MANAGEMENT INCENTIVE COMPENSATION
EFFECTIVE AS OF
This Exhibit highlights the
amendments to the Amended Incentive Plan discussed elsewhere in this Proxy
Statement that were not part of the original Incentive Plan as approved by
“Award” shall mean the amount payable to a Participant as determined by the Committee in accordance with this Plan as an incentive bonus for any one or more Fiscal Years.
“Base Amount” shall have the meaning ascribed thereto in Section 4(b) hereof.
“Base Salary Percentage” shall have the meaning ascribed thereto in Section 4(c) hereof.
“Board of Directors” shall mean the Board of Directors of the Company.
“Code” shall mean the Internal Revenue Code of 1986, as amended, and references to particular provisions of the Code shall include any amendments thereto or successor provisions and any final, temporary or proposed rules and regulations promulgated thereunder.
shall mean the
Management Compensation and Stock Option Organizational
Development Committee of the Board of Directors or any other duly
established committee or subcommittee of the Board of Directors,
in each case satisfying the requirements of Section 162(m)(4)(C)
of the Code that the Board of Directors hereinafter determines shall act as the
Committee for purposes of the Plan.
shall mean Toys“R” Us, Inc., a
Employee” shall mean, with respect to a Fiscal Year, any
Participant who is
designated by theCommittee,
prior to the Determination Date (defined below), to be a “covered employee”
within the meaning of Section 162(m) of the Code. “Pool Amount,“Covered Employee Group Limit,” for any Fiscal Year, shall mean 0.5% of the
consolidated pre-tax earnings of the Company, determined in accordance with
generally accepted accounting principles consistently applied.
“Covered Employee Individual Limit,” for any Fiscal Year, shall mean 40% of the Covered Employee Group Limit.
“Fiscal Year” shall mean the fiscal year of the Company ending on the Saturday closest to January 31 or such other period which the Company may hereafter adopt as its fiscal year.
“Participant” shall mean each management employee of the Company or its subsidiaries or divisions who have been designated for participation in the Plan by the Committee in accordance with Section 4 hereof.
“FinancialPerformance Goals” shall have the meaning
ascribed thereto in Section 4(a) hereof.
this the Amended and Restated Toys“R” Us, Inc. Management Incentive Compensation Plan, effective
“Target” shall have the meaning ascribed thereto in Section 4(a) hereof.
The purpose of the Plan is to permit the Company, through awards of incentive compensation, to attract and retain qualified management employees, to motivate such management employees to achieve maximum profitability and stockholder returns and to encourage stock ownership to further align the interests of management with the Company’s stockholders.
The Plan shall be administered by the Committee, which shall have full authority to interpret the Plan, to establish rules and regulations relating to the operation of the Plan, to determine the amount of any Awards (subject to the terms and conditions hereof) and to make all other determinations and take all other actions necessary or appropriate for the proper administration of the Plan. The Committee’s interpretation of the Plan, and all actions taken within the scope of its authority, shall be final and binding on the Company, any Participants, former Participants or their designated beneficiaries, and other employees of the Company and its subsidiaries. No member of the Committee shall be eligible to participate in the Plan.
OF TARGET, BASE AMOUNT
beginning of each Fiscal Year (or with respect to the Fiscal Year
of the ninety day period commencing on the first day of each Fiscal Year,
or prior to any later date to the extent the determinations set forth in this
Section 4 may be made prior to a later date hereunder
without causing any Award to fail to qualify as performance-based compensation
under Section 162(m) of the Code or any earlier date for any performance
period that is less than a Fiscal Year (the “Determination Date”), the
Committee shall select the Participants for the Fiscal Year (or portion
thereof) or Years to be covered by any Award or Awards and adopt in
writing, with respect to each Participant, each of the following:
one or more Targets, which shall be equal to a desired level or levels for any
Fiscal Year or Years of any or a combination of the following criteria on an
absolute or relative basis,and, where applicable,
measured before or after interest, depreciation, amortization and
extraordinary items and/or special items: (i) pre-tax earnings, (ii) operating earnings, (iii)
after-tax earnings, (iv) return on investments, (v) earned value added, (vi)
earnings per share, (vii) revenues, (viii) cash flow or cash flow return on
investments, (ix) return on assets or return on net assets, (x) return on
capital, (xi) return on equity, (xii) return of sales, (xiii) operating margin
or, (xiv) total shareholder return or stock price
appreciation(collectively, the“Financial, (xv)
expense reduction, (xvi) customer satisfaction, (xvii) associate satisfaction,
(xviii) litigation, (xix) human resources, (xx) government relations, (xxi)
product development or (xxii) product market share (collectively, the
“Performance Goals” ), in each case determined in accordance with
generally accepted accounting principles (subject to modifications approved by
the Committee) consistently applied for the Company on a consolidated basis;
provided, however, that, with respect to Participants who are employees of
any of the Company’s divisions, theFinancial Performance
Goals may be based on divisional or individual results underlying these
Performance Goals rather than consolidated results, or a combination of
the two three;
a Base Amount, with respect to each Target, based upon one or more
Performance Goals, representing a minimum amount which, if not
exceeded, would result in no Award being made to the Participant; and
(c) a Base Salary Percentage, representing the percentage of the Participant’s base salary in effect at the time a Target is established, which shall be payable as an Award in the event that 100% of the Participant’s Target is achieved.
