the extent permitted by applicable rules and regulations (and
(i) except with respect to situations in which Section 4.01 (h) applies, and
(ii) prior to March 15 of the calendar year following the Plan Year in which
such contributions are made or such later date as may be permitted under the
Act), recharacterize as After-Tax Contributions for such Plan Year all or a
portion of the Before-Tax Contributions for Members who are Highly Compensated
Employees to the extent necessary to comply with the applicable limit set forth
in this Section 4.02.
In lieu of either distributing or recharacterizing excess Before-Tax
Contributions, the Company may, to the extent permitted by applicable rules and
regulations, make a qualified nonelective contribution on behalf of non-Highly
Compensated Employees in an amount sufficient to satisfy one of the
non-discrimination tests set forth above, which Company contribution (if any)
shall be reimbursed by the Employer. Allocation of any such qualified
non-elective contribution would be to the Member Before-Tax Accounts of each
non-Highly Compensated Employee in the same proportion that such Member's
Before-Tax
17
<PAGE>
Contributions for the year bears to the total Member Before-Tax Contributions
for the year for all non-Highly Compensated Employees of the Employer. However,
the maximum annual addition credited to a Member's Account shall be limited by
Section 4.06.
(c) Notwithstanding any provision of Sections 4.02(c) to the
contrary, if Before-Tax Contributions on behalf of Highly Compensated Employees
in excess of the applicable limit set forth in Section 4.02 either are
distributed or are recharacterized, any Company Matching Allocation which would
have been attributable to the amounts distributed or recharacterized shall be
held unallocated in a suspense account and, as of the end of the Plan Year,
forfeited and added to and allocated with Company Contributions in the next
following Plan Year.
4.03 Distributions of Excess Deferrals.
(a) Notwithstanding any other provision of the Plan, Excess
Before- Tax Deferrals (as hereinafter defined) and earnings allocable thereto as
determined pursuant to such rules and regulations as are prescribed by the
Internal Revenue Service, may be distributed no later than April 15 (or such
later date as may be permitted under the Act) to Members who claim such
allocable Excess Before-Tax Amounts (which shall be the "Excess Before-Tax
Deferrals" plus earnings, if any) for the preceding calendar year.
(b) For purposes of this Section 4.03, "Excess Before-Tax
Deferral" means the amount of Pay which a Member has elected to have the
Employer contribute to the Trust rather than receive it in cash, which is a
Member Contribution under Section 4.01 for a calendar year that the Member
allocates to this Plan pursuant to the claim procedure set forth in subsection
4.03(c) hereof.
(c) The Member's claim shall be in writing; shall be submitted
to the Committee no later than March 1 (or such other date as the Committee may
specify); shall specify the amount of the Member's Excess Before-Tax Deferral
for the preceding calendar year; and shall be accompanied by the Member's
written statement that if such amounts are not distributed, the Excess
Before-Tax Deferrals, when added to amounts deferred under other plans or
arrangements described in Act Section 1165(e) exceeds the limit imposed on the
Member in accordance with the applicable provisions of the Act for the year in
which the deferral occurred.
(d) Notwithstanding any provision of Sections 3 or 4 to the
contrary, any Company Matching Allocation which would have been attributable to
an Excess Before-Tax Deferral distributed to a Member under Section 4.02(a)
shall not be retained or distributed (unless and to the extent permitted under
the Act and so determined by the Company in a uniform, nondiscriminatory
manner), but shall be held
18
<PAGE>
unallocated in a suspense account and, as of the end of the Plan Year, forfeited
and added to and allocated with Company Contributions in the next following Plan
Year.
4.04 Limitations on After-Tax Contributions. Notwithstanding the
foregoing provisions of this Section 4, the Company or the Committee, in their
respective discretion, may limit the amount of After-Tax Contributions made by
or on behalf of each eligible Member to the extent determined appropriate.
4.05 Limitations on Company Matching Contributions. Notwithstanding the
foregoing provisions of Sections 3.02 or this Section 4, the Company or the
Committee, in their respective discretion, may limit the amount of Company
Matching Contributions allocated on behalf of each eligible Member to the extent
determined appropriate.
4.06 Aggregate Limitations. To the extent required under the Act or as
so determined by the Company or the Committee, in their respective discretion,
Company Matching Contributions and Member After-Tax Contributions may be
aggregated on a Member by Member basis and limited, as determined appropriate.
SECTION 5
Investment Provisions
5.01 Investment Funds.
(a) There shall be established as part of the Trust Fund a
reasonable range of investment options which may include a money market or
stable value fund, a fixed income fund, a common stock fund, a Payless Common
Stock Fund and a May Common Stock Fund. The May Common Stock Fund shall not be
available for investment of new contributions and shall be eliminated entirely
as an investment option not later than December 31, 1997. If, on or before
December 31, 1997, a Member has failed to direct the reinvestment of amounts in
his May Common Stock Fund, he shall be deemed to have elected to have such
amounts invested in the money market or stable value fund. The Committee may
from time to time, in its discretion, change, delete or add Investment Funds
available within the Trust Fund; provided that unless and until the Plan is
amended accordingly, the Plan shall continue to provide a Payless Common Stock
Fund as an investment option.
(b) Income from and proceeds of sales of investments in each
Investment Fund shall be reinvested in the same Investment Fund. Any income or
other taxes payable with respect to a Fund shall be charged to such Fund.
19
<PAGE>
(c) A Trustee may, from time to time, make temporary
investments in short term obligations of the United States Government,
commercial paper, or other investments of a short term nature, pending
investment in an Investment Fund.
5.02 Investment Direction.
(a) A Member may elect that his Member Contributions for each
calendar month be invested in 1% increments totaling 100% in one or more of the
Investment Funds. Such election must be made with at least one day notice prior
to each calendar month or prior to membership in the Plan, pursuant to
procedures prescribed by the Committee, or on such other date and subject to
other conditions as may be determined by the Committee. Such election shall be
effective until and unless a Member makes a different election for any period,
but only as provided for under Subsection 5.02(b) and Subsection 5.02(c). If the
Member fails to file a timely initial investment election, he shall be deemed to
have elected to have 100% of his Member Contributions and his Company Profit
Sharing Contributions invested in the Money Market Fund (or such other stable,
fixed income investment as may be determined by the Committee) and 100% of his
Company Matching Contributions in the Payless Common Stock Fund.
For the Plan Year ended December 31, 1996 and until such time as the
Committee determines otherwise and so notifies Members, a Member's share of any
Company Contributions, when allocated as of Plan Year-end, shall be invested in
the same Investment Funds in the same proportions as the Member has elected in
connection with investment of his Member Contributions at such Plan Year-end.
(b) A Member may change his election with respect to future
Member and Company Contributions effective with the first payroll period paid in
each calendar month with at least one day prior written notice to the Committee
pursuant to procedures prescribed by the Committee, or on such other date and
subject to other conditions as may be determined by the Committee and may not
change his election in any other manner except as provided in Subsection
5.02(c).
(c) Effective as of the last day of each calendar month with
at least one day prior notice to the Committee, or as of such other date
determined by the Committee, and pursuant to procedures prescribed by the
Committee, a Member may elect to have any or all of the value in any of the
Investment Funds which are credited to his Member and/or Company Accounts
transferred and invested in any one or more of the Investment Funds under
Section 5.01.
20
<PAGE>
SECTION 6
Accounts
6.01 Member Accounts. The Committee shall maintain or cause to be
maintained for each Member under each Investment Fund in which his Member
Contributions are invested separate Member Accounts which shall reflect the
portion of his interest in such Investment Fund which is attributable to his
contributions. The Member's After-Tax Contributions shall be credited to a
separate Member After-Tax Account. The Member's Before-Tax Contributions shall
be credited to a separate Member Before-Tax Account.
