January 13, 1999
DAYTON HUDSON CORPORATION
INCOME CONTINUANCE POLICY STATEMENT
I. CONCEPTS
A. GENERAL
The present policy of the Corporation is to provide, under certain
defined circumstances, Income Continuance Payments to the persons
listed on Exhibit A in the event of termination of employment. This
policy is intended to assist in the occupational transition and
financial security of those Executives whose services are no longer
deemed required within the Corporation, who have during their tenure
been faithful and honest employees, who do not during the period of
those payments engage in disqualifying misconduct, and to the extent
not compensated for services to a directly competitive employer and to
assist Executives who terminate employment with the Corporation within
2 years after a Change in Control.
"Income Continuance" will be paid in monthly installments for from 18
to 24 months, depending upon the Executive's length of service in the
Corporation, in an amount equal to the Executive's cash compensation
prior to termination of employment.
This will be known as the Income Continuance Policy ("ICP") of the
Corporation. It will be interpreted and applied in accordance with
this Statement of policy and with any subsequent amendment or
restatement applicable to the Executive.
B. ELIGIBILITY
To be eligible under ICP, an Executive must be listed on Exhibit A and
be a member of the Corporation's Senior Management Group ("SMG").
C. REASSIGNMENT
An Executive will continue to have income protection under ICP for at
least 18 calendar months (Eligibility Period) after internal
reassignment to a position which is not an SMG position.
D. SPIN-OFF
An Executive who retains substantially the same position in an ongoing
Operating Company or similar business unit after the Corporation has
ceased to be its owner or operator will remain eligible for the same
ICP benefits from the Corporation as if the Executive had been
transferred to a non-SMG position within the Corporation at the time
of the Spin-Off.
E. DISQUALIFICATION AND REDUCTION
Serious and deliberate misconduct in employment by an Executive
resulting in discharge for cause can disqualify an Executive from ICP
eligibility. Except as otherwise expressly provided in this
Statement, after termination under ICP and normal windup of former
duties an Executive will not be required to perform any regular
services for the Corporation, and will be free to accept any other
employment. Except as otherwise provided in this ICP, ICP Payments
otherwise payable to an Executive will be reduced or excused in the
amount of compensation from Directly Competitive Employment as
specifically defined to the Executive in advance according to this
Statement. An Executive otherwise entitled to ICP Payments after
Termination, Reassignment or Spin-Off will be disqualified from
receiving future Payments by reason of serious and deliberate
misconduct which is unlawful or clearly and seriously harmful to the
Corporation, or to its interest or those of certain subsequent
employers.
F. INTERPRETATION
Subject to the express terms of this Statement, the Chief Executive
Officer of the Corporation will have sole and final authority to
interpret the ICP and determine its application, and will interpret it
consistently and in good faith. Section I of this Statement is
intended as a summary of the more detailed provisions of Section II.
For that reason, Section II will control in the event of any
difference.
G. MODIFICATION
ICP and the ICP Statement can only be modified or discontinued
prospectively, and only by action of the Board of Directors or a
committee of Directors acting with the authority of the Board for this
purpose.
II. APPLICATION
A. ELIGIBILITY PERIOD - DEFINITION
The "Eligibility Period" of an Executive is determined by the number
of full calendar months between the Executive's most recent first date
of continuous service within the Corporation and the Effective Date of
Termination, Spin-Off or
2
Reassignment by the Corporation. It will be calculated according to
the following schedule:
Months of Service Eligibility Period
----------------- ------------------
0 through 36 18 months
37 through 48 19 months
49 through 60 20 months
61 through 72 21 months
73 through 84 22 months
85 through 96 23 months
more than 96 24 months
An Executive entitled to ICP Payments will not be entitled to
prepayment or other change in the monthly payment schedule.
B. ELIGIBILITY PERIOD - USE
The Eligibility Period of an Executive will determine the number of
consecutive calendar months for which an Executive remains eligible
for ICP Payments under this Statement after:
1. Reassignment to a new position within the Corporation which does
not include SMG membership, or
2. The effective date of a Spin-Off by the Corporation.
C. PAYMENT PERIOD - DEFINITION
The Payment Period for an Executive will consist of the same number of
months as the Executive's Eligibility Period, measured from the time
when ICP Payments first become payable to the Executive under the
terms of this Statement.