The Committee is authorized to make adjustments in the method of calculating attainment of performance objectives for all Participants (including Covered Employees) as follows: (i) to exclude the dilutive effects of acquisitions or joint ventures; (ii) to exclude restructuring and/or other nonrecurring charges; (iii) to exclude exchange rate effects, as applicable, for non-U.S. dollar denominated net sales and operating earnings; (iv) to exclude the effects of changes to generally accepted accounting standards required
by the Financial Accounting Standards Board; (v) to exclude the effects to any statutory adjustments to corporate tax rates; (vi) to exclude the impact of any “extraordinary items” as determined under generally accepted accounting principles; (vii) to exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common shareholders other than regular cash dividends; and (viii) to exclude any other unusual, non-recurring gain or loss or other extraordinary item.
If for any Fiscal Year the Committee determines to use at least one Target to be measured over less than the entire Fiscal Year, then bonus payable under the Plan with respect to that Target shall be the bonus, if any, calculated for such short performance period. In that case, on or before the date that represents twenty-five percent of the total number of days in such short performance period, the Committee shall identify in writing the Target, the Base Amount and Base Salary applicable to such period.
The Committee shall also determine on each Determination Date for each Participant a mathematical formula or matrix which shall indicate the extent to which Awards will be made if the Base Amount is exceeded, including if the Target is attained or exceeded, and the Committee may also determine on any Determination Date alternative formulas or matrices to account for potential or anticipated significant transactions or events during such Fiscal Year or Years.
CALCULATION OF AWARDS; CERTIFICATION
As soon as practicable after the close of the last Fiscal Year with respect to any Target, the Committee shall determine with respect to each Participant whether and the extent to which the applicable Base Amount is exceeded, including the extent to which, if any, such Target was attained or exceeded. Each Participant’s Award, if any, shall be determined in accordance with the mathematical formula or matrix determined pursuant to Section 4, and subject to the limitations set forth in Section 6 hereof. The Committee shall certify in writing to the Board of Directors the amounts of such Awards and whether each material term of the Plan relating to such Awards has been satisfied.
LIMITATIONS WITH RESPECT TO AWARDS
Each Award determined pursuant to Section 5 hereof shall be subject to modification or forfeiture in accordance with the following provisions:
(a) No Participant shall have any right to receive payment of any Award unless the Participant remains in the employ of the Company or its subsidiaries through the date of certification of such Award; provided, however, that the Committee may, in its sole discretion, pay all or part of an Award to any Participant whose employment with the Company or its subsidiaries is terminated prior to such date of certification for any reason. The determination of the Committee shall be final and conclusive.
In no event shall Covered Employees, as a group, receive Awards in excess of
100%of the Pool Amount Covered Employee Group Limit
for the Fiscal Year preceding the Fiscal Year in which the Committee makes the
certification required by Section 5 with respect to such Awards and in no event
shall any Covered Employee receive aggregate Awards in excess of 35% of the
Pool Amount the Covered Employee Individual Limit for such
preceding Fiscal Year. Each The
Covered Employee Group Limit shall be applied before the Covered Employee
Individual Limit. In the event that the Covered Employee Group Limit is
exceeded, each Covered Employee’s Award shall be reduced pro rata in
the event that the foregoing 100% limitation is exceeded. as necessary so that the aggregate
Awards do not exceed the Covered Employee Group Limit. Any forfeiture required
by application of the Covered Employee Group Limit or the Covered Employee
Individual Limit will not increase any the Award payable to any Covered
Employee under the Plan.
(c) The Committee may, in its sole discretion, (i) increase or decrease the Award payable to any Participant who is not a Covered Employee and who would not become a Covered Employee as a result of such increase or (ii) decrease the Award payable to any Covered Employee (or increase such Award to the extent permitted under Section 162(m) of the Code), in each case, to reflect the individual
PAYMENT OF AWARDS
Subject to the limitations of Section 6 hereof, each Participant shall receive, as soon as practicable after the amount of such Participant’s Award for any Fiscal Year or Years has been determined and certified in accordance with Section 5 hereof, the amount of such Award in cash or common stock of the Company. The Participant receiving such Award shall designate the percentage of the Award to be received in Common Stock of the Company. Such designation shall be made by the Participant on a form prescribed by the Committee and on terms and conditions determined by the Committee. A Participant designation shall be effective only if it is made in writing on a form provided by the Company, signed by the Participant and received by the Company. If the Participant does not designate the percentages of the Award to be received in cash and common stock of the Company, then the Award shall be made in cash. The Committee may, in its discretion, provide that if any Covered Employee would receive from the Company during the year that the Award is granted total compensation, including the amount of the Award, in excess of $1,000,000 and the Company would not be entitled to a deduction for Federal income tax purposes with respect to all or a portion of such excess as a result of the application of Section 162(m) of the Code, then the Award for such Covered Employee may be deferred, but only to the extent necessary to preserve the deductibility of the Award for Federal income tax purposes. Any Award (or portion thereof) so deferred shall be paid in cash or common stock of the Company as soon as possible consistent with preserving the deductibility of such Award (or portion thereof) for Federal income tax purposes.