6.02 Company Accounts. The Committee shall maintain or cause to be
maintained for each Member under each Investment Fund in which his Company
Contributions are invested separate Company Accounts which shall reflect the
portion of his interest in such Investment Fund which is attributable to Company
Contributions, as well as to contributions made by an Employer under Prior Plans
and to any income or earnings attributable to such Company Contributions and
Prior Plan contributions. The Member's Company Matching Contributions shall be
credited to a separate Company Matching Contribution Account. The Member's
Company Profit Sharing Contribution, if any, shall be credited to a separate
Company Profit Sharing Contribution Account.
6.03 Maintenance of Accounts. For the purposes of maintaining Accounts
pursuant to this Section 6, each Investment Fund, shall be divided into Units,
and the Interest of each Member in such Investment Fund shall be evidenced by
the number of Units in such Investment Fund credited to his Accounts.
6.04 Valuation of Accounts. As of each Valuation Date the Committee
shall determine the value of a Unit in each Account by dividing the current
market value of all property in each such Account as of such Valuation Date
(after deducting any expenses or other amounts including withdrawals property
chargeable against such Account) by the number of Units then outstanding to the
credit of all Members in each such Account.
6.05 Member Statements. The Committee shall furnish or cause to be
furnished to each Member a statement of his Company and Member Accounts, at
least once each year, or more frequently if required by applicable law.
6.06 Shares of The May Department Stores Company ("May Stock") in the
May Common Stock Fund. The provisions of this Section 6.06 shall govern the
shares of common stock in the May Common Stock Fund, including the shares of
stock transferred to the Plan from the May Plan.
21
<PAGE>
(a) The May Stock shall be held by the Trustee in a separate
fund of the Trust designated as the May Common Stock Fund. Subject to the
further provisions of Section 6.07, the May Common Stock Fund shall be invested
only in shares of May Stock. Dividends received by the Trustee in respect of the
May Stock shall be first used to pay expenses of the May Common Stock Fund and
then invested in the Money Market Fund.
(b) A Member may elect to sell some or all of the Units in the
May Common Stock Fund attributable to either his Member or Company Accounts.
Such election shall be made in such manner as provided by the Committee and will
be effective as of the last day of the calendar month in which the election is
recorded.
Notwithstanding the foregoing, the Committee may permit Members to
elect to sell Units as of any monthly valuation date and under such further
conditions as may be determined from time to time which shall be applicable to
all Members with Units in the May Common Stock Fund.
(c) The net proceeds from the sale of a Member's interest in
the May Common Stock Fund shall be invested pursuant to the Member's election in
one or more of the other Investment Funds described in Section 5.02.
(d) At such time as all shares of May Common Stock
attributable to Units held in the May Common Stock Fund have been distributed or
sold pursuant to Member election, the May Common Stock Fund shall terminate.
Until such time as such Fund has been terminated, it shall be valued at the same
time and in the same manner as the Investment Funds described in Section 5.02,
and maintained to and valued in Member Accounts in accordance with Sections
6.03.
(e) Each Member (or beneficiary of a deceased Member) who has
Accounts in the May Common Stock Fund shall, as a named fiduciary within the
meaning of Section 403(a)(1) of ERISA, have the right to direct the Trustee with
respect to the vote of the number of shares of May Stock attributable to Units
credited to him in the May Common Stock Fund as of the latest practicable
Valuation Date prior to each meeting of shareowners of May. For such purpose the
Trustee shall furnish to each such Member prior to each such meeting the proxy
statement for such meeting, together with a form to be returned to the Trustee
on which may be set forth the Member's instructions as to the manner of voting
such shares of stock. Each Member or Beneficiary who has the right under this
section to direct the Trustee with respect to voting shares and who provides
timely instructions to the Trustee shall, as a named fiduciary, be considered to
have directed the Trustee to vote a pro rata portion of the shares attributable
to Units for which the Trustee receives no timely instructions and shares which
have not been credited as of the latest practicable Valuation Date. Upon
22
<PAGE>
receipt of such instructions, the Trustee shall vote such shares in accordance
therewith. If, within such reasonable period of time prior to any such meeting
of the shareowners as may be specified by the Trustee, no instructions shall
have been received by the Trustee from such Member, the Trustee shall vote, in
person or by proxy, such shares of stock proportionally in the same manner as
the May Stock for which the Trustee received voting instructions from Members.
The Trustee shall not divulge the instruction of any Member. The Trustee shall
also be entitled to vote in its sole discretion, in person or by proxy, all
shares of May Stock held by it upon any matters to which as a practical matter
no instructions can be given by Members prior to the meeting.
(f) Each Member who has Accounts in the May Common Stock Fund
shall, as a named fiduciary within the meaning of Section 403(a)(1) of ERISA,
have the right with respect to the number of shares of May Stock attributable to
Units credited to him in the May Common Stock Fund as of the latest practicable
Valuation Date, to direct the Trustee in writing as to the manner in which to
respond to a tender or exchange offer with respect to May Stock, and the Trustee
shall respond in accordance with the instructions so received. The Trustee shall
utilize its best efforts to timely distribute or cause to be distributed to each
Member such information as will be distributed to shareowners of May in
connection with any such tender or exchange offer, together with a form
requesting instructions on whether or not such shares will be tendered or
exchanged. If the Trustee shall not receive timely direction from a Member as to
the manner in which to respond to such a tender or exchange offer, the Trustee
shall not tender or exchange any shares of May Stock with respect to which such
Member has the right of direction. The Trustee shall not divulge the
instructions of any Member. Shares in May Stock Fund Accounts of Members who
direct that such shares be tendered or exchanged shall be transferred to a new
fund.
6.07 Shares of Payless Stock Received in Respect of May Stock. In the
event that shares of Payless Stock are distributed to Members' Accounts in the
May Common Stock Fund, such shares shall be segregated and transferred to the
Payless Common Stock Investment Fund.
6.08 Shares of Payless ShoeSource, Inc. ("Payless Stock") in the
Payless Stock Fund.
(a) Each Member (or beneficiary of a deceased Member) who has
Accounts invested in the Payless Common Stock Fund shall, as a named fiduciary
within the meaning of Section 403(a)(1) of ERISA, have the right to direct the
Trustee with respect to the vote of the number of shares of Payless Stock
attributable to Units credited to him in the Payless Common Stock Fund as of the
latest practicable Valuation Date prior to each meeting of shareowners of the
Company. For such purpose the Trustee shall furnish to each such Member prior to
each such meeting the
23
<PAGE>
proxy statement for such meeting, together with a form to be returned to the
Trustee on which may be set forth the Member's instructions as to the manner of
voting such shares of stock. Each member or Beneficiary who has the right under
this Section 6.08 to direct the Trustee with respect to voting shares and who
provides timely instructions to the Trustee shall, as a named fiduciary, be
considered to have directed the Trustee to vote a pro rata portion of the shares
attributable to Units for which the Trustee receives no timely instructions and
shares which have not been credited as of the latest practicable Valuation Date.
Upon receipt of such instructions, the Trustee shall vote such shares in
accordance therewith. If, within such reasonable period of time prior to any
such meeting of the shareowners as may be specified by the Trustee, no
instruction shall have been received by the Trustee from such Member, the
Trustee shall vote, in person or by proxy, such shares of stock proportionally
in the same manner as the Payless Stock for which the Trustee received voting
instructions from Members. The Trustee shall not divulge the instructions of any
Member. The Trustee shall also be entitled to vote in its sole discretion, in
person or by proxy, all shares of Payless Stock held by it upon any matters to
which as a practical matter no instructions can be given by Members prior to the
meeting.
