EX-4.1



 





Exhibit 4.1




THE CATO CORPORATION




2003 EMPLOYEE STOCK PURCHASE PLAN




PLAN DOCUMENT





	1.0	 	PURPOSE OF PLAN






The purpose of The Cato Corporation 2003 Employee Stock Purchase Plan
(hereinafter “ESPP” or “Plan”) is to provide employees of The Cato
Corporation and its subsidiaries (the “Company”) with an opportunity to
participate in the accumulation and potential appreciation of the Class A
Common Stock, par value $0.03-1/3 per share (“Common Stock”), of the
Company. The Company intends for the ESPP to comply with the provisions
of Section 423 of the Code, as in effect on October 1, 2003.




	2.0	 	DEFINITIONS






	2.1	 	Board of Directors: The Board of Directors of the Company.
	 
	2.2	 	Code: Internal Revenue Code of 1986, as amended.
	 
	2.3	 	Compensation: Annual Base Salary.
	 
	2.4	 	Designated Enrollment Period: The period 30 days before the
beginning of each offering period.
	 
	2.5	 	Eligible Employees: All active employees who are customarily
employed by the Company for more than 20 hours per week and more
than five months per calendar year and who have reached the age
required to enter into enforceable contracts in the employee’s state
of residence.
	 
	2.6	 	Compensation Committee: A committee consisting of the outside
members of the Board of Directors. Members of the Compensation
Committee shall not be eligible to participate in the Plan and shall
be “disinterested persons” within the meaning of Section 16 and Rule
16b-3 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”).






	3.0	 	EFFECTIVE DATE






The ESPP shall become effective on the date of the filing of a
registration statement with the Securities and Exchange Commission
pertaining to the Common Stock to be issued under the Plan, provided that
the Plan must be approved by the Company’s shareholders within twelve
months of the date of its adoption by the Company. Rights of Eligible
Employees are conditional upon shareholder approval of the Plan.



 









 






	4.0	 	ADMINISTRATION






	4.1	 	The ESPP shall be administered by the Compensation Committee
(“Committee”). Members of the Committee receive no additional
compensation for administering the ESPP.
	 
	4.2	 	Subject to the provisions of the ESPP and relevant law, the
Committee shall have complete authority, in its sole discretion (i)
to specify the purchase price, subject to Section 6 hereof, of
shares to be purchased under the ESPP; (ii) to interpret the ESPP;
(iii) to prescribe, amend and rescind rules and regulations relating
to the ESPP; (iv) to amend the ESPP to conform with relevant law;
and (v) to make all other determinations and to do all other acts
deemed necessary or advisable for the administration of the ESPP.
The Committee’s determination on the foregoing matters shall be
conclusive. No member of the Committee or the Board of Directors
shall be liable for any action or determination concerning the ESPP
made in good faith.






	5.0	 	ELIGIBILITY AND PARTICIPATION IN THE PLAN






	5.1	 	Offering Dates






Each ESPP offering period is a six month period, commencing October
1 and April 1 (the “offering periods” or “offering period”). The
initial offering period will commence on October 1, 2003 and will
end on March 31, 2004. The Committee shall have the power to
change the duration and effective dates of the offering periods.




	5.2	 	Participation in the Plan






	5.2.1	 	Enrollment






An Eligible Employee may elect to participate in the ESPP by
completing and submitting a subscription agreement during the
applicable Designated Enrollment Period. Once enrolled, and
providing that the employee remains eligible for the ESPP,
the employee’s participation and payroll deduction rate will
continue through ensuing offering periods unless the employee
cancels or changes such participation via the designated
change form.




An Eligible Employee may only enroll within the Designated
Enrollment Period. An employee who becomes eligible after an
enrollment period is closed may enroll only during a
subsequent Designated Enrollment Period.




	5.2.2	 	Cancellation






A participant may cancel his/her participation in the ESPP at
any time. If a participant cancels his/her participation on
or before March 15 and September 15 of each offering period
by submitting the designated form to



 









 






the Human Resources Department, payroll deductions withheld
during that offering period will be refunded to the employee
as soon as practicable. If a participant cancels his/her
participation after March 15 and September 15 of each
offering period, payroll deferral during the offering period
will be used to purchase Common Stock pursuant to Section
6.2, 6.3 and 6.4 and the participant’s account shall be
closed. No interest will be paid on any amount refunded.




