This Executive Compensation Plan Agreement involves
Title: TARGET CORPORATION OFFICER DEFERRED COMPENSATION PLAN
Governing Law: Minnesota Date: 8/25/2011
Industry: Retail (Specialty) Sector: Services
OFFICER DEFERRED COMPENSATION PLAN
The purpose of this Target Corporation Officer Deferred Compensation Plan, formerly known as the Target Corporation Deferred Compensation Plan — Senior Management Group, (the “Plan”) is to provide a means whereby Target Corporation (the “Company”) may afford financial security to a select group of employees who are in the Senior Management Group of the Company and its subsidiaries and who have rendered and continue to render valuable services to the Company or its subsidiaries and who make an important contribution towards the Company’s continued growth and success, by providing for additional future compensation so that such employees may be retained and their productive efforts encouraged. Participants ceased to be eligible to defer Earnings into the Plan after December 31, 1996. The Plan, which is intended to comply with Code section 409A, was amended and restated effective January 1, 2009. The Plan was amended to incorporate the Company’s recoupment policy effective January 13, 2010. This Plan document, which was amended to reflect Plan administration and amendment changes authorized by the Board of Directors on November 10, 2010 and modification of the Change in Control definition, is effective June 8, 2011.
DEFINITIONS AND CERTAIN PROVISIONS
Active Status . “Active Status” means the Participant is currently employed by the Company or has terminated employment under Normal or Early Retirement or under other conditions described in Section 5.2 and has not yet begun to receive payments from the Plan associated with a particular Deferral Account.
Affiliate . An “Affiliate” is the Company and all persons, with whom the Company would be considered a single employer under Code section 414(b) or 414(c).
Beneficiary . “Beneficiary” means the person or persons designated as such in accordance with Article 6.
Benefit Deferral Period . “Benefit Deferral Period” means that period of one (1) or four (4) Plan Years as determined pursuant to Article 4 over which a Participant defers a portion of such Participant’s Earnings.
Committee . “Committee” means the plan administration committee appointed to administer the Plan pursuant to Article 3; provided, solely for purposes of the Plan amendment provisions of Section 7.1, “Committee” means the Chief Executive Officer and the senior ranking Human Resources officer, jointly or individually.
Cumulative Deferral Amount . “Cumulative Deferral Amount” means the total cumulative amount by which a Participant’s Earnings must be reduced over the period prescribed in Section 4.1. If for a Plan Year a Matching Allocation for an Employee who is a member of the Senior Management Group of the Company pursuant to the Target Corporation Supplemental Retirement, Savings and Employee Stock Ownership Plan (“SRSP”) cannot be made because the Before Tax
Deposits or After Tax Deposits elected by the Employee are reduced to comply with the provisions of the SRSP, “Cumulative Deferral Amount” also includes the amount of the Matching Allocation that cannot be made.
Declared Rate . “Declared Rate” means with respect to any Plan Year the applicable rate announced in advance by the Committee for such Plan Year. Under no circumstances shall the minimum rate be less than twelve percent (12%) per annum and the maximum rate shall not exceed twenty percent (20%) per annum. The rate to be announced, subject to the minimum and maximum percentages referenced above, shall be a calculated rate using the following formula:
Moody’s Corporate Bond Yield Average . Monthly Average Corporates as published by Moody’s Investors Service, Inc. or its successor (or if said index is no longer available, its successor index, or if no successor index exists, such other index as selected by the Committee as most closely replicates the measure produced by said Moody index) for the month of June for the year preceding the subject Plan Year to which the Declared Rate shall apply, said rate of return to be rounded to the nearest .10% of said reported rate, to which percentage rate shall be added six (6) percentage points (e.g. an index of 7.16% rounded to 7.20% plus 6% equals a 13.2% “Declared Rate”). Provided however, if any tax or insurance change shall occur which in the reasoned judgment of the Committee shall have an ongoing adverse economic effect on the underlying COLI financing assumptions related to the Plan, then the Committee may adjust said Declared Rate to reflect such adverse economic impact but in no event below the twelve percent (12%) minimum referenced in the first paragraph hereof.
Deferral Account . “Deferral Account” means the account maintained on the books of account of the Company pursuant to Section 4.4.
Early Retirement . “Early Retirement” means the Participant’s Termination of Employment for a reason other than death on or after the date the Participant attains age 55 and prior to the date the Participant attains age 65.
Earnings . “Earnings” means the base pay and incentive pay paid to a Participant by the Company or a subsidiary, excluding car and other allowances and other cash and non-cash compensation.
Eligible Employee . “Eligible Employee” means each Employee in the Senior Management Group of the Company who executes an Enrollment Agreement to participate in the Plan.
Employee . “Employee” means any person employed by the Employer on a regular salaried basis, including officers of the Employer.
