Long-Term Incentive Plan – Target Corp.
TARGET CORPORATION
LONG-TERM INCENTIVE PLAN
(As amended and restated effective June 8, 2011)
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.1 PLAN NAME. This plan is known as the
“Target Corporation Long-Term Incentive Plan” (hereinafter called the “Plan”).
1.2 PURPOSE. The purpose of the Plan is to
advance the performance and long-term growth of the Company by offering
long-term incentives to directors and employees of the Company and its
Subsidiaries and such other Participants who the Plan Committee determines will
contribute to such performance and growth inuring to the benefit of the
shareholders of the Company. This Plan is also intended to facilitate
recruiting and retaining personnel of outstanding ability.
ARTICLE II
DEFINITIONS
2.1 AWARD. An “Award” is a grant of Stock
Options, Stock Appreciation Rights, Dividend Equivalents, Performance Awards,
Restricted Stock or Restricted Stock Units under the Plan.
2.2 BOARD. The “Board” is the Board of
Directors of the Company.
2.3 CASH PROCEEDS. “Cash Proceeds” means the
cash actually received by the Company for the purchase price payable upon
exercise of a Stock Option plus the maximum tax benefit that could be realized
by the Company as a result of the exercise of such Stock Options, which tax
benefit shall be determined by multiplying (a) the amount that is deductible as
a result of any such Stock Option exercise (currently equal to the amount upon
which the Participant153s tax withholding obligation is calculated), times (b) the
maximum federal corporate income tax rate for the year of exercise. To the
extent a Participant pays the exercise price and/or withholding taxes with
shares, Cash Proceeds shall not be calculated with respect to the amounts so
paid.
2.4 CHANGE IN CONTROL. “Change in Control”
means, unless otherwise provided in an Award agreement, one of the following:
(a) Individuals who are Continuing Directors
cease for any reason to constitute 50% or more of the directors of the Company;
or
(b) 30% or more of the outstanding voting
power of the Voting Stock of the Company is acquired or beneficially owned
(within the meaning of Rule 13d-3 under the Exchange Act) by any Person, other
than an entity
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resulting from a Business Combination in which clauses (x) and (y) of
Section 2.4(c) apply; or
(c) the consummation of a merger or
consolidation of the Company with or into another entity, a statutory share
exchange, a sale or other disposition (in one transaction or a series of
transactions) of all or substantially all of the Company153s assets or a similar
business combination (each, a “Business Combination”), in each case unless,
immediately following such Business Combination, (x) all or substantially all of
the beneficial owners (within the meaning of Rule 13d-3 under the Exchange Act)
of the Company153s Voting Stock immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of the voting power of
the then outstanding shares of voting stock (or comparable voting equity
interests) of the surviving or acquiring entity resulting from such Business
Combination (including such beneficial ownership of an entity that, as a result
of such transaction, owns the Company or all or substantially all of the
Company153s assets either directly or through one or more Subsidiaries), in
substantially the same proportions (as compared to the other beneficial owners
of the Company153s Voting Stock immediately prior to such Business Combination) as
their beneficial ownership of the Company153s Voting Stock immediately prior to
such Business Combination, and (y) no Person beneficially owns, directly or
indirectly, 30% or more of the voting power of the outstanding voting stock (or
comparable equity interests) of the surviving or acquiring entity (other than a
direct or indirect parent entity of the surviving or acquiring entity, that,
after giving effect to the Business Combination, beneficially owns, directly or
indirectly, 100% of the outstanding voting stock (or comparable equity
interests) of the surviving or acquiring entity); or
(d) approval by the shareholders of a
definitive agreement or plan to liquidate or dissolve the Company.
Notwithstanding the foregoing, to the extent that any Award constitutes a
deferral of compensation subject to Section 409A of the Code, and if that Award
provides for a change in the time or form of payment upon a Change in Control,
then, solely for purposes of applying such change in the time or form of payment
provision, a Change in Control shall be deemed to have occurred upon an event
described in Section 2.4 only if the event would also constitute a change in
ownership or effective control of, or a change in the ownership of a substantial
portion of the assets of, the Company under Section 409A of the Code.
2.5 CODE. The “Code” is the Internal Revenue
Code of 1986, as amended, and rules and regulations thereunder, as now in force
or as hereafter amended.
2.6 COMPANY. The “Company” is Target
Corporation, a Minnesota corporation, and any successor thereof.
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2.7 COMMON STOCK. “Common Stock” is the
common stock, $.0833 par value per share (as such par value may be adjusted from
time to time) of the Company.
2.8 DATE OF GRANT. The “Date of Grant” of an
Award is the date designated in the resolution by the Plan Committee as the date
of an Award, which shall not be earlier than the date of the resolution and
action thereon by the Plan Committee. In the absence of a designated date or a
fixed method of computing such date being specifically set forth in the Plan
Committee153s resolution, then the Date of Grant shall be the date of the Plan
Committee153s resolution or action.
2.9 DIVIDEND EQUIVALENT. A “Dividend
Equivalent” is a right to receive an amount equal to the regular cash dividend
paid on one share of Common Stock. Dividend Equivalents may only be granted in
connection with the grant of an Award that is based on but does not consist of
shares of Common Stock (whether or not restricted). The number of Dividend
Equivalents so granted shall not exceed the number of related stock-based
rights. (For example, the number of Dividend Equivalents granted in connection
with a grant of Stock Appreciation Rights may equal the number of such Stock
Appreciation Rights, even though the number of shares actually paid upon
exercise of those Stock Appreciation Rights necessarily will be less than the
number of Stock Appreciation Rights and Dividend Equivalents granted.) Dividend
Equivalents shall be subject to such terms and conditions as may be established
by the Plan Committee, but they shall expire no later than the date on which
their related stock-based rights are either exercised, expire or are forfeited
(whichever occurs first). The amounts payable due to a grant of Dividend
Equivalents may be paid in cash, either currently or deferred, or converted into
shares of Common Stock, as determined by the Plan Committee.
2.10 EXCHANGE ACT. The “Exchange Act” is the
Securities Exchange Act of 1934, as amended, and rules and regulations
thereunder, as now in force or as hereafter amended.
2.11 FAIR MARKET VALUE.
(a) Solely for purposes of determining the
exercise price of a Stock Option or Stock Appreciation Right, “Fair Market
Value” of a share of Common Stock on any date is the Volume Weighted Average
Price for such stock as reported for such stock by Bloomberg L.P. on such date,
or in the absence of such report the Volume Weighted Average Price for such
stock as reported for such stock by the New York Stock Exchange on such date or,
if no sale has been recorded by Bloomberg L.P. or the New York Stock Exchange on
such date, then on the last preceding date on which any such sale shall have
been made in the order of primacy indicated above.
(b) For all other purposes of the Plan, “Fair
Market Value” of a share of Common Stock shall be the amount determined by the
Company using
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such criteria as it shall determine, in its sole discretion, to be
appropriate for valuation.
2.12 INCENTIVE STOCK OPTIONS. An “Incentive Stock
Option” is a Stock Option that is intended to qualify as an “incentive stock
option” under Section 422 of the Code.
2.13 NON-QUALIFIED OPTIONS. A “Non-Qualified
Option” is a Stock Option that is not intended to qualify as an “incentive stock
option” under Section 422 of the Code.
2.14 PARTICIPANT. A “Participant” is a person who
has been designated as such by the Plan Committee and granted an Award under
this Plan pursuant to Article III hereof.
2.15 PERFORMANCE GOALS. “Performance Goals” are
the performance conditions, if any, established pursuant to Section 4.1 hereof
by the Plan Committee in connection with an Award.
2.16 PERFORMANCE PERIOD. The “Performance Period”
with respect to a Performance Award is a period of not less than one calendar
year or one fiscal year of the Company, beginning not earlier than the year in
which such Performance Award is granted, which may be referred to herein and by
the Plan Committee by use of the calendar or fiscal year in which a particular
Performance Period commences.
2.17 PERFORMANCE AWARD. A “Performance Award” is
any of: a number of shares of Common Stock subject to Performance Goals
(“Performance Shares”), a right to receive a number of shares of Common Stock
subject to Performance Goals (“Performance Share Units”), or a cash amount
subject to Performance Goals (“Performance Units”), determined (in all cases) in
accordance with Article IV of this Plan based on the extent to which the
applicable Performance Goals are achieved. A Performance Award shall be of no
value to a Participant unless and until earned in accordance with Article IV
hereof.
2.18 PLAN COMMITTEE. The “Plan Committee” is the
committee described in Section 8.1 hereof.
2.19 PLAN YEAR. The “Plan Year” shall be a fiscal
year of the Company falling within the term of this Plan.
2.20 RESTRICTED STOCK. “Restricted Stock” is
Common Stock granted subject to terms and conditions, including a risk of
forfeiture, established by the Plan Committee pursuant to Article VI of this
Plan.
2.21 RESTRICTED STOCK UNIT. A “Restricted Stock
Unit” is a right to receive one share of Common Stock at a future date that has
been granted subject to
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terms and conditions, including a risk of forfeiture, established by the Plan
Committee pursuant to Article VI of this Plan.