(b) Each Member (or beneficiary of a deceased Member) who has
Accounts invested in the Payless Common Stock Fund shall, as a named fiduciary
within the meaning of Section 403(a)(1) of ERISA, have the right with respect to
the number of shares of Payless Stock attributable to Units credited to him in
the Payless Common Stock Fund as of the latest practicable Valuation Date, to
direct the Trustee in writing as to the manner in which to respond to a tender
or exchange offer with respect to Payless Stock, and the Trustee shall respond
in accordance with the instructions so received. The Trustee shall utilize its
best efforts to timely distribute or cause to be distributed to each Member such
information as will be distributed to shareowners of the Company in connection
with any such tender or exchange offer, together with a form requesting
instructions on whether or not such shares will be tendered or exchanged. If the
Trustee shall not receive timely direction from a Member as to the manner in
which to respond to such a tender or exchange offer, the Trustee shall not
tender or exchange any shares of Payless Stock with respect to which such Member
has the right of direction. The Trustee shall not divulge the instructions of
any member. The proceeds from the tender or exchange of shares attributable to
Units in Payless Common Stock Investment Fund accounts of members shall be
transferred to one of the Investment Funds described in Section 5.01 and
pursuant to a procedure established by the Committee.
6.09 Vesting in Member and Company Accounts.
(a) Vesting Schedule. A Member shall have a fully vested
interest all times (i) in his Member Accounts and (ii) in his Company Profit
Sharing Account balance determined as of July 31, 1997. A Member who has
24
<PAGE>
completed at least two full Years of Service as of August 1, 1997 also shall be
fully vested at all times (i) in his Company Matching Contributions Account and
(ii) in his Company Profit Sharing Contribution Account determined at any time
after July 31, 1997. The Company Matching Contribution Account of a Member who
is not or was not credited with at least two Years of Service as of August 1,
1997 and his Company Profit Sharing Contribution Account attributable to Company
Profit Sharing Contributions, if any, based on such Member's eligibility for
such contributions after August 1, 1997, shall vest according to the following
schedule:
Period of Service Vested Interest
----------------- ---------------
Fewer than 2 years 0%
2 years 25%
3 years 50%
4 years 75%
5 years or more 100%
Notwithstanding the foregoing, a Member's interest in his Company Matching
Contribution Account and his Company Profit Sharing Contribution Account shall
become fully vested upon the Member's Retirement, death or Disability.
(b) Cash-Out Distributions to Partially Vested Members and
Restoration of Forfeitures. If, pursuant to Section 9.01, a partially-vested
Member receives a cash-out distribution before he incurs a Forfeiture Break in
Service (as defined in clause (e) below), the cash-out distribution will result
in an immediate forfeiture of the nonvested portion(s) of the Member's Company
Matching and Company Profit Sharing Contribution Account(s). See clause (f)
below. A partially- vested Member is a Member whose Vested Interest, determined
under Section 6.09(a), in either his Company Matching Contribution Account or
his Company Profit Sharing Contribution Account, or both, is less than 100%. A
cash-out distribution is a distribution of the entire vested portion of the
Member's Account(s).
(i) A partially-vested Member who is reemployed by an
Employer after receiving a cash-out distribution of the vested portion
of his Account(s) shall have such forfeited amount restored, unless the
Member no longer has a right to restoration under this subparagraph
(i). The amount restored by the Plan Administrator shall be the same
dollar amount as the dollar amount of his Account(s) on the Valuation
Date immediately preceding the date of the cash-out distribution,
unadjusted for any gains or losses occurring subsequent to that
Valuation Date but reduced by the amount of the prior cash- out
distribution. Restoration of the Member's Account balance(s) includes
restoration of all Code ss. 411(d)(6) protected benefits with respect
to the restored Account(s) in accordance with applicable Treasury
regulations. The Plan Administrator will not restore a reemployed
Member's Account balance(s)
25
<PAGE>
under this subparagraph (i) if the Member has incurred a Forfeiture
Break in Service (as defined in clause (e) below.
(ii) If restoration of the Member's Account(s) is
permitted under subparagraph (i) above, the Plan Administrator will
restore the Member's Account(s) as of the last day of the Plan Year
during which such Member was reemployed by an Employer. To restore the
Member's Account(s), the Plan Administrator, to the extent necessary,
will allocate to the Member's Account(s):
(A) first, the amount, if any, of Member
forfeitures otherwise available for allocation under clause
(f) below;
(B) second, deductible Employer
contributions for the Plan Year to the extent made under a
discretionary formula; and
(C) third, as otherwise permitted by law.
The Plan Administrator will not take into account any allocation under
this clause (b) in applying the limitation on allocations under Section
12.
(iii) The deemed cash-out rule applies to a 0% vested
Member. A 0% vested Member is a Member whose Account(s) derived from
Employer contributions is (are) entirely forfeitable at the time of his
termination of employment. Under the deemed cash-out rule, the Plan
Administrator will treat the 0% vested Member as having received a
cash-out distribution on the date of the Member's termination of
employment or, if the Member's Account(s) is (are) entitled to an
allocation of Employer contributions for the Plan Year in which he
terminates employment, on the last day of that Plan Year.
(c) Period of Service--Vesting. For purposes of determining a
Member's Vested Interest in his Company Contributions Account(s) under clause
(a) above, a Member shall be credited with that number of "years of service"
determined by adding together all of the Employee's Periods of Service, whether
or not consecutive. Only whole years of service shall be taken into account for
purposes of applying the schedule set forth in clause (a) above, and, for
purposes of determining a Member's number of whole years of service,
non-successive Periods of Service must be aggregated, with thirty (30) days of
service being deemed to constitute one month and with either twelve (12) months
or 365 days of service being deemed to constitute one year. For purposes of
determining a Member's Period of Service, the Service Spanning rules described
in Section 1.47(g) shall apply.
26
<PAGE>
(d) Break in Service--Vesting. For purposes of this Section
6.09, a "Break in Service" is a Period of Severance of at least twelve (12)
consecutive months.
(e) Included Periods of Service.
(i) For purposes of determining "Periods of Service"
under this clause (e), the Plan takes into account all Periods of
Service an Associate completes with an Employer, except:
(A) any Period of Service before the Plan
Year in which the Member attained the age of eighteen (18);
and
(B) for the sole purpose of determining a
Member's Vested Interest of his Account(s) derived from
Company contributions which accrued for his benefit prior to a
Forfeiture Break in Service, the Plan shall disregard any
Period of Service after the Member first incurs a Forfeiture
Break in Service. The Member incurs a Forfeiture Break in
Service when he incurs five (5) consecutive Breaks in Service.
(f) Forfeiture Occurs. A Member's forfeiture, if any, of his
Account balance(s) derived from Company contributions occurs under the Plan on
the earlier of:
(i) the last day of the last pay period ending within
the Plan Year in which the Member first incurs a Forfeiture Break in
Service; or
(ii) the date the Member receives a cash-out
distribution.
The Plan Administrator shall determine the percentage of a Member's
Account(s) forfeiture, if any, under this clause (f) solely by reference to the
vesting schedule of Section 6.09(a). As of the last day of each Plan Year, the
total amount of forfeitures which occurred during such Plan Year shall be
calculated and such amount shall be applied (i) to restore under (b) above any
amounts previously forfeited from rehired Members' Accounts, (ii) to pay
Administrative Expenses under Section 7.01 and (iii) the balance, if any, shall
be added to and allocated with the Company Matching Contribution for that Plan
Year.
(g) Former May Plan Members. The provisions of this clause (g)
apply to a Member who previously was employed by the Employer, when it was part
of the Group which included The May Department Stores Company, and who at the
termination of his employment had Company Accounts in the May Plan which were
forfeited as a result of termination of employment. If such Member has not
incurred five consecutive one-year breaks in service, the value of the Member's
Company
27
<PAGE>
Account forfeited under the May Plan will be restored under this Plan (in the
manner described in clause (b) above) and will be 100% vested.
