Document:

Exhibit (10)G

 

TARGET CORPORATION

OFFICER EDCP

(2012 PLAN STATEMENT)

 

Effective June 5, 2012

as Amended and Restated

 

 

TARGET CORPORATION

OFFICER EDCP

(2012 Plan Statement)

 

TABLE OF CONTENTS

 

	
SECTION 1 INTRODUCTION; DEFINITIONS
    	
1
    
	
1.1
    	
Name of Plan; History
    	
1
    
	
1.2
    	
Definitions
    	
1
    
	
 
    	
1.2.1
    	
Account
    	
1
    
	
 
    	
1.2.2
    	
Affiliate
    	
2
    
	
 
    	
1.2.3
    	
Base Salary
    	
2
    
	
 
    	
1.2.4
    	
Beneficiary
    	
2
    
	
 
    	
1.2.5
    	
Board
    	
2
    
	
 
    	
1.2.6
    	
Bonus
    	
2
    
	
 
    	
1.2.7
    	
Certified Earnings
    	
2
    
	
 
    	
1.2.8
    	
Change-in-Control
    	
2
    
	
 
    	
1.2.9
    	
Code
    	
3
    
	
 
    	
1.2.10
    	
[Intentionally left blank.]
    	
4
    
	
 
    	
1.2.11
    	
Company
    	
4
    
	
 
    	
1.2.12
    	
Company’s Fiscal Year
    	
4
    
	
 
    	
1.2.13
    	
Crediting Rate Alternative
    	
4
    
	
 
    	
1.2.14
    	
Deferral Credit
    	
4
    
	
 
    	
1.2.15
    	
Disabled
    	
4
    
	
 
    	
1.2.16
    	
Discretionary Credit
    	
4
    
	
 
    	
1.2.17
    	
Earnings Credit
    	
4
    
	
 
    	
1.2.18
    	
EDCP
    	
4
    
	
 
    	
1.2.19
    	
Effective Date
    	
4
    
	
 
    	
1.2.20
    	
Eligible Compensation
    	
4
    
	
 
    	
1.2.21
    	
Employee
    	
4
    
	
 
    	
1.2.22
    	
Enhancement
    	
4
    
	
 
    	
1.2.23
    	
ERISA
    	
4
    
	
 
    	
1.2.24
    	
ESBP
    	
5
    
	
 
    	
1.2.25
    	
ESBP Benefit
    	
5
    
	
 
    	
1.2.26
    	
ESBP Benefit Transfer Credits
    	
5
    
	
 
    	
1.2.27
    	
Newly Eligible Employee
    	
5
    
	
 
    	
1.2.28
    	
Officer
    	
5
    
	
 
    	
1.2.29
    	
Participant
    	
5
    
	
 
    	
1.2.30
    	
Participating Employer
    	
5
    
	
 
    	
1.2.31
    	
Performance Share Award
    	
5
    
	
 
    	
1.2.32
    	
Plan
    	
5
    
	
 
    	
1.2.33
    	
Plan Administrator
    	
6
    
	
 
    	
1.2.34
    	
Plan Rules
    	
6
    
	
 
    	
1.2.35
    	
Plan Statement
    	
6
    
	
 
    	
1.2.36
    	
Plan Year
    	
6
    
	
 
    	
1.2.37
    	
Restoration Match Credit
    	
6
    
	
 
    	
1.2.38
    	
Signing Bonus
    	
6
    
	
 
    	
1.2.39
    	
SPP Benefit
    	
6
    
	
 
    	
1.2.40
    	
SPP Benefit Transfer Credit
    	
6
    
	
 
    	
1.2.41
    	
Specified Employee
    	
6
    

 

i

 

	
 
    	
1.2.42
    	
Target   401(k) Plan
    	
6
    
	
 
    	
1.2.43
    	
Target Pension   Plan
    	
6
    
	
 
    	
1.2.44
    	
Termination of   Employment
    	
6
    
	
 
    	
1.2.45
    	
Trust
    	
7
    
	
 
    	
1.2.46
    	
Unforeseeable   Emergency
    	
7
    
	
 
    	
1.2.47
    	
Valuation Date
    	
7
    
	
 
    	
1.2.48
    	
Year of   Service
    	
7
    
	
 
    	
 
    	
 
    	
 
    
	
SECTION 2 PARTICIPATION   AND DEFERRAL ELECTIONS
    	
8
    
	
2.1
    	
Eligibility
    	
8
    
	
2.2
    	
Special   Rules for Participating Employees
    	
8
    
	
2.3
    	
Termination of   Participation
    	
8
    
	
2.4
    	
Rehires and   Transfers
    	
9
    
	
2.5
    	
Effect on   Employment
    	
9
    
	
2.6
    	
Condition of   Participation
    	
9
    
	
2.7
    	
Deferral   Elections
    	
10
    
	
2.8
    	
Base Salary   Deferrals
    	
10
    
	
2.9
    	
Bonus   Deferrals
    	
11
    
	
2.10
    	
Performance   Share Award Deferrals
    	
11
    
	
2.11
    	
Special Code   Section 162(m) Deferral Elections
    	
11
    
	
2.12
    	
Cancellation   of Deferral Elections
    	
12
    
	
 
    	
 
    	
 
    
	
SECTION 3 CREDITS TO   ACCOUNTS
    	
13
    
	
3.1
    	
Elective   Deferral Credit
    	
13
    
	
3.2
    	
Restoration   Match Credit
    	
13
    
	
3.3
    	
SPP Benefit   Transfer Credits
    	
13
    
	
3.4
    	
ESBP Benefit   Transfer Credits
    	
15
    
	
3.5
    	
Discretionary   Credits
    	
16
    
	
 
    	
 
    	
 
    
	