2.22 STOCK APPRECIATION RIGHT. A “Stock
Appreciation Right” is a right to receive, upon exercise of that right, an
amount, which may be paid in cash, shares of Common Stock or a combination
thereof in the discretion of the Plan Committee, equal to the difference between
the Fair Market Value of one share of Common Stock as of the date of exercise
and the exercise price for that right as determined by the Plan Committee on or
before the Date of Grant. Stock Appreciation Rights may be granted in tandem
with Stock Options or other Awards or may be freestanding.
2.23 STOCK OPTION. A “Stock Option” is a right to
purchase from the Company at any time not more than ten years following the Date
of Grant, one share of Common Stock for an exercise price not less than the Fair
Market Value of a share of Common Stock on the Date of Grant, subject to such
terms and conditions established pursuant to Article V hereof. Stock Options
may be either Non-Qualified Options or Incentive Stock Options.
2.24 SUBSIDIARY CORPORATION. The terms
“Subsidiary” or “Subsidiary Corporation” mean any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company, in
which each of the corporations other than the last corporation in the unbroken
chain owns stock possessing fifty percent or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain as
determined at the point in time when reference is made to such “Subsidiary” or
“Subsidiary Corporation” in this Plan.
2.25 CONTINUING DIRECTOR. “Continuing Director”
means an individual (a) who is, as of the effective date of the Plan, a director
of the Company, or (b) who becomes a director of the Company after the effective
date hereof and whose initial appointment, or nomination for election by the
Company153s shareholders, was approved by at least a majority of the then
Continuing Directors; provided, however, that any individual whose initial
assumption of office occurs as a result of either an actual or threatened
contested election by any Person (other than the Board) seeking the election of
such nominee in which the number of nominees exceeds the number of directors to
be elected shall not be a Continuing Director.
2.26 PERSON. “Person”, as used in Sections 2.4 and
2.25, means any individual, firm, corporation or other entity and shall include
any group comprised of any person and any other person with whom such person or
any affiliate or associate (as defined in Rule 14a-1(a) of the Exchange Act) of
such person has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or disposing of any
capital stock of the Company.
2.27 VOTING STOCK. “Voting Stock” means all
then-outstanding capital stock of the Company entitled to vote generally in the
election of directors of the Company.
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ARTICLE III
GRANTING OF AWARDS TO PARTICIPANTS
3.1 ELIGIBLE PARTICIPANTS. Awards may be
granted by the Plan Committee to any employee of the Company or a Subsidiary
Corporation, including any employee who is also a director of the Company or a
Subsidiary Corporation. Awards other than grants of Incentive Stock Options may
also be granted to (a) a director of the Company who is not an employee of the
Company or a Subsidiary Corporation and (b) any individual or entity, other than
an employee, who provides services to the Company or a Subsidiary Corporation in
the capacity of an advisor or consultant. References in this Plan to
“employment” and similar terms (except “employee”) shall include the providing
of services in the capacity of a director, advisor or consultant, and references
to termination of employment shall mean termination of the relationship
(employee, director, advisor or consultant) under which the Award was granted,
even if the person continues in another relationship. A person who has been
engaged by the Company for employment shall be eligible for Awards other than
Incentive Stock Options, provided such person actually reports for and commences
such employment within 90 days after the Date of Grant. Incentive Stock Options
may be granted only to individuals who are employees on the Date of Grant.
3.2 DESIGNATION OF PARTICIPANTS. At any time
and from time to time during the Plan Year, the Plan Committee may designate the
employees of the Company and its Subsidiaries and other Participants eligible
for Awards.
3.3 ALLOCATION OF AWARDS. Contemporaneously
with the designation of a Participant pursuant to Section 3.2 hereof, the Plan
Committee shall determine the size, type and Date of Grant for each Award,
taking into consideration such factors as it deems relevant, which may include
the following:
(a) the total number of shares of Common
Stock available for Awards under the Plan;
(b) the work assignment or the position of the
Participant and its sensitivity and/or impact in relationship to the
profitability and growth of the Company and its Subsidiaries; and
(c) the Participant153s performance in
reference to such factors.
The Plan Committee may grant a Participant only one type of Award or it may
grant any combination of Awards in whatever relationship one to the other, if
any, as the Plan Committee in its discretion so determines.
3.4 NOTIFICATION TO PARTICIPANTS AND DELIVERY
OF DOCUMENTS. As soon as practicable after such determinations have been made,
each Participant shall be notified of (a) his/her designation as a Participant,
(b) the Date of
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Grant, (c) the number and type of Awards granted to the Participant, (d) in
the case of Performance Awards, the Performance Period and Performance Goals,
and (e) in the case of Restricted Stock or Restricted Stock Units, the
Restriction Period. The Participant shall thereafter be supplied with written
evidence of any such Awards.
ARTICLE IV
PERFORMANCE AWARDS
4.1 ESTABLISHMENT OF PERFORMANCE GOALS.
Performance Goals applicable to a Performance Award shall be established by the
Plan Committee in its absolute discretion on or before the Date of Grant and not
more than a reasonable period of time after the beginning of the relevant
Performance Period. Such Performance Goals may include or be based upon any one
or more of the following criteria: net sales; comparable store sales; total
revenue; gross margin rate; selling, general and administrative expense rate;
earnings before interest, taxes, depreciation and amortization; earnings before
interest and taxes; earnings before taxes; net earnings; earnings per share;
Target Corporation share price; total shareholder return; return on equity;
return on sales; return on assets; return on invested capital; cash flow return
on investment; economic value added; credit card segment profitability; credit
card segment pre-tax return on invested capital; credit card spread to LIBOR;
operating cash flow; free cash flow; working capital; interest coverage; net
debt to earnings before interest, taxes, depreciation, amortization and rent
expense ratio; debt leverage; and total net debt. Performance Goals may be
absolute in their terms or be measured against or in relationship to the
performance of other companies or indices, whether comparably, similarly or
otherwise situated to the Company. Performance Goals may be based on the
Company153s consolidated results or the results of any segment or other subset of
the Company153s business, and may be calculated in accordance with generally
accepted accounting principles or any other management accounting principle. At
any time prior to distribution of a Performance Award, the Plan Committee may,
in its sole discretion, modify the Performance Goals applicable to such
Performance Award if it determines that unforeseen events have occurred which
have had a substantial effect on the Performance Goals and such unforeseen
events would otherwise make application of the original Performance Goals
unfair; provided, however, that no such change or modification may be made to
the extent it increases the amount of compensation payable to any Participant
who is a “covered employee” within the meaning of Code Section 162(m).
4.2 LEVELS OF PERFORMANCE REQUIRED TO EARN
PERFORMANCE AWARDS. At or about the same time that Performance Goals are
established for a specific period, the Plan Committee shall in its absolute
discretion establish the percentage of the Performance Awards granted for such
Performance Period which shall be earned by the Participant for various levels
of performance measured in relation to achievement of Performance Goals for such
Performance Period.
4.3 OTHER RESTRICTIONS. The Plan Committee
shall determine the terms and conditions applicable to any Performance Award,
which may include restrictions on
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the delivery of Common Stock payable in connection with the Performance Award
and restrictions that could result in the future forfeiture of all or part of
any Common Stock earned. The Plan Committee may provide that shares of Common
Stock issued in connection with a Performance Award be held in escrow and/or
legended.
4.4 NOTIFICATION TO PARTICIPANTS. Promptly
after the Plan Committee has established or modified the Performance Goals with
respect to a Performance Award, the Participant shall be provided with written
notice of the Performance Goals so established or modified.
4.5 MEASUREMENT OF PERFORMANCE AGAINST
PERFORMANCE GOALS. The Plan Committee shall, as soon as practicable after the
close of a Performance Period, determine:
(a) the extent to which the Performance
Goals for such Performance Period have been achieved; and
(b) the percentage of the Performance Awards
earned as a result.
Notwithstanding the foregoing, if and to the extent the applicable
Performance Award agreement permits, the Plan Committee may, in its sole
discretion, reduce the percentage of any Performance Award otherwise determined
for a Performance Period, and such reduced percentage shall be the amount earned
by the Participant. All determinations of the Plan Committee shall be absolute
and final as to the facts and conclusions therein made and be binding on all
parties. Promptly after the Plan Committee has made the foregoing determination,
each Participant who has earned Performance Awards shall be notified, in writing
thereof. For all purposes of this Plan, notice shall be deemed to have been
given the date action is taken by the Plan Committee making the determination.
Participants may not sell, transfer, pledge, exchange, hypothecate or otherwise
dispose of all or any portion of their Performance Awards during the Performance
Period, except that Performance Awards may be transferable by assignment by a
Participant to the extent provided in the applicable Performance Award
agreement.
