EXHIBIT 10.16
PAYLESS SHOESOURCE, INC.
PROFIT SHARING PLAN
FOR PUERTO RICO ASSOCIATES
Amended and Restated Effective May 1, 2002 or as otherwise specified.
TABLE OF CONTENTS
PAGE
----
SECTION 1................................................................................................. 7
DEFINITIONS............................................................................................... 7
1.01 ACCOUNTS.......................................................................................... 7
1.02 ADMINISTRATIVE DELEGATE........................................................................... 7
1.03 AFTER-TAX CONTRIBUTIONS........................................................................... 7
1.04 ALLOCATION PAY AMOUNT............................................................................. 7
1.05 ASSOCIATE......................................................................................... 7
1.06 AUTHORIZED LEAVE OF ABSENCE....................................................................... 8
1.07 BEFORE-TAX CONTRIBUTIONS.......................................................................... 8
1.08 BENEFICIARY....................................................................................... 8
1.09 BOARD............................................................................................. 8
1.10 US CODE........................................................................................... 8
1.11 COMMITTEE......................................................................................... 8
1.12 COMPANY OR PAYLESS................................................................................ 8
1.13 COMPANY ACCOUNTS.................................................................................. 8
1.14 COMPANY MATCHING CONTRIBUTIONS.................................................................... 9
1.15 COMPANY PROFIT SHARING CONTRIBUTIONS.............................................................. 9
1.16 EFFECTIVE DATE.................................................................................... 9
1.17 EMPLOYER OR PAYLESS PR............................................................................ 9
1.18 ERISA............................................................................................. 9
1.19 FIDUCIARY......................................................................................... 9
1.20 FISCAL YEAR....................................................................................... 9
1.21 GROUP............................................................................................. 9
1.22 HOUR OF SERVICE................................................................................... 9
1.23 INVESTMENT FUND.................................................................................. 10
1.24 MAY PLAN......................................................................................... 10
1.25 MEMBER........................................................................................... 10
1.26 MEMBER ACCOUNTS.................................................................................. 10
1.27 MEMBER AFTER-TAX ACCOUNTS........................................................................ 10
1.28 MEMBER BEFORE-TAX ACCOUNT........................................................................ 10
1.29 MEMBER CONTRIBUTIONS............................................................................. 10
1.30 MEMBER ROLLOVER CONTRIBUTION ACCOUNTS............................................................ 10
1.31 MILITARY SERVICE................................................................................. 10
1.32 NET PROFIT....................................................................................... 11
i
1.33 PAY.............................................................................................. 11
1.34 POOLED INVESTMENT ACCOUNT........................................................................ 11
1.35 PLAN............................................................................................. 11
1.36 PLAN YEAR........................................................................................ 11
1.37 PR CODE.......................................................................................... 11
1.38 PRIOR PLAN....................................................................................... 11
1.39 QUALIFIED DOMESTIC RELATIONS ORDER............................................................... 12
1.40 RETIREMENT....................................................................................... 12
1.41 ROLLOVER CONTRIBUTIONS........................................................................... 12
1.42 SOCIAL SECURITY WAGE BASE........................................................................ 12
1.43 TOTAL AND PERMANENT DISABILITY or DISABILITY..................................................... 12
1.44 TRANSFERRED ACCOUNTS............................................................................. 12
1.45 TRUST AGREEMENT.................................................................................. 12
1.46 TRUST FUND....................................................................................... 12
1.47 TRUSTEE.......................................................................................... 12
1.48 UNIT............................................................................................. 12
1.49 UNIT VALUE....................................................................................... 12
1.50 VALUATION DATE................................................................................... 12
1.51 YEAR OF SERVICE.................................................................................. 13
1.52 VESTING SERVICE.................................................................................. 13
SECTION 2................................................................................................ 14
MEMBERSHIP............................................................................................... 14
2.01 CONDITIONS OF ELIGIBILITY........................................................................ 14
2.02 RE-EMPLOYMENT.................................................................................... 15
SECTION 3................................................................................................ 16
COMPANY CONTRIBUTIONS.................................................................................... 16
3.01 AMOUNT OF COMPANY PROFIT SHARING CONTRIBUTION.................................................... 16
3.02 AMOUNT OF COMPANY MATCHING CONTRIBUTION.......................................................... 16
3.03 ALLOCATION OF COMPANY CONTRIBUTIONS.............................................................. 16
3.04 PROFIT SHARING ALLOCATION FORMULA................................................................ 16
3.05 INVESTMENT OF THE COMPANY........................................................................ 17
3.06 RETURN OF COMPANY CONTRIBUTIONS.................................................................. 17
SECTION 4................................................................................................ 18
MEMBER CONTRIBUTIONS..................................................................................... 18
4.01 PROCEDURE FOR MAKING CONTRIBUTIONS............................................................... 18
4.02 LIMITATIONS ON BEFORE-TAX CONTRIBUTIONS.......................................................... 20
4.03 DISTRIBUTIONS OF EXCESS DEFERRALS................................................................ 23
ii
4.04 LIMITATIONS ON AFTER-TAX CONTRIBUTIONS........................................................... 23
4.05 LIMITATIONS ON COMPANY MATCHING CONTRIBUTIONS.................................................... 23
4.06 AGGREGATE LIMITATIONS............................................................................ 24
SECTION 5................................................................................................ 24
INVESTMENT PROVISIONS.................................................................................... 24
5.01 INVESTMENT FUNDS................................................................................. 24
5.02 INVESTMENT DIRECTION............................................................................. 24
SECTION 6................................................................................................ 25
ACCOUNTS................................................................................................. 25
6.01 MEMBER ACCOUNTS.................................................................................. 25
