Exhibit 10.5
PAYLESS SHOESOURCE, INC.
1996 STOCK INCENTIVE PLAN
AMENDED SEPTEMBER 18, 2003
1996 STOCK INCENTIVE PLAN
I. GENERAL
1. PURPOSE. The purpose of the Plan is to aid the Company and its
Subsidiaries in attracting, retaining, and motivating management employees.
2. DEFINITIONS. Whenever used herein, the following terms shall have
the meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means a committee designated by the Board, which
shall consist of not less than two members of the Board who shall be appointed
by and serve at the pleasure of the Board and who shall be "non-employee
directors" within the meaning of Rule 16b-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended, and who shall be
"outside" directors within the meaning of Section 162(m) of the Code.
(d) "Company" means Payless ShoeSource, Inc., a Delaware
corporation.
(e) "Disability" means a permanent and total disability which
enables the Participant to be eligible for and receive a disability benefit
under the Federal Social Security Act.
(f) "Fair Market Value" means the average of the high and low prices
of the Stock on the New York Stock Exchange on the date in question, or, if no
sale or sales of the Stock occurred on such Exchange on that day, the average of
the high and low prices of the Stock on the last preceding day when the Stock
was sold on the New York Stock Exchange; with respect to a Stock Appreciation
Right, the term means the average of the high and low prices of the Stock on the
New York Stock Exchange on such date or dates as may be provided in the Stock
Appreciation Right Agreement; provided, however, that with respect to Options
granted as of the effective date of the spin-off (the "Effective Date") of the
Company by The May Department Stores Company ("May") with respect to options
previously granted by May which were waived by the Participant or which were not
yet exercisable and therefore lapsed on the Effective Date, the "Fair Market
Value" means the arithmetic average of the high and low trading prices of the
Stock on the New York Stock Exchange for each of the first 30 trading days on
which trading in the Stock on that exchange occurs.
(g) "Incentive Stock Option" means an Option granted under the Plan
which constitutes and shall be treated as an "incentive stock option" as defined
in Section 422 of the Code.
(h) "Non-Qualified Stock Option" means an Option granted under the
Plan which shall not constitute or be treated as an Incentive Stock Option.
(i) "Non-Tandem Stock Appreciation Right" means a Right described in
Part III, Section 3.
(j) "Option" means a right or rights to purchase shares of Stock
described in Part II.
(k) "Option Agreement" means the agreement between the Company and a
Participant evidencing the grant of an Option and containing the terms and
conditions, not inconsistent with the Plan, that are applicable to such Option.
(l) "Participant" means an individual to whom an Option, Right or
Performance Unit is granted or Restricted Stock Grant is made.
(m) "Performance Restricted Stock" means Restricted Stock whose
provisions include the restrictions described in Part IV, Section 3(b).
(n) "Performance Unit" means a right, described in Part V, to
receive up to 100% of the value of shares of Stock.
(o) "Plan" means the 1996 Stock Incentive Plan of the Company, as
amended from time to time.
(p) "Related Option" means the Option in relation to which a Tandem
Stock Appreciation Right is granted.
(q) "Restricted Stock Grant" means a grant described in Part IV.
(r) "Retirement" means retirement as that word is defined in the
Company's Profit Sharing Plan.
(s) "Stock" means the Common Stock of the Company.
(t) "Stock Appreciation Right" or "Right" means a right described in
Part III which provides for the payment of an amount in cash or Stock in
accordance with such terms and conditions as are provided in the Stock
Appreciation Right Agreement
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applicable to such Right; provided however, that in Part III, Section 2, "Right"
shall refer only to a "Tandem Stock Appreciation Right" and that in Part III,
Section 3, "Right" shall refer only to a "Non-Tandem Stock Appreciation Right".
(u) "Stock Appreciation Right Agreement" means the agreement between
the Company and a Participant evidencing the grant of a Stock Appreciation Right
and containing the terms and conditions, not inconsistent with the Plan, that
are applicable to such Right.
(v) "Subsidiary" means a subsidiary of the Company or an
unincorporated organization controlled, directly or indirectly, by the Company.
With respect to Incentive Stock Options, the term "Subsidiary" shall have the
meaning set forth in Section 424(f) of the Code.
(w) "Tandem Stock Appreciation Right" means a Right described in
Part III, Section 2.
3. ADMINISTRATION. The Plan shall be administered by the Committee.
Subject to all applicable provisions of the Plan, the Committee is authorized to
approve grants of Options, Rights or Performance Units or the making of
Restricted Stock Grants in accordance with the Plan, to construe and interpret
the Plan, to prescribe, amend, and rescind rules and regulations relating to the
Plan and to make all determinations and take all actions necessary or advisable
for the Plan's administration. The Committee shall act by vote or written
consent of a majority of its members. Whenever the Plan authorizes or requires
the Committee to take any action, make any determination or decision or form any
opinion, then any such action, determination, decision or opinion by or of the
Committee shall be in the absolute discretion of the Committee. Notwithstanding
anything in the Plan to the contrary, with respect to any employee who is a
resident outside the United States, the Committee may, in its sole discretion,
amend the terms of the Plan in order to conform such terms with the requirements
of local law or to meet the objectives of the Plan. The Committee may, where
appropriate, establish one or more sub-Plans for this purpose.
4. SHARES SUBJECT TO THE PLAN.
(a) Maximum Number of Shares. Stock issued under the Plan shall be
treasury shares or previously authorized but unissued shares, subject to the
following limitations:
(i) Plan Maximum. The maximum number of shares of Stock
which may be issued under the Plan is 5,200,000, of which no more
than 400,000 may be issued pursuant to Restricted Stock Grants.