4.6 TREATMENT OF PERFORMANCE AWARDS EARNED.
Upon the Plan Committee153s determination that a percentage of any Performance
Awards have been earned for a Performance Period, Participants to whom such
earned Performance Awards have been granted and who have been (or were) in the
employ of the Company or a Subsidiary thereof continuously from the Date of
Grant, subject to the exceptions set forth at Section 4.9 and Section 4.10
hereof, shall be entitled, subject to the other conditions of this Plan, to
payment in accordance with the terms and conditions of their Performance
Awards. Such terms and conditions may permit or require that any applicable tax
withholding be deducted from the amount payable. Performance Awards shall under
no circumstances become earned or have any value whatsoever for any Participant
who is not in the employ of the Company or its Subsidiaries continuously during
the entire Performance Period for which such Performance Award was granted,
except as provided at Section 4.9 or Section 4.10 hereof.
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4.7 DISTRIBUTION. Distributions payable
pursuant to Section 4.6 above shall be made as soon as practicable after the
Plan Committee determines the Performance Awards have been earned unless the
provisions of Section 4.8 hereof are applicable to a Participant.
4.8 DEFERRAL OF RECEIPT OF PERFORMANCE AWARD
DISTRIBUTIONS. With the consent of the Plan Committee, a Participant who has
been granted a Performance Award may by compliance with the then applicable
procedures under the Plan irrevocably elect in writing to defer receipt of all
or any part of any distribution associated with that Performance Award. The
terms and conditions of any such deferral, including but not limited to, the
period of time for, and form of, election; the manner and method of payout; the
plan and form in which the deferred amount shall be held; the interest
equivalent or other payment that shall accrue pending its payout; and the use
and form of Dividend Equivalents in respect of stock-based units resulting from
such deferral, shall be as determined by the Plan Committee. The Plan Committee
may, at any time and from time to time, but prospectively only, amend, modify,
change, suspend or cancel any and all of the rights, procedures, mechanics and
timing parameters relating to such deferrals. An election made prior to
December 31, 2008 to defer receipt of any distribution associated with a
Performance Award relating to Performance Periods ending after December 31, 2004
is subject to the provisions of Appendix A.
4.9 NON-DISQUALIFYING TERMINATION OF
EMPLOYMENT. Except for Section 4.10 hereof, the only exceptions to the
requirement of continuous employment during a Performance Period for Performance
Award distribution are termination of a Participant153s employment by reason of
death (in which event the Performance Award may be transferable by will or the
laws of descent and distribution only to such Participant153s beneficiary
designated to receive the Performance Award or to the Participant153s applicable
legal representatives, heirs or legatees), total and permanent disability, with
the consent of the Plan Committee, normal or late retirement or early
retirement, with the consent of the Plan Committee, or transfer of an executive
in a spin-off, with the consent of the Plan Committee, occurring during the
Performance Period applicable to the subject Performance Award. In such instance
a distribution of the Performance Award shall be made at the end of the
Performance Period, and the percentage of the total Performance Award that would
have been earned during the Performance Period shall be earned and paid out;
provided, however, in a spin-off situation the Plan Committee may set additional
conditions, such as, without limiting the generality of the foregoing,
continuous employment with the spin-off entity. If a Participant153s termination
of employment does not meet the criteria set forth above, but the Participant
had at least 15 years of employment with the Company or a Subsidiary or any
combination thereof, the Plan Committee may allow distribution of the percentage
(or a portion thereof) of the total Performance Award that is earned for the
Performance Period, subject to any conditions that the Plan Committee shall
determine.
4.10 CHANGE IN CONTROL. In the event of a Change
in Control, the Performance Period shall be deemed to have ended and a pro rata
portion of all
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outstanding Performance Awards under the Plan shall be deemed to have been
earned. Specifically, the pro rata amount earned shall be determined by
multiplying 100% of each Performance Award by a fraction, the numerator of which
shall be the number of months that have elapsed in the applicable Performance
Period prior to the Change in Control and the denominator of which shall be the
total number of months in the Performance Period. Distribution of the amount
deemed earned shall be made within ten days after the Change in Control or later
if so provided in the applicable Award agreement, a related deferral election
or, if applicable, Appendix A.
ARTICLE V
STOCK OPTIONS AND
STOCK APPRECIATION RIGHTS
5.1 NON-QUALIFIED OPTION. Non-Qualified
Options granted under the Plan are Stock Options that are not intended to be
Incentive Stock Options under the provisions of Section 422 of the Code.
Non-Qualified Options shall be evidenced by written agreements in such form and
not inconsistent with the Plan as the Plan Committee shall in its sole
discretion approve from time to time, which agreements shall specify the number
of shares to which they pertain and the purchase price of such shares.
5.2 INCENTIVE STOCK OPTION. Incentive Stock
Options granted under the Plan are Stock Options that are intended to be
“incentive stock options” under Section 422 of the Code, and the Plan shall be
administered, except with respect to the right to exercise options after
termination of employment, to qualify Incentive Stock Options issued hereunder
as incentive stock options under Section 422 of the Code. An Incentive Stock
Option shall not be granted to an employee who owns, or is deemed under
Section 424(d) of the Code to own, stock of the Company (or of any parent or
Subsidiary of the Company) possessing more than 10% of the total combined voting
power of all classes of stock therein. The aggregate Fair Market Value
(determined as of the time the option is granted) of the stock with respect to
which Incentive Stock Options are exercisable for the first time by any
Participant during any calendar year (under all incentive stock option plans of
the Company or any parent or Subsidiary of the Company) shall not exceed
$100,000. Incentive Stock Options shall be evidenced by written agreements in
such form and not inconsistent with the Plan as the Plan Committee shall in its
sole discretion approve from time to time, which agreements shall specify the
number of shares to which they pertain and the purchase price of such shares.
5.3 OPTION TERMS. Stock Options granted under this
Plan shall be subject to the following terms and conditions:
(a) Option Period. Each Stock Option
shall expire and all rights to purchase shares thereunder shall cease not more
than ten years after its Date of Grant or on such date prior thereto as may be
fixed by the Plan Committee, or on such other date as is provided by this Plan
in the event of termination of employment, death or reorganization. No Stock
Option shall permit the purchase of any shares thereunder during the first year
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after its Date of Grant, except as provided in Section 5.5 hereof or as
otherwise determined by the Plan Committee.
(b) Exercise Price. The purchase
price per share payable upon exercise of a Stock Option shall not be less than
the Fair Market Value of a share of Common Stock on the Date of Grant of the
Stock Option.
(c) Transferability and Termination of
Options. During the lifetime of an individual to whom a Stock Option is
granted, the Stock Option may be exercised only by such individual and only
while such individual is an employee of the Company or a Subsidiary and only if
the Participant has been continuously so employed by any one or combination
thereof since the Date of Grant of the Stock Option, provided, however, that if
the employment of such Participant by the Company or a Subsidiary Corporation
terminates, the Stock Option may additionally be exercised as follows, or in any
other manner provided by the Plan Committee, but in no event later than ten
years after the Date of Grant of the Stock Option, except as set forth in
(ii) and (v) below:
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(i) |
If a Participant153s termination of employment occurs by reason of normal or |
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(ii) |
If a Participant153s termination of employment occurs by reason of death, then |
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less, but in the case of Non-Qualified Options in no event less than one year
after the date of death, unless the Plan Committee provides otherwise.
(iii) If a Participant153s termination of
employment occurs for any reason other than as specified in Section 5.3(c)(i) or
(ii) hereof, the Participant has been employed by the Company or a Subsidiary or
any combination for more than 15 years, and if the Plan Committee so approves,
then such Participant153s Stock Options may be exercised within a period of up to
five years after the date of termination of employment. During the extension
period, the right to exercise options, if any, accruing in installments shall
continue unless the Plan Committee provides otherwise; provided, however, the
Plan Committee may set additional conditions.
(iv) If a Participant153s termination of
employment occurs for any reason other than as specified in Section 5.3(c)(i) or
(ii) hereof and the Plan Committee has not approved an extension, then, except
as provided below and only with respect to installments that have as of the date
of termination already accrued, such Participant153s Stock Options may be
exercised within ninety days after the date of such termination of employment
except in the case of Participants who would at the time be subject to the
provisions of Section 16(b) of the Exchange Act, in which instance the period of
exercise shall be two hundred ten days after termination. Notwithstanding the
foregoing, those Participants whose employment is terminated because of
deliberate and serious disloyal or dishonest conduct in the course of employment
that justifies and results in prompt discharge for specific cause under the
established policies and practices of the Company as interpreted by the Plan
Committee shall have no additional period after termination of employment in
which to exercise their options. Examples of such deliberate and serious
disloyal or dishonest conduct would include material unlawful conduct, material
and conscious falsification or unauthorized disclosure of important records,
embezzlement or unauthorized conversion of property, serious violation of
conflict of interest or vendor relations policies, and misuse or disclosure of
significant trade secrets or other information likely to be of use to the
detriment of the Company or its interests.
