January 13, 1999
DAYTON HUDSON CORPORATION
SMG INCOME CONTINUANCE POLICY STATEMENT
FOR MEMBERS OF THE SENIOR MANAGEMENT GROUP
I. CONCEPTS
A. GENERAL
The present policy of the Corporation is to provide, under certain
defined circumstances, Income Continuance Payments to certain members
of its Senior Management Group ("SMG") whose employment is terminated
at the instance of the Corporation or who terminates within two years
after a Change in Control. This policy is intended to assist in the
occupational transition and financial security of those identified
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 two years after a
Change in Control.
This will be known as the SMG Income Continuance Policy ("SMG-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 SMG-ICP, an Executive must be a member of the SMG
after July 13, 1988, as specified in this Statement, and not be
covered by the Dayton Hudson Corporation Income Continuance Policy
Statement. An SMG shall not be eligible to participate under this
policy if he/she is eligible to participate under the Dayton Hudson
Corporation Income Continuance Policy.
C. REASSIGNMENT
An Executive will continue to have income protection under SMG-ICP for
at least 12 calendar months (Eligibility Period) after internal
reassignment to a position which does not otherwise include
eligibility for SMG-ICP benefits.
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
SMG-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
SMG-ICP eligibility. Except as otherwise expressly provided in
this Statement, after termination under SMG-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
Statement, SMG-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 SMG-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 SMG-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.
II. APPLICATION
A. ELIGIBILITY PERIOD - DEFINITION
The "Eligibility Period" of an Executive is determined by the
Executive's most recent Salary Grade on the Effective Date of
Termination, Spin-Off or Reassignment by the Corporation; provided,
however, in the event of a downgrade or downgrades, the Eligibility
Period of the Executive's highest Salary Grade shall continue to be
applicable until the expiration of the Eligibility Period for that
Salary Grade and then the Eligibility Period for the next highest
Salary Grade shall be used until it expires and this process shall
continue until the Eligibility Period for the last Salary Grade for
which this Statement covers expires. It will be calculated according
to the following schedule:
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Salary Grade Eligibility Period
------------ ------------------
37-51 24 months
35-36 22 months
32-34 20 months
30-31 18 months
28-29 16 months
26-27 14 months
lower than 26 12 months
An Executive entitled to SMG-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 SMG-ICP Payments under this Statement after:
1. Reassignment to a new position within the Corporation which is
not designated an SMG Position, or
2. The effective date of a Spin-Off by the Corporation, or
3. A downgrade as set forth in A. above.
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 SMG-ICP Payments first become payable to the Executive under the
terms of this Statement.
D. PAYMENTS
1. AMOUNT
Each monthly SMG-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-
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Off or downgrade, 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 or downgrade, 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 SMG-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 SMG-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 SMG-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 SMG-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
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that Effective Date will be charged against the SMG-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 SMG-ICP Effective Date of Termination,
then:
1) All Cash Compensation that the Executive receives after
the SMG-ICP Effective Date of Termination will be
treated as an Adjustment and deducted from SMG-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 SMG-ICP
Payments to which the Executive is entitled under this
Statement.
3. SET-OFF AND WITHHOLDING
SMG-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.
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Termination of employment by reason of mandatory
retirement under a lawful and uniform policy of the
employer applicable to the Executive will not be treated
as a termination for SMG-ICP purposes.
b. DEBT
The Corporation may apply not more than 25 percent of any
SMG-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 SMG-ICP, then when
regular monthly SMG-ICP Payments begin they will reflect
itemized adjustments to apply the SMG-ICP monthly rate to
the SMG-ICP Effective Date of Termination. Taxes and other
amounts required by law or by the Executive's written
instruction will be withheld from SMG-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.
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4. In the interest of providing uninterrupted income to authorized
beneficiaries of the Executive, any SMG-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 entitlement of the Executive and
Executive's beneficiaries under SMG-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 SMG-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 SMG-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 SMG-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
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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 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 SMG-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 SMG-ICP is not intended to encourage or reward
misconduct in employment, an Executive can be disqualified
from receipt of future SMG-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 SMG-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 SMG-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 SMG-ICP Payments to the
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Executive, the Corporation may postpone commencement of or
change in SMG-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 reasonable time not exceeding 60
days to complete an investigation and for the CEO to make a
determination.
3. PRESERVATION OF RIGHTS
Neither SMG-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 SMG-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 SMG-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 SMG-ICP
Payment. If an Executive engages in DCE as specifically defined in
advance and by this Statement, then each SMG-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 (whether
on a current or deferred payment basis) from that source during the
Payment Period.
These provisions will be interpreted and administered as follows:
1. PURPOSE OF SET-OFF
Reduction of SMG-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 SMG-ICP with the
legitimate interests of the Shareholders of the Corporation in
its highly competitive business context.