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(ii) Participant Maximum. The maximum number of Options
and Stock Appreciation Rights which may be granted to any
Participant during the term of the Plan is 500,000; provided,
however, that if a Stock Appreciation Right is issued in
substitution for an existing stock option or in tandem with a stock
option, then the grant of such a Stock Appreciation Right shall not
count against the limit. The maximum number of shares of Stock which
may be issued to each Participant free from restrictions pursuant to
a grant of Performance Restricted Stock is 50,000 per year. The
maximum number of shares of Stock which may be granted to each
Participant pursuant to Performance Units is 50,000 per year.
(b) Expired Options or Rights. If an Option or Right expires,
terminates, ceases to be exercisable or is surrendered without having been
exercised in full, then the shares relating to the Option or Right shall, unless
the Plan has been terminated, again become available under the Plan.
(c) Lapse of Restrictions on Restricted Stock. If any shares of
Stock shall be returned to the Company pursuant to the provisions of Sections 2
or 3 of Part IV or in the instruments evidencing the making of Restricted Stock
Grants, then such shares shall, unless the Plan has been terminated, again
become available under the Plan.
(d) Expired Performance Units. If a Performance Unit expires,
terminates, is surrendered or otherwise ceases to exist, so that no further
shares of Stock may be issued pursuant to such Performance Unit, then the shares
of Stock which could have been issued but were not issued pursuant thereto
shall, unless the Plan has been terminated, again become available under the
Plan.
5. PARTICIPANTS. Participants in the Plan shall be determined as
follows:
(a) Eligibility. The individuals who are eligible to receive
Options, Rights, Performance Units or Restricted Stock Grants hereunder shall be
limited to management employees of the Company and its Subsidiaries (including
employees who are directors and/or officers).
(b) Determination. From time to time the Committee shall, in its
sole discretion, but subject to all of the provisions of the Plan, determine
which of those eligible employees shall receive Option(s), Stock Appreciation
Right(s), Performance Unit(s) or Restricted Stock Grant(s) under the Plan and
the size, terms, conditions and/or restrictions of the Option(s), Right(s),
Performance Unit(s) or Restricted Stock Grant(s).
(c) Differing Terms; Effect of Grant. The Committee may approve the
grant of Option(s) Right(s), or Performance Unit(s) or the making of Restricted
Stock Grant(s) subject to differing terms, conditions and/or restrictions to any
eligible employee in any year. The Committee's decision to approve the grant of
an Option, Right or
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Performance Unit or the making of a Restricted Stock Grant to an eligible
employee in any year shall not require the Committee to approve the grant of an
Option, Right or Performance Unit or the making of a Restricted Stock Grant to
that employee in any other year or to any other employee in any year; nor shall
the Committee's decision with respect to the size, terms, conditions and/or
restrictions of any Option, Right or Performance Unit to be granted to an
employee or any Restricted Stock Grant to be made to an employee in any year
require the Committee to approve the grant of an Option, Right or Performance
Unit or the making of a Restricted Stock Grant of the same size or with the same
terms, conditions and/or restrictions to that employee in any other year or to
any other employee in any year. The Committee shall not be precluded from
approving the grant of an Option, Right or Performance Unit or the making of a
Restricted Stock Grant to any eligible employee solely because such employee may
previously have been granted an Option, Right or Performance Unit or may
previously have received a Restricted Stock Grant.
6. RIGHTS WITH RESPECT TO SHARES OF STOCK. A Participant who has
exercised an Option or Right (payable all or in part in Stock) or to whom a
Restricted Stock Grant has been made or to whom shares of Stock have been issued
pursuant to Performance Units shall have, after a certificate or certificates
for the number of shares of Stock granted have been issued in his name, absolute
ownership of such shares including the right to vote the same and receive
dividends thereon; provided, however that rights with respect to shares issued
in connection with a Restricted Stock Grant shall be subject to the terms,
conditions and restrictions described in the Plan and in the instrument
evidencing the making of the Restricted Stock Grant to such Participant.
7. EMPLOYMENT. In the absence of any specific agreement to the
contrary, no grant of an Option, Right or Performance Unit or making of a
Restricted Stock Grant to a Participant under the Plan shall affect any right of
the Company or its Subsidiaries to terminate the Participant's employment at any
time.
II. OPTIONS
1. GENERAL. Each employee chosen to receive an Option(s) may be granted
an Incentive Stock Option, a Non-Qualified Stock Option or both, subject to the
following terms, conditions and restrictions. Each Option granted under the Plan
shall be evidenced by an Option Agreement which shall contain such terms and
conditions consistent with the Plan as the Committee shall determine; provided,
however, that each Option shall satisfy the following requirements and each
Incentive Stock Option shall satisfy the requirement of Part II, Section 2:
(a) Option Price. The option price for each share purchased under
any Option shall be specified in the Option Agreement and, subject to the
provisions of paragraph (b) below and Part VII, Section 3, shall not be less
than Fair Market Value on
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the date the Option is granted; provided, however, that in no event shall the
option price per share be less than the par value thereof.
(b) Option Period.
(i) General. The period in which an Option may be
exercised shall not exceed ten years from the date the Option is
granted; provided, however, that the Option may be sooner terminated
in accordance with the provisions of this paragraph (b). Subject to
the foregoing, the Committee may provide that any Option may be
exercised, in whole or in part, at such time or times as the
Committee may in its discretion determine.