(v) Rights accruing to a Participant under
Sections 5.3(c)(i), 5.3(c)(iii) and 5.3(c)(iv) may, upon the death of a
Participant subsequent to his/her termination of employment, be exercised by
his/her duly designated beneficiary or otherwise by his/her applicable legal
representatives, heirs or legatees to the extent vested in and unexercised or
perfected by the Participant at the date of his/her
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death. In the case of Non-Qualified Options, the period for such exercise
shall not expire less than one year after the date of the Participant153s death,
unless the Plan Committee provides otherwise.
(vi) Absence on a leave of absence approved by
the Plan Committee shall not be deemed a termination or interruption of
continuous employment for the purposes of the Plan.
No Stock Option shall be assignable or transferable by the individual to whom
it is granted, except that it may be transferable (X) by assignment by the
Participant to the extent provided in the applicable option agreement (or as
subsequently allowed by the Plan Committee), or (Y) by will or the laws of
descent and distribution in accordance with the provisions of this Plan. Upon
the death of the Participant an option may only be exercised by such
individual153s beneficiary designated to exercise the option or otherwise by
his/her applicable legal representatives, heirs or legatees, and only within the
specific time period set forth above and only to the extent vested in and
unexercised by the Participant at the date of his/her death, except as provided
in Section 5.3(c)(ii).
In no event, whether by the Participant directly or by his/her proper
assignee or beneficiary or other representative, shall any option be exercisable
at any time after its expiration date as stated in the option agreement, except
as provided in Section 5.3(c)(ii) and (v). When an option is no longer
exercisable it shall be deemed for all purposes and without further act to have
lapsed and terminated. The Plan Committee may, in its sole discretion,
determine solely for the purposes of the Plan that a Participant is permanently
and totally disabled, and the acts and decisions of the Plan Committee made in
good faith in relation to any such determination shall be conclusive upon all
persons and interests affected thereby.
(d) Exercise of Options. An
individual entitled to exercise Stock Options may, subject to their terms and
conditions and the terms and conditions of the Plan, exercise them in whole or
in part by delivery of written notice of exercise to the Company at its
principal office or such other manner as the Company may direct, specifying the
number of whole shares of Common Stock with respect to which the Stock Options
are being exercised. Before shares may be issued, payment must be made in full,
in legal United States tender, in the amount of the purchase price of the shares
to be purchased at the time and any amounts for withholding as provided in
Section 10.8 hereof; provided, however, in lieu of paying for the exercise price
in cash as described above, the individual may pay (subject to such conditions
and procedures as the Plan Committee may establish) all or part of such exercise
price by tendering (either actually or by attestation) owned and unencumbered
shares of Common Stock acceptable to the Plan Committee
13
and having a Fair Market Value on the date of exercise of the Stock Options
equal to or less than the exercise price of the Stock Options exercised, with
cash, as set forth above, for the remainder, if any, of the purchase price;
provided, further, that the Plan Committee may permit a Participant to elect to
pay the exercise price by authorizing a third party to sell shares of Common
Stock (or a sufficient portion of the shares) acquired upon exercise of the
Stock Options and remit to the Company a sufficient portion of the sale proceeds
to pay the entire exercise price and any tax withholding resulting from such
exercise. Subject to rules established by the Plan Committee, the withholdings
required by Section 10.8 hereof may be satisfied by the Company withholding
shares of Common Stock issued on exercise that have a Fair Market Value on the
date of exercise of the Stock Options equal to or less than the withholding
required by Section 10.8 hereof.
(e) Repricing Prohibited. Subject to
Sections 5.5, 7.3 and 10.7, outstanding Stock Options granted under this Plan
shall not be repriced.
5.4 STOCK APPRECIATION RIGHTS. Stock
Appreciation Rights may be granted to Participants either alone (“freestanding”)
or in tandem with other Awards, including Performance Awards, Stock Options and
Restricted Stock. Stock Appreciation Rights granted in tandem with Incentive
Stock Options must be granted at the same time as the Incentive Stock Options
are granted. Stock Appreciation Rights granted in tandem with any other Award
may be granted at any time prior to the earlier of the exercise or expiration of
such Award. Stock Appreciation Rights granted in tandem with Stock Options
shall terminate and no longer be exercisable upon the termination or exercise of
the related Stock Options. The Plan Committee shall establish the terms and
conditions applicable to any Stock Appreciation Rights, which terms and
conditions need not be uniform but may not be inconsistent with the terms of the
Plan. Freestanding Stock Appreciation Rights shall generally be subject to
terms and conditions substantially similar to those described in Section 5.3 for
Stock Options, including the requirements of 5.3(a), (b) and (e) regarding the
maximum period, minimum price and prohibition on repricing.
5.5 CHANGE IN CONTROL. In the event of a
Change in Control:
(a) If the Company is the surviving entity and
any adjustments necessary to preserve the value of the Participant153s outstanding
Stock Options and Stock Appreciation Rights have been made, or the Company153s
successor at the time of the Change in Control irrevocably assumes the Company153s
obligations under this Plan or replaces the Participant153s outstanding Stock
Options and Stock Appreciation Rights with stock options and stock appreciation
rights having substantially the same value and having terms and conditions no
less favorable to the Participant than those applicable to the Participant153s
Stock Options and Stock Appreciation Rights immediately prior to the Change in
Control (collectively, an “Equitable Assumption or Replacement”), then such
14
Awards or their replacement awards shall become immediately exercisable in
full only if within two years after the Change in Control the Participant153s
employment:
(i) is terminated without “Cause”, which
for purposes of this Section 5.5 shall mean (x) willful and continued failure to
substantially perform the Participant153s duties (other than failure resulting
from incapacity due to physical or mental illness) after receipt of a written
demand for such performance specifically identifying such failure, or (y) the
willful engaging by the Participant in illegal conduct or gross misconduct that
is materially and demonstrably injurious to the Company or its successor;
(ii) terminates with “Good Reason”, which
for purposes of this Section 5.5 shall mean any material diminution of the
Participant153s position, authority, duties or responsibilities (including the
assignment of duties materially inconsistent with the Participant153s position or
a material increase in the time Participant is required by the Company or its
successor to travel), any reduction in salary or in the Participant153s aggregate
bonus and incentive opportunities, any material reduction in the aggregate value
of the Participant153s employee benefits (including retirement, welfare and fringe
benefits), or relocation to a principal work site that is more than 40 miles
from the Participant153s principal work site immediately prior to the Change in
Control; or
(iii) terminates under circumstances that
entitle the Participant to accelerated exercisability under any individual
employment agreement between the Participant and the Company, a Subsidiary, or
any successor thereof.
(b) If there is no Equitable Assumption or
Replacement, then without any action by the Plan Committee or the Board, each
outstanding Stock Option and Stock Appreciation Right granted under the Plan
that has not been previously exercised or otherwise lapsed and terminated shall
become immediately exercisable in full; provided, however, that the Plan
Committee, in its sole discretion, and without the consent of any Participant
affected thereby, may determine that a cash payment shall be made promptly
following the Change in Control in lieu of all or any portion of the outstanding
Stock Options and Stock Appreciation Rights granted under this Plan. The amount
payable with respect to each share of Common Stock subject to an affected Stock
Option and each affected Stock Appreciation Right shall equal the excess of the
Fair Market Value of a share of Common Stock immediately prior to such Change in
Control over the exercise price of such Stock Option or Stock Appreciation
Right. After such a determination by the Plan Committee, each Stock Option and
Stock Appreciation Right, with respect to which a cash payment is to be made
shall terminate, and the Participant shall have no further rights thereunder
except the right to receive such cash payment.
15
ARTICLE VI
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
6.1 RESTRICTION PERIOD. At the time an Award
of Restricted Stock or Restricted Stock Units is made, the Plan Committee shall
establish the terms and conditions applicable to such Award, including the
period of time (the “Restriction Period”) during which certain restrictions
established by the Plan Committee shall apply to the Award. The Restriction
Period shall not be less than three years, provided, however, that for Awards to
non-employee directors of the Company, the terms of the Award may allow for the
ratable release of the restrictions over a minimum period of one year. Each such
Award, and designated portions of the same Award, may have a different
Restriction Period, at the discretion of the Plan Committee. Except as permitted
or pursuant to Sections 6.4, 6.5 or 10.7 hereof, the Restriction Period
applicable to a particular Award shall not be changed.
6.2 RESTRICTED STOCK TERMS AND CONDITIONS.
Restricted Stock shall be represented by a stock certificate registered in the
name of the Participant granted such Restricted Stock. Such Participant shall
have the right to enjoy all shareholder rights during the Restriction Period
except that:
(a) The Participant shall not be entitled to
delivery of the stock certificate until the Restriction Period shall have
expired.
(b) The Company may either issue shares
subject to such restrictive legends and/or stop-transfer instructions as it
deems appropriate or provide for retention of custody of the Common Stock during
the Restriction Period.
(c) The Participant may not sell, transfer,
pledge, exchange, hypothecate or otherwise dispose of the Common Stock during
the Restriction Period, except that it may be transferable by assignment by the
Participant to the extent provided in the applicable Restricted Stock Award
agreement.