Employer . “Employer” means the Company and any of its wholly owned subsidiaries.
Enrollment Agreement . “Enrollment Agreement” means the written agreement entered into by the Employer and an Eligible Employee pursuant to which the Eligible Employee becomes a Participant in the Plan. In the sole discretion of the Company, authorization forms filed by any Participant by which the Participant makes the elections provided for by this Plan may be treated as a completed and fully executed Enrollment Agreement for all purposes under the Plan.
Normal Retirement . “Normal Retirement” means the Termination of Employment of a Participant with the Employer for reasons other than death on or after the date the Participant attains age 65.
Participant . “Participant” means an Eligible Employee who has filed a completed and executed Enrollment Agreement or authorization form with the Committee and is participating in the Plan in accordance with the provisions of Article 4. “Participant” also means an Employee who is a member of the Senior Management Group of the Company who has a Cumulative Deferral Amount based on Matching Allocation that could not be made to the SRSP.
Pay Status . “Pay Status” means that the Participant has had a Termination of Employment with the Company and has begun to receive payments from the Plan associated with a particular Deferral Account.
Plan Year . “Plan Year” means the calendar year beginning January 1 and ending December 31.
Specified Employee . For purposes of complying with the requirements of Code section 409A(a)(2)(B)(i) (relating to the 6 month suspension of certain benefit distributions), an individual is a “Specified Employee” if on his or her Termination of Employment, the Company or other Affiliate has stock that is traded on an established securities market within the meaning of Code section 409A(a)(2)(B) and such individual is a “key employee” (defined below). For this purpose, an individual is a “key employee” during the 12-month period beginning on April 1 immediately following the calendar year in which the individual was employed by the Company and other Affiliates, and satisfied, at any time within such calendar year, the requirements of Code section 416(i)(1)(A)(i), (ii) or (iii) (without regard to Code section 416(i)(5)). An individual will not be treated as a Specified Employee if the individual is not required to be treated as a Specified Employee under Treasury Regulations issued under Code section 409A.
Termination of Employment .
(a) For purposes of determining entitlement to or amount of benefits under the Plan, “Termination of Employment” means a severance of a Participant’s employment relationship with the Employer and all other Affiliates, for any reason.
(b) For purposes of determining when a distribution will be made under the Plan, a “Termination of Employment” will be deemed to occur if, based on the relevant facts and circumstances to the Participant, the Employer, all other Affiliates, and Participant reasonably anticipate that the level of bona fide future services to be performed by the Participant for the Employer and all other Affiliates will permanently decrease to no more than 20% of the average level of bona fide services performed over the immediately preceding 36-month period.
(c) 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.
(d) Notwithstanding the foregoing, a Termination of Employment shall not occur unless such termination also qualifies as a “separation from service,” as defined under Code section 409A and related guidance thereunder.
ADMINISTRATION OF THE PLAN
A Committee (of one or more individuals) shall be appointed by the Board of Directors of the Company to administer the Plan and to establish, adopt or revise such rules and regulations as it may deem necessary or advisable for the administration of the Plan. The Committee shall have discretionary authority to determine eligibility for benefits and to construe the terms of the Plan. Interpretations of the Plan by the Committee shall be conclusive. Members of the Committee shall be eligible to participate in the Plan while serving as members of the Committee, but a member of the Committee shall not vote or act upon any matter which relates solely to such member’s interest in the Plan as a Participant.
4.1 Election to Participate . Effective for Plan Years beginning on and after January 1, 1997, Participants ceased to be eligible to defer Earnings into this Plan. For Plan Years beginning prior to January 1, 1997, any Employee who is a member of the Senior Management Group of the Company may enroll in the Plan by filing a completed and fully executed Enrollment Agreement or authorization form with the Committee. Pursuant to said Enrollment Agreement or authorization form, the Employee shall irrevocably designate a dollar amount by which the aggregate Earnings of such Participant would be reduced over one (1) or four (4) Plan Years next following the execution of the Enrollment Agreement (the “Benefit Deferral Period”), provided, however, that:
(a) Minimum Deferral . The reduction for any Plan Year shall not be less than Five Thousand Dollars ($5,000.00)
(b) Reduction in Earnings .
(i) In General . Except as otherwise provided in this Section 4.1, the Earnings of the Participant for each of the Plan Years in the Benefit Deferral Period shall be reduced by the amount specified in the Enrollment Agreement (including any authorization form) applicable to such Plan Year.
(ii) Accelerated Reduction . A Participant may elect in a written notice with the consent of the Committee to increase the amount of the reduction of Earnings otherwise provided for by Section 4.1(b)(i) for any of the Plan Years remaining in the Benefit Deferral Period, provided, however, that any such increase in the reduction of Earnings for any remaining Plan Years in the Benefit Deferral Period shall not increase the Cumulative Deferral Amount, but shall act to shorten the length of the Benefit Deferral Period.