Upon cancellation, the participant’s account shall be closed
and, if the participant requests, certificates for all whole
shares of Common Stock in the participant’s account shall be
issued to the participant. The participant will receive cash
for any fractional shares and any uninvested payroll
deductions in the account except as provided above.




Upon the request of a participant in his/her notice of
cancellation, all (but not less than all) of the shares in
the participant’s account will be sold as soon as practicable
at market price. The net proceeds of the sale (the total
sales price of all shares of Common Stock sold less the costs
of sale) will be distributed to the participant. If the
participant does not request that shares of stock in his/her
account be sold, certificates for such shares will be
distributed to the participant.




Notice of a participant’s death constitutes notice of
withdrawal from the Plan. Settlement of the participant’s
account will be made pursuant to Section 8.3.




To reinstate his/her participation, the employee must
re-enroll during any subsequent Designated Enrollment Period




	5.2.3	 	Changes, other than cancellation as noted in
Section 5.2.2 above may made only during the Designated
Enrollment Periods. Such changes will be effective at the
beginning of the offering period following such Designated
Enrollment Period.






	6.0	 	NUMBER OF SHARES AND PRICE






	6.1	 	The number of shares of Common Stock available for purchase
under the ESPP shall be TWO HUNDRED FIFTY THOUSAND (250,000) shares,
all of which will be available for purchase during the initial
offering period. Shares available for purchase during the initial
offering period but not purchased by participants will be carried
over to each subsequent offering period. The number of shares
covered by the ESPP is subject to adjustment in the event of a stock
split or other transaction described in Section 9.1.
	 
	6.2	 	The purchase price at which shares will be sold during each
ESPP offering period is 85% of the lower of the fair market value at
(1) the beginning date of such offering period or (2) the ending
date of such offering period. The fair market value of the Common
Stock on a given date is the closing or last sale price on the




 









 






	 	 	NYSE/New York Stock Exchange for that date. If the offering period
begins or ends on a day when the NYSE/New York Stock Exchange does
not trade, the fair market value shall be determined by using the
closing or last sale price on the last trading day immediately
preceding the beginning or ending day of the offering period.
Shares shall be purchased as soon as practicable after the end of
each offering period.
	 
	6.3	 	An Eligible Employee may elect to allocate from 1% to 10%, in
whole percentages, of his/her compensation, through payroll
deductions, to purchase shares through the ESPP. Eligible Employees
who are paid bi-weekly must allocate a minimum of $10.00 per pay
period. Eligible Employees who are paid monthly must allocate a
minimum of $20.00 per pay period. Each Eligible Employee who is a
participant in the Plan on April 15 of each year may make a one time
election effective April 15 of each year to purchase shares through
the ESPP for a minimum amount of $100 and a maximum of $10,000.
The participant shall indicate his/her intent to make a one time
purchase by returning an election form and a check representing the
amount of the election by April 10 to the Company. A participant
who is an officer subject to Section 16(b) of the Exchange Act must
return an irrevocable election form on or before October 15 of the
preceding year. The purchase price will be determined on April 15
using 85% of the closing or last sale price on the NYSE for that
date. All payroll deductions made for a participant are credited to
his/her ESPP account and are deposited into an interest bearing
account and may be commingled with other Company funds. Interest
earned on the account balance will be used to defray the expense of
administering the Plan. If interest earned on the account balance
exceeds the expenses incurred by the Plan, the excess interest shall
accrue to the benefit of the Company to be used for general
corporate purposes. The Company will pay expenses in excess of the
amount generated by the interest on the account used to hold payroll
deductions.
	 
	6.4	 	The number of shares purchased by each participant at the end
of each offering period will be determined by dividing the purchase
price as defined in Section 6.2 above into the amount of payroll
deduction withheld for that participant during the offering period,
subject to ESPP limitations detailed elsewhere in this Plan.
	 
	6.5	 	If the number of shares elected to be purchased by
participants exceeds the aggregate number of shares available during
the offering period, the Company will reduce, pro rata, the number
of shares available to each participant. Excess payroll deductions
will be refunded.
	 
	6.6	 	After purchases have been made, or after the offering date,
the Company will issue the applicable number of Common Stock shares
and, as soon as practicable after the end of such offering period or
offering date, credit the account of each participant for the
applicable number of shares and distribute to each participant a
statement showing the number of shares (whole and fractional)
credited to the account of the participant. A participant will
receive Common Stock certificates for whole shares owned by the
participant only upon written request to the




 









 






	 	 	Company. The excess of any payroll deduction required to purchase
the applicable number of shares of Common Stock, including amounts
attributable to fractional share interests, will be carried over to
the next offering period. No fractional shares may be issued under
the ESPP. If the participant chooses not to participate in the
next offering period, the participant’s cancellation will be
handled pursuant to Section 5.2.2.
	 