(d) A breach of the terms and conditions
established by the Plan Committee with respect to the Restricted Stock shall
cause a forfeiture of the Restricted Stock, and any dividends withheld thereon.
(e) Dividends payable in cash or in shares
of stock or otherwise may be either currently paid or withheld by the Company
for the Participant153s account. At the discretion of the Plan Committee,
interest may be paid on the amount of cash dividends withheld, including cash
dividends on stock dividends, at a rate and subject to such terms as determined
by the Plan Committee.
16
Provided, however, and the provisions of Section 6.4 to the contrary
notwithstanding, in lieu of the foregoing, the Plan Committee may provide that
no shares of Common Stock be issued until the Restriction Period is over and
further provide that the shares of Common Stock issued after the Restriction
Period has been completed, be issued in escrow and/or be legended and that the
Common Stock be subject to restrictions including the forfeiture of all or a
part of the shares.
6.3 PAYMENT FOR RESTRICTED STOCK. A
Participant shall not be required to make any payment for Restricted Stock
unless the Plan Committee so requires.
6.4 FORFEITURE PROVISIONS. Subject to
Section 6.5, in the event a Participant terminates employment during a
Restriction Period for the Participant153s Restricted Stock or Restricted Stock
Units, such Awards will be forfeited; provided, however, that the Plan Committee
may provide for proration or full payout in the event of (a) a termination of
employment because of normal or late retirement, (b) with the consent of the
Plan Committee, early retirement or spin-off, (c) death, (d) total and permanent
disability, as determined by the Plan Committee, (e) with the consent of the
Plan Committee, termination of employment after 15 years of employment with the
Company or a Subsidiary or any combination thereof, or (f) in the case of a
non-employee director, a departure from the Board following the completion of
the director153s term of office, all subject to any other conditions the Plan
Committee may determine. Any Restricted Stock Unit that is not, in all cases,
due and payable not later than the 15th day of the third month following the
calendar year, or if later, the Company153s fiscal year, in which the Restricted
Stock Unit ceases to be subject to a “substantial risk of forfeiture” within the
meaning Section 409A of the Code, will be subject to the provisions of Appendix
A.
6.5 CHANGE IN CONTROL. In the event of a
Change in Control, restrictions on a fraction of each Participant153s outstanding
Restricted Stock and Restricted Stock Units granted under the Plan will lapse.
The numerator of such fraction with respect to an Award shall be the number of
months that have elapsed in the applicable Restriction Period prior to the
Change in Control and the denominator shall be the number of months in such
Restriction Period. Distribution of any shares not previously distributed shall
be made within ten days after the Change in Control or later if so provided in
the applicable Award agreement, a related deferral election or if applicable,
Appendix A.
6.6 DEFERRAL OF RECEIPT OF RESTRICTED STOCK
UNITS. With the consent of the Plan Committee, a Participant who has been
granted a Restricted Stock Unit may by compliance with the then applicable
procedures under the Plan irrevocably elect in writing to defer receipt of all
or any part of any distribution associated with that Award. The terms and
conditions of any such deferral, including but not limited to, the period of
time for, and form of, election; the manner and method of payout; the plan and
form in which the deferred amount shall be held; the interest equivalent or
other payment that shall accrue pending its payout; and the use and form of
Dividend Equivalents in
17
respect of stock-based units resulting from such deferral, shall be as
determined by the Plan Committee. The Plan Committee may, at any time and from
time to time, but prospectively only, amend, modify, change, suspend or cancel
any and all of the rights, procedures, mechanics and timing parameters relating
to such deferrals. An election made prior to December 31, 2008 to defer receipt
of any distribution associated with a Restricted Stock Unit relating to a
Restriction Period ending after December 31, 2004 is subject to the provisions
of Appendix A.
ARTICLE VII
SHARES OF STOCK SUBJECT TO THE PLAN; MAXIMUM
AWARDS
7.1 SHARES AVAILABLE. Subject to the other
provisions of this Article VII, the total number of shares available for grant
as Awards pursuant to the Plan shall not exceed in the aggregate 81,000,000
shares of Common Stock. (This limit includes the 44,000,000 shares that were
originally made available under this Plan.) Solely for the purpose of applying
the limitation in the preceding sentence and subject to the replenishment and
adjustment provisions of Sections 7.2 and 7.3 below:
(a) each Award granted under this Plan prior
to May 19, 2004 (the date the Plan was last approved by shareholders) shall
reduce the number of shares available for grant by one share for every one share
granted;
(b) each Stock Option or Stock Appreciation
Right granted under this Plan on or after May 19, 2004 shall reduce the number
of shares available for grant by one share for every one share granted;
(c) each Award granted under this Plan on or
after May 19, 2004 that may result in the issuance of Common Stock, other than a
Stock Option, Stock Appreciation Right, or Dividend Equivalent, shall reduce the
number of shares available for grant by two shares for every one share granted;
(d) each Dividend Equivalent that the
Corporation has determined may result in the issuance of Common Stock shall
reduce the number of shares available for grant by two shares for every share
that would be issuable if the accumulated value of the Dividend Equivalent were
converted into Common Stock at Fair Market Value, but such reduction shall only
occur if the corresponding dividends payable to shareholders were paid in cash;
and
(e) if Awards are granted in tandem, so that
only one of the Awards may actually be exercised, only the Award that results in
the greater reduction in the number of shares available for grant shall result
in a reduction of the shares so available, and the other Award shall be
disregarded.
Shares available for grant under the Plan may be authorized and unissued
shares, treasury shares held by the Company or shares purchased or held by the
Company or a Subsidiary
18
for purposes of the Plan, or any combination thereof. Shares issued upon
assumption or conversion of outstanding stock-based awards granted by an
acquired company shall be disregarded in applying the limitation set forth in
this Section 7.1.
7.2 SHARES AGAIN AVAILABLE. In the event all
or any portion of an Award is forfeited or cancelled, expires, is settled for
cash, or otherwise does not result in the issuance of all or a portion of the
shares subject to the Award in connection with the exercise or settlement of
such Award, the number of shares not issued that were deducted for such Award
pursuant to Section 7.1 above shall be restored and may again be used for Awards
under the Plan. If a Participant uses shares of Common Stock to pay a purchase
or exercise price or tax withholding, either by having the Company withhold
shares or tendering shares (either actually or by attestation), an equal number
of such shares shall be restored and may again be used for Awards under the
Plan. In addition, shares may be reacquired on the open market by the Company
using the Cash Proceeds received by the Company from the exercise on or after
May 19, 2004 of Stock Options granted under the Plan to restore an equal number
of shares that may again be used for Awards under the Plan; provided, however,
that the number of shares so restored does not exceed the number that could be
purchased at Fair Market Value with the Cash Proceeds on the date of exercise of
the Stock Option giving rise to such Cash Proceeds.
If one of the events described in the first sentence of the preceding
paragraph occurs with respect to an award that was granted under a Prior Plan
(as defined in Section 10.11) but was outstanding on May 19, 2004, the total
number of shares available for grant under this Plan shall be increased by one
share for each share subject to that award that is not issued.
Notwithstanding anything in this Section 7.2 to the contrary and solely for
purposes of determining whether shares are available for the issuance of
Incentive Stock Options, the maximum aggregate number of shares that may be
granted under this Plan shall be determined without regard to any shares
restored pursuant to this Section 7.2 that, if taken into account, would cause
the Plan to fail the requirement under Code Section 422 that the Plan designate
the maximum aggregate number of shares that may be issued.
7.3 RELEVANT CHANGE ADJUSTMENTS. In the
event of any equity restructuring (within the meaning of Financial Accounting
Standards No. 123 (revised 2004)) other than: (1) any distribution of securities
or other property by the Company to shareholders in a spin-off or split-up that
does not qualify as a tax-free spin-off or split-up under Section 355 of the
Code (or any successor provision of the Code); or (2) any cash dividend
(including extraordinary cash dividends), appropriate adjustments in the number
of shares available for grant and in any outstanding Awards, including
adjustments in the size of the Award and in the exercise price per share of
Stock Options and Stock Appreciation Rights, shall be made by the Plan Committee
to give effect to such equity restructuring to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the
Plan. No such adjustment shall be required to reflect the events described in
clauses (1) and (2) above, or any other change in
19
capitalization that does not constitute an equity restructuring, however such
adjustment may be made: (x) if necessary to comply with Section 409A of the
Code, the adjustment qualifies as a substitution or assumption under Treasury
Regulation Section 1.424-1; and (y) the Plan Committee affirmatively determines,
in its discretion, that such an adjustment is appropriate.
7.4 MAXIMUM PER PARTICIPANT AWARD. During
any consecutive thirty-six month period, no Participant may receive Awards that,
in the aggregate, could result in that Participant receiving, earning or
acquiring, subject to the adjustments described in Section 7.3:
(a) Stock Options and Stock Appreciation
Rights for, in the aggregate, more than 4,000,000 shares of Common Stock;
(b) Performance Shares, Restricted Stock and
Restricted Stock Units for, in the aggregate, more than 700,000 shares of Common
Stock;
(c) A number of Dividend Equivalents greater
than the number of shares of Common Stock the Participant could receive, earn or
acquire in connection with the related stock-based Awards granted to the
Participant; and
(d) Performance Units with a value exceeding
$15,000,000.