6.02 COMPANY ACCOUNTS................................................................................. 25
6.03 MAINTENANCE OF ACCOUNTS.......................................................................... 25
6.04 VALUATION OF ACCOUNTS............................................................................ 26
6.05 MEMBER STATEMENTS................................................................................ 26
6.06 SHARES OF PAYLESS SHOESOURCE, INC. ("PAYLESS STOCK") IN THE PAYLESS COMMON STOCK FUND............ 26
6.07 VESTING IN MEMBER AND COMPANY ACCOUNTS........................................................... 27
SECTION 7................................................................................................ 30
EXPENSES................................................................................................. 30
7.01 ADMINISTRATIVE EXPENSES.......................................................................... 30
SECTION 8................................................................................................ 30
WITHDRAWALS DURING EMPLOYMENT............................................................................ 30
8.01 WITHDRAWALS PROHIBITED UNLESS SPECIFICALLY AUTHORIZED............................................ 30
8.02 AUTHORIZED WITHDRAWALS........................................................................... 30
SECTION 9................................................................................................ 32
BENEFITS UPON RETIREMENT, DEATH, DISABILITY, OR TERMINATION OF EMPLOYMENT................................ 32
9.01 BENEFITS......................................................................................... 32
9.02 BENEFICIARY...................................................................................... 32
SECTION 10............................................................................................... 32
PAYMENT OF BENEFITS...................................................................................... 32
10.01 TIME OF PAYMENT................................................................................. 33
10.02 FORM OF PAYMENT................................................................................. 34
10.03 INDIRECT PAYMENT OF BENEFITS.................................................................... 34
10.04 INABILITY TO FIND MEMBER........................................................................ 34
10.05 COMMENCEMENT OF BENEFIT DISTRIBUTION TO MEMBER.................................................. 34
10.06 COMMENCEMENT OF BENEFIT DISTRIBUTION TO BENEFICIARY............................................. 34
10.07 COMMENCEMENT OF BENEFIT DISTRIBUTION TO ALTERNATE PAYEE......................................... 34
SECTION 11............................................................................................... 35
PERMITTED ROLLOVER OF PLAN DISTRIBUTIONS................................................................. 35
11.01 ROLLOVER AMOUNT TO OTHER PLANS.................................................................. 35
11.02 ROLLOVER AMOUNT FROM OTHER PLANS................................................................ 35
iii
11.03 DEFINITIONS..................................................................................... 36
SECTION 12............................................................................................... 37
LOANS.................................................................................................... 37
12.01 AVAILABILITY OF LOANS........................................................................... 37
12.02 AMOUNTS OF LOANS................................................................................ 37
12.03 TERMS OF LOANS.................................................................................. 37
SECTION 13............................................................................................... 38
LIMIT ON CONTRIBUTIONS TO THE PLAN....................................................................... 38
13.01 LIMIT ON CONTRIBUTIONS.......................................................................... 38
13.02 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS....................................................... 39
SECTION 14............................................................................................... 40
ADMINISTRATION OF THE PLAN............................................................................... 40
14.01 PLAN ADMINISTRATOR.............................................................................. 40
14.02 DELEGATION OF AUTHORITY......................................................................... 40
14.03 COMMITTEE AND SUBCOMMITTEES..................................................................... 41
14.04 ACCOUNTS AND REPORTS............................................................................ 42
14.05 NON-DISCRIMINATION.............................................................................. 42
SECTION 15............................................................................................... 42
MANAGEMENT OF THE TRUST FUND............................................................................. 42
15.01 USE OF THE TRUST FUND........................................................................... 42
15.02 TRUSTEES........................................................................................ 42
15.03 INVESTMENTS AND REINVESTMENTS................................................................... 42
SECTION 16............................................................................................... 43
CERTAIN RIGHTS AND OBLIGATIONS OF EMPLOYERS AND MEMBERS.................................................. 43
16.01 DISCLAIMER OF EMPLOYER LIABILITY................................................................ 43
16.02 EMPLOYER-ASSOCIATE RELATIONSHIP................................................................. 44
16.03 BINDING EFFECT.................................................................................. 44
16.04 CORPORATE ACTION................................................................................ 44
16.05 CLAIM AND APPEAL PROCEDURE...................................................................... 44
SECTION 17............................................................................................... 45
NON-ALIENATION OF BENEFITS............................................................................... 45
17.01 PROVISIONS WITH RESPECT TO ASSIGNMENT AND LEVY.................................................. 45
17.02 ALTERNATE APPLICATION........................................................................... 45
SECTION 18............................................................................................... 45
AMENDMENTS............................................................................................... 45
18.01 COMPANY'S RIGHTS................................................................................ 45
18.02 PROCEDURE TO AMEND.............................................................................. 46
18.03 PROVISION AGAINST DIVERSION..................................................................... 46
SECTION 19............................................................................................... 46
TERMINATION.............................................................................................. 46
19.01 RIGHT TO TERMINATE.............................................................................. 46
iv
19.02 WITHDRAWAL OF AN EMPLOYER....................................................................... 46
19.03 DISTRIBUTION IN EVENT OF TERMINATION OF TRUST................................................... 46
19.04 ADMINISTRATION IN EVENT OF CONTINUANCE OF TRUST................................................. 47
19.05 MERGER, CONSOLIDATION OR TRANSFER............................................................... 47
SECTION 20............................................................................................... 47
CONSTRUCTION............................................................................................. 47
20.01 APPLICABLE LAW.................................................................................. 47
20.02 GENDER AND NUMBER............................................................................... 47
v
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"). Effective January 1, 1997, a
portion of the Payless Plan covering Associates employed by Payless PR was spun
off and established a new plan, Payless ShoeSource, Inc. Profit Sharing Plan for
Puerto Rico Associates (the "Plan"), which was adopted by Payless PR as an
adopting Employer.