(ii) Termination of Employment. If the Participant
ceases to be an employee of the Company or a Subsidiary for any
reason other than Retirement, Disability, or death, all of such
Participant's outstanding Options shall immediately terminate.
(iii) Retirement or Disability. If a Participant's
employment is terminated by Retirement or Disability, the term of
any then outstanding Option held by the Participant shall extend for
a period specified by the Committee in the agreement pertaining to
such Option, and the number of shares in respect of which the Option
may be exercised after the Participant's Retirement or Disability
shall be determined by the agreement pertaining to such Option;
provided, however, that such agreement shall provide that the
Committee may cancel the Participant's Option during such period if
the Participant's Retirement was without the consent of the Company,
or if the Participant engages during such period of Retirement or
Disability in employment or activities contrary, in the opinion of
the Committee, to the best interests of the Company.
2. INCENTIVE STOCK OPTIONS. Each Option Agreement evidencing an
Incentive Stock Option shall satisfy the requirement that to the extent that the
aggregate Fair Market Value of Stock with respect to which Incentive Stock
Options are exercisable for the first time by any Participant during any
calendar year (under the Plan and all stock option plans of the Company and its
Subsidiaries) exceeds $100,000, such Options shall be treated as Non-Qualified
Stock Options. For purposes of this Section 2, aggregate Fair Market Value of
Stock shall be determined as of the time the Option with respect to such Stock
is granted.
3. DEATH. If a Participant's employment is terminated by death at a
time when he or she has not fully exercised any then outstanding Option, or if a
Participant dies after Retirement or Disability without having fully exercised
any then outstanding Option, the beneficiary designated by the Participant (or,
in the absence of such designation, the executors or administrators or legatees
or distributees of the Participant's
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estate) shall have the right to exercise such Option in whole or in part during
such period following the Participant's death as is set forth in the Option
Agreement. The Company shall prescribe the procedures and requirements for
beneficiary designations not inconsistent with this provision and has the right
to review and approve such designations.
4. NONASSIGNABILITY. Each Option shall not be transferable (other than,
upon the death of the Participant, by beneficiary designation, by last will and
testament or by the laws of descent and distribution) and shall be exercisable
during the Participant's lifetime only by the Participant.
5. PAYMENT FOR STOCK. Full payment in cash or, if the Committee
approves, in Stock, for shares purchased shall be made at the time of exercising
the Option in whole or in part. No certificates for shares so purchased shall be
issued until full payment therefor has been made, and a Participant shall have
none of the rights of a shareowner until such certificates are issued to him or
her. If the Committee approves, a Participant may elect to pay all or part of
the purchase price for shares pursuant to an exercise of a Non-Qualified Stock
Option by requesting the Company to reduce the number of shares otherwise
issuable to the Participant upon the exercise of the Non-Qualified Stock Option
by the number of shares with a Fair Market Value sufficient to pay the exercise
price. In addition, if the Committee approves, the Option Agreement may provide
that the Participant may elect, on terms set forth in the Option Agreement, to
have the Company withhold from the shares of Stock payable to the Participant
upon exercise of an Option the number of shares of Stock having a Fair Market
Value equal to the amount of any required withholding taxes. In addition, if the
Committee approves, a Participant may elect to pay all or part of the purchase
price for shares through simultaneous sale through a broker of shares acquired
on exercise, as permitted under Regulation T of the Federal Reserve Board or, at
the discretion of the Committee and to the extent permitted by law, by such
other methods as the Committee may from time to time prescribe.
6. USE OF PROCEEDS. The proceeds received by the Company from the sale
of Stock pursuant to the exercise of an Option may be used for general corporate
purposes.
7. RESTRICTIONS UPON EXERCISE OF OPTION. The exercise of each Option
shall be subject to the condition that if at any time the Company shall
determine in its discretion that the satisfaction of withholding tax or other
withholding liabilities under any state or Federal law, or that the listing,
registration or qualification of any shares otherwise deliverable upon such
exercise upon any securities exchange or under any state or Federal law, or that
the consent or approval of any regulatory body, is necessary or desirable as a
condition of, or in connection with, such exercise or the delivery or purchase
of shares thereunder, then in any such event such exercise shall not be
effective unless such withholding, listing, registration, qualification, consent
or approval shall have been effected or obtained free of any conditions not
acceptable to the Company.
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8. REPRICING PROHIBITED. There shall be no grant of an Option(s) to a
Participant in exchange for a Participant's agreement to cancellation of a
higher-priced Option(s) that was previously granted to such Participant.
III. STOCK APPRECIATION RIGHTS
1. GENERAL. Each employee chosen to receive a Stock Appreciation
Right(s) may be granted a Tandem Stock Appreciation Right, a Non-Tandem Stock
Appreciation Right or both, subject to the following terms, conditions and
restrictions and subject to such additional terms, conditions and restrictions
as may be determined by the Committee from time to time hereafter; provided
however, that no Right shall be subject to additional terms, conditions or
restrictions which are more favorable to a Participant than the terms,
conditions and restrictions set forth in the Plan.