D. PAYMENTS
1. AMOUNT
Each monthly ICP Payment to an Executive during the Payment
Period will equal one twelfth (1/12) of the Executive's Final
Annual Cash Compensation from the Corporation which will consist
of the sum of:
a. BASE COMPENSATION
The annual Base (regular monthly or other fixed salary) rate
payable as Cash Compensation to the Executive at the time of
Notice of Termination or effective date of Reassignment or
Spin-
3
Off, but in no event less than the highest annual rate
paid to the Executive at any time during a number of months
equal to the Executive's Eligibility Period immediately
before the Notice of Termination or effective date of
Reassignment or Spin-Off, and
b. PERFORMANCE BONUS
The average amount of the three annual Performance Bonuses
most recently paid or credited to the Executive as Cash
Compensation or deferred bonus, prior to Executive's Notice
of Termination or effective date of Reassignment or Spin-Off
or downgrade. For purposes of ICP, the Performance Bonus of
an Executive shall be determined according to the applicable
Short Term Incentive Plan of the Corporation, shall also
include, if applicable, any discretionary bonus paid during
said applicable period on account of the Executive's
performance but outside of the purview of the then
applicable Short Term Incentive Plan.
c. ADJUSTMENT
The annual rate in dollars of each merit increase awarded to
an Executive before Notice of Termination will be included
in Base Compensation to determine the Executive's ICP
Payments. If the Executive's annual rate of Base
Compensation at the time of Notice of Termination has been
increased or decreased to reflect a change from the Short
Term Incentive Plan used to determine the Performance Bonus
defined above, and the change is for the purpose of altering
the future relationship of Bonus to total Annual Cash
Compensation of the Executive, then the dollar amount of
that increase or decrease in annual rate of Base
Compensation will be excluded in determining ICP Payments.
2. COMMENCEMENT
Monthly ICP Payments, or entitlement to begin receiving them,
will commence in the next full calendar month after the Effective
Date of Termination, subject to any Set-offs, Adjustments and
Withholding as specified in
a. DEFERRED ICP PAYMENTS
Until the Effective Date of Termination there will be no
change in the rate or timing of compensation, benefits or
perquisites to which the Executive was entitled immediately
before the Notice of Termination, and no amount received
from the Corporation before
4
that Effective Date will be charged against the ICP Payments
to which the Executive is entitled under this Statement.
b. DIFFERENT EMPLOYMENT SEVERANCE DATE
If the Corporation agrees in writing with the Executive
upon, or notifies the Executive of, an Employment Severance
Date later than the ICP Effective Date of Termination, then:
1) All Cash Compensation that the Executive receives after
the ICP Effective Date of Termination will be treated
as an Adjustment and deducted from ICP Payments
otherwise payable, as defined in 3 c below, and will be
paid in the amount(s) and at the time(s) to which the
Executive was entitled immediately before the Notice of
Termination, and
2) Employee benefits and normal use and expense of
executive perquisites and facilities available to the
Executive before the Notice of Termination will
continue until the Employment Severance Date and,
except to any extent otherwise specified in this
Statement or by written advance notice to the Executive
by the Corporation, will not be charged against ICP
Payments to which the Executive is entitled under this
Statement.
3. SET-OFF AND WITHHOLDING
ICP Payments are not intended to duplicate or be in addition to
any other payment due between the Corporation and the Executive.
a. REDUCTION
Each Payment otherwise due from the Corporation to the
Executive will be reduced, dollar for dollar and in timing
by all amounts which the Executive receives or is entitled
to receive from the Corporation or under a plan, program or
agreement maintained by and at the expense of the
Corporation after the Effective Date of Termination or
Spin-Off. This will include such sources as life and
disability insurance. It will not apply to accrued
vacation or expense reimbursement (both will be paid in
cash at termination), Pension proceeds, Supplemental
Retirement and Savings Plan proceeds, Deferred Compensation
Plans, Social Security, fully exercisable or earned-out
stock option, stock appreciation rights, performance shares
or restricted stock awards, or benefits payable under any
Worker's Compensation or similar law or regulation.
Termination of employment by reason of mandatory retirement
5
under a lawful and uniform policy of the employer applicable
to the Executive will not be treated as a termination for
ICP purposes.
b. DEBT
The Corporation may apply not more than 25 percent of any
ICP Payment otherwise due to the Executive to pay any
overdue debt payable to the Corporation on any obligation of
the Executive or dependent of Executive, until all such
accounts are paid in full or current according to their
terms.
c. ADJUSTMENTS
If monthly payments received by the Executive from the
Corporation immediately after the Effective Date of
Termination are not computed under ICP, then when regular
monthly ICP Payments begin they will reflect itemized
adjustments to apply the ICP monthly rate to the ICP
Effective Date of Termination. Taxes and other amounts
required by law or by the Executive's written instruction
will be withheld from ICP amounts otherwise payable.
E. DEATH OF EXECUTIVE
If an Executive should die after Notice of Termination and before
completion of the Executive's Payment Period, the remaining Payments
will be made by the Corporation as follows, without unnecessary
interruption:
1. Unless the Executive has otherwise designated in unrevoked
writing, acknowledged in writing by the CEO, the surviving spouse
of the Executive, if any, will be entitled to all remaining
Payments.
2. If the Executive has otherwise effectively designated in
unrevoked writing, acknowledged in writing by the CEO, then
Payment will be made to or for the account of the person or
persons so designated as identified by the Corporation.
3. In the absence of effective prior written designation by the
Executive and of a known surviving spouse, the Corporation may
hold remaining Payments until the executor, heirs or
administrator of the Executive can be identified and Payment made
and receipted to the reasonable satisfaction of the Corporation
pursuant to the advice of its legal counsel.