Effective March 20, 2000, or as otherwise specified, Payless amended
and restated the Plan primarily to include provisions for loans, the acceptance
of rollover contributions from other qualified plans, a change to daily
valuation, other miscellaneous changes and to comply with the tax laws of Puerto
Rico. Such amendment and restatement applies only to Associates or former
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 are 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.
Notwithstanding the preceding sentence, the change in valuation date became
effective for all Associates and former Associates, without regard to employment
after the effective date.
Now effective May 1, 2002, the Plan is amended and restated primarily
to permit Full-Time Associates to participate in the Plan upon the completion of
90 days of employment service with a participating Employer or other member of
the Group. Other amendments made herein are effective on the dates as specified.
The terms and provisions of this new Plan are as follows:
6
SECTION 1
DEFINITIONS
1.01 ACCOUNTS means the Company Accounts and Member Accounts
established under Section 6.
1.02 ADMINISTRATIVE DELEGATE means one or more persons or
institutions to which the Committee has delegated certain administrative
functions pursuant to a written agreement.
1.03 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).
1.04 ALLOCATION PAY AMOUNT means with respect to each eligible
Member, (a) one (1) times the amount of Pay as defined in Section 1.33 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 1.04 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 US 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, 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 US Treas. Reg. Section 1.401(l)-2, Allocation Pay Amount shall be
adjusted to permit Section 3.03 to operate in compliance with the limitations of
US Treas. Reg. Section 1.401(l)-2.
1.05 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 person who receives Pay
from sources within Puerto Rico and who is employed, at the request of the
Company or the Employer, by a member of the Group (defined in Section 1.21) to
the extent such employee otherwise qualifies for membership under Section 2, in
which case such Group member shall be
7
deemed to be an "Employer" hereunder, as to such person or persons only. 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 who received no earned
income from the Employer from sources within Puerto Rico, and (iii) any "leased
employee" within the meaning of US Code Section 414(n)(2). The term "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. In the event that an
individual who was not classified as an employee or a common-law employee is
legally reclassified as an employee or a common-law employee of the Employer,
such employee shall only be considered to be an employee at the time of such
reclassification, or, if later, at the time that such individual is initially
treated as an employee or common-law employee on the payroll records of the
Company.
1.06 AUTHORIZED LEAVE OF ABSENCE means any leave of absence
authorized by the Employer under rules established by the Employer.
1.07 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 PR Code Section 1165(e)(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.
1.08 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.
1.09 BOARD means the Board of Directors of the Company.
1.10 US CODE means the U.S. Internal Revenue Code of 1986, as
amended from time to time.
1.11 COMMITTEE means the Profit Sharing 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 Profit Sharing Committee of the Payless ShoeSource, Inc. 401(k) Profit
Sharing Plan from time to time.
1.12 COMPANY OR PAYLESS means Payless ShoeSource, Inc., a Delaware
corporation, and any other organization which may be a successor to it.
1.13 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
8
Employer under Prior Plans, as well as to any income and/or earnings
attributable to such Company Contributions and Prior Plan contributions.
1.14 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.
1.15 COMPANY PROFIT SHARING CONTRIBUTIONS means discretionary
contributions made by the Company, based on Net Profits, pursuant to Section
3.01.
1.16 EFFECTIVE DATE means March 20, 2000 or as otherwise specified
herein.
1.17 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.
1.18 ERISA means the Employee Retirement Income Security Act of
1974, as amended from time to time, to the extent applicable to the Plan.
1.19 FIDUCIARY means the Employer, the Trustee, each of the members
of the Committee described in Section 14, and any investment manager designated
pursuant to Section 15.
1.20 FISCAL YEAR means the Company's Fiscal Year.
1.21 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 ERISA Section 210(c), or as a trade or business
under common control in accordance with ERISA Section 210(d). 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. Members of an affiliated service group under US Code Section
414(m) will also be part of the Group.
1.22 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, the Employer or any other member of the Group,
whether or not such Group member has adopted the Plan, for any of the following:
(a) the performance of duties during the applicable
computation period;
9
(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. Section 2530.200b.
1.23 INVESTMENT FUND means any fund for investment of contributions
as described in Section 5.01.
1.24 MAY PLAN means The May Department Stores Company Profit
Sharing Plan.
1.25 MEMBER means any person included in the membership of this
Plan as provided in Section 2.
1.26 MEMBER ACCOUNTS means the Member Before-Tax Accounts, the
Member After-Tax Accounts and the Member Rollover Contribution Accounts. To the
extent an Associate makes a Rollover Contribution pursuant to Section 11.02 and
the Associate is otherwise eligible but has not yet completed the participation
requirements of Section 2.01, such contribution shall also be a Member Account.
1.27 MEMBER AFTER-TAX ACCOUNTS means the Member Accounts with
respect to a Member's After-Tax Contributions.