SECTION 7
Expenses
7.01 Administrative Expenses. To the extent permitted by applicable
law, the costs and expenses for administering this Plan, consisting of Trustee
fees and expenses, Investment Manager fees and expenses, fees and expenses of
outside experts, expenses of maintaining records under Section 6 of the Plan,
and all other administrative expenses of the Plan, shall be paid out of the
Trust Fund unless the Company or the Employer elects to pay them with its own
funds. Costs incident to the purchase and sale of securities, such as brokerage
fees, commissions and stock transfer fees, are not regarded as administrative
expenses and shall be borne by the appropriate Investment Fund as determined by
the Trustee or Committee.
SECTION 8
Withdrawals During Employment
8.01 Withdrawals Prohibited Unless Specifically Authorized. No
withdrawal from the Plan shall be permitted prior to a Member's termination of
employment, except as provided in Section 8.02.
8.02 Authorized Withdrawals.
(a) Prior to his termination of employment, a Member may elect
to withdraw, in cash, any or all of the value in his Member After-Tax Accounts.
However, in the event a Member elects to withdraw all or a portion of his
After-Tax Contributions made after August 1, 1997, such Member shall forfeit his
right to fifty percent (50%) of the Company Matching Contribution, if any,
otherwise allocable in connection with his Member Contributions for the Plan
Year in which the withdrawal occurs.
(b) Prior to his termination of employment, a Member may elect
to withdraw, in the event of a "hardship", an amount in cash equal to (i) the
total amount of the Before-Tax Contributions made to the Trust on his behalf, or
(ii) the value in his Member Before-Tax Account whichever is less. In any event
the amount withdrawn may not be greater than the amount determined by the
Committee as being required to meet the immediate financial need created by the
"hardship" and not reasonably available from other resources of the Member,
whichever amount is less. The term "hardship" means a heavy financial hardship
in light of immediate and heavy financial
28
<PAGE>
needs as determined by the Committee in accordance with Internal Revenue Service
regulations. The amount of an immediate and heavy financial need may include any
amounts necessary to pay any federal, state or local taxes or penalties
reasonably anticipated to result from the distribution. The determination shall
be made in a nondiscriminatory manner. Hardship shall include but not be limited
to the following:
(i) Medical expenses described in Code Section
213(d), previously incurred by the Member, the Member's spouse, or any
of the Member's dependents (as defined in Code Section 125) or
necessary for these persons to obtain medical care described in Section
213(d);
(ii) Purchase (excluding mortgage payments) of a
principal residence for the Member;
(iii) Payment of tuition, related educational fees,
and room and board expenses for the next 12 months of post-secondary
education for the Member, his or her spouse, children, or dependents
(as defined in Code Section 152);
(iv) The need to prevent the eviction of the Member
from his or her principal residence or foreclosure on the mortgage of
the Member's principal residence.
The Committee may adopt written guidelines which identify additional
circumstances constituting hardship and which provide procedures to be followed
in the administration of hardship withdrawal requests, which guidelines are
hereby incorporated herein.
In addition, such hardship must be one which in the judgment of the
Committee, based on the Member's representations, cannot be relieved (1) through
reimbursement or compensation by insurance or otherwise, (2) by reasonable
liquidation of the Member's assets to the extent such liquidation would not
itself cause an immediate and heavy financial need, (3) by cessation of Member
Contributions under the Plan or (4) by other distributions from employee benefit
plans maintained by the Company or any other employer or by borrowing from
commercial sources on reasonable commercial terms. The Member shall be required
to submit documentation, to be determined by the Committee, with his hardship
withdrawal request to enable the Committee to make a judgment regarding the
validity of such hardship withdrawal request.
For any Member who has attained age 59 1/2, the "hardship" requirement
shall be deemed waived.
29
<PAGE>
(c) A withdrawal election shall be made pursuant to
application procedures established by the Committee. For any withdrawal under
paragraph (a) or (b), if the amount which may be withdrawn exceeds $100, the
Member may not withdraw less than $100, and if the amount which may be withdrawn
is less than $100, the Member shall be required to withdraw all of such amount.
Contribution totals and Account values shall be determined as of the Valuation
Date coinciding with or next following the filing of the withdrawal election. If
the Member Accounts from which withdrawal is made are in more than one
Investment Fund, the withdrawal shall be pro rata from each such Investment
Fund.
(d) Any Member who was a Participant in or eligible to be a
Participant in the Volume Shoe Corporation Profit Sharing Plan (the "Volume
Plan") as of December 31, 1988 and who had an account balance in the Volume Plan
attributable to Employer Contributions made to the Volume Plan before July 31,
1976 and which account became a Company Account under The May Department Stores
Company Profit Sharing Plan and which has been transferred to this Plan from the
Payless Plan, shall be entitled to withdraw the market value of such account
balance determined (and frozen) as of December 31, 1988.
SECTION 9
Benefits Upon Retirement, Death, Disability, or Termination of Employment
9.01 Benefits. Upon a Member's Retirement, death, Disability, or other
termination of employment, the value of his Member Accounts and of his vested
Company Accounts shall be determined as of the Valuation Date at the end of the
month next following the later of (i) the date of such termination of employment
or (ii) the date the Plan Administrator receives notice of such termination of
employment, whether such notice be written notice or actual notice, and shall be
distributed as provided in Section 10. A temporary Authorized Leave of Absence
for Military Service or for other purposes approved by the Company and/or the
Employer shall not, while any such Authorized Leave of Absence is validly in
effect be regarded as a termination of employment for the purposes of this Plan.
9.02 Beneficiary. Any benefits payable on account of a Member's death
shall be paid to such Member's spouse. If such Member has no spouse or if such
Member's spouse shall have consented to the naming of another beneficiary, such
benefits shall be paid to the person or persons (including, without limitation,
estates, trust, or other entities) last named as beneficiary by such Member on
an appropriate form filed with the Committee. A spouse's consent shall designate
a beneficiary, acknowledge the effect of the consent and be in writing,
witnessed by a Plan representative or notary public. A spouse's consent shall be
irrevocable. If no beneficiary has been so named or the named beneficiary does
not survive the Member,
30
<PAGE>
any payment to be made under this Plan on account of a Member's death shall be
paid to such Member's spouse, or, if he has no spouse, to such Member's estate.
Whenever permitted by the Code or regulations thereunder, the Committee may
waive the requirements that a spouse's consent be obtained. Such waiver may be
on a case by case basis or by categories.
SECTION 10
Payment of Benefits
10.01 Time of Payment.
(a) All amounts distributable to a Member or Beneficiary
pursuant to Section 9 shall, unless the Member makes an approved election
pursuant to Section 10.01 (b) or 10.01 (c), be paid in a lump sum payment to be
made as soon as practicable after the Valuation Date as of which the Account
values are determined pursuant to Section 9.01 provided, however, that any
additional amounts which may be allocated to a Member's Company Accounts
resulting from a Company Contribution in respect of the calendar year in which
employment terminates shall be paid as soon as practicable after such
contribution.
Notwithstanding any provision of this Section 10 to the contrary, if
the present value of the nonforfeitable accrued benefit of a Member, including
Company and Member Contributions (but excluding accumulated deductible employee
contribution, if any) exceeds (or ever has exceeded) $3,500 (or, effective
January 1, 1998, $5,000), no partial or total distribution shall be made unless
the Member has consented thereto in writing in the manner required by law.
(b) Any Member who was a Member of the May Plan as of June 30,
1990 may elect that all Transferred Accounts distributable to him pursuant to
Section 9 shall be paid in annual installments over a period not to exceed ten
years beginning with the Valuation Date as of which the lump sum payment would
otherwise be made. In the event of the death of a Member prior to the expiration
of such period, all amounts which have not been distributed to him shall be paid
in a lump sum to his designated Beneficiary or his estate if there is no
designated Beneficiary. Subject to the foregoing, each such installment shall be
paid as of a Valuation Date and, until all the Accounts of the Member have been
fully distributed, they shall continue to be revalued as of each succeeding
Valuation Date pursuant to Section 6.04.