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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
SMG-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 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 SMG-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
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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 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. SMG-ICP PAYMENT REDUCTION
Uniform and responsible administration of SMG-ICP will require
reliable information and verification to the Corporation.
a. REPORTING
To be eligible for any SMG-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 SMG-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 SMG-ICP
Payment pending
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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.
H. REASSIGNMENT AND SPIN-OFF
The purpose of SMG-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, SMG-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 SMG-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.
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a. SMG-ICP ELIGIBILITY
An Executive will, in the event of Spin-Off, have the same
rights and limitations to elect to receive SMG-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 SMG-ICP Payments
from the Corporation for the Executive's full SMG-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 SMG-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 SMG-ICP Payments otherwise payable
to the Executive by the Corporation.
c. REEMPLOYMENT OFFER
The obligation of the Corporation to make future SMG-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 SMG-ICP
Payments when notified in writing of the non-disqualifying
termination, and continue Payments until the
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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 SMG-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 SMG-ICP Payments
otherwise payable to the Executive.
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 SMG-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 SMG-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 SMG-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.
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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
SMG-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 SMG-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 subsequent SMG-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 SMG-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 SMG-ICP.
K. RELEASE
Payment and receipt of SMG-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 SMG-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
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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 SMG-ICP.
L. GENERAL
The SMG-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. SMG-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 and in
writing reserved to an Executive under SMG-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
SMG-ICP.
M. AMENDMENT
SMG-ICP and this Statement may not be terminated and may not be
amended to reduce benefits with respect an Executive subject to the
SMG-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, SMG-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 SMG-ICP and (b) a
termination or an amendment that reduces benefits will not be
effective as to an Executive subject to the SMG-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 SMG-ICP benefits a written statement
of
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SMG-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 Executive's representative knowingly receives a
benefit or improvement under SMG-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 SMG-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 SMG-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
SMG-ICP statement, will be exclusive and final with respect to any
application or interpretation of SMG-ICP. If any body of law should
be used or applied in determining the meaning or effect of SMG-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.
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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 SMG-ICP Statement.
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 SMG-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 SMG-ICP purposes,
unless expressly agreed upon in advance in writing. The
Corporation reserves the right to announce a termination at any
time after notice.
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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 SMG-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 SMG-ICP Effective Date of Termination, then the
Effective Date of Termination will control all SMG-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 employed as an executive within the
Corporation who currently is, or within the designated
Eligibility period has been, a member of the SMG on or after July
13, 1988; provided, however, if a person is covered by the Dayton
Hudson Corporation Income Continuance Policy statement, that
person is not an Executive hereunder. 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.
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 SMG-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 SMG-ICP and will include all
of those made to or for the account of an Executive or a
designated creditor or
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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
(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
20
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.
14. "SALARY GRADE"
The numerical "Salary Grade" that the Executive is assigned under
the Corporation's salary grading system.
NOTE: Additional Definitions for particular purposes are contained in
the text.
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.
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Q. CERTAIN REDUCTION OF PAYMENTS BY THE CORPORATION
1. Anything in this SMG-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 SMG-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 present value of payments under
this SMG-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 SMG-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 SMG-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
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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
SMG-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 SMG-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
SMG-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
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.
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CLAIMS PROCEDURE
FOR THE
DAYTON HUDSON CORPORATION
SMG INCOME CONTINUANCE POLICY STATEMENT
FOR MEMBERS OF THE SENIOR MANAGEMENT GROUP
When your employment with Dayton Hudson Corporation (the "Company")
terminates, the Company will tell you whether you are eligible for benefits
from the above-referenced plan and, if so, the amount and timing of the
payments that will be made to you.
If you believe that the Company's determination is incorrect in any way, you
must file a written claim with the Chief Executive Officer of the Company.
The Chief Executive Officer ordinarily will respond to the claim within 90
days of the date on which it is received. However, if special circumstances
require an extension of the period of time for processing a claim, the 90-day
period can be extended for an additional 90 days by giving you written notice
of the extension and the reason that the extension is necessary.
If the claim for a benefit is approved, you will receive written notice of
the amount of your benefit and the date on which payments will begin. If your
claim is denied in whole or in part, you will be told in writing the specific
reasons for the decision and will receive an explanation of the procedures
for reviewing the decision.
If you do not agree with the decision, you can request that the Chief
Executive Officer reconsider his or her decision by filing a written request
for review within 60 days after receiving notice that the claim has been
denied. You or your representative can also present written statements which
explain why you believe that the benefit claimed should be paid and may
review all pertinent plan documents.
Generally, the decision will be reviewed within 60 days after the Chief
Executive Officer receives a request for reconsideration. However, if special
circumstances require a delay, the review may take up to 120 days. (If a
decision cannot be made within the 60-day period, you will be notified of
this fact in writing.) You will receive a written notice of the decision
which will explain the reasons for the decision by making specific reference
to the Plan provisions on which the decision is based.