1.28 MEMBER BEFORE-TAX ACCOUNTS means the Member Accounts with
respect to a Member's Before-Tax Contributions.
1.29 MEMBER CONTRIBUTIONS means the Member's Before-Tax
Contributions and After-Tax Contributions.
1.30 MEMBER ROLLOVER CONTRIBUTION ACCOUNTS means the Member
Accounts with respect to an Associate's or Member's Rollover Contributions.
1.31 MILITARY SERVICE means effective December 13, 1996, 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 re-employ the Associate under
Federal law. Notwithstanding any provision
10
of this Plan to the contrary, contributions, benefits and service credit with
respect to qualified Military Service will be provided in accordance with the
Uniform Services Employment and Reemployment Rights Act and US Code Section
414(u).
1.32 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.
1.33 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
US 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 $170,000 shall be disregarded, although such amount shall be adjusted at the
same time and in such manner as permitted under US Code Section 415(d).
1.34 POOLED INVESTMENT ACCOUNT means an account established
pursuant to an administrative services agreement between the Company and the
Trustee.
1.35 PLAN means this Payless ShoeSource, Inc. Profit Sharing Plan
for Puerto Rico Associates, as amended from time to time.
1.36 PLAN YEAR means a calendar year ending each December 31.
1.37 PR CODE means the Puerto Rico Internal Revenue Code of 1994,
as amended from time to time.
1.38 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.
11
1.39 QUALIFIED DOMESTIC RELATIONS ORDER means a "qualified domestic
relations order" as that term is defined in ERISA Section 206(d)(3), provided
that such order was entered on or after January 1, 1985.
1.40 RETIREMENT means a Member's termination of employment on or
after age 55 and after completing at least five (5) Years of Service or
attaining the fifth anniversary of participation, as of which date the Member's
benefit shall be nonforfeitable.
1.41 ROLLOVER CONTRIBUTIONS means contributions which the Associate
or Member, as applicable, elects to make in accordance with Section 11.02.
1.42 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.
1.43 TOTAL AND PERMANENT DISABILITY or DISABILITY means the
qualification for disability benefits under Title 11 of the Federal Social
Security Act.
1.44 TRANSFERRED ACCOUNTS means Member and Company Accounts
transferred from a Prior Plan.
1.45 TRUST AGREEMENT means the agreement or agreements provided for
in Section 14, as amended from time to time.
1.46 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.
1.47 TRUSTEE means the corporation(s), person or persons which may
at any time be acting as Trustee or Trustees under the Trust Agreement.
1.48 UNIT means one of the units representing an interest in an
Investment Fund as provided in Section 6.03.
1.49 UNIT VALUE means the value of each Unit in an Investment Fund
as of the Valuation Date as determined pursuant to Section 6.04.
1.50 VALUATION DATE means any day that the New York Stock Exchange
is open for business or any other date chosen by the Committee. Prior to March
31, 2000, Valuation Date means the last business day of each calendar month and
any other date chosen to perform a valuation.
12
1.51 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 or any other member of
the Group. An Associate shall be credited with a year of employment on each
anniversary date of his commencement of employment with an Employer during which
he earns not less than 1,000 Hours of Service for an Employer or any other
member of the Group. 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 the US Treasury Regulations, a
"leased employee" within the meaning of US Code Section 414(n) has been paid for
not less than 1,000 Hours of Service for the Employer even though during such
period the leased employee was not an Associate as defined in Section 1.05. 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
1.52 shall be determined by the Company or by the Committee on a case-by-case
basis.
1.52 VESTING SERVICE for purposes of determining a Member's vested
interest under Section 6.07 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.
(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 or any other member of the Group.
(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 last date upon which an Associate
terminates employment with the Employer or any other member of the
Group (either voluntarily or involuntarily), retires or dies; or
13
(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
ERISA Sections 202(b)(5)(A) or 203(b)(3)(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.
(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 or any other member of the Group.
(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 April 30, 2002, was a Member of
or is eligible to be a Member of the Plan shall continue to be a Member of the
Plan entitled to
14
make Member Contributions pursuant to Section 4 and eligible to share in Company
Contributions pursuant to Section 3.
(b) Each other 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.
Notwithstanding the foregoing, a Full Time Associate shall be eligible to make
Member Contributions pursuant to Section 4 as of the first day of the month
conincident with or following the date he has completed 90 days of employment
with the Employer and attained age 21. For the purpose of the preceding
sentence, a "Full Time Associate" is an Associate classified on the Employer's
records as a Full Time Associate. In many locations, this means the Associate is
normally scheduled to work 32 or more hours per week. However, the Associate's
classification on the Employer's records, and not the actual number of hours
worked in any period, determines Full Time status.
(c) Each Member shall be deemed to have elected to make a
three percent (3%) Before-Tax Contribution pursuant to Section 4.01(b),
commencing with the paycheck issued with respect to the first payroll period
beginning on or after 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%).
(d) Only Associates employed by the Company's Puerto
Rican subsidiaries are eligible for membership hereunder. Any other Associate
who has Accounts in this Plan, such Accounts shall continue to be revalued as of
each succeeding Valuation Date pursuant to Section 6.04.
2.02 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.
15
SECTION 3
COMPANY CONTRIBUTIONS
3.01 AMOUNT OF COMPANY PROFIT SHARING CONTRIBUTION. The Company or
an Employer may contribute to the Trust, as of the end of each Plan Year, a
percentage of the Company's 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.