Notwithstanding the paragraph above, any Member who as of December 31,
1988 was or was entitled to be a Participant in the Volume Shoe Corporation
Profit Sharing Plan may elect that all Transferred Accounts distributable to him
pursuant to Section 9 be paid in the form of equal monthly installments over a
period not to exceed
31
<PAGE>
120 months. Such payments shall otherwise be made in accordance with the
foregoing portion of this Subsection 10.01 (b).
(c) A Member who is entitled to receive a distribution in
excess of $3,500 (or $5,000) may elect to defer such distribution to age 65. An
election to defer distribution shall conform to such requirements as to form,
content, manner, and timing as shall be determined by the Committee and which
requirements shall be applied in a manner which does not discriminate in favor
of Members who are highly compensated employees (within the meaning of Code
Section 414(q)). All Accounts of a Member who elects to defer his distribution
shall continue to be revalued as of each succeeding Valuation Date pursuant to
Section 6.04. A deferred distribution shall be paid when such Member attains the
age of 65 years or at such earlier or later time as shall be determined by the
Committee as permitted by law. In the event of the death of a Member prior to
distribution of the deferred amounts, all amounts shall be distributed in a lump
sum to his designated Beneficiary or to his estate if there is no designated
Beneficiary. The value for payment shall be determined as of the Valuation Date
coincident with or next following such Member's 65th birthday or such other
payment date determined by the Committee.
10.02 Form of Payment. All distributions shall be made in the form of
cash, except that distributions from the May Common Stock Fund or the Payless
Common Stock Fund shall be made in the form of full shares of May Common Stock
or Payless Common Stock, as applicable (with payment in cash for a fraction of a
share) or in cash if elected by the Member or Beneficiary. The rights extended
to a Member hereunder shall also apply to any Beneficiary or alternate payee of
such Member.
10.03 Indirect Payment of Benefits. If any Member or Beneficiary has
been adjudged to be legally, physically or mentally incapable or incompetent,
payment may be made to the legal guardian or other legal representative of such
Member or Beneficiary as determined by the Committee. Such payments shall
constitute a full discharge with respect thereto.
10.04 Inability to Find Member. If a Member or Beneficiary or other
person to whom a benefit payment is due cannot be found during the three years
subsequent to the date a distribution was required to be made under this Plan,
the Accounts shall be forfeited at the end of such three-year period. The value
of such Accounts as of the date the distribution was required to be made shall
be restored if such Member or Beneficiary or other person makes a claim.
10.05 Commencement of Benefit Distribution to Member. In accordance
with Code Section 401 (a) (9) and Treasury Regulations promulgated thereunder,
distributions to a Member must commence not later than the first day of April
following the calendar year in which the Member attains age 70 1/2.
Notwithstanding
32
<PAGE>
the foregoing, effective January 1, 1997, distribution to a Member who is not a
"five percent owner" as defined in Section 20.10(f)(3) shall commence not later
than April 1 following the calendar year in which the Member attains age 70 1/2
or, if later, the calendar year in which the Member retires. If a Member is
currently receiving required distributions from the Plan under Code Section
401(a)(9) and this Section 10.05 but would not be required to receive such
payments after January 1, 1997 under this Section 10.05 as amended, such Member
may elect, in the manner determined by the Committee, to postpone further
distributions until the date otherwise required hereunder.
Such distribution may be made by distributing the entire value of the
Member's Accounts as of the last day of such calendar year. If otherwise
permitted pursuant to Code Section 401 (a) (9) and Regulations thereto, the
Member may elect to take such distribution in lump sum or in installments, if he
is otherwise entitled to installment payments pursuant to Section 10.01 (b).
10.06 Commencement of Benefit Distribution to Beneficiary.
Distributions to the Beneficiary entitled under Section 10.02 to receive any
payments payable under this Plan on account of a Member's death shall be made in
a lump sum payment not later than the first day of April following the calendar
year in which the Member would have attained age 70 1/2.
Notwithstanding the above, any portion of a Member's accounts which are
distributable to a Beneficiary shall be distributed within five (5) years of the
Member's death.
10.07 Commencement of Benefit Distribution to Alternate Payee.
Distributions to an alternate payee entitled under Section 16.01 to receive any
payments payable under this Plan pursuant to the terms of a Qualified Domestic
Relations Order shall be made in accordance with the terms of such Qualified
Domestic Relations Order and this Plan on or after the date on which the Member
has attained his "earliest retirement age" (as defined under Code Section
414(p)) under the Plan. Notwithstanding the foregoing, distribution to an
alternate payee may be made prior to the Member's attainment of his earliest
retirement age if, but only if: (1) the Qualified Domestic Relations Order
specifies distribution at that time or permits an agreement between the Plan and
the alternate payee to authorize an earlier distribution; (2) the distribution
is a single sum distribution of the alternate payee's entire benefit entitlement
under the Plan; and (3) in the event the present value of the alternate payee's
benefits under the Plan exceeds $3,500, the alternate payee consents to any
distribution occurring prior to the Member's attainment of earliest retirement
age.
Nothing in this Section 10.07 shall be construed to permit a Member to
(1) receive a distribution at a time not otherwise permitted under the Plan, (2)
permit the
33
<PAGE>
alternate payee to receive a form of payment not otherwise permitted under the
Plan, or (3) cause his Plan accounts to be valued or otherwise determined in a
manner not otherwise permitted under the Plan.
SECTION 11
Permitted Rollover of Plan Distributions
11.01 Rollover Permitted. Notwithstanding any provision of the Plan to
the contrary that would otherwise limit a distributee's election under this
Section, a distributee may elect, at the time and pursuant to procedures
prescribed by the Committee, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by the
distributee in a direct rollover. Such distribution may commence less than
thirty (30) days after the notice required under Treas. Reg. ss. 1.411(a)-11(c)
(or its successor) is given to a Member or other distributee, provided that the
Member has been clearly informed that he has a right to a period of at least
thirty (30) days after receiving said notice to consider the decision as to
whether to elect a distribution or, if applicable, a distribution option, and
the Member nevertheless affirmatively elects an earlier distribution.
11.02 Definitions. The following definitions shall apply for the
purposes of this Section 11:
(a) Eligible rollover distribution. An eligible rollover
distribution is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover distribution does
not include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's beneficiary or for a specified period
of ten years or more; any distribution to the extent such distribution is
required under Code Section 401 (a) (9); and the portion of any distribution
that is not includable in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to employer securities).
(b) Eligible retirement plan. An eligible retirement plan is
an individual retirement account described in Code Section 408(a), an individual
retirement annuity described in Code Section 401(b), an annuity plan described
in Code Section 403(a), or a qualified trust described in Code Section 401(a),
and which accepts the distributee's eligible rollover distribution. However, in
the case of an eligible rollover distribution to a Member's surviving spouse, an
eligible retirement plan is an individual retirement account or individual
retirement annuity.
34
<PAGE>
(c) Distributee. A distributee includes a Member or former
Member. In addition, the Member or former Member's surviving spouse and the
Member's or former Member's spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as defined in Code Section 414(p),
are distributees with regard to the interest of the spouse or former spouse.
(d) Direct rollover. A direct rollover is a payment by the
Plan to the eligible retirement plan specified by the distributee.
SECTION 12
Limit on Contributions to the Plan
This Section 12 is intended to conform the Plan to the requirements of
Code Section 415 and limits the contributions that can be made by and for an
individual under the Plan.