In addition, during any consecutive thirty-six month period, no Participant
who is a non-employee director may receive Awards that, in the aggregate, could
result in that Participant receiving, earning or acquiring, subject to the
adjustments described in Section 7.3, more than 75,000 shares of Common Stock.
For purposes of applying the limits described in this Section 7.4, if Awards
subject to the same limit are granted in tandem, so that only one of the Awards
may actually be exercised, only one of the Awards shall be counted.
ARTICLE VIII
ADMINISTRATION
8.1 PLAN COMMITTEE. The Plan will be
administered by a committee of two or more members of the Compensation Committee
of the Board who are appointed from time to time by the Board and who are
outside, independent Board members who, in the judgment of the Board, are
qualified to administer the Plan as contemplated by (a) Rule 16b-3 of the
Securities and Exchange Act of 1934 (or any successor rule), (b) Section 162(m)
of the Code, as amended, and the regulations thereunder (or any successor
Section and regulations), and (c) any rules and regulations of a stock exchange
on which Common Stock is traded. Any member of the committee administering the
Plan who does not satisfy or ceases to satisfy the qualifications set out in the
preceding sentence may recuse himself or herself from any vote or other action
taken by such committee. The Board may, at any time and in its complete
discretion, remove any member of such committee and may fill any vacancy on such
committee.
20
8.2 POWERS. The Plan Committee shall have
and exercise all of the powers and responsibilities granted expressly or by
implication to it by the provisions of the Plan. Subject to and as limited by
such provisions, the Plan Committee may from time to time enact, amend and
rescind such rules, regulations and procedures with respect to the
administration of the Plan as it deems appropriate or convenient.
8.3 INTERPRETATION. All questions arising
under the Plan, any Award agreement, or any rule, regulation or procedure
adopted by the Plan Committee shall be determined by the Plan Committee, and its
determination thereof shall be conclusive and binding upon all parties.
8.4 COMMITTEE PROCEDURE. Any action required
or permitted to be taken by the Plan Committee under the Plan shall require the
affirmative vote of a majority of a quorum of the members of the Plan
Committee. A majority of all members of the Plan Committee shall constitute a
“quorum” for Plan Committee business. The Plan Committee may act by written
determination instead of by affirmative vote at a meeting, provided that any
written determination shall be signed by all members of the Plan Committee, and
any such written determination shall be as fully effective as a majority vote of
a quorum at a meeting.
8.5 DELEGATION. The Plan Committee may
delegate all or any part of its authority under the Plan to a subcommittee of
directors and/or officers of the Company for purposes of determining and
administering Awards granted to persons who are not then subject to the
reporting requirements of Section 16 of the Exchange Act.
ARTICLE IX
REDUCTION IN AWARDS
9.1 WHEN APPLICABLE. Anything in this Plan to the contrary notwithstanding,
the provisions of this Article IX shall apply to a Participant if an independent
auditor selected by the Plan Committee (the “Auditor”) determines that each of
(a) and (b) below are applicable.
(a) Payments or distributions hereunder,
determined without application of this Article IX, either alone or together with
other payments in the nature of compensation to the Participant which are
contingent on a change in the ownership or effective control of the Company, or
in the ownership of a substantial portion of the assets of the Company, or
otherwise (but after any elimination or reduction of such payments under the
terms of the Company153s Officer Income Continuance Policy Statement, as amended),
would result in any portion of the payments hereunder being subject to an excise
tax on excess parachute payments imposed under Section 4999 of the Code.
21
(b) The excise tax imposed on the Participant
under Section 4999 of the Code on excess parachute payments, from whatever
source, would result in a lesser net aggregate present value of payments and
distributions to the Participant (after subtraction of the excise tax) than if
payments and distributions to the Participant were reduced to the maximum amount
that could be made without incurring the excise tax.
9.2 REDUCED AMOUNT. Under this Article IX
the payments and distributions under this Plan shall be reduced (but not below
zero) so that the present value of such payments and distributions shall equal
the Reduced Amount. The “Reduced Amount” (which may be zero) shall be an amount
expressed in present value which maximizes the aggregate present value of
payments and distributions under this Plan which can be made without causing any
such payment to be subject to the excise tax under Section 4999 of the Code. The
determinations and reductions under this Section 9.2 shall be made after
eliminations or reductions, if any, have been made under the Company153s Officer
Income Continuance Policy Statement, as amended.
9.3 PROCEDURE. If the Auditor determines
that this Article IX is applicable to a Participant, it shall so advise the Plan
Committee in writing. The Plan Committee shall then promptly give the
Participant notice to that effect together with a copy of the detailed
calculation supporting such determination which shall include a statement of the
Reduced Amount. Such notice shall also include a description of which and how
much of the Awards shall be eliminated or reduced (as long as their aggregate
present value equals the Reduced Amount). For purposes of this Article IX,
Awards shall be reduced in the following order: (1) Stock Options with an
exercise price above the then Fair Market Value of a share of Common Stock that
have a positive value for purposes of Section 280G of the Code, as determined
under applicable IRS guidance; (2) pro rata among Awards that constitute
deferred compensation subject to Section 409A of the Code; and (3) if a further
reduction is necessary to reach the Reduced Amount, among the Awards that are
not subject to Section 409A of the Code. Present value shall be determined in
accordance with Section 280G of the Code. All the foregoing determinations made
by the Auditor under this Article IX shall be made as promptly as practicable
after it is determined that excess parachute payments (as defined in Section
280G of the Code) will be made to the Participant if an elimination or reduction
is not made. As promptly as practicable, the Company shall provide to or for the
benefit of the Participant such amounts and shares as are then due to the
Participant under this Plan and shall promptly provide to or for the benefit of
the Participant in the future such amounts and shares as become due to the
Participant under this Plan.
9.4 CORRECTIONS. As a result of the
uncertainty in the application of Section 280G of the Code at the time of the
initial determination by the Auditor hereunder, it is possible that payments or
distributions under this Plan will have been made which should not have been
made (“Overpayment”) or that additional payments or distributions which will
have not been made could have been made (“Underpayment”), in each case,
consistent with the calculation of the Reduced Amount hereunder. In the event
that the Auditor, based upon the assertion of a deficiency by the Internal
Revenue Service
22
against the Company or the Participant which the Auditor believes has a high
probability of success, determines that an Overpayment has been made, any such
Overpayment shall be treated for all purposes as a loan to the Participant which
the Participant shall repay together with interest at the applicable Federal
rate provided for in Section 7872(f)(2) of the Code; provided, however, that no
amount shall be payable by the Participant if and to the extent such payment
would not reduce the amount which is subject to the excise tax under Section
4999 of the Code. In the event that the Auditor, based upon controlling
precedent, determines that an Underpayment has occurred, any such Underpayment
shall be promptly paid to or for the benefit of the Participant together with
interest at the applicable Federal rate provided for in Section 7872(f)(2)(A) of
the Code.
9.5 NON-CASH BENEFITS. In making its
determination under this Article IX, the value of any non-cash benefit shall be
determined by the Auditor in accordance with the principles of Section
280G(d)(3) of the Code.
9.6 DETERMINATIONS BINDING. All
determinations made by the Auditor under this Article IX shall be binding upon
the Company, the Plan Committee and the Participant.
ARTICLE X
GENERAL PROVISIONS
10.1 AMENDMENT OR TERMINATION OF PLAN. The Board
may at any time amend, suspend, discontinue or terminate the Plan (including the
making of any necessary enabling, conforming and procedural amendments to the
Plan to authorize and implement the granting of Incentive Stock Options or other
income tax preferred stock options which may be authorized by federal law
subsequent to the effective date of this Plan); provided, however, that no
amendment by the Board shall, without further approval of the shareholders of
the Company, increase the total number of shares of Common Stock which may be
made subject to the Plan, except as provided at Section 7.3 hereof, or make any
other change for which shareholder approval is required by law or under the
applicable rules of the New York Stock Exchange. No action taken pursuant to
this Section 10.1 of the Plan shall, without the consent of the Participant,
adversely affect any Awards which have been previously granted to a Participant
except pursuant to Section 10.5 of the Plan.
10.2 NON-ALIENATION OF RIGHTS AND BENEFITS. Except
as expressly provided herein, no right or benefit under the Plan shall be
subject to anticipation, alienation, sale, assignment, pledge, encumbrance or
charge and any attempt to anticipate, alienate, sell, assign, pledge, encumber
or charge the same shall be void. No right or benefit hereunder shall in any
manner be liable for or subject to the debts, contracts, liabilities or torts of
the person entitled to such right or benefit. If any Participant or beneficiary
hereunder should become bankrupt or attempt to anticipate, alienate, sell,
assign, pledge, encumber or charge any right or benefit hereunder (other than as
expressly provided herein), then such right or benefit shall, in the sole
discretion of the Plan Committee, cease and in such event the Company may hold
or apply the same
23
or any or no part thereof for the benefit of the Participant or beneficiary,
his/her spouse, children or other dependents or any of them in any such manner
and in such proportion as the Plan Committee in its sole discretion may deem
proper.