3.02 AMOUNT OF COMPANY MATCHING CONTRIBUTION. 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 ShoeSource, Inc.
Profit Sharing 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 soon as practicable after the close of each Fiscal Year and shall
be reimbursed to the Company by the Employer when paid.
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 6.07. Company Matching Contributions shall be
subject to the vesting provisions of Section 6.07 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 PR Code
Section 1165(e)(7)(A) 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 ShoeSource, Inc. 401(k) Profit Sharing Plan and this Plan.
16
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 at the time the amount is
allocated.
3.06 RETURN OF COMPANY CONTRIBUTIONS.
(a) If, after the Company Contribution has been made and
allocated, it should appear that, through oversight or a mistake of fact or law,
a Member (or an Associate who should have been considered a Member) who should
have been entitled to share in such contribution, receives no allocation or
received an allocation which was less than he should have received, the Company
may, at its election and in lieu of reallocating such contribution, make a
special make-up contribution for the Company Account of such Member in an amount
sufficient to provide for him the same addition to his Company Account as he
should have received. Similarly, if a Member received an allocation which was
more than he should have received (or a Member was inappropriately included in
the Plan), the Company, at its election, may reallocate such contribution,
offset other Company contributions against such allocation, or use such
allocation to pay Plan expenses.
(b) To the extent permitted by ERISA, each contribution
made to the Trust shall be made on the condition that it is currently deductible
by the Employer under PR Code Section 1023(A) 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.
17
SECTION 4
MEMBER CONTRIBUTIONS
4.01 PROCEDURE FOR MAKING CONTRIBUTIONS.
(a) AFTER-TAX CONTRIBUTIONS. Subject to any limitations
set forth in the PR Code 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 as he shall have designated pursuant to procedures established by the
Company (which may establish lower permissible After-Tax Contributions for
Highly Compensated Employees); provided, however, that a Member shall not
contribute, or elect to have contributed on his behalf, amounts with respect to
Pay received by him after the close of the calendar year during which his
employment terminated and further provided that any Before-Tax Contributions
made on behalf of the Member shall reduce by the percentage which he elects to
have contributed pursuant to Section 4.01(b)(i), the percentage of Pay that the
Member may contribute pursuant to this Section 4.01(a). Notwithstanding any
provision in the Plan to the contrary, in no event may After-Tax Contributions
exceed 10% of the Members accumulated Pay since he or she became a Member in the
Plan without taking into consideration any Member's After-Tax Contribution
subject to Company Matching Contributions.
(b) BEFORE-TAX CONTRIBUTIONS.
(i) Subject to the limitations set forth below,
each Member may elect that his Employer shall contribute directly to
the Trust Fund an amount equal to a whole percentage of his Pay, not
less than 1% nor greater than such percentage as may be determined from
time to time by the Company 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) Pursuant to Section 2.01(c), 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
18
arrangement" for purposes of Section 1165(e) of the PR Code, or if the Actual
Deferral Percentage standards set forth in the PR Code 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
may 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.
(e) Effective with the paycheck issued with respect to
the first payroll period beginning 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. 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 (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.
19
(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 $8,000 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"). In addition, Before-Tax
Contributions by a Member will be further limited by contributions to an
individual retirement account as described in PR Code Section 1169. 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).
(i) As of April 1, 2000, all then currently existing flat
dollar Member Contributions shall be converted to Member Contributions based on
1% increments calculated by dividing such flat dollar amount by the Member's Pay
for the prior year and rounding the product to the nearest whole percent;
provided, that no flat dollar contribution shall be converted to a percent
contribution of less than 1%.
(j) Notwithstanding this Section 4.01, effective March
20, 2000, during the black out period as determined by the Committee and the
Trustee established to change to daily valuation or a change in recordkeepers,
no contribution rate changes or suspensions may be made by a Member except as
provided by the Committee.
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:
(i) The "Actual Deferral Percentage" (as
hereinafter defined) of the group of eligible Highly Compensated
Employees for the Plan Year 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 for the Plan Year is not more than two
percentage points, and the Actual Deferral Percentage for the group of
eligible Highly Compensated Employees for the Plan Year is not more
than the Actual Deferral Percentage of all other eligible Associates
multiplied by 2.0.
(iii) To the extent permitted by the Act, the
Actual Deferral Percentage for non-Highly Compensated Employees used in
satisfying the tests set
20
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. To the extent permitted by the PR
Code and its regulations, the Committee may elect to include all other
non-eligible employees for the purposes of determining compliance by the Plan
with the actual deferral percentage test of PR Code Section 1165.
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 PR Code, may be
aggregated with such Before-Tax Contributions for purposes of
demonstrating compliance with the requirements of the PR Code) 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 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
21
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 Puerto Rico Department of the
Treasury) 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. 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 PR
Code), 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 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.
22
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 Puerto Rico Department of the Treasury, may be distributed no later than
April 15 (or such later date as may be permitted under the PR Code) 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 PR Code Section 1165(e) exceeds the limit imposed on
the Member in accordance with the applicable provisions of the PR Code 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 PR Code and so determined by the Company in a uniform, nondiscriminatory
manner), but 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.
4.04 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.
23
4.06 AGGREGATE LIMITATIONS. To the extent required under the PR
Code 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. 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 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.
(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 Payroll period be invested in 1% increments totaling 100% in one or more of
the Investment Funds. Such election must be made pursuant to procedures
prescribed 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 stable, fixed income investment as may be determined by the Committee and
100% of his Company Matching Contributions in the Payless Common Stock Fund.