2. TANDEM STOCK APPRECIATION RIGHTS. Each Tandem Stock Appreciation
Right may be granted only with respect to a share(s) of Stock for which an
Option(s) has been granted under the Plan, and may be awarded concurrently with
the grant of such Option or at any time thereafter while the Option is
outstanding. If the Committee so determines, a Tandem Stock Appreciation Right
may also be granted with respect to a share(s) of Stock for which an option has
been granted and is outstanding under any other plan of the Company. A Stock
Appreciation Right shall be evidenced by a Stock Appreciation Right Agreement
which shall contain such terms and conditions (which may include limitations as
to the time when such Stock Appreciation Right becomes exercisable and when it
ceases to be exercisable that are more restrictive than the limitations
applicable to the Related Option(s)) not inconsistent with the Plan as the
Committee shall determine; provided, however, that each Tandem Stock
Appreciation Right shall satisfy the following requirements:
(a) Termination of a Right. If the Related Option is exercised, in
whole or in part, then the Right with respect to the shares of Stock purchased
pursuant to such exercise (but not with respect to any unpurchased shares of
Stock) shall terminate as of the date of the exercise. If an unexercised Right
is otherwise exercisable on the date that the Related Option expires, and if the
Fair Market Value of the shares of Stock with respect to which such Right was
granted, determined as of the date of such expiration, exceeds the Option price
of such shares, then, notwithstanding Section 2(b), the Right shall
automatically be deemed to have been exercised as of the date of such
expiration; otherwise, on the date that the Related Option expires, any
outstanding Right related thereto shall be terminated as of the date of such
expiration.
(b) Exercise. Tandem Stock Appreciation Rights may be exercised (i)
only at such time or times as, and to the extent that, the Related Options shall
be exercisable, (ii) only upon surrender of the Related Options with respect to
the shares for
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which the Rights are then being exercised, and (iii) subject to the terms and
conditions set forth in the Stock Appreciation Right Agreement; provided that no
Tandem Stock Appreciation Right may be exercised prior to the expiration of six
(6) months from the date of the grant and can only be exercised during the
ten-day period beginning on the third business day following the release of the
Company's quarterly or annual statement of sales and earnings.
3. NON-TANDEM STOCK APPRECIATION RIGHTS. Each Non-Tandem Stock
Appreciation Right may be granted with respect to a share(s) of Stock or, if the
Committee so determines, in exchange for an outstanding Option or an outstanding
stock option granted under any other plan of the Company. A Non-Tandem Stock
Appreciation Right shall be evidenced by a Stock Appreciation Right Agreement
which shall contain such terms and conditions not inconsistent with the Plan as
the Committee shall determine; provided, however, that each Non-Tandem Stock
Appreciation Right shall satisfy the following requirements:
(a) Termination of a Right. A Non-Tandem Stock Appreciation Right
shall terminate as of the earlier of (i) the date of exercise of such Right, to
the extent that it is exercised; or (ii) the termination date specified in the
Stock Appreciation Right Agreement. If an unexercised Right is otherwise
exercisable on the date that it expires, and if the Fair Market Value of the
shares of Stock with respect to which such Right was granted, determined as of
the date of such expiration, exceeds the exercise price of such Right (set forth
in the Stock Appreciation Right Agreement), then the Right shall automatically
be deemed to have been exercised as of the date of such expiration.
(b) Exercise. Non-Tandem Stock Appreciation Rights may be exercised
in accordance with the terms and conditions set forth in the Stock Appreciation
Right Agreement; provided that (i) no Non-Tandem Stock Appreciation Right that
is payable all or in part in Stock may be exercised prior to the expiration of
six (6) months from the date of the grant; (ii) the exercise price of any
Non-Tandem Stock Appreciation Right granted in exchange for an outstanding
Option or for an outstanding stock option granted under any other plan of the
Company shall be the same exercise price as that outstanding Option or option
and (iii) the exercise price of any Non-Tandem Stock Appreciation Right not
granted in exchange for an outstanding Option or for an outstanding stock option
granted under any other plan of the Company shall be the Fair Market Value of
the Stock on the date of the grant of the Right(s).
4. PAYMENT.
(a) Amount. Upon the exercise of a Stock Appreciation Right, a
Participant shall be entitled to receive the excess of the aggregate Fair Market
Value of the shares of Stock with respect to which the Right is being exercised
(determined as of the date of such exercise) over (i) the aggregate option price
of such shares in the case of
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Tandem Stock Appreciation Rights; or (ii) the aggregate exercise price (set
forth in the Stock Appreciation Right Agreement) in the case of Non-Tandem Stock
Appreciation Rights.
(b) Form. Any amount which becomes payable upon exercise of a Stock
Appreciation Right under the Plan shall be paid entirely in cash, entirely in
Stock or partly in cash and partly in Stock in accordance with such terms and
conditions as are provided in the applicable Stock Appreciation Right Agreement;
provided, however, that notwithstanding any provision in any Stock Appreciation
Right Agreement, the Committee may determine in its sole and absolute judgment
that any amount which may become payable upon exercise of a Right shall be paid
entirely in cash.
5. TERMINATION OF EMPLOYMENT.
(a) General. If a Participant ceases to be an employee of the
Company or of a Subsidiary for any reason other than Retirement, Disability or
death, all of such Participant's outstanding Rights shall immediately terminate.
(b) Retirement or Disability. If a Participant's employment is
terminated by Retirement or Disability, the Participant's right to exercise all
or any portion of any Right after the date of such Retirement or Disability
shall be determined by the provisions of the Stock Appreciation Right Agreement;
provided, however, that such Agreement shall provide that the Committee may
terminate the Participant's Right prior to the date on which the Right is
exercised if the Participant's Retirement was without the consent of the
Company, or if the Participant engages during such period of Retirement or
Disability in employment or activities contrary, in the opinion of the
Committee, to the best interests of the Company.