SECTION 4 ADJUSTMENTS OF ACCOUNTS
    	
17
    
	
4.1
    	
Establishment   of Accounts
    	
17
    
	
4.2
    	
Adjustments of   Accounts
    	
17
    
	
4.3
    	
Investment   Adjustment
    	
17
    
	
4.4
    	
Enhancement
    	
17
    
	
4.5
    	
Account   Adjustments Upon a Change-in-Control or Plan Termination
    	
18
    
	
 
    	
 
    	
 
    
	
SECTION 5 VESTING
    	
19
    
	
5.1
    	
Deferral   Credits and Restoration Match Credits
    	
19
    
	
5.2
    	
Discretionary   Credits
    	
19
    
	
5.3
    	
Enhancement
    	
19
    
	
5.4
    	
SPP Benefit   Transfer Credit
    	
19
    
	
5.5
    	
ESBP Benefit   Transfer Credit
    	
19
    
	
5.6
    	
Failure to   Cooperate; Misinformation or Failure to Disclose
    	
19
    
	
 
    	
 
    	
 
    
	
SECTION 6 DISTRIBUTION
    	
20
    
	
6.1
    	
Distribution   Elections
    	
20
    
	
6.2
    	
General Rule
    	
20
    
	
6.3
    	
Six-Month   Suspension for Specified Employees
    	
23
    
	
6.4
    	
Distribution   on Account of Death
    	
23
    
	
6.5
    	
Distribution   on Account of Unforeseeable Emergency
    	
23
    
	
6.6
    	
Designation of   Beneficiaries
    	
23
    

 

ii

 

	
6.7
    	
Facility of   Payment
    	
25
    
	
6.8
    	
Tax   Withholding
    	
25
    
	
6.9
    	
Payments Upon   Rehire
    	
25
    
	
6.10
    	
Application   for Distribution
    	
25
    
	
6.11
    	
Acceleration   of Distributions
    	
26
    
	
6.12
    	
Delay of   Distributions
    	
26
    
	
 
    	
 
    	
 
    
	
SECTION 7 SOURCE OF   PAYMENTS; NATURE OF INTEREST
    	
27
    
	
7.1
    	
Source of   Payments
    	
27
    
	
7.2
    	
Unfunded   Obligation
    	
27
    
	
7.3
    	
Establishment   of Trust
    	
27
    
	
7.4
    	
Spendthrift   Provision
    	
27
    
	
7.5
    	
Compensation   Recovery (Recoupment)
    	
28
    
	
 
    	
 
    	
 
    
	
SECTION 8 ADOPTION,   AMENDMENT AND TERMINATION
    	
29
    
	
8.1
    	
Adoption
    	
29
    
	
8.2
    	
Amendment
    	
29
    
	
8.3
    	
Termination   and Liquidation
    	
29
    
	
 
    	
 
    	
 
    
	
SECTION 9 CLAIM PROCEDURES
    	
31
    
	
9.1
    	
Claims   Procedure
    	
31
    
	
9.2
    	
Rules and   Regulations
    	
32
    
	
9.3
    	
Limitations   and Exhaustion
    	
33
    
	
 
    	
 
    	
 
    
	
SECTION 10 PLAN   ADMINISTRATION
    	
35
    
	
10.1
    	
Plan   Administration
    	
35
    
	
10.2
    	
Conflict of   Interest
    	
35
    
	
10.3
    	
Service of   Process
    	
36
    
	
10.4
    	
Choice of Law
    	
36
    
	
10.5
    	
Responsibility   for Delegate
    	
36
    
	
10.6
    	
Expenses
    	
36
    
	
10.7
    	
Errors in   Computations
    	
36
    
	
10.8
    	
Indemnification
    	
36
    
	
10.9
    	
Notice
    	
36
    
	
 
    	
 
    	
 
    
	
SECTION 11 CONSTRUCTION
    	
37
    
	
11.1
    	
ERISA Status
    	
37
    
	
11.2
    	
IRC Status
    	
37
    
	
11.3
    	
Rules of   Document Construction
    	
37
    
	
11.4
    	
References to   Laws
    	
37
    
	
11.5
    	
Appendices
    	
37
    
	
 
    	
 
    	
 
    
	
APPENDIX A
    	
38
    
	
 
    	
 
    
	
APPENDIX B
    	
41
    

 

iii

 

SECTION 1

INTRODUCTION; DEFINITIONS

 

1.1         Name of Plan; History.  This Plan (formerly known as the “Target Corporation SMG Executive Officer Deferred Compensation Plan) is a non-qualified, unfunded plan established for the purpose of allowing a select group of management or highly compensated employees to defer the receipt of income.  This Plan was originally adopted effective as of January 1, 1997 and was amended at various times thereafter.  Effective April 30, 2002, Participants in this Plan who were members of the Company’s Corporate Operating Committee received credits under this Plan equal to the present value of their benefit under the supplemental pension plans maintained by the Company.  Each subsequent April, the Participant receives annual SPP Benefit Transfer Credits equal to the change in value of his or her benefit under the supplemental pension plans.  Effective July 31, 2002, this program was extended to include all officers of the Company.  Effective April 30, 2002, Participants in this Plan who were members of the Company’s Corporate Operating Committee received credits under this Plan equal to the present value of their benefit under the Company’s ESBP.  Each subsequent April, Participants received annual credits equal to the change in value of his or her benefit under the ESBP.  Effective October 28, 2005, all officers who had not previously received ESBP Benefit Transfer Credits, received a one-time transfer of the present value of their benefit under the ESBP.  As of January 28, 2006, a one-time ESBP credit was made to certain executive committee members and no subsequent ESBP Benefit Transfer Credits were made to those receiving the one-time ESBP credit.  From time to time, certain participants in the Target Corporation Deferred Compensation Plan – Senior Management Group (“ODCP”) and the Company negotiated to transfer the economic value of their benefit under ODCP to this Plan.  Officers eligible to receive performance share awards granted in the fiscal years ending February 1, 2003 and January 31, 2004 had an opportunity to defer receipt of the value of the earned performance shares into this Plan at the end of the performance period.  The performance period for the shares granted in 2003 ended February 3, 2007.  The performance period for the shares granted in 2004 ended February 2, 2008.  Effective January 1, 2005 (and other effective dates as specifically provided), this Plan was operated in compliance with Code section 409A.  Effective January 29, 2006, members of the Company’s executive committee ceased to be eligible to receive enhanced earnings on their account balances.  The Plan, which is intended to comply with Code section 409A, was amended and restated effective January 1, 2009.  The Plan was amended and restated to incorporate the Company’s recoupment policy effective January 13, 2010.  The Plan was amended and restated to reflect Plan administration and amendment changes authorized by the Board on November 10, 2010, to modify the Change in Control definition, and to set forth special provisions that are applicable to certain Participants who transfer to Canada,  effective as of June 8, 2011.  This Plan Statement, which was amended and restated to reflect the replacement of the Stable Value Crediting Rate Alternative with the Intermediate-Term Bond Crediting Rate Alternative beginning June 6, 2012, is effective June 5, 2012.