4. In the interest of providing uninterrupted income to authorized
beneficiaries of the Executive, any ICP Payment made with
reasonable care and in good faith by the Corporation shall
conclusively constitute Payment by the Corporation in accordance
with and satisfaction of the
6
entitlement of the Executive and Executive's beneficiaries under
ICP. No interest or other charge shall be payable by the
Corporation or its representatives on any Payment delayed by the
Corporation to permit reasonable verification of authorized
recipient(s).
F. DISQUALIFICATION
No Executive will be disqualified from receipt of future ICP Payments
by reason of any act or omission of anyone other than the Executive or
one or more persons acting pursuant to the conscious and effective
control of the Executive. Disqualification will be interpreted as
follows:
1. WHILE EMPLOYED IN THE CORPORATION
Deliberate and serious disloyal or dishonest conduct in the
course of employment will disqualify if it justifies and results
in prompt discharge for specific cause under the established
policies and practices of the Corporation as interpreted by the
CEO for this purpose. Examples would include material unlawful
conduct, material and conscious falsification or unauthorized
disclosure of important records or reports, 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 Corporation or its
interests.
2. AFTER NOTICE OF TERMINATION OR SPIN-OFF
The ICP will not restrict an Executive's conduct or employment
opportunities after Notice of Termination, or any independent
remedy of the Corporation or its representatives by reason of the
Executive's conduct while employed. The obligation of the
Corporation to or for an Executive during the Eligibility and
Payment Periods can be terminated only by the deliberate conduct
of the Executive or one acting under the Executive's conscious
and effective control, and only as to any ICP Payments not yet
due, by reason of one or more of the following events:
a. Unauthorized removal, use or disclosure of strategic or
operating plans, trade secrets, customer lists, internal
systems or other significant proprietary information of or
concerning the Corporation or its personnel, the use or
disclosure of which is intended or likely to cause loss or
reduction of business advantage or substantial injury to the
Corporation or its management, business opportunities or
interests.
b. Expressing or endorsing publication of untrue statements
which are intended or likely to receive broad public
attention and to bring the
7
Corporation or its interests, methods or representatives
into disrepute.
c. Providing materially false or misleading information
concerning post-termination employment, or failure or
refusal promptly and accurately to provide required
information, verification or authorization required by the
CEO as provided in this Statement and affecting any ICP
payment due from the Corporation.
d. Solicitation of or an offer to an employee within the
Corporation to accept employment elsewhere, where the
selection of or offer to the recruited employee was based in
the whole or in part upon Executive's knowledge or
experience concerning the employee which was acquired by the
Executive while employed within the Corporation or through
one or more personal acquaintances employed within the
Corporation.
e. Exercising the discretion, authority or powers of an office
or position held by an Executive after Notice of
Termination, and whether or not before an Effective Date of
Termination or Employment Severance Date, unless
specifically authorized or directed in writing in advance by
an authorized executive of the Corporation.
f. Because ICP is not intended to encourage or reward
misconduct in employment, an Executive can be disqualified
from receipt of future ICP Payments from the Corporation
because of termination of employment by a Spin-Off employer
for unlawful or serious and deliberate misconduct during the
Executive's Eligibility Period. If the CEO independently
determines and informs the Executive in writing that
termination of employment by another employer was due to
unlawful or serious and deliberate misconduct which would
have resulted in ICP disqualification under the standards of
this Statement if committed against and while employed by
this Corporation, then the Executive will be deemed
conclusively and irrevocably to have waived and abandoned
all right to future ICP Payments from this Corporation. If
the CEO concludes that there is reason to believe that
disqualifying misconduct under this paragraph may have
resulted in a termination of employment which would
otherwise initiate or increase its ICP Payments to the
Executive, the Corporation may postpone commencement of or
change in ICP Payments until it has received from the
Executive a full and accurate explanation of the
circumstances and written authorization for the terminating
employer to make full and confidential disclosure to the
Corporation, and has had a
8
reasonable time not exceeding 60 days to complete an
investigation and for the CEO to make a determination.
3. PRESERVATION OF RIGHTS
Neither ICP nor its application shall waive, excuse, preclude or
otherwise affect any right or remedy which the Corporation or any
agent or representative of the Corporation may have, individually
or collectively, under law by reason of conduct of the Executive
during or after employment within the Corporation.
Disqualification or reduction of Payments under ICP will be an
additional and not an exclusive remedy.
G. COMPETITIVE EMPLOYMENT
An Executive will receive not less than the full amount of the
specified ICP Payments from the Effective Date of Termination through
the full Payment Period whether or not compensated by another employer
for services in that Period, unless disqualified under Section F.,
immediately above or employed by a Spin-Off employer, as defined, or
as provided in this Section G. Compensation from employment which is
not identified as Directly Competitive Employment ("DCE") will be in
addition to and will not reduce any ICP Payment. If an Executive
engages in DCE as specifically defined in advance and by this
Statement, then each ICP Payment otherwise payable to the Executive
will be currently reduced., dollar for dollar and in timing, by the
amount of all Cash Compensation earned from that source during the
Payment Period.