10.3 NO RIGHTS AS SHAREHOLDER. The granting of
Awards under the Plan shall not entitle a Participant or any other person
succeeding to his/her rights, to any dividend, voting or other right as a
shareholder of the Company unless and until the issuance of a stock certificate
to the Participant or such other person pursuant to the provisions of the Plan
and then only subsequent to the date of issuance thereof.
10.4 LIMITATION OF LIABILITY OR OBLIGATION OF THE
COMPANY. As illustrative only of the limitations of liability or obligation of
the Company and not intended to be exhaustive thereof, nothing in the Plan shall
be construed:
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(a) |
to give any employee of the Company any right to be granted any Award other |
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(b) |
to give any Participant any rights whatsoever with respect to shares of |
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(c) |
to limit in any way the right of the Company or any Subsidiary to terminate, |
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(d) |
to be evidence of any agreement or understanding, express or implied, that |
Payments and other benefits received by a Participant under an Award shall
not be deemed part of a Participant153s regular, recurring compensation for
purposes of any termination, indemnity or severance pay laws and shall not be
included in, nor have any effect on, the determination of benefits under any
other employee benefit plan, contract or similar arrangement provided by the
Company or any Subsidiary, unless expressly so provided by such other plan,
contract or arrangement or the Plan Committee determines that an Award or
portion of an Award should be included to reflect competitive compensation
practices or to recognize that an Award has been made in lieu of a portion of
competitive cash compensation.
10.5 GOVERNMENT REGULATIONS. Notwithstanding any
other provisions of the Plan seemingly to the contrary, the obligation of the
Company with respect to Awards granted under the Plan shall at all times be
subject to any and all applicable laws, rules and regulations and such approvals
by any government agencies as may be required or deemed by the Board or Plan
Committee as reasonably necessary or appropriate for the protection of the
Company.
24
In connection with any sale, issuance or transfer hereunder, the Participant
acquiring the shares shall, if requested by the Company, give assurances
satisfactory to counsel of the Company that the shares are being acquired for
investment and not with a view to resale or distribution thereof and assurances
in respect of such other matters as the Company may deem desirable to assure
compliance with all applicable legal requirements.
10.6 NON-EXCLUSIVITY OF THE PLAN. Neither the
adoption of the Plan by the Board nor the submission of the Plan to shareholders
of the Company for approval shall be construed as creating any limitations on
the power or authority of the Board to adopt such other or additional incentive
or other compensation arrangements of whatever nature as the Board may deem
necessary or desirable or preclude or limit the continuation of any other plan,
practice or arrangement for the payment of compensation or fringe benefits to
employees generally, or to any class or group of employees, which the Company or
any Subsidiary now has lawfully put into effect, including, without limitation,
any retirement, pension, savings, profit sharing or stock purchase plan,
insurance, death and disability benefits, and executive short term incentive
plans.
10.7 REORGANIZATION. In case the Company is merged
or consolidated with another corporation, or in case the property or stock of
the Company is acquired by another corporation, or in case of a separation,
reorganization or liquidation of the Company (for purposes hereof any such
occurrence being referred to as an “Event”), the Plan Committee or a comparable
committee of any corporation assuming the obligations of the Company hereunder,
shall either:
(a) make appropriate provision for the
protection of any outstanding stock-based Awards granted thereunder by the
substitution on an equitable basis of appropriate stock, stock units, stock
options or stock appreciation rights of the Company, or of the merged,
consolidated or otherwise reorganized corporation which will be issuable in
respect to the Awards. Stock to be issued pursuant to such substitute awards
shall be limited so that the excess of the aggregate fair market value of the
shares subject to such substitute awards immediately after such substitution
over the purchase price thereof (if any) is not more than the excess of the
aggregate fair market value of the shares subject to such substitute awards
immediately before such substitution over the purchase price thereof (if any);
or
(b) upon written notice to the Participant,
declare that all Performance Awards granted to the Participant are deemed
earned, that the Restriction Period of all Restricted Stock and Restricted Stock
Units has been eliminated and that all outstanding Stock Options and Stock
Appreciation Rights shall accelerate and become exercisable in full but that all
outstanding Stock Options and Stock Appreciation Rights, whether or not
exercisable prior to such acceleration, must be exercised within the period of
time set forth in such notice or they will terminate. In connection with any
declaration pursuant to this Section 10.7(b), the Plan Committee may, but shall
not be
25
obligated to, cause a cash payment to be made to each Participant who holds a
Stock Option or Stock Appreciation Right that is terminated in an amount equal
to the product obtained by multiplying (x) the amount (if any) by which the
Event Proceeds Per Share (as hereinafter defined) exceeds the exercise price per
share covered by such Stock Option times (y) the number of shares of Common
Stock covered by such Stock Option or Stock Appreciation Right. For purposes of
this Section 10.7(b), “Event Proceeds Per Share” shall mean the cash plus the
fair market value, as determined in good faith by the Plan Committee, of the
non-cash consideration to be received per share by the shareholders of the
Company upon the occurrence of the Event.
10.8 WITHHOLDING TAXES, ETC. All distributions
under the Plan shall be subject to any required withholding taxes and other
withholdings and, in case of distributions in Common Stock, the Participant or
other recipient may, as a condition precedent to the delivery of Common Stock,
be required to pay to his/her participating employer the excess, if any, of the
amount of required withholding over the withholdings, if any, from any
distributions in cash under the Plan. All or a portion of such payment may, in
the discretion of the Plan Committee and upon the election of the Participant,
be made (a) by withholding from shares that would otherwise be delivered to the
Participant a number of shares sufficient to satisfy the remaining required tax
withholding or (b) by tendering (either actually or by attestation) owned and
unencumbered shares of Common Stock acceptable to the Plan Committee and having
a Fair Market Value on the date of tender equal to or less than the remaining
required tax withholding. No distribution under the Plan shall be made in
fractional shares of Common Stock, but the proportional market value thereof
shall be paid in cash.
10.9 GENERAL RESTRICTION. Each Award shall be
subject to the requirement that, if at any time the Board shall determine, in
its discretion, that the listing, registration or qualification of the shares
subject to such option and/or right upon any securities exchange or under any
state or federal law, or the consent or approval of any government regulatory
body, is necessary or desirable as a condition of, or in connection with the
granting of such Award or the issue or purchase of shares respectively
thereunder, such Award may not be exercised in whole or in part unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.
10.10 USE OF PROCEEDS. The proceeds derived by the
Company from the sale of the stock pursuant to Awards granted under the Plan
shall constitute general funds of the Company.
10.11 PRIOR PLANS. Notwithstanding the adoption of this
Plan by the Board, the Company153s Executive Long Term Incentive Plan of 1981 and
the Director Stock Option Plan of 1995, as the same have been amended from time
to time (the “Prior Plans”), shall remain in effect, and all grants and awards
heretofore made under the Prior
26
Plans shall be governed by the terms of the Prior Plans. The Plan Committee
shall not, however, make any additional grants pursuant to the Prior Plans.
10.12 DURATION OF PLAN. This Plan shall remain in effect
until the earliest of the following events occurs: (a) distribution of all
shares of Common Stock subject to the Plan, (b) termination of this Plan
pursuant to Section 10.1 hereof, or (c) May 19, 2014; provided, however, that
Awards made before the termination or expiration of this Plan may be exercised,
vested, settled or otherwise effectuated after such date in accordance with the
terms of such Awards.
10.13 SEVERABILITY. In the event any provision of this
Plan shall be held to be illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of this Plan, and this Plan
shall be construed and enforced as if the illegal or invalid provision had not
been included.
10.14 GOVERNING LAW. To the extent that federal laws do
not otherwise control, this Plan and all determinations made and actions taken
pursuant to this Plan shall be governed by the laws of Minnesota and construed
accordingly.
10.15 HEADINGS. The headings of the Articles and their
subparts in this Plan are for convenience of reading only and are not meant to
be of substantive significance and shall not add to or detract from the meaning
of such Article or subpart to which it refers.
10.16 STOCK CERTIFICATES. Notwithstanding anything in
the Plan to the contrary, to the extent the Plan provides for the issuance of
stock certificates to reflect the issuance of shares of Common Stock or
Restricted Stock, the issuance may be effected on a non-certificated basis, to
the extent not prohibited by applicable law or the applicable rules of any stock
exchange on which the Common Stock is traded.