 

1.2         Definitions.  When the following terms are used herein with initial capital letters, they shall have the following meanings:

 

1.2.1     Account.  “Account” means the separate bookkeeping account representing the separate unfunded and unsecured general obligation of the Participating Employers established with respect to each person who is a Participant in this Plan.  Within each Participant’s Account, separate subaccounts shall be maintained to the extent the Plan Administrator determines it to be necessary or desirable for the administration of this Plan.

 

 

1.2.2     Affiliate.  An “Affiliate” is the Company and all persons, with whom the Company would be considered a single employer under Code section 414(b) or 414(c).

 

1.2.3     Base Salary.  “Base Salary” with respect to a Plan Year means Certified Earnings as modified by the rules below:

 

(a)          the  limits imposed by Code section 401(a)(17) will not apply;

 

(b)          deferrals under Section 2.8 of this Plan are included as Base Salary; and

 

(c)          Bonus and Signing Bonus amounts are not included as Base Salary.

 

1.2.4     Beneficiary.  “Beneficiary” means an individual (human being), a trust that is a United Sates person within the meaning of the Code, a person that has been recognized as a charitable organization under Code section 170(b), or the Participant’s estate designated in accordance with Section 6.7 to receive all or a part of the Participant’s Account in the event of the Participant’s death prior to full distribution thereof.  A person so designated shall not be considered a Beneficiary until the death of the Participant.

 

1.2.5     Board.  “Board” is the Board of Directors of the Company, or such committee of the Board of Directors to which the Board of Directors of the Company has delegated the respective authority.

 

1.2.6     Bonus.  “Bonus” with respect to a Plan Year means that portion of Certified Earnings that is equal to the amount payable under any regular incentive plan of a Participating Employer that is earned, or intended to be earned, over a period of at least a calendar year or fiscal year as modified by the rules below:

 

(a)          the limits imposed by Code section 401(a)(17) will not apply;

 

(b)          deferrals under Section 2.9 of this Plan are included as Bonus; and

 

(c)          Signing Bonus amounts are not included as Bonus.

 

1.2.7     Certified Earnings.  “Certified Earnings” has the same meaning as the defined term in the Target 401(k) Plan (determined without regard to the 30-day receipt rule); provided, however, “Certified Earnings” shall not include compensation that is accrued for any period following a Participant’s Termination of Employment.

 

1.2.8     Change in Control.  “Change-in-Control” means one of the following:

 

(a)          Individuals who are Continuing Directors cease for any reason to constitute 50% or more of the directors of the Company; or

 

(b)          30% or more of the outstanding voting power of the Voting Stock of the Company is acquired or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by any Person, other than an entity resulting from a Business Combination in which clauses (x) and (y) of Section 1.2.8(c) apply; or

 

(c)          the consummation of a merger or consolidation of the Company with or into another entity, a statutory share exchange, a sale or other disposition (in one

 

2

 

transaction or a series of transactions) of all or substantially all of the Company’s assets or a similar business combination (each, a “Business Combination”), in each case unless, immediately following such Business Combination, (x) all or substantially all of the beneficial owners (within the meaning of Rule 13d-3 under the Exchange Act) of the Company’s Voting Stock immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the voting power of the then outstanding shares of voting stock (or comparable voting equity interests) of the surviving or acquiring entity resulting from such Business Combination (including such beneficial ownership of an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), in substantially the same proportions (as compared to the other beneficial owners of the Company’s Voting Stock immediately prior to such Business Combination) as their beneficial ownership of the Company’s Voting Stock immediately prior to such Business Combination, and (y) no Person beneficially owns, directly or indirectly, 30% or more of the voting power of the outstanding voting stock (or comparable equity interests) of the surviving or acquiring entity (other than a direct or indirect parent entity of the surviving or acquiring entity, that, after giving effect to the Business Combination, beneficially owns, directly or indirectly, 100% of the outstanding voting stock (or comparable equity interests) of the surviving or acquiring entity); or

 

(d)          approval by the shareholders of a definitive agreement or plan to liquidate or dissolve the Company.