(c) Maximum Reduction in Earnings . A Participant may not elect a Cumulative Deferral Amount or an increase in reduction of Earnings pursuant to Section 4.1(b)(ii), or any combination of the two, that would cause the aggregate total reduction in Earnings in any Plan Year to exceed twenty-five percent (25%) of the base pay and one hundred percent (100%) of the incentive pay payable during such Plan Year up to a total of $250,000 per year plus the amount of any payout made pursuant to Section 5.4, or such greater percent of base pay and/or incentive pay or greater total amount as the Committee may permit in its sole discretion. In the event that a Participant elects a Cumulative Deferral Amount or increase in reduction of Earnings that would violate the limitation described in this paragraph (c), the election shall be valid except that the Cumulative Deferral Amount or increase in reduction of Earnings so elected shall automatically be reduced to comply with such limitation, whichever is most appropriate in the sole discretion of the Committee.
4.2 Deferral Accounts . The Committee shall establish and maintain a separate Deferral Account for each Participant. The amount by which a Participant’s Earnings are reduced pursuant to Section 4.1 shall be credited by the Employer to the Participant’s Deferral Account on the fifteenth (15th) day of the month in which such Earnings would otherwise have been paid. The Participant’s Deferral Account shall be credited with the annual SRSP lost Matching Allocation on January 15 following the year of the lost Matching Allocation. Effective for Plan Years beginning on
and after January 1, 1997, Participants ceased to be eligible for the annual SRSP lost Matching Allocation. Such Deferral Account shall be debited by the amount of any payments made by the Employer to the Participant or the Participant’s Beneficiary pursuant to this Plan.
(a) Normal and Early Retirement Interest . Each Deferral Account of a Participant who retires as a Normal or Early Retirement shall be deemed to bear interest, in accordance with Appendix A, Section 1, from the date such Deferral Account was established through the date of commencement of payment of the Normal or Early Retirement Benefit at a rate equal to the Declared Rate which is announced by the Committee for each Plan Year. Following the date of commencement of payment of the Normal or Early Retirement Benefit, a Participant’s Deferral Account shall be deemed to bear interest on the balance of such Deferral Account in accordance with Appendix A, Section 2.
(b) Other Interest . In the case of any Termination of Employment other than by Normal or Early Retirement or upon the Participant’s termination of enrollment in this Plan pursuant to Section 5.2(b), the Participant’s Deferral Account shall be deemed to bear interest from the date such Deferral Account was established through the date of the earlier of Termination of Employment or termination of enrollment in this Plan under Section 5.2(c) on the balance in such Deferral Account in accordance with Appendix A, Section 1, except that the interest rate used to calculate interest earned in the Deferral Account shall be ten percent (10%) per annum, provided, however, that if more than five (5) years have elapsed since the first day of the Benefit Deferral Period, the Participant’s Deferral Account shall be deemed to bear interest from the date such Deferral Account was established through the date of the earlier of Termination of Employment or termination of enrollment in this Plan on the balance in such Deferral Account at a rate equal to the Declared Rate which is announced by the Committee for each Plan Year, in accordance with Appendix A, Section 1. Following the earlier of the date of commencement of payment of the Termination Benefit or the date of termination of enrollment in this Plan, a Participant’s Deferral Account shall be deemed to bear interest on the balance in such Deferral Account in accordance with Appendix A, Section 1, if the Participant is in Active Status with respect to the Deferral Account or in accordance with Appendix A, Section 2, if the Participant is in Pay Status with respect to the Deferral Account. However, in either case the interest rate used to calculate interest earned in the Deferral Account shall be twelve percent (12%) per annum. Notwithstanding anything contained herein to the contrary, if a Participant has begun receiving benefits under this Plan and the calculation of future benefits, using the method of calculation set forth on Appendix A causes a reduction in benefits, the future payments shall be made in accordance with the method used at the time of the Participant’s initial payment.
4.3 Rollover Deferred Compensation Account . In its sole discretion, the Committee may permit a Participant to make a special rollover election to transfer any amounts which were previously deferred under the Company’s existing deferred compensation plans to this Plan. Notwithstanding the foregoing, no such special rollover elections or transfers to this Plan shall be permitted after December 31, 2008.