(c) Death. If a Participant's employment is terminated by death at a
time when the Participant has not fully exercised any then outstanding Rights,
or if a Participant dies after Retirement or Disability without having fully
exercised any then outstanding Rights, the beneficiary designated by the
Participant (or, in the absence of such designation, the executors or
administrators or legatees or distributees of the Participant's estate) shall
have the right to exercise such Right in whole or in part during such period
following the Participant's death as set forth in the Stock Appreciation Right
Agreement. The Company shall prescribe the procedures and requirements for
beneficiary designations not inconsistent with this provision and has the right
to review and approve such designations.
6. EXPIRATION. If the period in which a Stock Appreciation Right is
exercisable expires and the Right has not been exercised, then such Right shall
terminate as of the last day on which it was exercisable.
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7. NONASSIGNABILITY. Each Right shall not be transferable (other than,
upon the death of the Participant, by beneficiary designation, by last will and
testament or by the laws of descent and distribution) and shall be exercisable
during the Participant's lifetime only by the Participant.
8. RESTRICTIONS UPON EXERCISE OF RIGHTS. The exercise of each Right
shall be subject to the condition that if at any time the Company shall
determine in its discretion that the satisfaction of withholding tax or other
withholding liabilities under any state or Federal law, or that the consent or
approval of any regulatory body, is necessary or desirable as a condition of, or
in connection with, such exercise, then, in any such event, such exercise shall
not be effective unless such withholding, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
IV. RESTRICTED STOCK GRANTS
1. GENERAL. A Restricted Stock Grant made under the Plan shall contain
the following terms, conditions and restrictions and such additional terms,
conditions and restrictions as may be determined by the Committee from time to
time hereafter; provided, however, that no Restricted Stock Grant shall be
subject to additional terms, conditions or restrictions which are more favorable
to a Participant than the terms, conditions and restrictions set forth in the
Plan.
2. RESTRICTIONS. Subject to the provisions of Part IV, Section 3,
shares of Stock granted to a Participant pursuant to a Restricted Stock Grant:
(a) shall not be sold, assigned, conveyed, transferred, pledged,
hypothecated, or otherwise disposed of, and
(b) shall be returned to the Company forthwith, and all the rights
of the Participant to such shares shall immediately terminate without any
payment or consideration by the Company, if the Participant's continuous
employment with the Company or any Subsidiary shall terminate for any reason,
except as provided in Part IV, Section 4. Such return of such Stock shall be
accomplished by the Participant's delivering or causing to be delivered to the
Secretary or any Assistant Secretary of the Company the certificate(s) for such
shares of Stock, accompanied by such endorsement(s) and/or instrument(s) of
transfer as may be required by the Secretary or any Assistant Secretary of the
Company.
3. LAPSE OF RESTRICTIONS.
(a) General. Subject to the provisions of Part IV, Sections 3(b) and
4 and of Part VII, Section 4, the restrictions set forth in Part IV, Section 2
shall lapse on
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such date or dates on or after the first anniversary and on or before the tenth
anniversary of the date as of which the Restricted Stock Grant is made, as the
Committee shall determine at the time of the Restricted Stock Grant.
(b) Performance Restricted Stock. If the Committee has designated
the Stock covered by a Restricted Stock Grant as Performance Restricted Stock,
then the lapse of restrictions set forth in Part IV, Section 2 that would
otherwise occur on a specified date shall also be subject to the following:
(i) if the Company meets or exceeds the Target Long-Term
EPS Growth Objective (after adjustment for Relative Performance
Rank) for the most recently ended Long-Term Performance Period, then
the restrictions that would otherwise lapse on such date shall lapse
as to 100% of the shares of such Performance Restricted Stock; and
(ii) if the Company meets or exceeds the Threshold
Long-Term EPS Growth Objective (after adjustment for Relative
Performance Rank) but does not meet or exceed the Target Long-Term
Growth Objective (after adjustment for Relative Performance Rank)
for the most recently ended Long-Term Performance Period, then the
restrictions on the shares of Performance Restricted Stock that
would otherwise lapse on such date shall lapse as to (i) 50% of such
shares plus (ii) 50% of such shares multiplied by a fraction (not
less than zero and not greater than one), the numerator of which is
the Company's actual Long-Term EPS Growth for the most recently
ended Long-Term Performance Period less the Threshold Long-Term EPS
Growth Objective for such period and the denominator of which is the
Target Long-Term EPS Growth Objective for such period less the
Threshold Long-Term EPS Growth Objective for such period, and the
remaining shares of Performance Restricted Stock shall immediately
forfeit to the Company; and
(iii) if the Company does not meet or exceed the
Threshold Long-Term EPS Objective (after adjustment for Relative
Performance Rank) for the most recently ended Long-Term Performance
Period, then 100% of the shares of such Performance Restricted Stock
shall immediately forfeit to the Company.
For purposes of this Section 3(b), the terms Long-Term Performance Period,
Relative Performance Rank, Target Long-Term EPS Objective and Threshold
Long-Term EPS Objective shall have the same meanings as in the Company's
Executive Incentive Compensation Plan for Payless Executives. No restrictions
shall lapse on any Performance Restricted Stock until the Committee certifies,
in writing, that the requirements set forth in this Section 3(b) have been
satisfied.
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(c) Forfeiture. All shares of Stock forfeited under this Section 3
shall be returned to the Company forthwith, and all the rights of the
Participant to such shares shall immediately terminate without any payment or
consideration by the Company.