DESIGNATION OF BENEFICIARY
A Participant may designate a beneficiary or beneficiaries who, in the event of the Participant’s death prior to the payment of any Award earned hereunder, shall receive such payment when due under the Plan. Such designation shall be made by the Participant on a form prescribed by the Committee. The Participant may at any time change or revoke such designation. A beneficiary designation, or revocation of a prior beneficiary designation, will be effective only if it is made in writing on a form provided by the Company, signed by the Participant and received by the Company. If the Participant does not designate a beneficiary or the designated beneficiary dies prior to the payment of any Award, any amounts remaining to be paid shall be paid to the Participant’s estate.
If any Target or other criterion upon which Awards for any Fiscal Year or Years is based shall have been affected by special factors (including material changes in accounting policies or practices, material acquisitions or dispositions of property, or other unusual or unplanned items) which in the Committee’s judgment should or should not be taken into account, in whole or in part, in the equitable administration of the Plan, the Committee may, for any purpose of the Plan, adjust such Target or criterion for such Fiscal Year or Years (and subsequent Fiscal Years, as appropriate) and make credits, payments and reductions accordingly under the Plan; provided, however, that the Committee shall not have the authority to make any such adjustments with respect to Awards paid to any Participant who is at such time a Covered Employee.
The Committee may at any time amend this Plan, provided that no such amendment shall be effective which alters the Award, Target or other criteria relating to an Award applicable to a Covered Employee for the Fiscal Year in which such amendment is made or any prior Fiscal Year, except any such amendment which may be made without the loss of any tax deduction to the Company under Section 162(m) of the Code.
The Board of Directors may terminate this Plan at any time; provided, however, that any Award determined and certified pursuant to Section 5 hereof but not yet paid as of the date of such termination shall be paid as soon as practicable, but in no event later than 30 days after the date of such termination, unless such payment has been deferred in accordance with the terms and conditions designated by the Committee. In no event shall the Committee determine performance criteria for a Covered Employee to earn incentive compensation under this Plan at any time after the annual shareholders’ meeting of the Company in 2008.
If the terms, conditions or administration of the Plan conflicts with the requirements of Section 162(m) of the Code, then any payments made with respect to such terms, provisions or administration which are not deductible for purposes of Section 162 of the Code shall not invalidate the remaining portions of thePlan as performance-based compensation under Section 162(m). With respect to Section 162(m), if the Plan does not contain any provision required to be included herein under Section 162(m) of the Code, such provision shall be deemed to be incorporated herein with the same force and effect as if such provision had been set out at length herein.
Neither the adoption of the Plan by the Committee or the Board nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitation on the power of the Committee or the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the grant of stock options and the awarding of stock or cash or other benefits other than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases. Any discretionary bonus paid by the Company to a Covered Employee shall not constitute performance-based compensation for purposes of Section 162(m).
(a) This Plan is not a contract between the Company and any Participant or other employee. No Participant or other employee shall have any claim or right to be paid an Award under this Plan until the amount of such Award shall have been determined and certified in accordance with Section 5 hereof. Neither the establishment of this Plan, nor any action taken hereunder, shall be construed as giving any Participant or other employee any right to remain in the employ of the Company or its subsidiaries for any period. Nothing contained in this Plan shall limit the ability of the Company to make payments or awards to employees under any other plan, agreement or arrangement.
(b) A Participant’s right and interest in any Award under the Plan may not be assigned or transferred, except as provided in Section 8 hereof, and any attempted assignment or transfer shall be null and void and shall permit the Committee, in its sole discretion, to extinguish the Company’s obligation under the Plan to pay any Award with respect to such Participant.
(c) The Plan shall be unfunded. The Company shall not be required to establish any special segregation of assets to assure payment of Awards.
(d) The Company shall have the right to deduct at the time of payment of any Award any amounts required by law to be withheld for the payment of taxes or otherwise.
(e) If the Company for any reason fails to make payment of an Award at the time such Award becomes payable, the Company shall not be liable for any interest or other charges thereon.
Except where federal law is applicable, the provisions of the Plan shall be
governed by and construed in accordance with the laws of the State of
(g) If any provision of this Plan is found to be illegal or invalid or would cause any Award not to constitute performance-based compensation under Section 162(m)(4)(C) of the Code, the Committee shall have discretion to sever that provision from this Plan and, thereupon, such provision shall not be deemed to be a part of this Plan.
(h) No member of the Board of Directors or the Committee, and no officer, employee or agent of the Company or its subsidiaries shall be liable for any act or actions hereunder, whether of commission or omission, taken by any other member, or by any officer, agent, or employee, or, except in circumstances involving bad faith, for anything done or omitted to be done in the administration of the Plan.
Plan shall be effective beginning with the Fiscal Year