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
the time the amount is allocated.
(b) A Member may change his election with respect to
future Member and Company Contributions effective pursuant to procedures
prescribed by the
24
Committee, and may not change his election in any other manner except as
provided in Subsection 5.02(c).
(c) Effective as of the 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.
(d) Notwithstanding this Section 5.02, effective March
20, 2000, during the black out period as determined by the Committee and the
Trustee established to change to daily valuation or a change in recordkeepers,
no investment transfers or changes may be made by a Member unless provided in
Section 6.06. Notwithstanding anything to the contrary, no loans, withdrawals or
distributions shall be made during any such blackout period except as provided
by the Committee.
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. The Member's or Associate's
Rollover Contribution shall be credited to a separate Member Rollover
Contribution 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.
25
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 PAYLESS SHOESOURCE, INC. ("PAYLESS STOCK") IN THE
PAYLESS COMMON 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 or contemporaneous with the
record date set by the Company for each meeting of shareowners of the Company.
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. Upon receipt of such instructions,
the Trustee shall vote such shares in accordance therewith. If Member's
instructions are not received by the Trustee in a timely manner, the Trustee
shall vote such Member's shares in the same proportion as the shares of Common
Stock for which instructions were actually received from Members. The Trustee
shall not divulge the instructions of any Member.
(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. Tenders as a result of a self-tender
offer by the Company shall continue notwithstanding any investment change
blackout. The Trustee shall not divulge the instructions of any member. The
proceeds
26
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.
6.07 VESTING IN MEMBER AND COMPANY ACCOUNTS
(a) VESTING SCHEDULE. A Member shall have a fully vested
interest at all times (i) in his Member Accounts and (ii) in his Company Profit
Sharing Contribution Account balance determined as of July 31, 1997. A Member
who has 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:
Vesting 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 10.01, a
partially-vested Member receives a cash-out distribution before he incurs a
Forfeiture Break in Service (as defined in Subsection (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 Subsection (e) below. A partially-vested Member is a Member
whose Vested Interest, determined under Section 6.07(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).
27
(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 US Code Section 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) under this subparagraph (i) if
the Member has incurred a Forfeiture Break in Service (as defined in
Subsection (d) 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
Subsection (e) 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 subsection (b) in applying the limitation on allocations under
Section 13.
(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) DETERMINATION OF VESTING SERVICE. For purposes of
determining a Member's Vested Interest in his Company Contributions Account(s)
under subsection (a) above, a Member shall be credited with that number of years
of Vesting Service
28
determined by adding together all of the Associate's Periods of Service, whether
or not consecutive. Notwithstanding the foregoing, Vesting Service shall not
include any Period of Service before the Plan Year in which an Associate attains
age eighteen (18). Only whole years of service shall be taken into account for
purposes of applying the schedule set forth in subsection (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 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 1.52(g) shall
apply.
(d) FORFEITURE BREAK IN SERVICE. For purposes of this
Section 6.07, a "Break in Service" is a Period of Severance of at least 365
consecutive days. A "Forfeiture Break in Service" occurs when a Member of former
Member incurs 5 consecutive Breaks in Service.
(e) 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 Subsection (e) solely by reference to
the vesting schedule of Section 6.07(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 and (ii) the
balance, if any, shall be added to and allocated with the Company Matching
Contribution for that Plan Year.
(f) FORMER MAY PLAN MEMBERS. The provisions of this
subsection (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 as defined in Section 6.07(d),
the value of the Member's Company Account forfeited under the May Plan
will be restored under this Plan (in the manner described in Subsection
(b) above) and will be 100% vested.
29
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
provided, however, that no withdrawal will be permitted to the extent that loans
from the Plan are available to the Member. 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 needs as determined by the Committee in accordance with the PR Code
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
30
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 PR Code
Section 1023(aa)(2)(P), previously incurred by the Member, the Member's
spouse, or any of the Member's dependents (as defined in PR Code
Section 1025);
(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 PR Code Section 1025);
(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.
(c) A 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, shall
be entitled to withdraw the market value of such account balance determined (and
frozen) as of December 31, 1988.
31
(d) Associates with Member Rollover Contribution Accounts
may elect to withdraw their Member Rollover Contribution Accounts prior to
termination of employment.
(e) A withdrawal election shall be made pursuant to
application procedures established by the Committee. 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 except in the case
the Member is subject to Section 16 of the Securities Exchange Act of 1934 or
has been designated as a "Designated Insider," in which case such Member's
withdrawal will be taken first from such Member's Investment Funds other than
the Payless Common Stock Fund.
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 prior to
the date the distribution is calculated. 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.
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
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, 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 ERISA 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
32
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 request is received, 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 for distributions prior to March 22, 1999,
ever has exceeded) $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 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 $5,000 may elect to defer such distribution to the required minimum
distribution age, as determined by law from time to time. 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
33
Section 6.04. A deferred distribution shall be paid when such Member attains the
required minimum distribution age 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 birthday
coincident with the Member's required minimum distribution age 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 Payless Common Stock Fund shall be
made in the form of full shares of 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 US 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 the foregoing, 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.
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 December 31 of the calendar year following the
calendar year in which the Member died.
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
34
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 ERISA Section 206(d)(3)) 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 $5,000, 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 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 AMOUNT TO OTHER PLANS. 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 his entire Plan distribution
paid directly to a qualified retirement plan described in the PR Code Section
1165(a) or to an individual retirement account as described in PR Code Section
1165(b)(2) specified by him.