In such event, the Committee shall establish and maintain a separate Rollover Deferral Account for each Participant who makes a rollover transfer to this Plan. Such Rollover Deferral Account shall be deemed to bear interest at the same rate and subject to the same conditions as other Deferral Accounts pursuant to Section 4.2. Each Participant who makes a rollover transfer to a Rollover Deferral Account shall be treated for purposes of determining benefits under the Plan as
having a separate Cumulative Deferral Amount and Deferral Account which shall initially be in the amount of the rollover transfer. A Participant who makes a rollover transfer shall be deemed to waive all rights under the Company’s existing deferred compensation plans from which rollover transfers are made with respect to the amounts transferred to this Plan, including the right to make elections regarding the time or manner of payment as permitted thereunder. Rollover transfers shall be subject to the minimum deferral amount set forth in Section 4.1(a), but shall not be subject to any maximum deferral limitation.
4.4 Valuation of Accounts . The value of a Deferral Account as of any date shall equal the amounts theretofore credited to such account less any payments debited to such account plus the interest deemed to be earned on such account in accordance with Section 4.2. Interest shall be credited in accordance with Appendix A.
4.5 Statement of Accounts . The Committee shall submit to each Participant, within one hundred twenty (120) days after the close of each Plan Year, a statement in such form as the Committee deems desirable setting forth the balance standing to the credit of each Participant in his Deferral Account.
4.6 No Future Deferrals . No Employee or Participant can make additional deferrals into the Plan.
5.1 Normal or Early Retirement . Upon a Participant’s Normal or Early Retirement, the payment of benefits shall commence on the first day of the month following such Termination of Employment, or following such later date which the Participant elected in his Enrollment Agreement (including any authorization form). A Participant may elect in his Enrollment Agreement (including any authorization form) to have payments commence from one (1) to ten (10) years following Termination of Employment, but not later than age 65 (or five (5) years after the first day of the Benefit Deferral Period, if later).
(a) Single Participant . In the case of a Participant who is single when payments commence, the Employer shall make periodic payments to the Participant in an amount in accordance with Appendix A, Section 2.B., for the life of the Participant, but not less than fifteen (15) years. The payments shall be the actuarial equivalent of the aggregate of the Participant’s Deferral Account at the time payments commence and the interest that will accrue on the unpaid balance in such Deferral Account during the payment period pursuant to Section 4.2(a). The payment amount will be redetermined annually to reflect the changes in the Declared Rate.
(b) Married Participant . In the case of a Participant who is married when payments commence, the Employer shall make actuarially reduced payments in accordance with Appendix A, Section 2.B., to the Participant for his life and thereafter, if the Participant is survived by a spouse who was married to the Participant when Normal or Early Retirement Benefit payments commenced, shall continue to make payments to the Participant’s spouse for his life, with payments to be made for an aggregate period of not less than fifteen (15) years. The payments shall be the actuarial equivalent of the payments which would be made to the Participant pursuant to Section 5.1(a) if he were single. The monthly amount of payments will be redetermined annually to reflect changes in the Declared Rate.
5.2 Termination Benefit .
(a) Terminations of Employment . If a Participant has a Termination of Employment for any reason other than death or Normal or Early Retirement, the Employer shall pay to the Participant in one immediate lump sum an amount (the “Termination Benefit”) equal to the value of the Deferral Account as of the date of payment and such Participant shall be entitled to no further benefits under this Plan. Upon Termination of Employment (as defined in paragraph (a) of that definition) the Participant shall immediately cease to be eligible for any benefits under the Plan other than the Termination Benefit. Payment will be made as soon as practicable but not more than 90 days following the Participant’s Termination of Employment or at such later time provided in Section 5.3. Except as provided in paragraph (b) below, no other benefit shall be payable to either the Participant or any Beneficiary of such Participant.
(b) Certain Terminations of Employment . If a Participant has a Termination of Employment after attaining age 50, but prior to attaining age 55, and the Participant has worked for the Company for at least 10 years, and has received an ICP Contract under the Company’s Income Continuance Policy that is signed by Participant and
Company and not rescinded, the Participant will be entitled to an additional, immediate lump sum distribution equal to the difference between:
(i) The actuarial equivalent lump sum value of the periodic payments scheduled to be made to the Participant determined in accordance with Appendix A, Section 2.B for the life of the Participant, but not less than fifteen (15) years payments; and
(ii) The value of the Participant’s Deferral Account.
(c) Termination of Enrollment in Plan . With the written consent of the Committee, a Participant may terminate his enrollment in the Plan by filing with the Committee a written request to terminate enrollment. The Committee will consent to the termination of a Participant’s enrollment in the Plan in the event of an unforeseeable financial emergency of the Participant. An unforeseeable financial emergency shall mean an unexpected need for cash arising from an illness, casualty loss, sudden financial reversal or other such unforeseeable occurrence, but only if and to the extent such unforeseeable emergency constitutes an “unforeseeable emergency” under Code section 409A. Cash needs arising from foreseeable events such as the purchase of a house or education expenses for children shall not be considered