 

For purposes of this Section 1.2.8:

 

“Continuing Director” means an individual (A) who is, as of June 8, 2011, a director of the Company, or (B) who becomes a director of the Company after June 8, 2011, and whose initial appointment, or nomination for election by the Company’s shareholders, was approved by at least a majority of the then Continuing Directors; provided, however, that any individual whose initial assumption of office occurs as a result of either an actual or threatened contested election by any Person (other than the Board of Directors) seeking the election of such nominee in which the number of nominees exceeds the number of directors to be elected shall not be a Continuing Director;

 

“Person” means any individual, firm, corporation or other entity and shall include any group comprised of any person and any other person with whom such person or any affiliate or associate (as defined in Rule 14a-1(a) of the Exchange Act) of such person has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of any capital stock of the Company;

 

“Voting Stock” means all then-outstanding capital stock of the Company entitled to vote generally in the election of directors of the Company; and

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended and in effect from time to time, and the regulations promulgated thereunder.

 

1.2.9     Code.  “Code” means the Internal Revenue Code of 1986, as amended (including, when the context requires, all regulations, interpretations and rulings issued hereunder).

 

3

 

1.2.10   [Intentionally left blank.]

 

1.2.11   Company.  “Company” means Target Corporation, a Minnesota corporation, or any successor thereto.

 

1.2.12   Company’s Fiscal Year.  “Company’s Fiscal Year” means the period commencing on the Sunday that immediately follows the Saturday that is nearest to the last day in January through the Saturday that is nearest to the last day in January in the following year.

 

1.2.13   Crediting Rate Alternative.  “Crediting Rate Alternative” means a hypothetical investment option used for the purpose of measuring income, gains and losses to the Accounts of Participants (as if the Accounts had in fact been so invested).  The Crediting Rate Alternatives shall be designated in writing by the Plan Administrator.

 

1.2.14   Deferral Credit.  A “Deferral Credit” is the amount credited to a Participant’s Account pursuant to Section 3.1.

 

1.2.15   Disabled.  A Participant will be “Disabled” if he or she has become entitled to receive disability income benefits under the provisions of the Social Security Act.

 

1.2.16   Discretionary Credit.  A “Discretionary Credit” is the amount credited to a Participant’s Account pursuant to Section 3.5.

 

1.2.17   Earnings Credit.  “Earnings Credit” means the investment adjustment credited to a Participant’s Account pursuant to Section 4.3 or Section 4.5 as applicable.

 

1.2.18   EDCP.  “EDCP” means the Target Corporation EDCP, a non-qualified, unfunded deferred compensation plan maintained by the Company and certain other Affiliates.

 

1.2.19   Effective Date.  The “Effective Date” of this Plan Statement is June 5, 2012, except as otherwise provided.

 

1.2.20   Eligible Compensation.  “Eligible Compensation” means, the Base Salary, Bonus and Performance Share Award that the Participant receives or is entitled to receive from his or her Participating Employer for services rendered.

 

1.2.21   Employee.  An “Employee” is an individual who performs services for a Participating Employer as an employee of the Participating Employer (as classified by the Participating Employer at the time the services are preformed and without regard to any subsequent reclassification) and does not include any individual who is classified an independent contractor.

 

1.2.22   Enhancement.  “Enhancement” means an additional .1667% of investment earnings per month added to the applicable Crediting Rate Alternatives as provided in Section 4.4.

 

1.2.23   ERISA.  “ERISA” means the Employee Retirement Income Security Act of 1974, as amended (including, when the context requires, all regulations, interpretations and rulings issued thereunder).

 

4

 

1.2.24   ESBP.  “ESBP” means the Target Corporation Post Retirement Executive Survivor Benefit Plan.

 

1.2.25   ESBP Benefit.  “ESBP Benefit” means the actuarial lump sum present value of a Participant’s survivor benefit under the ESBP determined as of a particular determination date under Section 3.4 but without regard to whether the Participant had experienced either an “early retirement” or “normal retirement” under the Target Pension Plan as provided under the ESBP.  The present value of such survivor benefit will be determined by the Company in its sole and absolute discretion based on such interest rates, mortality factors and other assumptions deemed appropriate by the Company.

 

1.2.26   ESBP Benefit Transfer Credits.  “ESBP Benefit Transfer Credits” are the initial and annual credits to a Participant’s Account under Section 3.4.

 

1.2.27   Newly Eligible Employee.  “Newly Eligible Employee” means an Employee who either (i) was not previously eligible to participate in this Plan or any other non-qualified, deferred compensation plans maintained by a Participating Employer or other Affiliate, (ii) had been paid all amounts previously deferred under all non-qualified, deferred compensation plans maintained by a Participating Employer or other Affiliate and had ceased to be eligible to continue to participate in such plans on or before the date of payment of all amounts due under such plans, or (iii) was not eligible to participate in any non-qualified deferred compensation plans (other than the accrual of earnings) maintained by a Participating Employer or other Affiliate at any time during the 24-month period ending on the date the Employee has again become eligible to participate in the Plan.

 

1.2.28   Officer.  An “Officer” is a member of the executive committee and any other Employee who is designated and categorized as an officer of the Company by the Company’s Chief Executive Officer.

 

1.2.29   Participant.  A  “Participant” is an Employee who becomes a Participant in this Plan in accordance with the provisions of Section 2.  An Employee who has become a Participant shall be considered to continue as a Participant in this Plan until the date when the Participant no longer has any Account under this Plan, or the date of the Participant’s death, if earlier.

 

1.2.30   Participating Employer.  “Participating Employer” means the Company and each other Affiliate that, with the consent of the Plan Administrator, adopts this Plan.  A Participating Employer shall cease to be a Participating Employer on the date it ceases to be an Affiliate.

 

1.2.31   Performance Share Award.  “Performance Share Award” means a performance share award issued under the Company’s Long-Term Incentive Plan of 1999 or the Company’s Long-Term Incentive Plan of 2004.