	6.7	 	Notwithstanding any other provisions of this ESPP, the fair
market value of shares that may be purchased by any participant
during any calendar year, pursuant to this ESPP or any other plan
maintained by the Company or any Subsidiary that constitutes an
employee stock purchase plan within the meaning of Section 423 of
the Code, determined as of the first day of the offering period,
shall in no event exceed $25,000, and no participant shall have the
right to purchase shares under the ESPP to the extent such purchase
would cause the participant to own stock aggregating 5 percent or
more of the total combined voting power or value of all classes of
stock of the Company or of any parent or subsidiary as described in
Section 424(d) of the Code.
	 
	6.8	 	A participant may purchase shares under the ESPP only if such
participant is an employee on both the first day and the last
business day of such offering period. No participant shall have any
of the rights of a shareholder with respect to shares purchased
under the ESPP until the purchase price for such shares has been
paid and either the participant’s account has been credited with
such shares or certificates for such shares have been issued to the
participant.
	 
	6.9	 	With respect to shares purchased under the ESPP by officers
subject to Section 16(b) of the Exchange Act, such persons
acknowledge that to avail themselves of the exemption from Section
16 (b), such shares must be held for a minimum period of one (1)
year from the date of purchase to the date of disposition of the
shares.
	 
	6.10	 	An employee of the Company or lineal descendants of the
employee may not participate in the Plan if such employee owns stock
aggregating five (5) percent or more of the total combined voting
power or value of all classes of stock of the Company.






	7.0	 	WITHDRAWALS OF SHARES HELD IN THE PLAN






All shares purchased under the ESPP must be held for a minimum of one (1)
year from the date of purchase. A Participant may withdraw all or any
portion of the full shares held in the Participant’s account under the
Plan by notifying Cato in writing. A Participant may elect withdrawal of
a portion or all of his or her shares held in the Plan in one of two
ways: (a) a certificate for the full shares withdrawn may be issued in
the name of and mailed to the Participant or (b) the shares so withdrawn
may be liquidated in cash. Participant will be responsible for brokerage
fees and costs, if any, associated with liquidation. Certificates for
fractional shares will not be issued. Fractional share amounts will be
paid in cash. Any written notice of withdrawal received by the Agent



 









 






after the record date for a cash dividend will not be effective until
after the dividend is reinvested under the Plan. A Participant who
requests a withdrawal of shares will be suspended from Plan participation
for a period of two (2) years from the date of the request for
withdrawal. A suspended Participant may continue Plan participation at
the next designated enrollment period after a period of two (2) years
from the date of the request for a withdrawal of shares.




	8.0	 	NO CONTRACT OF EMPLOYMENT






Participation in the ESPP shall neither constitute a contract of
employment nor convey to any employee any right to continue in the
employment of the Company or to continue to be involved in any business
in which the Company may engage.




	9.0	 	EMPLOYMENT TERMINATION, DEATH, DISABILITY, RETIREMENT AND LEAVES OF
ABSENCE






	9.1	 	If a participant terminates employment for any reason,
including death, disability or retirement, or no longer meets the
eligibility requirements for any reason other than a leave of
absence as detailed in Section 8.2 below, his/her account balance
representing partial shares shall be paid in cash in accordance with
the cancellation provisions in Section 5.2.2 above. A certificate
shall be issued for whole shares.
	 
	9.2	 	If a participant is on an unpaid leave of absence for up to a
maximum of twelve weeks during an offering period, provided that
she/he is an active participant (not terminated) on the beginning
and ending dates of such offering period, she/he may remain in the
ESPP for that period. If the leave exceeds twelve weeks or if the
employee is not on active status (terminated) at the beginning and
ending dates of the offering period, participation will be
automatically canceled and the account balance paid in accordance
with the cancellation provisions in Section 5.2.2 above.
	 
	9.3	 	A participant may designate, in writing via the enrollment
form, a beneficiary. In the event of a participant’s death, his/her
designated beneficiary shall receive shares and cash in full
repayment of the amounts deposited in the participant’s account and
cash for the payroll deductions, if any, for the current offering
period. In the case of a married participant who resides in a
community property state, no party other than the participant’s
spouse may be named as primary beneficiary without the written
consent of the spouse. In the absence of a designated beneficiary,
the account balance of a married participant will be paid to the
participant’s spouse, and the account balance of an unmarried
participant will be paid to the participant’s estate.