These provisions will be interpreted and administered as follows:
1. PURPOSE OF SET-OFF
Reduction of ICP Payments by the amount of Cash Compensation
determined to be from DCE is not intended to restrict or penalize
an Executive's choice of alternative career opportunities, but
only to preserve and reconcile the personal income security
intended to be provided to Executives by ICP with the legitimate
interests of the Shareholders of the Corporation in its highly
competitive business context.
2. COMPETITORS IDENTIFIED
At or about the time of Notice of Termination, the Corporation
will inform the Executive in writing of those employers who have
been individually and specifically determined to offer DCE for
ICP purposes with respect to the Executive's former employment
within the Corporation. This designation will take into account
existing operations and known plans of the Corporation and of the
employers listed, and will not change during the Eligibility
Period by reason of subsequent and mutually unanticipated
9
changes in the operations or plans of either. An Executive whose
employment with a Spin-Off employer is terminated during the
Eligibility Period without disqualifying misconduct and who is
not reemployed in the Corporation will receive designation of DCE
employers promptly after written notice by the Executive to the
Corporation of non-disqualifying termination of Spin-Off
employment.
3. CRITERIA
The following criteria will be employed in determining and
administering ICP application to DCE.
a. SELECTIVE POTENTIAL DETRIMENT
A position will not be determined to constitute DCE for this
purpose unless the CEO determines that the competitive
effectiveness of the Executive and the new employer would be
materially enhanced by the Executive's current knowledge of
such matters as the particular methods, policies, customers,
suppliers, personnel or plans of the Corporation or its
relevant Operating Company, as distinguished from the
skills, experience and services of the Executive generally.
The Corporation will identify for DCE purposes not more than
three persons, firms or corporations who are determined for
this purpose to be the leading direct and immediate
competitors of the affected business of the Corporation.
b. PRESERVATION OF EMPLOYMENT OPPORTUNITIES
Whether or not an Executive's most recent employment within
the Corporation involved direct participation in the
management of one or more Operating Companies, this section
will not be used to discourage or penalize otherwise
suitable employment opportunities in retailing or otherwise.
The Corporation may require, as a condition of avoiding DCE
designation for the Executive, a suitable written
undertaking by the Executive and the new employer that the
Executive remains obliged not to use or divulge trade
secrets or proprietary information of the Corporation and
that the Executive will not volunteer or be expected or
required to violate that obligation in the course of the new
employment.
c. RELEVANT CONSIDERATIONS
In determining DCE, the CEO will give suitable consideration
to geographic, product and price-line marketing overlaps,
the nature and content of the Executive's particular
knowledge of strategies
10
and plans within the Corporation, and the extent to which
the Executive's knowledge, as distinguished from skills,
is likely to be a significant factor in generating an
employment opportunity. Employment exclusively with a
component of a larger business entity, which component is
not presently or known to be planned to be a direct and
immediate competitor of the Executive's former Operating
Company, will not be treated as DCE merely because one or
more other components of that entity is or may become a
competitor of the Corporation or one or more of its other
Operating Companies.
4. ICP PAYMENT REDUCTION
Uniform and responsible administration of ICP will require
reliable information and verification to the Corporation.
a. REPORTING
To be eligible for any ICP Payment during a period of DCE,
an Executive must, in addition to all other required
reporting, provide to the Corporation in writing an accurate
statement of the amount and payment schedule of all Cash
Compensation or its equivalent to be received from the new
employer and of any subsequent change or correction of that
amount, in such form and with such verification as the CEO
may request in writing. An Executive will not be or become
entitled to receive or retain any portion of any ICP Payment
on account of any Payment Period for which that information,
and any required verification, is not currently and
accurately provided.
b. VERIFICATION AND RECONCILIATION
Required verification may include authorization for written
confirmation from the employer and confidential disclosure
of completed W-2, payroll and income tax forms of the
Executive on which taxes have been or will be paid. If the
Corporation withholds for more than 30 days any ICP Payment
pending receipt of required information or verification
which is later received and found satisfactory, the
Corporation will pay interest at a realistic rate determined
by the CEO for the period of delay. The Corporation and the
Executive will each fairly and promptly adjust by payment
any discrepancy later discovered between reported and actual
Cash Compensation of the Executive, but the Corporation will
have no liability for any amount not claimed by an Executive
in writing before final expiration of the Executive's
Payment Period.