4. TERMINATION OF EMPLOYMENT BY REASON OF DEATH OR DISABILITY. If a
Participant who has been in the continuous employment of the Company or of a
Subsidiary since the date as of which a Restricted Stock Grant was made to such
Participant shall, while in such employment, die or become Disabled and such
Participant's death or Disability shall occur more than one year after the date
as of which the Restricted Stock Grant was made to such Participant, then the
restrictions set forth in Part IV, Section 2 shall lapse as to all shares of
Restricted Stock granted to such Participant pursuant to such Restricted Stock
Grant on the date of such event. A Participant may file a written designation of
beneficiary to receive, in the event of the Participant's death, any shares for
which restrictions lapse on the date of death. The Company shall prescribe
procedures and requirements for beneficiary designations not inconsistent with
this provision and has the right to review and approve such designations.
5. AGREEMENT BY EMPLOYEE REGARDING WITHHOLDING TAXES. Each Participant
shall agree that, subject to the provisions of Part IV, Section 6,
(a) no later than the date as of which the restrictions mentioned in
Part IV, Section 2 and in the instrument evidencing the making of the Restricted
Stock Grant shall lapse, such Participant will pay to the Company in cash, or,
if the Committee approves, in Stock, or make other arrangements satisfactory to
the Committee regarding payment of, any Federal, state or local taxes of any
kind required by law to be withheld with respect to the shares of Stock subject
to such Restricted Stock Grant, and
(b) the Company and its Subsidiaries shall, to the extent permitted
by law, have the right to deduct from any payment of any kind otherwise due to
the Participant any Federal, state or local taxes of any kind required by law to
be withheld with respect to the shares of Stock subject to such Restricted Stock
Grant.
6. ELECTION TO RECOGNIZE GROSS INCOME IN THE YEAR OF GRANT. If any
Participant properly elects, within thirty (30) days of the date of grant, to
include in gross income for Federal income tax purposes an amount equal to the
Fair Market Value of the shares of Stock granted on the date of grant, such
Participant shall pay to the Company, or make arrangements satisfactory to the
Committee to pay to the Company in the year of such grant, any Federal, state or
local taxes required to be withheld with respect to such shares. If such
Participant shall fail to make such payments, the Company and its Subsidiaries
shall, to the extent permitted by law, have the right to deduct from any payment
of any kind otherwise due to the employee any Federal, state or local taxes of
any kind required by law to be withheld with respect to such shares.
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7. RESTRICTIVE LEGEND; CERTIFICATES MAY BE HELD IN CUSTODY. Each
certificate evidencing shares of Stock granted pursuant to a Restricted Stock
Grant shall, (i) if issued to any person other than the Company for safekeeping
while the restrictions apply, bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted Stock Grant and (ii)
if issued to the Company for safekeeping while the restrictions apply, be noted
as restricted on the records of the transfer agent. Any attempt to dispose of
such shares of Stock in contravention of such terms, conditions and restrictions
shall be ineffective. The Committee may adopt rules which provide that the
certificates evidencing such shares may be held in custody by a bank or other
institution, or that the Company may itself hold such shares in custody, until
the restrictions thereon shall have lapsed.
8. RESTRICTIONS UPON MAKING OF RESTRICTED STOCK GRANTS. The listing upon
the New York Stock Exchange or the registration or qualification under any
Federal or state law of any shares of Stock to be granted pursuant to Restricted
Stock Grants (whether to permit the making of Restricted Stock Grants or the
resale or other disposition of any such shares of Stock by or on behalf of the
employees receiving such shares) may be necessary or desirable as a condition of
or in connection with such Restricted Stock Grants and if, in any such event,
the Board in its sole discretion so determines, delivery of the certificates for
such shares of Stock shall not be made until such listing, registration or
qualification shall have been completed. In such connection, the Company agrees
that it will use its best effort to effect any such listing, registration or
qualification; provided, however, the Company shall not be required to use its
best efforts to effect such registration under the Securities Act of 1933 other
than on Form S-8, as presently in effect, or such other forms as may be in
effect from time to time calling for information comparable to that presently
required to be furnished under Form S-8.
9. RESTRICTIONS UPON RESALE OF STOCK. If the shares of Stock that have
been granted to a Participant pursuant to the terms of the Plan are not
registered under the Securities Act of 1933, as amended, pursuant to an
effective registration statement, such Participant, if the Committee shall deem
it advisable, may be required to represent and agree in writing that (i) any
shares of Stock acquired by such employee pursuant to the Plan will not be sold
except pursuant to an effective registration statement under the Securities Act
of 1933, as amended, or pursuant to an exemption from registration under said
Act and (ii) such Participant is acquiring such shares of Stock for the
Participant's own account and not with a view to the distribution thereof.
V. PERFORMANCE UNITS
1. GENERAL. The Committee may, from time to time and upon such terms and
conditions as it may determine, grant Performance Units which will become
payable to a Participant upon the achievement of specified performance
objectives. Each grant of
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Performance Units shall be evidenced by a Performance Unit Agreement which shall
contain such terms and conditions consistent with the Plan as the Committee
shall determine; provided, however that each grant of Performance Units shall
satisfy the following requirements:
(a) Each grant shall specify the number of Performance Units to
which it pertains.
(b) The performance period with respect to each Performance Unit
shall be such period of time commencing with the date of grant as shall be
determined by the Committee at the time of grant.
(c) Each grant shall specify performance objectives, if any, that
are to be achieved in order for payments to be made with respect to such
Performance Units.