 









 






	9.4	 	The Committee shall have the discretion to make decisions
about rights of participants and obligations of the ESPP in
situations of death, disability, retirement, and leaves of absence
and all decisions of the Committee shall be final and binding on all
affected parties.






	10.0	 	CAPITAL CHANGES






	10.1	 	If the outstanding shares of Common Stock are increased,
decreased or changed into, or exchanged for, a different number or
kind of shares or securities of the Company, with or without receipt
of consideration by the Company, through reorganization, merger,
recapitalization, reclassification, stock split, stock
consolidation, stock dividend, or similar event, then an appropriate
and proportionate adjustment shall be made in the number and kind of
shares or other securities which may be purchased under the ESPP.
	 
	10.2	 	Adjustments under Section 9.1 hereof shall be made by the
Committee, whose determination as to what adjustments shall be made,
and the extent thereof, shall be final and conclusive as to all
affected parties. No fractional shares shall be issued under the
Plan on account of any such adjustment but total ownership balance
(whole and fractional shares) will be considered for such
adjustments.






	11.0	 	RECORDKEEPING






	11.1	 	A recordkeeper on agent will be designated for the ESPP. All
expenses of establishing and administering the ESPP, in excess of
interest earned on the account to hold participants’ payroll
deductions, will be paid by the Company without charge to
participants.
	 
	11.2	 	A statement will be sent to each participant as soon as
practicable after the end of each offering period. The statement
will include payroll deduction totals, fair market values at the
beginning and end of the offering period, purchase price, shares
purchased (whole and fractional) and shares allocated.






	12.0	 	RESTRICTIONS ON ASSIGNMENT OF PLAN RIGHTS






Subject to the provisions hereof, a participant may not sell, pledge or
otherwise assign or transfer his/her right to purchase shares under the
Plan, his/her account under the Plan, or any interest therein, or any
cash or shares credited to such account. A participant who desires to
sell, pledge or otherwise assign or transfer shares in his/her account
must request that certificates for such shares be issued in the
participant’s name as provided herein.




	13.0	 	CONSENT OF PARTICIPANTS






Each participant shall be bound by the terms and conditions of the ESPP
as such terms and conditions may be amended from time to time.




	14.0	 	AMENDMENT OR TERMINATION OF THE PLAN




 









 












The Board of Directors shall have the right to modify or terminate the
ESPP in its sole discretion at any time, without the approval of
shareholders except as required by applicable law. The approval of the
Company’s shareholders shall be required for, among other things, any
amendment that will increase the number of shares reserved under the
ESPP, as such number may be adjusted pursuant to Sections 6.1 and 9.0
hereof; reduce the price of shares to be purchased under the ESPP below
the price determined in accordance with Section 6.0 hereof; or cause the
Plan to fail to comply with Section 423 of the Code. The ESPP shall
terminate on September 30, 2013 unless it has been previously terminated
by the Board of Directors.




	15.0	 	TAXATION






Any taxes required by law to be withheld on account of the ESPP shall be
deducted and withheld accordingly. A participant may become liable for
taxes when she/he disposes of shares acquired through this ESPP. The
Company shall not be responsible for any effect that the ESPP may have on
an individual’s taxes.




	16.0	 	GOVERNING LAW






The interpretation and performance of this ESPP shall be governed by the
laws of the State of Delaware.




	17.0	 	DIVIDENDS






Dividends will be paid on all shares held in each participant’s account
under the Plan on the basis of full and fractional shares held in the
account on the record dates for such dividends. Dividend payments will
be reinvested in additional shares of Common Stock on the dividend
payable date as determined by the Board of Directors at a price equal to
85% of the closing or last sale price of the Common Stock on the NYSE/New
York Stock Exchange on the dividend payable date.




	18.0	 	RESTRICTIONS ON RESALE






Shares of Common Stock for which certificates have been issued in the
participant’s name as provided herein are freely transferrable and will
not be subject to specific transfer restrictions except as defined in
Section 6.9 and except for purchases made on the one-time purchase date
of April 15. One-time purchases made on April 15 are subject to and must
be held for a minimum period of one (1) year from the date of grant to
the date of disposition of the shares.