 

1.2.32   Plan.  “Plan” means the nonqualified, unfunded income deferral program maintained by the Company and established for the benefit of Participants eligible to participate therein, as set forth in this Plan Statement.  As used herein, “Plan” does not refer to the documents pursuant to which this Plan is maintained.  That document is referred to herein as the “Plan Statement”.  The Plan shall be referred to as the “Target Corporation Officer EDCP” (formerly known as the Target Corporation SMG Executive Deferred Compensation Plan).

 

5

 

1.2.33   Plan Administrator.  “Plan Administrator” is the individual designated in Sec. 10.1.1, or, if applicable, its delegate.

 

1.2.34   Plan Rules.  “Plan Rules” are rules, policies, practices or procedures adopted by the Plan Administrator or its delegate pursuant to Section 10.1.5.

 

1.2.35   Plan Statement.  “Plan Statement” means this document entitled “Target Corporation Officer EDCP (2012 Plan Statement),” as adopted by the Company, effective as of June 5, 2012, as the same may be amended from time to time.

 

1.2.36   Plan Year.  “Plan Year” means the period from January 1 through December 31.

 

1.2.37   Restoration Match Credit.  “Restoration Match Credit” is the amount credited to a Participant’s Account pursuant to Section 3.2.

 

1.2.38   Signing Bonus.  “Signing Bonus” is the cash remuneration earned following a period of employment provided to certain new Employees related to their acceptance of employment with a Participating Employer.

 

1.2.39   SPP Benefit.  “SPP Benefit” means the amount determined under Appendix A.

 

1.2.40   SPP Benefit Transfer Credit.  “SPP Benefit Transfer Credit” is the amount credited to a Participant’s Account under Section 3.3.

 

1.2.41   Specified Employee.  For purposes of complying with the requirements of Code section 409A(a)(2)(B)(i) (relating to the 6 month suspension of certain benefit distributions), an individual is a “Specified Employee” if on his or her Termination of Employment, the Company or other Affiliate has stock that is traded on an established securities market within the meaning of Code section 409A(a)(2)(B) and such individual is a “key employee” (defined below).  For this purpose, an individual is a “key employee” during the 12-month period beginning on April 1 immediately following the calendar year in which the individual was employed by the Company and other Affiliates, and satisfied, at any time within such calendar year, the requirements of Code section 416(i)(1)(A)(i), (ii) or (iii) (without regard to Code section 416(i)(5)).  An individual will not be treated as a Specified Employee if the individual is not required to be treated as a Specified Employee under Treasury Regulations issued under Code section 409A.

 

1.2.42   Target 401(k) Plan.  “Target 401(k) Plan” means the tax-qualified defined contribution retirement plan, with a qualified cash or deferred arrangement, established by the Company for the benefit of employees eligible to participate therein, and known as the Target Corporation 401(k) Plan.

 

1.2.43   Target Pension Plan.  “Target Pension Plan” means the tax qualified defined benefit pension plan, established for the benefit of employees eligible to participate therein, and known as the Target Corporation Pension Plan, including any predecessor plan(s) or successor plan.

 

1.2.44   Termination of Employment.

 

(a)          For purposes of determining entitlement to or the amount of benefits under the Plan, “Termination of Employment” means a severance of a Participant’s

 

6

 

employment relationship with each Participating Employer and all Affiliates, for any reason.

 

(b)          For purposes of determining when a distribution will be made under the Plan, a “Termination of Employment” will be deemed to occur if, based on the relevant facts and circumstances to the Participant, the Participating Employer, all Affiliates and Participant reasonably anticipate that the level of bona fide future services to be performed by the Participant for the Participating Employer and all Affiliates will permanently decrease to no more than 20% of the average level of bona fide services performed over the immediately preceding 36-month period.

 

(c)          A bona fide leave of absence that is six months or less, or during which an individual retains a reemployment right, will not cause a Termination of Employment.  In the case of a leave of absence without a right of reemployment that exceeds the time periods described in this paragraph, a Termination of Employment will be deemed to occur once the leave of absence exceeds six months.

 

(d)          Notwithstanding the foregoing, a Termination of Employment shall not occur unless such termination also qualifies as a “separation from service,” as defined under Code section 409A and related guidance thereunder.

 

1.2.45   Trust.  “Trust” means the Target Corporation Deferred Compensation Trust Agreement, dated January 1, 2009 by and between the Company and State Street Bank and Trust Company, as it is amended from time to time, or similar trust agreement.

 

1.2.46   Unforeseeable Emergency.  “Unforeseeable Emergency” means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (within the meaning of Code section 152(a)) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, but only if and to the extent such Unforeseeable Emergency constitutes an “unforeseeable emergency” under Code section 409A.

 

1.2.47   Valuation Date.  “Valuation Date” means each business day on which the New York Stock Exchange is open.

 

1.2.48   Year of Service.  A “Year of Service” means each 12-consecutive month period an individual is an Employee after the date the individual is first eligible to participate under this Plan or any other non-qualified deferred compensation plan maintained by a Participating Employer.

 

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SECTION 2

PARTICIPATION AND DEFERRAL ELECTIONS

 

2.1         Eligibility.

 

2.1.1     An Employee is eligible to participate in this Plan on the first day of a Plan Year if, on such day, he or she:

 

(a)          is a “qualified employee” as that term is defined in the Target 401(k) Plan; and

 

(b)          is an Officer.

 

2.1.2     A Newly Eligible Employee is eligible to participate in this Plan on the date that is 30 days after he or she satisfies the requirements in Section 2.1.1.

 

2.1.3     An Employee shall, as a condition of participation in this Plan, complete such forms and make such elections in accordance with Plan Rules as the Plan Administrator may require.  An Employee who satisfies the requirements of this Section 2.1 is eligible to participate in this Plan in accordance with and subject to the requirements of this Plan.