(d) Each grant shall specify a minimum acceptable level of
achievement in respect of the specified performance objective below which no
payment will be made and shall set forth a formula for determining the amount of
payment to be made if performance is at or above such minimum, but short of full
achievement of the performance objectives.
(e) Each grant shall specify the time and manner of payment (whether
in cash, shares of Stock or a combination thereof) of Performance Units which
have been earned. If the value of a Performance Unit is paid in whole or in part
with Stock, the number of shares issued with respect to such Unit or portion
thereof that is paid in Stock shall be based on the Fair Market Value of the
Stock on the date the Performance Unit is earned. In no event shall the total
payment of a Performance Unit (whether in cash, shares of Stock or a combination
thereof) exceed the amount earned based on the performance objectives
established at the time of grant.
(f) The Committee may adjust the performance objectives and the
related minimum acceptable level of achievement if, in the sole judgment of the
Committee, events or transactions, such as stock splits, recapitalizations,
mergers, combinations, divestitures, spin-offs and the like, have occurred after
the date of grant which are unrelated to the performance of the Participant and
result in distortion of the performance objectives or the related minimum.
2. PAYMENT FOR PERFORMANCE UNITS. Full and/or partial payment of
Performance Units will be made only upon certification by the Committee of the
attainment by the Participant of the performance objectives.
3. TERMINATION OF EMPLOYMENT BY REASON OF DEATH, DISABILITY OR RETIREMENT.
The Committee may, in its sole discretion, determine that Performance
15
Units awarded to a Participant shall become partially or fully vested upon such
Participant's termination of employment due to death, Disability or Retirement.
VI. CANCELLATION AND RESCISSION.
1. COMPETITION; CONFIDENTIAL INFORMATION.
(a) Unless an Option Agreement or a Stock Appreciation Right
Agreement (any such agreement being referred to herein as an "Agreement")
specifies otherwise, the Committee may
(i) cancel at any time any unexercised Option or Right; or
(ii) rescind any exercise of an Option or Right;
if the Participant is not in compliance with all other applicable
provisions of the Agreement or the Plan or if, prior to any such exercise
or within six months after such exercise, the Participant
(i) engages in a Competing Business, as such term is defined
in the Agreement; or
(ii) solicits for employment, hires or offers employment to,
or discloses information to or otherwise aids or assists any other person
or entity other than the Company in soliciting for employment, hiring or
offering employment to, any employee of the Company; or
(iii) takes any action which is intended to harm the Company
or its reputation, which the Company reasonably concludes could harm the
Company or its reputation or which the Company reasonably concludes could
lead to unwanted or unfavorable publicity to the Company; or
(iv) discloses to anyone outside the Company, or uses in other
than the Company's business, any "confidential information", as such term
is defined in the Agreement.
(b) Upon exercise of an Option or Right, the Participant shall
certify on a form acceptable to the Committee that the Participant is in
compliance with the terms and conditions of the Agreement and the Plan.
(c) The Company shall immediately notify the Participant in writing
of any cancellation of any unexercised Option or Right. Following receipt of
such notice, the Participant shall have no further rights with respect to such
Option or Right.
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(d) The Company shall notify the Participant in writing of any
rescission of an exercise of an Option or Right within one year after the
activity referred to in Part VI, Section 1(a). Within ten days after receiving
such a notice from the Company, the Participant shall either (i) pay to the
Company the excess of the Fair Market Value of the Stock on the date of exercise
of an Option over the exercise price for the Option or the Fair Market Value of
the Stock and/or cash distributed to the Participant as a result of the exercise
of a Right or (ii) return the Stock received upon the exercise of an Option (in
which case the Company will return the exercise price to the Participant) or
return the Stock and/or cash distributed upon the exercise of a Right.
2. AGREEMENT BY PARTICIPANT REGARDING DEDUCTION. The Participant shall
agree and consent to a deduction from any amounts the Company owes to the
Participant from time to time (including amounts owed as wages or other
compensation, fringe benefits, or vacation pay, as well as any other amounts
owed to the Participant by the Company), to the extent of the amounts the
Participant owes the Company under this Article VI. Whether or not the Company
elects to make any set-off in whole or in part, if the Company does not recover
by means of set-off the full amount owed by the Participant, calculated as set
forth in this Article VI, then the Participant agrees to pay immediately the
unpaid balance to the Company.
VII. MISCELLANEOUS
1. EFFECTIVE DATE. The Plan became effective on April 30, 1996, subject to
approval by shareowners, and the Plan was approved by shareowners on April 30,
1996.
2. DURATION OF PLAN. Unless sooner terminated, the Plan shall remain in
effect until April 30, 2006. Termination of the Plan shall not affect any
Options or Rights previously granted, which Options or Rights shall remain in
effect until exercised, surrendered, or canceled, or until they have expired,
all in accordance with their terms. Termination of the Plan shall not affect any
Restricted Stock Grants previously made, or Stock previously granted pursuant to
a Restricted Stock Grant; the terms, conditions and restrictions applicable to
shares issued pursuant to a Restricted Stock Grant shall remain in effect until
such terms, conditions and restrictions shall have lapsed all in accordance with
their terms. Termination of the Plan shall not affect any grant of Performance
Units previously made; the terms and conditions applicable to such Performance
Units shall remain in effect until the Performance Units are earned in
accordance with their terms.