12.01 Limit on Contributions. Notwithstanding any provision of the Plan
to the contrary:
(a) The "Annual Addition" that may be made to a Member's
Accounts in any calendar year shall not exceed (i) 25% of his Earnings for the
calendar year or (ii) $30,000 (as adjusted from time to time by the Secretary of
the Treasury or his delegate, pursuant to Code Section 415(d), provided that no
such adjustment shall be taken into account before the calendar year for which
the adjustment first takes effect).
(b) If a Member participates in a Defined Benefit Plan
maintained by the Extended Group, the sum of the Member's Defined Contribution
Plan Fraction and Defined Benefit Plan Fraction may not exceed 1.0 for any
calendar year.
(c) If the limitation imposed by Subsection (a) above applies
to a Member in a calendar year, his Member Contributions and, if necessary,
Company Contributions shall be reduced to the extent necessary to prevent the
limitation with respect to such calendar year from being exceeded. If the
limitation imposed by Subsection (b) above, applies, the benefits under any
Defined Benefit Plan maintained by the Extended Group shall be reduced before
the Annual Additions under this Plan are reduced.
12.02 Special Definitions. For the purposes of this Section 12, the
following terms shall have the following meanings:
(a) Annual Addition for any calendar year is the sum of:
35
<PAGE>
(i) the amount of the Company Profit Sharing and
Matching Contributions for the calendar year, plus
(ii) the Member's Before-Tax Contributions for
the calendar year, plus
(iii) the Member's After-Tax Contributions, plus
(iv) the amount of an Employer's contribution on
behalf of the Member or of a Member's contribution, if any, in the same
Plan Year, to another individual account pension benefit plan
maintained by an Employer, plus
(v) the amount, if any, allocated to an individual
medical account pursuant to Code Section 415(l)(1), plus
(vi) the amount, if any, attributable to
post-retirement medical or life insurance benefits for key employees
pursuant to Code Section 419A(d)(2).
(b) Defined Benefit Plan means any plan which is qualified
under Code Sections 401(a) or 403(a) and which is not a Defined Contribution
Plan.
(c) Defined Benefit Plan Fraction means a fraction, where the
numerator is the Member's projected annual benefit under the Defined Benefit
Plan (determined as of the close of the calendar year), and the denominator is
the lesser of:
(i) 1.25 multiplied by the dollar limitation in
effect under Code Section 415(b)(1)(A) for that calendar year, or
(ii) 1.4 multiplied by the amount that may be taken
into account under Code Section 415(b)(1)(B) with respect to the Member
for the calendar year.
(d) Defined Contribution Plan means any plan which is
qualified under Code Sections 401(a), 403(a), or 405(a) and which provides for
an individual account for each Member and for benefits based solely on the
amount contributed to the account, and any income, expenses, gains, losses, and
forfeitures that may be allocated to the account.
(e) Defined Contribution Plan Fraction means a fraction, where
the numerator is the sum of the Annual Additions to the Member's Accounts as of
the
36
<PAGE>
close of the calendar year, and the denominator is the sum of the lesser of the
following amounts for such calendar year and for each prior calendar year of
service with the Extended Group:
(i) 1.25 multiplied by the dollar limitation in
effect under Code Section 415(c)(1)(A) for that calendar year
(determined without regard to Code Section 415(c)(6)), or
(ii) 1.4 multiplied by the amount that may be taken
into account under Code Section 415(c)(1)(B) with respect to the Member
for the calendar year; provided, that the Company may, in accordance
with applicable Treasury Department regulations, elect to calculate the
denominator of the Defined Contribution Plan Fraction in accordance
with Code Section 415(e)(6).
(f) Earnings means the Member's "415(c) compensation" (as
determined under Section 415(c)(3) of the Code and under Treasury Regulation
Section 1.415-2(d)(11), and including any such compensation received from the
Extended Group.
(g) Extended Group means the Company, the Employer and any
other employer which is related to the Corporation as a member of a controlled
group of corporations in accordance with Code Section 414(b), or as a trade or
business under common control in accordance with Code Section 414(c), plus any
other company, trade or business which would be included by such definition
after the modification thereof required by Code Section 415(h).
12.03 General.
(a) For purposes of applying the limitations set forth in this
Section 12, all Defined Benefit Plans (whether or not terminated) of the
Extended Group shall be treated as one Defined Benefit Plan, and all Defined
Contribution Plans (whether or not terminated) of the Extended Group shall be
treated as one Defined Contribution Plan.
(b) This Section 12 is intended to satisfy the requirements
imposed by Code Section 415 and shall be construed in a manner that shall
effectuate this intent. This Section 12 shall not be construed in a manner that
would impose limitations that are more stringent than those required by Code
Section 415.
12.04 Adjustment for Excessive Annual Additions.
(a) If, as a result of the allocation of forfeitures, a
reasonable error in estimating a Member's Pay or other facts and circumstances
to which Treasury
37
<PAGE>
Regulation Section 1.415-6(b)(6) shall be applicable, the "annual additions"
under this Plan would cause the maximum "annual additions" to be exceeded for
any Member, the Committee shall (1) return any Member Contributions credited for
the "limitation year"to the extent that the return would reduce the "excess
amount" in the Member's Accounts, (2) hold any "excess amount" remaining after
the return of any Member Contributions in a "Section 415 suspense account", (3)
use the "Section 415 suspense account" in the next "limitation year" (and
succeeding "limitation years" if necessary) to reduce either Company
Contributions for that Member if that Member is covered by the Plan as of the
end of the "limitation year" or if such Member is not covered by the Plan at the
end of the "limitation year" to reduce Company Contributions for all Members in
the Plan, before any Company Contributions or Member Contributions which would
constitute "annual additions" are made to the Plan for such "limitation year,"
(4) reduce Company Contributions for such "limitation year" by the amount of the
"Section 415 suspense account" allocated and reallocated during such "limitation
year." For purposes of (3) above, the Plan may not distribute "excess amounts"
to Members or former Members.
(b) For purposes of this Section, "excess amount" for any
Member for a "limitation year" shall mean the excess, if any, of (1) the "annual
additions" which would be credited to his account under the terms of the Plan
without regard to the limitations of Code Section 415 over (2) the maximum
"annual additions" determined pursuant to Section 12.01(a).
(c) For purposes of this Section, "Section 415 suspense
account" shall mean an unallocated account equal to the sum of "excess amount"
for all Members in the Plan during the "limitation year." The "Section 415
suspense account" shall not share in any earnings or losses of the Trust Fund.
12.05 Limitation Imposed by Code Section (401)(a)(17). In addition to
other applicable limitations set forth in the Plan, and notwithstanding any
other provision of the Plan to the contrary, the annual Pay of each Associate
taken in to account under the Plan shall not exceed the annual compensation
limit of the Omnibus Budget Reconciliation Act of 1993 (OBRA '93). The OBRA '93
annual Pay limit is $150,000, as adjusted by the Commissioner of Internal
Revenue Service for increases in the cost of living in accordance with Code
Section 40l(a)(17)(B). The cost-of-living adjustment in effect for a calendar
year applies to any period, not exceeding 12 months, over which Pay is
determined (determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the OBRA '93 annual Pay
limit will be multiplied by a fraction, the numerator of which is the number of
months in the determination period, and the denominator of which is 12.
Any reference in this Plan to the limitation under Code Section
401(a)(17) shall mean the OBRA '93 annual Pay limit set forth is this provision.
38
<PAGE>
If Pay for any prior determination period is taken into account in
determining an Associate's benefits accruing in the current year, the Pay for
that prior determination period is subject to the OBRA '93 annual Pay limit in
effect for that prior determination period. For this purpose, for a
determination period beginning before the first day of the first Plan Year
beginning on or after January 1, 1994, the OBRA '93 annual Pay limit is
$150,000.
SECTION 13
Administration of the Plan
13.01 Plan Administrator. The Company shall be the Plan Administrator
of the Plan for purposes of ERISA and shall be a "named fiduciary" as determined
in ERISA Section 402(a)(2).