27
APPENDIX A
A-1 PURPOSE AND EFFECT. This Appendix A to
the Target Corporation Long-Term Incentive Plan modifies the terms of any
deferred Performance Award and any Restricted Stock Unit that is subject to
Section 409A of the Code that was awarded prior to December 31, 2008 and that is
paid or payable after December 31, 2008. The provisions of this Appendix A will
supersede any inconsistent terms of any award that is covered by this Appendix
A. Awards covered by this Appendix A (collectively referred to herein as
“Appendix A Awards”) include:
(a) Any Performance Award deferred prior to December 31, 2008 for a
Performance Period ending after December 31, 2004 (“Deferred Performance Share
Unit”);
(b) Any Restricted Stock Unit (other than a Deferred Restricted Stock
Unit defined below) for which distribution is not, in all cases, due and payable
not later than the 15th day of the third month following the calendar year, or
if later, the Company153s fiscal year, in which the Restricted Stock Unit ceases
to be subject to a “substantial risk of forfeiture” within the meaning of
Section 409A of the Code; and
(c) Any Restricted Stock Unit relating to a Restriction Period
ending after December 31, 2004 for which an election was made prior to
December 31, 2008 to defer receipt of any distribution associated with such
Restricted Stock Unit (“Deferred Restricted Stock Unit”).
A-2 DEFINITIONS. The capitalized terms in
this Addendum that are not defined below, shall have the same meaning as in the
Agreement, or, if not defined in the Agreement, as defined in the Plan.
(a) Company. For purposes of this Addendum, Company includes
any person that would be treated as a single employer with the Company under
Section 414(b) or 414(c) of the Code.
(b) Disabled. An employee Participant will be Disabled if, by
reason of any medically-determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve months, Participant (i) is unable to engage in any
substantial gainful activity or (ii) is receiving income replacement benefits
for a period of not less than three months under an accident and health plan
covering employees of the Company. An employee Participant will be deemed to be
Disabled if he or she is determined to be totally disabled by the Social
Security Administration.
(c) Termination of Employment. For purposes of determining an
employee Participant153s entitlement to payment of an Appendix A Award,
“Termination
28
of Employment” means a severance of such Participant153s employment
relationship with the Company, for any reason. For purposes of determining when
a distribution will be made under Appendix A, a “Termination of Employment” will
be deemed to occur if, based on the relevant facts and circumstances to the
Participant, the Company and Participant reasonably anticipate that future
services to be performed by the Participant for the Company will permanently
decrease to no more than 20% of the average level of services performed over the
immediately preceding 36-month period. A bona fide leave of absence that is six
months or less, or during which an individual retains a reemployment right, will
not cause a Termination of Employment. In the case of a leave of absence without
a right of reemployment that exceeds the time periods described in this
paragraph, a Termination of Employment will be deemed to occur once the leave of
absence exceeds six months. Notwithstanding the foregoing, a Termination of
Employment shall not occur unless such termination also qualifies as a
“separation from service,” as defined under Section 409A of the Code and related
guidance thereunder.
(d) Trust. Trust means the Target Corporation Deferred
Compensation Trust, established by agreement dated January 1, 2005, by and
between the Company and State Street Bank and Trust Company, as amended, or
similar trust agreement.
A-3 PAYMENT OF EMPLOYEE PARTICIPANT153S
RESTRICTED STOCK UNITS. The vested amount of an employee Participant153s
Restricted Stock Units and Deferred Restricted Stock Units shall convert to
shares of Common Stock and shall be issued to or on behalf of the Participant
upon the earlier of the following:
(a) the employee Participant153s death;
(b) the date the employee Participant becomes Disabled;
(c) for a Participant153s Deferred Restricted Stock Units, the later
of the Vesting Date or the first day of the month next following the date that
is six (6) months after the employee Participant153s Termination of Employment;
and for a Participant153s Restricted Stock Units that are not Deferred Restricted
Stock Units, the earlier of the Vesting Date or the first day of the month next
following the date that is six (6) months after the employee Participant153s
Termination of Employment; or
(d) the termination and liquidation of employee Participant153s
Restricted Stock Units or Deferred Restricted Stock Units under Section A-7
below.
Payments under Paragraphs (a), (b) and (c) will be made within 90 days of
such distribution event and payment on account of Paragraph (d) will be made in
accordance with Section A-7.
29
A-4 PAYMENT OF NON-EMPLOYEE DIRECTOR
PARTICIPANT153S RESTRICTED STOCK UNITS. The vested amount of a non-employee
director Participant153s Restricted Stock Units shall convert to shares of Common
Stock and shall be issued to or on behalf of the Participant upon the earlier of
the following:
(a) the date of the Participant153s death; or
(b) the date the non-employee director Participant ceases to be a member of
the Board of Directors of the Company, provided the Participant has ceased all
contractual relationships as an independent contractor with the Company and has
experienced a “separation from service” under Section 409A of the Code, provided
further, if the Participant is a “specified employee,” as defined under
Section 409A of the Code, on the date of his or her separation from service,
payment will be suspended for six (6) months following the Participant153s
separation from service, or, if earlier, until the Participant153s death.
A-5 PAYMENT OF DEFERRED PERFORMANCE
AWARD. The vested amount of the percentage of a Participant153s Deferred
Performance Share Units shall convert to shares of Common Stock and shall be
issued to or on behalf of a Participant as soon as practicable, but not more
than 90 days, after the later of the following:
(a) the end of the Performance Period; or
(b) the first of the following events to occur:
|
(1) |
the Participant153s death; |
|
(2) |
the date the Participant becomes Disabled; |
|
(3) |
the first day of the month next following the date that is six (6) months |
|
(4) |
the fixed distribution date, if any, designated by the Participant pursuant |
|
(5) |
the termination and liquidation of the Participant153s Deferred Performance |
A-6 FUNDING UPON A CHANGE IN CONTROL. In
the event a Change in Control causes the Trust to be funded, the Company shall:
(a) determine the amount of the Company153s
obligation to Participants who are entitled to a distribution of Appendix A
Awards, by multiplying the number of Units earned as of the Change in Control by
the Fair Market Value of one share of Common Stock on the date of the Change in
Control;
(b) credit the amounts determined in
paragraph (a) to a bookkeeping account in the name of each applicable
Participant;
30
(c) on and after the date of the Change in
Control, credit to such bookkeeping accounts investment earnings at an annual
rate equal to the sum of the 10-Year United States Treasury Note rate plus 2%.
The 10-Year United States Treasury Note rate will be determined on the date of
the Change in Control, or if no such rate is available on that date, the
immediately preceding date such rate is available, and such rate will be reset
each calendar quarter as necessary; and
(d) transfer cash or other property to the
Trust as provided under the Trust. Such transfer shall be made to the extent
permitted by, subject to, and in accordance with, the terms of the Trust.
A-7 AWARD TERMINATION AND LIQUIDATION ON
ACCOUNT OF A CHANGE IN CONTROL. Upon a Change in Control the Appendix A
Awards will terminate and payment of all amounts under such Awards will be
accelerated if and to the extent provided in this Section A-7.
(a) The Appendix A Awards will be terminated effective as of the first
date on which there has occurred both (i) a Change in Control under
Section 2.4(a) and (ii) a funding of the Trust on account of such Change in
Control (referred to herein as the “Appendix A termination effective date”)
unless, prior to such Appendix A termination effective date the Board
affirmatively determines that the Appendix A Awards will not be terminated as of
such effective date. The Board will be deemed to have taken action to
irrevocably terminate the Appendix A Awards as of the Appendix A termination
effective date by its failure to affirmatively determine that the Appendix A
Awards will not terminate as of such date.
(b) The determination by the Board under paragraph (a) constitutes a
determination that such termination will satisfy the requirements of
Section 409A of the Code, including an agreement by the Company that it will
take such additional action or refrain from taking such action as may be
necessary to satisfy the requirements necessary to terminate and liquidate the
Appendix A Awards under paragraph (c) below.
(c) In the event the Board does not affirmatively determine not to
terminate the Appendix A Awards as provided in paragraph (a), such termination
shall be subject to either (1) or (2) as follows:
1. If the Change in Control qualifies as a “change in control
event” under Section 409A of the Code, payment of all Appendix A Awards will be
accelerated and made in a lump sum as soon as administratively practicable but
not more than 90 days following the Appendix A termination effective date,
provided the requirements of Treasury Regulation
Section 1.409A-3(j)(4)(ix)(B) have been satisfied.
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2. If the Change in Control does not qualify as a “change in
control event” for purposes of Section 409A of the Code, payment of all Appendix
A Awards will be accelerated and made in a lump sum as soon as administratively
practicable but not more than 60 days following the 12 month anniversary of the
Appendix A termination effective date, provided, the requirements of Treasury
Regulation Section 1.409A-3(j)(4)(ix)(C) have been satisfied.
A-8 LIMITATIONS ON TRANSFER. Awards subject
to this Appendix A may not be assigned or transferred by a Participant during
their lifetime, other than to a former spouse incident to divorce if and to the
extent required by a qualified domestic relations order and permitted under the
terms of the applicable Award agreement, and the Awards shall not be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance or
hypothecation, execution, attachment or similar process. Any attempt to
anticipate, alienate, sell, assign, transfer, pledge, encumber, hypothecate,
charge or otherwise dispose of an Award in a manner contrary to the provisions
hereof, and the levy of any attachment or similar process upon the awards, shall
be null and void.
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