 

2.1.4     An Employee who has had a Termination of Employment as defined in Section 1.2.44(b), will not be eligible to make deferral elections for subsequent Plan Years until otherwise notified by the Plan Administrator.  Any deferral election in effect at the time of such Termination of Employment will continue to apply with respect to any Eligible Compensation received from a Participating Employer or other Affiliate.  Such Employee will still be eligible to receive credits, if any, pursuant to Sections 3.2, 3.3, 3.4 and 3.5.

 

2.2         Special Rules for Participating Employees.  A Participant who transfers employment from one Participating Employer to another Affiliate, whether or not a Participating Employer will, for the duration of the Plan Year in which the transfer occurs, continue to participate in this Plan in accordance with the deferral election in effect at the time of such transfer.  A Participant who is simultaneously employed with more than one Participating Employer will participate in this Plan as an Employee of each such Participating Employer on the basis of a single deferral election applied separately to his or her respective, Eligible Compensation from each Participating Employer.

 

2.3         Termination of Participation.  Except as otherwise specifically provided in this Plan Statement or by the Plan Administrator, an Employee who ceases to satisfy the requirements of Section 2.1 is not eligible to continue to participate in the Plan, provided, that any deferral elections in effect, and irrevocable, will continue to apply with respect to any Eligible Compensation received from a Participating Employer or other Affiliate.  The Participant’s Account will continue to be governed by the terms of the Plan until such time as the Participant’s Account balance is paid in accordance with the terms of the Plan.  A Participant or Beneficiary will cease to be such as of the date on which his or her entire Account balance has been distributed.

 

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2.4         Rehires and Transfers.

 

2.4.1     A Participant who incurs a Termination of Employment and is rehired during the same calendar year will continue Base Salary deferrals for such calendar year in accordance with his or her election in effect immediately prior to the Termination of Employment.

 

2.4.2     A Participant who incurs a Termination of Employment and is rehired prior to the later of the end of the Plan Year or the date the Bonus for such Plan Year is paid in cash, will continue Bonus Deferrals for such Plan Year in accordance with his or her election in effect immediately prior to the Termination of Employment.

 

2.4.3     Transfers from Non-Officer Plan.  An Employee who is a Participant in the EDCP and is promoted to an Officer position will cease to be eligible to participate in the EDCP and will be eligible to participate in this Plan, subject to the following rules:

 

(a)          The Employee will become a Participant in this Plan immediately upon satisfying the requirements to participate hereunder.

 

(b)          The Employee’s deferral elections made under the EDCP will transfer to the Plan and continue as an election made under Section 2.

 

(c)          The Employee’s account maintained under the EDCP will be transferred to the Employee’s Account under this Plan.

 

(d)          The Employee’s distribution elections made under the EDCP (including any default distributions) will transfer to this Plan and continue as the distribution elections made under this Plan.

 

(e)          The Employee’s beneficiary designation made under the EDCP will be treated as the Employee’s Beneficiary designation under this Plan until changed in accordance with Section 6.7.

 

2.5         Effect on Employment.

 

2.5.1     Not a Term of Employment.  Neither the terms of this Plan Statement nor the benefits under this Plan (including the continuance thereof) shall be a term of the employment of any Employee.

 

2.5.2     Not an Employment Contract.  This Plan is not and shall not be deemed to constitute a contract of employment between any Participating Employer and any Employee or other person, nor shall anything herein contained be deemed to give any Employee or other person any right to be retained in any Participating Employer’s employ or in any way limit or restrict any Participating Employer’s right or power to discharge any Employee or other person at any time and to treat him or her without regard to the effect that such treatment might have upon him or her as a Participant in this Plan.

 

2.6         Condition of Participation

 

2.6.1     Cooperation.  Each Participant shall cooperate with the Plan Administrator by furnishing any and all information requested by the Plan Administrator in order to facilitate the payment of benefits hereunder and taking such other relevant action as may be requested by the

 

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Plan Administrator.  If a Participant refuses to cooperate, neither the Company nor any Participating Employer shall have any further obligation to the Participant under this Plan, other than payment to such Participant of the aggregate amount of Eligible Compensation deferred under Section 3.1.

 

2.6.2     Plan Terms and Rules.  Each Participant, as a condition of participation in this Plan, is bound by all the terms and conditions of this Plan and the Plan Rules.

 

2.7         Deferral Elections.  An Employee who satisfies the eligibility requirements of Section 2 may, at the time and in the manner provided hereunder, elect to defer the receipt of his or her Eligible Compensation.

 

2.7.1     General Rule.  Except as otherwise provided in this Plan, an election shall be made before the beginning of the Plan Year during which the Participant performs services for which the Eligible Compensation is earned.  The election must designate the percentage of the Base Salary, Bonus or Performance Share Award which shall be deferred under this Plan.  In accordance with Plan Rules, the Plan Administrator will determine the manner and timing required to file a deferral election.  No deferral election shall be effective unless prior to the deadline for making such election, the Participant has filed with the Plan Administrator, in accordance with Plan Rules, an insurance consent form permitting the Participating Employer or Company to purchase and maintain life insurance coverage on the Employee with the Participating Employer or Company as the beneficiary.  An election to defer Eligible Compensation for the Plan Year or other period is irrevocable once it has been accepted by the Plan Administrator and the deadline for making such election has expired, except as otherwise provided under this Plan.

 

2.7.2     Newly Eligible Employees.  For a Newly Eligible Employee, the deferral election may be made after the first day of a Plan Year provided it is made within 30 days after becoming eligible to participate in this Plan.  Such a deferral election by a Newly Eligible Employee is irrevocable once it has been received by the Plan Administrator and the deadline for making such election has expired, except as otherwise provided under this Plan.  Such election will be effective with respect to Eligible Compensation payable for services performed after becoming eligible for this Plan and commencing with the next full pay period after the deferral election becomes irrevocable.