13.02 Delegation of Authority.
(a) Authority to administer the Plan has been delegated to the
Committee and the Administrative Subcommittee, if any, in accordance with
Sections 1.38 (Total and Permanent Disability), 4.01 (b) and (c) (Member
Contributions), 6.01 (Member Accounts), 6.02 (Company Accounts), 6.05 (Annual
Statements), 8.02 (Authorized Withdrawals), 12.04 (Adjustment of Excessive
Annual Additions), 18.02 (Withdrawal of an Employer) and this Section 13.
(b) Authority with respect to the Investment Funds of the Plan
has been delegated to the Trustee in accordance with Sections 7.01
(Administrative Expenses), 5.01 (c) (Investment Funds), 14 (Management of the
Trust Fund), 6.06 (shares of The May Department Stores Company in the May Common
Stock Fund), and 6.08 (shares of Payless ShoeSource, Inc. in the Payless Common
Stock Fund).
(c) Authority to direct the investment of the Plan's funds has
been delegated to the Investment Subcommittee, if any, in accordance with
Section 14.03(b), (c) and (d) (Investments and Reinvestments).
13.03 Committee and Subcommittees.
(a) The Committee may appoint two subcommittees (an
"Administrative Subcommittee" and an "Investment Subcommittee"), each
Subcommittee to consist of at least three persons, who need not be members of
the Board. The Committee and each Subcommittee, if appointed, shall elect from
its members a Chairman and a Secretary, and may appoint one or more Assistant
Secretaries who may, but need not be, members of the Committee or such
Subcommittee, and may employ such agents, such legal counsel and such clerical,
39
<PAGE>
medical, accounting, actuarial and other services as it may from time to time
deem advisable to assist in the administration of the Plan. The Committee and
each Subcommittee may, from time to time, appoint agents and delegate to such
agents such duties as it considers appropriate and to the extent that such
duties have been so delegated, the agent shall be exclusively responsible for
the proper discharge of such duties.
(b) The Administrative Subcommittee shall have the general
responsibility for the administration of the Plan and the carrying out of its
provisions, and shall have general powers with respect to Plan administration,
including, but not limited to, the powers listed in this Section 13.03. The
Administrative Subcommittee shall have the power to interpret and construe the
Plan, the power to establish rules for the administration of the Plan and the
transaction of its business, the power to remedy and resolve inconsistencies and
omissions, and the power to determine all questions which arise in the
administration, interpretation, or application of the Plan, including but not
limited to questions regarding the eligibility, status, Account value and any
rights of any Member, Beneficiary, and any other person hereunder.
(c) The Investment Subcommittee shall have the powers provided
for in Section 14.03(b).
(d) The Committee and each Subcommittee shall act by a
majority of its members and the action of such majority expressed by a vote at a
meeting, or in writing without a meeting, shall constitute the action of the
Committee or such Subcommittee. All decisions, determinations, actions or
interpretations with respect to the Plan by the Committee or either Subcommittee
and the individual committee or subcommittee members shall be in the
Committee's, Subcommittee's or individual member's sole discretion. The
decision, determination, action or interpretation of the Committee or either
Subcommittee and the respective individual members of the Committee or
Subcommittee in respect to all matters within the scope of its authority shall
be conclusive and binding on all persons. No member of the Committee or either
Subcommittee shall have any liability to any person for any action or omission
except each for his own individual willful misconduct. If a Subcommittee is not
appointed, the Committee shall exercise such Subcommittee's authority and
perform its duties as described herein.
(e) Nothing in this Section 13 or in any other provision of
the Plan shall be deemed to relieve any person who is a fiduciary under the Plan
for purposes of ERISA from any responsibility or liability for any
responsibility, obligation or duty which Part 4 of Title I of ERISA shall impose
upon such person with respect to this Plan.
40
<PAGE>
13.04 Accounts and Reports. The Committee shall maintain or cause to be
maintained accounts reflecting the fiscal transactions of the Plan and shall
keep in convenient form such data as may be necessary for the administration of
the Plan. The Committee shall prepare annually a report showing in reasonable
detail the assets and liabilities of the Plan and setting forth a brief account
of the operation of the Plan for the preceding year.
13.05 Non-Discrimination. Neither the Committee nor either Subcommittee
shall exercise its discretion in such a way as to result in discrimination in
favor of officers, shareholders or highly compensated employees (within the
meaning of Code Section 414(q)).
SECTION 14
Management of the Trust Fund
14.01 Use of the Trust Fund. All assets of the Plan shall be held as a
Trust Fund in one or more trusts and shall be used to provide the benefits of
this Plan. No part of the corpus or income shall be used for, or diverted to,
purposes other than for the exclusive benefit of Members and their Beneficiaries
under this Plan and administrative expenses of this Plan.
14.02 Trustees. The Trust Fund may, at the direction of the Company, be
divided into one or more separate trusts, each of which may have a separate
Trustee appointed from time to time by the Company and subject to removal by the
Company. The Trustee or Trustees of each trust shall have complete authority and
discretion with respect to the investment and reinvestment of the assets of each
trust, subject, however, to (i) the provisions in the Trust Agreements between
the Trustee or Trustees and the Company, and (ii) the provisions of this Plan.
Any or all of such separate trusts shall be referred to collectively from time
to time as the Trust Fund. Any division of the Trust Fund into one or more
separate trusts shall be at the direction of the Company.
14.03 Investments and Reinvestments. The investment and reinvestment of
the assets of the Trust Fund shall be in accordance with the following:
(a) The Company shall have the authority to instruct the
Trustee or Trustees to accept and follow the instructions of any designated
investment manager (within the meaning of ERISA Section 3(38)) with respect to
the investment and reinvestment of the assets constituting a money market or
stable value fund, a fixed income fund, a common stock index fund, or any other
Investment Funds the Company may designate.
41
<PAGE>
(b) The Investment Subcommittee shall have the powers, with
respect to investment and reinvestment of the assets constituting the Investment
Funds, to promulgate limitations, restrictions, rules or guidelines with respect
to the investment policies and classes of investments in which the assets of the
Funds may be invested or reinvested by the Trustee or Trustees, including any
such investments made pursuant to the instructions of any investment manager. In
the event an investment manager designated pursuant to Section 14.03(a) resigns
or otherwise is unable to act, the Investment Subcommittee shall have such power
and authority as otherwise would be exercisable by such Investment Manager.
(c) In the event that the assets of the Trust Fund shall be
divided into one or more separate trusts pursuant to the authority provided for
in Section 14.02, then the powers of the Investment Subcommittee as provided for
in Section 14.03(b) may be exercised with respect to one or more of such trusts
within the discretion of the Investment Subcommittee.
(d) The powers of the Investment Subcommittee as provided in
Section 14.03(b), may be exercised at any time or from time to time by the
Investment Subcommittee within the discretion of the Investment Subcommittee and
shall be pursuant to a written agreement between the Investment Subcommittee and
the Trustee or Trustees or, if an investment manager has been appointed, between
the Investment Subcommittee and the investment manager.
(e) The Trust Agreement between the Company (and/or the
Employer) and the Trustee or Trustees implementing the Plan shall contain
provisions effectuating the provisions of this Section 14 of the Plan.
SECTION 15
Certain Rights and Obligations of Employers and Members
15.01 Disclaimer of Employer Liability.
(a) No liability shall attach to the Company or the Employer
with respect to a benefit or claim hereunder and Members and their
Beneficiaries, and all persons claiming under or through them, shall have
recourse only to the Trust Fund for payment of any benefit hereunder.
(b) The rights of the Members, their Beneficiaries and other
persons are hereby expressly limited and shall be only in accordance with the
provisions of the Plan. Nothing contained herein shall be deemed to give a
Member any interest in any specific property of the Trust or any interest other
than a right to receive payments pursuant to the provisions of the Plan.