3. CHANGES IN CAPITAL STRUCTURE. In the event that there is any change in
the capital structure of the Company through merger, consolidation,
reorganization, recapitalization, spin-off or otherwise, or if there shall be
any dividend on the Company's Stock, payable in such Stock, or if there shall be
a Stock split or a combination of shares, then:
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(a) the number of shares reserved for Options (both in the aggregate
and with respect to each Participant) and the number of shares subject to
outstanding Options and the price per share of each such Option;
(b) the number of shares with respect to which Rights may be
exercised (both in the aggregate and with respect to each Participant); and
(c) the number of shares of Stock reserved for Restricted Stock
Grants under the Plan shall be proportionately adjusted by the Board as it deems
equitable, in its absolute discretion, to prevent dilution or enlargement of the
rights of a Participant and any shares issued pursuant to such change in capital
structure shall be subject to the same terms, conditions and restrictions as the
shares of Stock with respect to which newly issued shares are issued. The
issuance of Stock for consideration and the issuance of Stock rights shall not
be considered a change in the Company's capital structure. No adjustment
provided for in this Section 3 shall require the issuance of any fractional
share.
4. CHANGE IN CONTROL. If while unexercised Options, Rights, Restricted
Stock Grants or Performance Units remain outstanding under the Plan:
(a) Any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") acquires beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i)
the then-outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (ii) the combined voting power of the then-outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however,
that, for purposes of this Section 4, none of the following shall constitute a
Change of Control: (A) any acquisition directly from the Company of 30% or less
of Outstanding Company Common Stock or Outstanding Company Voting Securities
provided that at least a majority of the members of the board of directors of
the Company following such acquisition were members of the Incumbent Board at
the time of the Board's approval of such acquisition, (B) any acquisition by the
Company, (C) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any affiliated company, or (D) any
acquisition by the Company which, by reducing the number of shares of
Outstanding Company Common Stock or Outstanding Company Voting Securities,
increases the proportionate number of shares of Outstanding Company Common Stock
or Outstanding Company Voting Securities beneficially owned by any Person to 20%
or more of the Outstanding Company Common Stock or Outstanding Company Voting
Securities; provided, however, that, if such Person shall thereafter become the
beneficial owner of any additional shares of Outstanding Company Common Stock or
Outstanding Company Voting Securities and beneficially owns 20% or
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more of either the Outstanding Company Common Stock or the Outstanding Company
Voting Securities, then such additional acquisition shall constitute a Change of
Control; or
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board;
(c) A reorganization, merger, consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
"Business Combination") is consummated, in each case, unless, immediately
following such Business Combination, (i), more than 50%, respectively, of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of (x) the corporation resulting from such
Business Combination or (y) a corporation that, as a result of such transaction,
owns the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries, is represented by the Outstanding
Company Common Stock and the Outstanding Company Voting Securities (or, if
applicable, is represented by shares into which Outstanding Company Common Stock
or Outstanding Company Voting Securities were converted pursuant to such
Business Combination) in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then-outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then-outstanding voting securities of such
corporation, except to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement or of the action of the Board providing for such Business Combination;
or
(d) The stockholders of the Company approve of a complete
liquidation or dissolution of the Company.
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then from and after the date of the first of the foregoing events to occur, (i)
all Options and Rights held by active employees on such date shall be
exercisable in full, whether or not otherwise exercisable; (ii) the restrictions
set forth in Part IV, Section 2 on all outstanding Restricted Stock Grants,
including Performance Restricted Stock Grants, shall lapse; and (iii)
Performance Units shall be earned and become fully payable.
5. AMENDMENT OR TERMINATION. The Board may, by resolution, amend or
terminate the Plan at any time; provided, however, that
(a) shareowner approval shall be required for (i) any changes to the
Plan which would require shareowner approval under the New York Business
Corporation Law, Rule 16b-3 of the Securities Exchange Act of 1934, as amended,
or Section 162(m) of the Code, and (ii) except as otherwise provided herein or
except for changes which do not otherwise involve in the aggregate more than 5%
of the total shares authorized under the Plan, any other changes to the Plan
that would (A) increase the maximum number of shares that may be issued under
the Plan, (B) permit participation by persons who are not employees of the
Company, (C) permit regranting or repricing of previously granted stock options,
or (D) waive restrictions on previously granted restricted stock awards except
in the case of retirement or other termination of employment; and
(b) the Board may not, without the written consent of the
Participant, alter, impair or adversely affect any right of such Participant
with respect to any Option, Right or Performance Unit previously granted, or
Restricted Stock Grant grant previously made to such Participant under the Plan
except as authorized herein.
Notwithstanding the foregoing, the Board may, by resolution, amend the Plan in
any way that it deems necessary or appropriate in order to make income with
respect to the Plan deductible for Federal income tax purposes under Section
162(m) of the Code without regard to the foregoing provisos (i) and (ii), and
any such amendment shall be effective as of such date as is necessary to make
such income under the Plan so deductible.
6. UNFUNDED PLAN. The Plan shall be unfunded. Neither the Company nor the
Committee shall be required to segregate any assets that may at any time be
represented by Options or Rights under the Plan. Neither the Company nor the
Committee shall be deemed to be a trustee of any amounts to be paid under the
Plan. Any liability of the Company to any Participant with respect to a right
shall be based solely upon any contractual obligations created by the Plan, a
Performance Unit Agreement, a Stock Appreciation Right Agreement or an Option
Agreement; no such obligation shall be deemed to be secured by any pledge or any
encumbrance on any property of the Company.
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7. GOVERNING LAW. The law of the State of Kansas shall apply to all awards
and interpretations under the Plan without regard to the application of such
state's conflict of laws principles.
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