11.02 ROLLOVER AMOUNT FROM OTHER PLANS. An Associate eligible to
participate in the Plan, regardless of whether he has satisfied the
participation requirements of Section 2.01, may transfer to the Plan an Eligible
Rollover Distribution provided that such distribution is from an Eligible
Retirement Plan. If such transfer is not a direct transfer, such a transfer may
be made only if the following conditions are met:
(a) the transfer occurs on or before the 60th day
following the Associate's receipt of the distribution from the Eligible
Retirement Plan; and
(b) the amount transferred is equal to any portion of the
distribution the Associate received from the Eligible Retirement Plan, not in
excess of the fair market value of all property received in such a distribution
reduced by employee contributions, as defined in US Code Section 402 (a)(5)(E).
35
The Committee shall develop such procedures, and may require such information,
from a Member desiring to make such a transfer, as it deems necessary or
desirable to determine that the proposed transfer will meet the requirements of
the Section. Upon approval by the Committee or its Administrative Delegate, the
amount transferred shall be deposited in the Trust Fund and shall be credited to
the Member's account. Such rollover amount shall be one hundred percent (100%)
vested in the Member, shall share in the income allocations in accordance with
Section 5, but shall not share in the Company Profit Sharing Contributions, the
Company Matching Contributions or the forfeiture allocations. Upon termination
of employment, the total amount of the rollover contribution shall be
distributed in accordance with the terms of the Plan.
Upon such a transfer by an Associate who is otherwise eligible to participate in
the Plan but who has not yet completed the participation requirements of Section
2.01, his rollover amount shall represent his sole interest in the Plan until he
becomes a Member.
11.03 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
of the credit of the distributee as defined in Code Section 402(c),
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, 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), which accepts or will make, as
applicable, an 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.
(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.
36
(d) DIRECT TRANSFER. A direct rollover is a payment by the Plan to
the eligible retirement plan specified by the distributee as described in US
Code Section 401(a)(31).
SECTION 12
LOANS
12.01 AVAILABILITY OF LOANS. Loans shall be permitted under this
Plan as established by the policy of the Committee. Any such loan shall be
subject to such conditions and limitations as the Committee deems necessary for
administrative convenience and to preserve the tax-qualified status of the Plan.
12.02 AMOUNTS OF LOANS. No loan to any Member or Beneficiary may be
made to the extent that such loan, when added to the outstanding balance of all
other loans to the Member or Beneficiary, would exceed the lesser of (a) $50,000
reduced by the excess (if any) of the highest outstanding balance of loans
during the one-year period ending on the day before the loan is made, over the
outstanding balance of loans from the Plan on the date the loan is made, or (b)
one-half the present value of the nonforfeitable accrued benefit of the Member.
For the purpose of the above limitation, all loans from all plans of the
Employer and other member of a group of employers described in US Code Sections
414(b), 414(c), 414(m), and 414(o) are aggregated. Furthermore, any loan shall
by its terms require that repayment (principal and interest) be amortized in
level payments, not less frequently than quarterly, over a period not extending
beyond five years from the date of the loan. If such loan is used to acquire a
dwelling unit which within a reasonable time (determined at the time the loan is
made) will be used as the principal residence of the Member, the repayment
period shall not extend beyond twenty nine and one-half years from the date of
the loan. An assignment or pledge of any portion of the Member's interest in the
Plan and a loan, pledge, or assignment with respect to any insurance contract
purchased under the Plan, will be treated as a loan under this paragraph.
12.03 TERMS OF LOANS.
(a) Loans shall be made available to all Members and
Beneficiaries on a reasonably equivalent basis.
(b) Loans shall not be made available to Highly
Compensated Employees (as defined in US Code Section 414(q)) in an amount
greater than the amount made available to other Employees.
(c) Loans must be adequately secured using not more than
fifty percent (50%) of the Member's Vested Account balance, and bear a
reasonable interest rate as determined from time to time by the Committee.
37
(d) A Member loan for less than $1,000 is not permitted;
provided, however, that if such Member also receives a loan from the Payless
ShoeSource, Inc. 401(k) Profit Sharing Plan, such minimum amount limitation
shall not apply.
(e) In the event of default, foreclosure on the note and
attachment of security will not occur until a distributable event occurs in the
Plan.
(f) No loans will be made to any Member who on any day
during the Company's applicable fiscal year is a beneficial owner of more than
five percent (5%) of the outstanding stock of the Company.
(g) All loans shall be made pursuant to a written Member
loan program incorporated herein by reference.
(h) Loans are available from the following accounts, and
will be withdrawn from the Member's accounts in the following hierarchy:
(1) Member Accounts
(2) Vested Company Accounts
(3) Member Rollover Contribution
(i) Loans will be taken and repaid from and to the
Investment Funds on a pro rata basis, except in the case the Member is subject
to Section 16 of the Securities Exchange Act of 1934 or has been designated as a
"Designated Insider," in which case such Member's loan will be taken first from
such Member's Investment Funds other than the Payless Common Stock Fund.
SECTION 13
LIMIT ON CONTRIBUTIONS TO THE PLAN
This Section 13 is intended to conform the Plan to the requirements of
US Code Section 415 and limits the contributions that can be made by and for an
individual under the Plan.