 

2.7.3     Terminations of Employment.  A Participant who completes a deferral election in accordance with this Section 2.7, but who has a Termination of Employment prior to the expiration of the deadline for making such election, will be deemed to have made no deferral election for the respective period.

 

2.8         Base Salary Deferrals.   A Participant’s election to defer Base Salary is subject to the following requirements:

 

2.8.1     A Base Salary deferral election will be effective with respect to the first paycheck issued during the Plan Year, including for the payroll period that includes the last day of the preceding Plan Year, and such election will remain in effect through the last paycheck issued during the Plan Year.

 

2.8.2     Except as provided in Section 2.11, the Base Salary deferral percentage may not exceed 80%.

 

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2.9         Bonus Deferrals.  A Participant’s election to defer his or her Bonus is subject to the following requirements:

 

2.9.1     A Bonus deferral election will be in effect for service periods that begin in the Plan Year immediately following the date the election becomes irrevocable and continue through the end of the Plan Year or if the Bonus is paid after such Plan Year, through the date the Bonus would have been paid in cash.  Notwithstanding Section 2.7.2, a Newly Eligible Employee may not elect to defer a Bonus that is payable with respect to a service period that begins before the effective date of the Newly Eligible Employee’s deferral election.

 

2.9.2     Except as provided in Section 2.11, a Participant’s Bonus effective deferral percentage may not exceed 80%.

 

2.9.3     If the Plan Administrator determines that a Participant’s Bonus is “performance-based compensation” within the meaning of Code section 409A, then, consistent with Plan Rules, the Participant’s deferral election may be made no later than six months before the last day of the performance period during which the Bonus is earned.

 

2.9.4     If a Participant has a Termination of Employment before the end of the service period for any Bonus, but is still entitled to receive a bonus, the Participant’s existing Bonus deferral election will continue to apply.

 

2.10       Performance Share Award Deferrals.  A Participant’s election to defer his or her Performance Share Award is subject to the following requirements:

 

2.10.1   The election is available for Performance Share Awards issued in the Company’s Fiscal Year ending in calendar year 2003 and 2004.

 

2.10.2   A Participant’s Performance Share Award deferral percentage may not exceed 100%.

 

2.10.3   If the Plan Administrator determines that a Participant’s Performance Share Award is “performance-based compensation” within the meaning of Code section 409A, then the Participant’s Performance Share Award deferral election must be made no later than twenty-four (24) months prior to the date the Performance Share Award would otherwise be paid in the form of cash or Company stock, or, if earlier, six (6) months before the end of the period over which the services giving rise to the Performance Share Award were performed.

 

2.10.4   The “Plan Committee” as defined under the Company’s Long Term Incentive Plan shall determine, in its sole and absolute discretion for each Plan Year during which a Performance Share Award is issued, whether Participants in any group or class are eligible to make deferral elections under this Section 2.10 with respect to a Performance Share Award.

 

2.11       Special Code Section 162(m) Deferral Elections.  Notwithstanding Sections 2.8 and 2.9, a Participant who, prior to the beginning of a Plan Year, is identified by the Plan Administrator as a potential “covered employee” (within the meaning of Code section 162(m)) for the Company’s Fiscal Year either ending in or beginning in the Plan Year may:

 

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2.11.1   Make a Base Salary deferral election for the Plan Year that consists of two parts:

 

(a)          the first part of the election will apply with respect to the first paycheck issued during the applicable Plan Year through the last paycheck issued prior to the end of the Company’s Fiscal Year ending in the Plan Year, and

 

(b)          the second part will apply to the paychecks issued after the beginning of the Company’s Fiscal Year beginning in such Plan Year and issued prior to the end of such Plan Year.

 

2.11.2   Make a separate Bonus deferral election for the Plan Year with respect to:

 

(a)          The Bonus amounts that satisfy the requirements of performance-based compensation under Code section 162(m), and

 

(b)          All other Bonus amounts as determined by the Plan Administrator.

 

The Plan Administrator will set the maximum Bonus deferral percentage in its sole discretion, on a Participant by Participant basis.

 

2.12       Cancellation of Deferral Elections.

 

2.12.1   401(k) Hardship.  Notwithstanding any provisions in the Plan to the contrary, an election to defer under Sections 2.8, 2.9, and 2.10 will be cancelled to the extent necessary for the Participating Employer to comply with the hardship withdrawal provisions of such Participating Employer’s 401(k) plan.

 

(a)          An election to defer Base Salary amounts for the Plan Year during which the hardship withdrawal was made will be cancelled.  Further, no Base Salary deferral election will be effective for the next Plan Year if the hardship withdrawal occurs after June 30, and on or before December 31 of the calendar year.

 

(b)          Any election to defer Bonus or Performance Share Award amounts in effect at the time of the hardship withdrawal will be cancelled.  Further, no deferral election for a Bonus related to service in the next Plan Year will be effective if the hardship withdrawal occurs after June 30, and on or before December 31 of the calendar year.

 

2.12.2   Unforeseeable Emergency.  Notwithstanding any provisions in the Plan to the contrary, an election to defer under Sections 2.8, 2.9, and 2.10 will be cancelled for the remaining portion of the Plan Year in the event the Participant has received a distribution on account of an Unforeseeable Emergency under Section 6.5.  The revocation shall be made at the time and in the manner specified in Plan Rules and must otherwise comply with the requirements of Section 6.5.

 

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SECTION 3

CREDITS TO ACCOUNTS

 

3.1         Elective Deferral Credit.  The Plan Administrator shall credit to the Account of each Participant the amount, if any, of Eligible Compensation the Participant elected to defer pursuant to Section 2.  Such amount shall be credited as nearly as practicable as of the time or times when the Eligible Compensation would have been paid to the Participant but for the election to defer.