11
H. REASSIGNMENT AND SPIN-OFF
The purpose of ICP is to attract and preserve the services of
Executives for the benefit of the Corporation by providing unreduced
personal income to them for the full Eligibility and Payment Periods
in the absence of disqualifying personal misconduct, DCE or continued
employment after a Spin-Off. If the Corporation should determine that
its shareholders' interests would best be served by disposition or
major alteration of an Executive's current Operating Company or
position, ICP will be available to the Executive unless:
1. REASSIGNMENT AND OTHER ADJUSTMENTS
The Corporation may transfer an Executive to another position
within the Corporation or any of its Operating Companies or
reduce the Executive's Compensation in Executive's current
position (collectively referred to as "Reassignment"). An
Executive in the case of either event may elect ICP Payments if
the Executive's total monetary compensation after Reassignment
will be measurably and substantially below the total monetary
compensation of the Executive immediately before notice of
Reassignment. For this purpose, personal monetary compensation
will include salary and bonus and continuation, or payment of the
substantial equivalent in Cash Compensation, of all non-cash
personal benefits and perquisites which the Executive was
receiving immediately before and does not receive after the
Reassignment and which are susceptible of accurate and objective
measurement in dollars as determined by the CEO; or
2. SPIN-OFF
A Spin-Off (as defined) occurs and the Executive is requested by
the Corporation to continue in the resulting company or
operation in substantially the same position as immediately
before Spin-Off.
a. ICP ELIGIBILITY
An Executive will, in the event of Spin-Off, have the same
rights and limitations to elect to receive ICP payments in
lieu of the continuation of employment as if Reassigned at
that time to another position within the Corporation as
provided in subparagraph (1), immediately above. Comparison
of the Executive's monetary compensation before and after
the ownership change will be measured by the same standards
for this purpose. An Executive whose employment continues
after Spin-Off will remain eligible for ICP Payments from
the Corporation for the Executive's full
12
ICP Eligibility Period, measured from the effective date of
Spin-Off.
b. SUBSEQUENT TERMINATION
If during the Eligibility period after Spin-Off the
Executive's employment should be involuntarily terminated,
or the Executive irrevocably terminates the employment
because of an involuntary reduction in monetary compensation
to a rate materially below the Executive's most recent
monetary compensation rate within the Corporation, the
Executive shall be eligible for full ICP Payments from the
Corporation as though the Executive were then employed by
the Corporation. Any amount paid to the Executive by the
Spin-Off employer after effective date or on account of that
termination will be set off against, and reduce dollar for
dollar and in timing, any ICP Payments otherwise payable to
the Executive by the Corporation.
c. REEMPLOYMENT OFFER
The obligation of the Corporation to make future ICP
Payments to an Executive because of a non-disqualifying
termination of employment after a Spin-Off under this
subsection can be terminated by a suitable offer to the
Executive of employment within the Corporation. Such an
offer will be suitable for this purpose if it is a good
faith offer of a management position at a rate of monetary
compensation at least equal to the Executive's rate
immediately before the effective date of Spin-Off, and is
timely. It will be timely for this purpose if communicated
to the Executive within 30 days after the Corporation
receives written notice or has actual knowledge of the
termination of the Executive's employment, and specifies a
starting date not less than 30 nor more than 60 days
thereafter. The Corporation will promptly initiate ICP
Payments when notified in writing of the non-disqualifying
termination, and continue Payments until the starting date
specified in the reemployment offer, whether or not the
offer is accepted. If the offer is not accepted and
implemented by the Executive according to its terms, the
obligation of the Corporation to make further ICP Payments
will irrevocably expire on the starting date specified in
the offer. If the offer is accepted, all Cash Compensation
paid to the Executive after reemployment within the
Corporation will be credited, dollar for dollar, against ICP
Payments otherwise payable to the Executive.
13
d. ELIGIBILITY AFTER REEMPLOYMENT
If reemployed within the Corporation but not in an SMG
position after involuntary termination during the
Executive's Eligibility Period following Spin-Off under this
section, the Executive will remain eligible under ICP for
the balance of the Executive's Eligibility Period measured
from the effective date of Spin-Off, but in no event for a
period shorter than one-half of the number of calendar
months in the Executive's Eligibility Period on the
effective date of Spin-Off measured from the first date of
reemployment.
e. INTERPRETATION.
A Spin-Off will be deemed to have occurred for purposes of
this paragraph whether or not afterward: (a) the Executive
has a personal ownership or incentive interest in the
severed Company or operation; or (b) the severed Company or
operation becomes, as a result of or after the severance, a
part of one or more other legal entity or entities.
I. REPORTING
For convenience and uniformity of administration, each Executive while
eligible for or entitled to ICP Payments after Termination or Spin-Off
will be expected as a pre-condition currently and accurately to inform
the Corporation in writing of the name and business address of each
employer of Executive during the Eligibility and Payment Periods,
including a summary description of the nature and principal business
locations of the new employer and the title, principal duties, address
and telephone number of the Executive. Significant changes in
employment, duties or location will also be promptly reported. The
Corporation will not be required to make any ICP Payment for any
period for which it has not received a current and accurate report as
required by, or by the CEO in accordance with, this Statement.
J. INTERPRETATION
1. An Executive may at any time request in writing of the CEO, and
the CEO may respond or initiate to any, some or all of the
Executives, a written determination of the application of the ICP
to specific or reasonably foreseeable circumstances. The express
language of Section II of this Statement will control where
applicable, and the CEO will act reasonably and in good faith in
providing any ICP or Statement interpretation. Any decision of
the CEO consistent with those criteria will be: (1) Final and
conclusive of the rights and obligations of all affected parties
and (2) Applied uniformly as to all Executives then similarly
situated (subject to
14
subsequent ICP amendment); and (3) Not subject to separate
determination or review by any public or private agency or
authority except as expressly provided in this Statement.