13.01 LIMIT ON CONTRIBUTIONS. Notwithstanding any provision of the
Plan to the contrary:
(a) The amounts allocated to a Participant during the Limitation
Year under the Plan and allocated to the Participant under any other
defined contribution plan to which the Employer or any other member of
the Group has contributed shall be proportionately reduced, to the
extent necessary, so that the Annual Addition does not exceed the least
of:
38
(1) $30,000; or
(2) 25% of the Participant's remuneration from the
Employer or any member of the Group during the Limitation Year; or
(3) such other limits set forth in US Code Section 415.
The amount set forth in subparagraph (1) above shall automatically be
adjusted to reflect adjustments made by applicable law. Remuneration
for purposes of this Section means remuneration as defined in US
Treasury Regulation Section 1.415-2(d) and shall also include the
deferrals described in US Code Section 415(c)(3)(D).
(b) For purposes of this Section, Limitation Year means
the 12 month period commencing on January 1 and ending on December 31.
(c) For purposes of this Section, Annual Additions means
the sum for the Limitation Year of Employer contributions, Employee
contributions (determined without regard to any rollover contributions
as defined in US Code Sections 402(a)(5), 403(a)(4), 403(b)(8) and
408(d)(3) and without regard to Employee contributions to a simplified
employee pension plan which are excludible from gross income under US
Code Section 408(k)(6)) and forfeitures.
13.02 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 US Treasury 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.
39
(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 US Code Section 415 over (2) the maximum
"annual additions" determined pursuant to Section 13.01(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.
SECTION 14
ADMINISTRATION OF THE PLAN
14.01 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).
14.02 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 1.43 (Total and Permanent Disability), 4.01 (Member Contributions),
6.01 (Member Accounts), 6.02 (Company Accounts), 6.05 (Member Statements), 8.02
(Authorized Withdrawals), 13.02 (Adjustment for Excessive Annual Additions),
20.02 (Withdrawal of an Employer) and this Section 14.
(b) Authority with respect to the Investment Funds of the
Plan has been delegated to the Trustee in accordance with Sections 5.01(c)
(Investment Funds), 6.06 (shares of Payless ShoeSource, Inc. ("Payless Stock")
in the Payless Common Stock Fund), 7.01 (Administrative Expenses) and 15
(Management of the Trust 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 15.03(b), (c) and (d) (Investments and Reinvestments).
(d) The Committee shall also have the authority and
discretion to engage on Administrative Delegate who shall perform, without
discretionary authority or control, administrative functions within the frame
work of policies, interpretations, rules practices and procedures made by the
Committee or other Plan Fiduciary. Any action made or taken by the
Administrative Delegate may be appealed by an affected Member to the Committee
in accordance with the claims review procedure in Section 16.05. Any
40
decisions which call for interpretations of the Plan provisions not previously
made by the Committee shall be made only by the Committee. The Administrative
Delegate shall not be considered a fiduciary with respect to the services it
provides.
14.03 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,
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
14.03. 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 15.03(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
41
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 14 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.
14.04 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.
14.05 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 US Code Section 414(q)).
SECTION 15
MANAGEMENT OF THE TRUST FUND
15.01 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.
15.02 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.
15.03 INVESTMENTS AND REINVESTMENTS. The investment and reinvestment
of the assets of the Trust Fund shall be in accordance with the following:
42
(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 in any Investment Funds the
Company may designate.
(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 15.03(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 15.02, then the powers of the Investment Subcommittee as provided
for in Section 15.03(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 15 of the Plan.
SECTION 16
CERTAIN RIGHTS AND OBLIGATIONS OF EMPLOYERS AND MEMBERS
16.01 DISCLAIMER OF EMPLOYER LIABILITY.
(a) No liability shall attach to the Company or any
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.
43
(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.
16.02 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.
16.03 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.
16.04 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:
16.05 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.
44
SECTION 17
NON-ALIENATION OF BENEFITS
17.01 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.
Notwithstanding the above a Member's benefit will be offset
against any amount he or she is ordered or required to pay to the Plan pursuant
to an order or requirement which arises under a judgment of conviction for a
crime involving the Plan, under a civil judgment entered by a court in an action
involving a fiduciary breach, or pursuant to a settlement agreement between the
Participant and the Department of Labor or the Pension Benefit Guaranty
Corporation. Any such offset shall be made pursuant to Section 206(d) of ERISA.
17.02 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 18
AMENDMENTS
18.01 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
45
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 under US Code Section 401(a) and the applicable PR Code
section(s) and to have the trust or trusts declared exempt from taxation under
US Code Section 501(a) and the applicable PR Code section(s).
18.02 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.
18.03 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 19
TERMINATION
19.01 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 19.03 shall apply and the Accounts of
affected Members shall become (or remain) fully vested and nonforfeitable.
19.02 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 19.03 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.
19.03 DISTRIBUTION IN EVENT OF TERMINATION OF TRUST. If this Plan is
terminated at any time including a partial termination as defined in US 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.
46
19.04 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 19.03 shall apply.
19.05 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 20
CONSTRUCTION
20.01 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 US Code to the
extent applicable and of the PR Code of 1994.
20.02 GENDER AND NUMBER. Wherever applicable, the masculine pronoun
as used herein shall include the feminine pronoun and the singular pronoun shall
include the plural.
47
IN WITNESS WHEREOF, the Company has caused this amended and restated
Plan to be executed by a duly authorized officer effective May 1, 2002.
PAYLESS SHOESOURCE OF
PUERTO RICO, INC.
By: /s/ JAY A. LENTZ
_______________________
48