42
<PAGE>
15.02 Employer-Associate Relationship. Neither the establishment of
this Plan nor its communication through a Summary Plan Description (or
otherwise) shall be construed as conferring any legal or other rights upon any
Associate or any other person to continue in employment or as interfering with
or affecting in any manner the right of the Company or the Employer to discharge
any Associate or otherwise act with relation to him. The Company and the
Employer may take any action (including discharge) with respect to any Associate
or other person and may treat him without regard to the effect which such action
or treatment might have upon him as a Member of this Plan.
15.03 Binding Effect. Each Member, by executing an enrollment form,
beneficiary designation and otherwise agreeing to participate in the Plan agrees
for himself, his beneficiary(ies), heirs, successors and assigns to be bound by
all of the provisions of the Plan.
15.04 Corporate Action. With respect to any action permitted or
required by the Plan, the Company and/or the Employer may act through its
appropriate officers:
15.05 Claim and Appeal Procedure. A Member or beneficiary may file with
the Committee or its designee at any time a written claim in connection either
with a benefit payable hereunder or otherwise. The Committee or its designee,
normally within 90 days after receipt of a written claim, shall render a written
decision on the claim, unless an additional 90 days is required by special
circumstances which shall be explained to the claimant. If the claim is denied,
either in whole or in part, the decision shall include the reason or reasons for
the denial; a specific reference to the Plan provision or provisions which are
the basis for the denial; a description of any additional material or
information necessary for the claimant to perfect the claim; an explanation as
to why the information or material is necessary; and an explanation of the
Plan's entire claim procedure. The claimant may file with the Committee, within
60 days after receiving the written decision from the Committee, a written
notice of request for review of the Committee's decision. The review shall be
made by a committee of up to three individuals (which may include members of the
Committee) appointed by the Company or by the Committee. Said committee shall
render a written decision on the claim containing the specific reasons for their
decision, including a reference to the Plan's provisions, normally within 60
days after receipt of the request for review, unless an additional 60 days is
required by special circumstances which shall be explained to the claimant. If a
Member or beneficiary does not file written notice of a claim with the Committee
or its designee at the times set forth above, he shall have waived any right to
a benefit other than as originally proposed by the Company or the Committee.
43
<PAGE>
SECTION 16
Non-Alienation of Benefits
16.01 Provisions With Respect to Assignment and Levy. No benefit
payable under this Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, levy or charge, and
any attempt so to anticipate, alienate, sell, transfer, assign, encumber, levy
upon or charge the same shall be void; nor shall any such benefit be in any
manner liable for or subject to the debts, contracts, liabilities, engagements
or torts of the person entitled to such benefit, except as specifically provided
herein. Notwithstanding the foregoing, the creation, assignment, or recognition
of a right to any benefit payable to an alternate payee with respect to a
Qualified Domestic Relations Order shall not be treated as an assignment or
alienation prohibited by this Section. Any other provision of the Plan to the
contrary notwithstanding, if a Qualified Domestic Relations order requires the
distribution of all or part of a Member's benefits under the Plan, the
establishment or acknowledgment of the alternate payee's right to benefits under
the Plan in accordance with the terms of such Qualified Domestic Relations Order
shall in all events be deemed to be consistent with the terms of the Plan.
16.02 Alternate Application. If a Member or Beneficiary under this Plan
becomes bankrupt or attempts to anticipate, alienate, sell, transfer, assign,
pledge, encumber or charge any benefit under this Plan, except as specifically
provided herein, or if any benefit shall, in the discretion of the Committee,
cease, and in that event the Committee may hold or apply the same or any part
thereof to or for the benefit of such Member or Beneficiary, his spouse,
children or other dependents, or any of them, or in such other manner and in
such proportion as the Committee may deem proper.
SECTION 17
Amendments
17.01 Company's Rights. The Company reserves the right at any time and
from time to time in its sole discretion to alter, amend, or modify, in whole or
in part, any or all of the provisions of this Plan, provided, however, no such
alteration, amendment or modification shall be made which shall decrease the
accrued benefit of any Member. Anything in this Plan to the contrary
notwithstanding, the Company in its sole discretion may make any modifications
or amendments, additions or deletions in or to this Plan as to benefits or
otherwise and retroactively if necessary, and regardless of the effect thereof
on the rights of any particular Member or Beneficiary, which it deems
appropriate and/or necessary in order to comply with or satisfy any conditions
of any law or regulation relating to the qualification of this Plan and the
trust or trusts created pursuant hereto and to keep this Plan and said trusts
qualified
44
<PAGE>
under Code Section 401(a) and to have the trust or trusts declared exempt from
taxation under Code Section 501(a).
17.02 Procedure to Amend. This Plan may be amended by action of the
Company's Board of Directors and evidenced by a written amendment signed by the
Company's Secretary or by any other person so authorized by or pursuant to
authority of the Board of Directors.
17.03 Provision Against Diversion. No part of the assets of the Trust
Fund shall, by reason of any modification or amendment or otherwise, be used
for, or diverted to, purposes other than for the exclusive benefit of Members
and their Beneficiaries under this Plan and administrative expenses of this
Plan.
SECTION 18
Termination
18.01 Right to Terminate. The Company reserves the right to terminate
this Plan, in whole or in part, at any time and, if this Plan shall be
terminated, the provisions of Section 18.03 shall apply and the Accounts of
affected Members shall become (or remain) fully vested and nonforfeitable.
18.02 Withdrawal of an Employer. If an Employer shall cease to be a
participating Employer in this Plan, the Trust Fund and the Accounts of the
Members of the withdrawing Employer and their Beneficiaries shall be revalued as
if such withdrawal date were a Valuation Date. The Committee shall then direct
the Trustee either to distribute the Accounts of the Members of the withdrawing
Employer as of the date of such withdrawal on the same basis as if the Plan had
been terminated pursuant to Section 18.03 or to deposit in a trust established
by the withdrawing Employer pursuant to a plan substantially similar to this
Plan assets equal in value to the assets of the Trust Fund allocable to the
Accounts of the Members of the withdrawing Employer.
18.03 Distribution in Event of Termination of Trust. If this Plan is
terminated at any time including a partial termination as defined in Code
Section 411(d)(3), or if contributions are completely discontinued and the
Company determines that the trust shall be terminated, in whole or in part, the
Trust Fund and all Accounts shall be revalued as if the termination date were a
Valuation Date and the affected Members' Accounts shall be distributed in
accordance with Section 10.
45
<PAGE>
18.04 Administration in Event of Continuance of Trust. If this Plan
shall be terminated in whole or in part or contributions completely discontinued
but the Company determines that the trust shall be continued pursuant to the
terms of the Trust Agreement, the trust shall continue to be administered as
though the Plan were otherwise in effect. Upon the subsequent termination of the
trust, in whole or in part, the provisions of Section 18.03 shall apply.
18.05 Merger, Consolidation or Transfer. In the case of any merger or
consolidation with, or transfer of Plan assets or liabilities to, any other plan
each Member shall be entitled to receive a benefit immediately after the merger,
consolidation or transfer (if the transferee plan then terminated) which is
equal to or greater than the benefit he would have been entitled to receive
immediately before the merger, consolidation or transfer (if the Plan had then
terminated).
SECTION 19
Construction
19.01 Applicable Law. The provisions of this Plan except as otherwise
governed by ERISA shall be construed, regulated, administered and enforced
according to the laws of Puerto Rico and, whenever possible, to be in conformity
with the applicable requirements of ERISA, of the Internal Revenue Code to the
extent applicable and of the Puerto Rico Internal Revenue Code of 1994.
19.02 Gender and Number. Wherever applicable, the masculine pronoun as
used herein shall include the feminine pronoun and the singular pronoun shall
include the plural.
46
<PAGE>