2. References to compensation and other monetary rates or
measurements in this Statement and its applications are in
current dollars, unadjusted by reason of inflation, deflation or
otherwise.
3. Any portion of a full calendar month or year will be prorated on
a full calendar basis, without differential related to such
considerations as working days or holidays. Any portion of a day
will be treated as a full day, and measurement days will begin
and end at midnight, current time. The fiscal year of the
Corporation will be treated for all purposes as it is for
financial reporting purposes.
4. In the event of application or interpretation of ICP to an
individual Executive who is a Director of the Corporation, or
otherwise in its sole discretion, the Board of Directors of the
Corporation or its authorized committee shall have and may
exercise the sole, exclusive and final authority and discretion
of the CEO for any purpose under ICP.
K. RELEASE
Payment and receipt of ICP Payments will be in full and final
satisfaction of all claims by or through an Executive against the
Corporation and its representatives by reason of the employment of the
Executive and its termination, except as otherwise expressly provided
in this Statement or as required by applicable law or regulation. A
signed written Release to that effect, in form approved by the CEO,
will be delivered by the Executive or the Executive's representative
to the Corporation before the effective date of a Spin-Off affecting
the Executive, and in any event before any ICP Payment will become
payable by the Corporation to or on account of the Executive. The
Release may, without limitation, require a representation that no
confidential documents concerning the Corporation or its intentions
have been or will be removed or retained by the Executive without
specific authority, and that the Executive will not engage in
disqualifying misconduct as defined in this Statement, in reference to
the Corporation. The Release will not affect any conversion, vested
or continuing rights available to an Executive under a plan of the
Corporation other than ICP.
L. GENERAL
The ICP and this Statement will not constitute or infer an obligation
or undertaking to employ any person for any future period of time or
in any specific position. ICP Eligibility or Payments after Notice of
Termination or Spin-Off will not create, continue or evidence any
employment relationship with the Corporation. All employment
privileges, benefits and perquisites not expressly
15
and in writing reserved to an Executive under ICP will terminate on
the Effective Date of Termination or Spin-Off, unless otherwise
expressly agreed in advance in writing by the Corporation. This
will not affect any conversion, vested or other continuing benefits
or rights available to an Executive under a plan of the Corporation
other than ICP.
M. AMENDMENT
ICP and this Statement may not be terminated and may not be amended to
reduce benefits with respect an Executive subject to the ICP until two
years after the Executive receives written notice of the proposed
termination or amendment. Except as set forth in the first sentence
hereof, ICP and this Statement can be amended (including modification,
restatement, suspension and termination) at any time, without prior
written notice to or consultation with any Executive, by the Board of
Directors or any committee appointed by the Board of Directors having
the authority of the Board for that purpose. Any such change will
have effect as follows:
1. EFFECTIVE DATE OF CHANGE
Except as set forth below, any amendment will be effective on the
date of its adoption by the Board or committee or such other such
subsequent date or dates as may be specified in the amendment or
the resolution by which it is adopted. Unless otherwise mutually
agreed in writing by the parties, (a) an amendment or termination
will have no effect upon any Executive who at the time has
received Notice of Termination under ICP and (b) a termination or
an amendment that reduces benefits will not be effective as to an
Executive subject to the ICP until 2 years after the Executive
receives written notice of the termination or amendment.
2. NOTICE OF AMENDMENT
The Corporation will promptly after any amendment provide to each
Executive then eligible for ICP benefits a written statement of
ICP as amended, and no amendment will be effective as to an
Executive until the later of the date the Executive receives such
written statement, or two years after notice as provided in 1
above. An Executive will be deemed to have received the written
statement if it is delivered to the Executive in person, or after
48 hours following its hand delivery or dispatch by mail or other
suitable means of delivery to the last known address of the
Executive.
3. ACQUIESCENCE
An amendment will apply in full to an Executive if mutually
agreed in writing by the Executive and the Corporation, or if the
Executive or the
16
Executive's representative knowingly receives a benefit or
improvement under ICP as amended which would not have been
available without the amendment. If any such benefit from an
amendment is knowingly received by an Executive with the
consent of the Corporation, then all elements of that
amendment and all prior ICP Statements and amendments then
currently in effect will also be applicable to the Executive.
4. ADJUSTMENT
A change in or addition or deletion of any benefit or perquisite
plan or program of the Corporation applicable to an Executive may
be expressly made subject to prior written agreement by the
Executive upon a corresponding change in the interpretation or
application of ICP to the Executive, to prevent redundant or
other unintended benefits or detriments to the Executive or the
Corporation which might otherwise result.
N. APPLICABLE LAW
It is intended that the decision of the CEO, as specified in the ICP
statement, will be exclusive and final with respect to any application
or interpretation of ICP. If any body of law should be used or
applied in determining the meaning or effect of ICP, in the interest
of consistency this will be deemed an agreement made and executed in
the State of Minnesota and the law of the State of Minnesota will
control.
O. DEFINITIONS
As used in this Statement:
1. "CASH COMPENSATION"
Means all amounts earned, whether or not currently payable, as
wages, salary, bonus or a combination by an Executive, payable in
cash or its equivalent or agreed to be in lieu of cash
compensation. This will not include the value of employee or
executive perquisites or benefits accrued or received pursuant to
a plan of the employer which is uniformly applied to all of the
employees of the employer who are similarly situated or is
consistent with established prior practice for the position
occupied by the Executive.
2. "CEO"
Means the Chief Executive Officer of Dayton Hudson Corporation,
as then currently designated by its Board of Directors, or as
otherwise expressly provided in the ICP Statement.
17
3. "CORPORATION"
Means Dayton Hudson Corporation and each and all of its Operating
Companies, including divisions and subsidiaries, unless otherwise
clearly intended by the written context.
4. "DIRECTLY COMPETITIVE EMPLOYMENT" (OR "DCE")
Means personal services to, or for the direct and intended
benefit of, a person, firm or corporation determined by the CEO
and specified in writing to the Executive at or about the time of
Notice of Termination as constituting DCE for ICP purpose.
5. "EFFECTIVE DATE OF TERMINATION"
If no later date is specified in writing with the Notice of
Termination, the Effective Date of Termination for all purposes
will be the date the Notice is received by the Executive. No
delay in public announcement, or continuation of former duties
with or without the consent of the Corporation, will alter or
extend the Effective Date of Termination for ICP purposes, unless
expressly agreed upon in advance in writing. The Corporation
reserves the right to announce a termination at any time after
notice.
6. "EMPLOYMENT SEVERANCE DATE"
If there is no separate written agreement between the Executive
and the Corporation, all employment relationships between them
shall terminate on the ICP Effective Date of Termination and will
do so in any event upon the effective date of a Spin-Off. If the
Corporation agrees in writing in advance that the employment of
the Executive within the Corporation will continue after the ICP
Effective Date of Termination, then the Effective Date of
Termination will control all ICP Payments to which the Executive
is entitled under this Statement, but the employment of the
Executive within the Corporation will continue until the
Employment Severance Date to which the Corporation has agreed in
writing with, or has given advance written notice to, the
Executive.
7. "EXECUTIVE"
Means an individual listed on Exhibit A. Unless clearly
otherwise intended by the written context, Executive will include
all beneficiaries of and persons claiming by or through the
designated employee or former employee. Provided, however, if an
individual listed on Exhibit A terminates employment with the
Corporation and does not return as an SMG prior to the end of his
or her Eligibility Period, such individual will
18
not be treated as an Executive and will not be eligible for the
ICP when he or she is rehired.
8. "NOTICE OF TERMINATION" (OR "NOTICE")
Means an unconditional written or oral statement of an
Executive's organizational superior that the Executive's
employment in the Corporation is terminated at the instance of
the Corporation. Notice that an Executive's employment will end
because of achievement of the age of mandatory retirement under
lawful policies of the Corporation will not be a Notice of
Termination for ICP purposes.
9. "OPERATING COMPANY"
Means a division or subsidiary of the Corporation which operates
a group of department, low margin, soft lines or specialty
stores, or a similar category of ventures within the Corporation
having a common business purpose and single chief executive
officer.
10. "PAYMENTS" (OR "ICP PAYMENTS")
By the Corporation will include all of those payments made by or
on account of the Corporation under ICP and will include all of
those made to or for the account of an Executive or a designated
creditor or authorized representative or beneficiary of an
Executive or deceased Executive.
11. "REASSIGNMENT"
Means a change in the assignment or work content of an Executive
within the Corporation.
12. "SPIN-OFF"
Means a sale or other disposition as a going business of the
Corporation's ownership or control of an Operating Company or
other unit previously a part of the Corporation.
13. "CHANGE IN CONTROL"
A "Change in Control" shall be
(a) a majority of the directors of the Corporation shall be
persons other than persons
(i) for whose election proxies shall have been solicited by
the Board of Directors of the Corporation or
19
(ii) who are then serving as directors appointed by the
Board of Directors to fill vacancies on the Board of
Directors caused by death or resignation (but not by
removal) or to fill newly-created directorships,
(b) 30% or more of the outstanding Voting Stock (as defined in
Article IV of the Restated Articles of Incorporation of the
Corporation) of the Corporation is acquired or beneficially
owned (as defined in Article IV of the Restated Articles of
Incorporation of the Corporation) by any person (as defined
in Article IV of the Restated Articles of Incorporation of
the Corporation), or
(c) the shareholders of the Corporation approve a definitive
agreement or plan to
(i) merge or consolidate the Corporation with or into
another corporation (other than (1) a merger or
consolidation with a subsidiary of the Corporation
or (2) a merger in which the Corporation is the
surviving corporation and either (A) no
outstanding Voting Stock of the Corporation (other
than fractional shares) held by shareholders
immediately prior to the merger is converted into
cash, securities, or other property or (B) all
holders of outstanding Voting Stock of the
Corporation (other than fractional shares)
immediately prior to the merger have substantially
the same proportionate ownership of the Voting
Stock of the Corporation or its parent corporation
immediately after the merger),
(ii) exchange, pursuant to a statutory exchange of
shares of Voting Stock of the Corporation held by
shareholders of the Corporation immediately prior
to the exchange, shares of one or more classes or
series of Voting Stock of the Corporation for
shares of another corporation or other securities,
cash or other property,
(iii) sell or otherwise dispose of all or substantially
all of the assets of the Corporation (in one
transaction or a series of transactions), or
(iv) liquidate or dissolve the Corporation.
NOTE: Additional Definitions for particular purposes are
contained in the text.
20
P. CHANGE IN CONTROL
Other provisions of this Statement to the contrary notwithstanding, in
the event of a Change in Control:
1. If an Executive's employment with the Corporation is terminated,
whether voluntarily or involuntarily, within two years from a
Change in Control, the Executive shall be eligible for ICP
Payments.
2. In lieu of periodic payments, the ICP Payment shall be made in a
lump sum within 20 days after Executive's termination of
employment. The lump sum amount shall be determined by
discounting the periodic ICP Payments by the Prime Rate of First
National Bank of Minneapolis.
3. Except for the Release required by Section II.K. of this
Statement all other obligations or restrictions of Executive
under this Statement shall terminate.
Q. CERTAIN REDUCTION OF PAYMENTS BY THE CORPORATION
1. Anything in this ICP to the contrary notwithstanding, the
provisions of this section Q shall apply to an Executive if Ernst
& Young LLP determines that each of a and b below are applicable.
a. Payments hereunder, determined without application of this
section Q, either alone or together with other payments in
the nature of compensation to the Executive which are
contingent on a change in the ownership or effective control
of the Corporation, or in the ownership of a substantial
portion of the assets of the Corporation, or otherwise,
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 Internal Revenue Code of
1986, as amended (the "Code").
b. The excise tax imposed on the Executive 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 Executive (after
subtraction of the excise tax) than if payments and
distributions to the Executive were reduced to the maximum
amount that could be made without incurring the excise tax.
2. Under this section Q the payments under this ICP shall be reduced
(but not below zero) so that the present value of such payments
shall equal the Reduced Amount. The "Reduced Amount" (which may
be zero) shall be an amount expressed in present value which
maximizes the aggregate
21
present value of payments under this ICP which can be made
without causing any such payment to be subject to the excise tax
under section 4999 of the Code.
3. If Ernst & Young LLP determines that this section Q is applicable
to an Executive, it shall so advise the Corporation. The
Corporation shall then promptly give the Executive notice to that
effect together with a copy of the detailed calculation
supporting such determination which shall include a statement of
the Reduced Amount. The Executive may then elect, in his/her
sole discretion, which and how much of payments otherwise to be
made under this ICP shall be eliminated or reduced (as long as
after such election the aggregate present value of the remaining
payments to be made under this ICP equals the Reduced Amount),
and shall advise the Corporation in writing of his/her election
within ten days of his/her receipt of notice. If no such
election is made by the Executive within such ten-day period, the
Corporation may elect which and how much of the payments shall be
eliminated or reduced (as long as after such election the
aggregate present value of the payments equals the Reduced
Amount) and shall notify the Executive promptly of such election.
For purposes of this section Q, present value shall be determined
in accordance with Section 280G of the Code. All the foregoing
determinations made by Ernst & Young LLP under this section Q
shall be made as promptly as practicable after it is determined
that parachute payments will be made to the Executive if an
elimination or reduction is not made. As promptly as practicable
following the election hereunder, the Corporation shall pay to or
for the benefit of the Executive such amounts as are then due to
the Executive under this ICP and shall promptly pay to or for the
benefit of the Executive in the future such amounts as become due
to the Executive under this ICP.
4. As a result of the uncertainty in the application of Section 280G
of the Code at the time of the initial determination by Ernst &
Young LLP hereunder, it is possible that payments under this ICP
will have been made which should not have been made
("Overpayment") or that additional payments 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 Ernst & Young LLP, based upon the assertion of
a deficiency by the Internal Revenue Service against the
Corporation or the Executive which Ernst & Young LLP 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 Executive which the Executive 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 Executive 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
22
Ernst & Young LLP, based upon controlling precedent, determines
that an Underpayment has occurred, any such Underpayment shall be
promptly paid to or for the benefit of the Executive together
with interest at the applicable Federal rate provided for in
Section 7872(f)(2)(A) of the Code.
5. In making its determination under this section Q, the value of
any non-cash benefit shall be determined by Ernst & Young LLP in
accordance with the principles of section 380G(d)(3) of the Code.
6. All determinations made by Ernst & Young LLP under this section Q
shall be binding upon the Corporation and the Executive.
23