 

3.2         Restoration Match Credit.

 

3.2.1     Eligibility for Credit.  An Employee who satisfies the eligibility requirements of Section 2.1 during a Plan Year will receive a Restoration Match Credit for the Plan Year if he or she: (i) was actively employed and eligible to participate in this Plan on the last business day of the Plan Year; (ii) has experienced a Termination of Employment as defined under Section 1.2.44(a) during the Plan Year after attaining age 55 and completing five (5) “years of vesting service” as defined in the Target Pension Plan; (iii) has experienced a Termination of Employment as a result of death; or (iv) has become Disabled during such Plan Year.

 

3.2.2     Amount of Credit.  A Participant who satisfies the requirements of Section 3.2.1 is entitled to a Restoration Match Credit equal to the sum of:

 

(a)          5% of the Participant’s Base Salary and Bonus that is deferred under this Plan during the Plan Year; and

 

(b)          5% of the Participant’s Plan Year Base Salary and Bonus that is not deferred under this Plan during the Plan Year and that exceeds the compensation limit in effect under Code section 401(a)(17) for such Plan Year;

 

provided, however, that: (y) no Restoration Match Credit shall be made for Base Salary or Bonus paid prior to the date the Participant became eligible to participate in the Target 401(k) Plan, and (z) the credit under this Section 3.2.2 will not exceed the amount of Deferral Credits made by the Participant under Section 3.1 during the Plan Year.

 

3.2.3     Crediting to Account.  The Plan Administrator shall credit to a Participant’s Account as of the last business day of the Plan Year the amount of the Restoration Match Credit determined for the Plan Year for that Participant under Section 3.2.2.

 

3.2.4     Credit Upon Change-in-Control.  Upon a Change-in-Control that causes the Plan to be terminated under Section 8.3.2, the Plan Administrator shall credit to a Participant’s Account as of the date of the Plan termination a Restoration Match Credit determined for the Plan Year for that Participant under Section 3.2.2 through such date.  Any subsequent determination of the Restoration Match Credit during the same Plan Year will be made under Section 3.2.2, less any amounts previously credited under this Section 3.2.4.

 

3.3         SPP Benefit Transfer Credits.

 

3.3.1     Eligibility.  A Participant who satisfies the eligibility requirements of Section 2.1 shall receive an SPP Benefit Transfer Credit under this Plan if he or she:  (i) is classified as an Officer of the Company; and (ii) has a vested benefit under the Target Pension Plan, including a vested interest arising on account of the Participant’s death.

 

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3.3.2     Initial SPP Benefit Transfer Credit.

 

(a)          A Participant who satisfies the requirements of Section 3.3.1 receives an initial SPP Benefit Transfer Credit on or about the April 30 (or immediately preceding business day) immediately following the calendar year in which the Participant becomes eligible under Section 3.3.1, in an amount equal to the actuarial lump sum present value on March 31 (or immediately preceding business day) for the Participant’s SPP Benefit accrued through the preceding December 31.  In the case of Participant who is an executive officer, such transfer will be made and determined on or about the last business day prior to the end of the Company’s Fiscal Year.

 

(b)          Upon a Plan termination upon a Change-in-Control under Section 8.3.2, the Plan Administrator shall credit the initial SPP Benefit Transfer Credit to a Participant’s Account as of the Plan termination effective date in an amount equal to the actuarial lump sum present value on the Plan termination effective date.

 

3.3.3     Annual SPP Benefit Transfer Credit.  A Participant who has received an initial SPP Benefit Transfer Credit under the Plan, who is eligible to receive credits pursuant to Section 3.3.1, and who is employed by a Participating Employer during a Plan Year will receive an annual SPP Benefit Transfer Credit to his or her Account under the Plan as follows:

 

(a)          For each Plan Year, the annual SPP Benefit Transfer Credit will be the difference between (i) the SPP Benefit determined as the last day of the Plan Year expressed as the actuarial lump sum present value on the determination date and (ii) the aggregate amount of the previous SPP Benefit Transfer Credits to the Participant’s Account increased by assumed earnings at an annual rate equal to the sum of the average of the applicable Stable Value Crediting Rate Alternative for the Plan Year plus two percent (2%) determined from the crediting date through the earlier of June 5, 2012 or the determination date and after June 5, 2012 at an annual rate equal to the sum of the average of the applicable Intermediate-Term Bond Crediting Rate Alternative for the Plan Year plus two percent (2%) from the later of June 5 or the crediting date through the determination date; provided that with respect to periods that a Participant does not receive the Enhancement on their Account, the annual rate will be equal to the average of the applicable Stable Value Crediting Rate Alternative, through June 5, 2012, or the Intermediate-Term Bond Crediting Rate Alternative, after June 5, 2012, as applicable.

 

(b)          If the amount of the annual or final SPP Benefit Transfer Credit is positive, a credit will be made to the Participant’s Account.  If the amount of the SPP Benefit Transfer Credit is negative and if, and only if, (i) the Participant is an executive officer on the determination date, or (ii) the Participant is an Employee and member of the Board, but was formerly an executive officer, then such Participant’s Account will be debited by such negative amount.  The debit will be made prorata among all distribution options of the Plan other than fixed payment dates.

 

(c)          The annual SPP Benefit Transfer Credit (including a negative credit) will be made to the Participant’s Account as of the April 30 (or immediately preceding

 

14

 

business day) following the determination date.  In the case of a Participant who is an executive officer, such transfer will be made and determined on or about the last business day prior to the end of the Company’s Fiscal Year.

 

(d)          For purposes of this section, “determination date” means on or about March 31; provided that in the case of Participant who is an executive officer, “determination date” shall mean on or about the last business day prior to the end of the Company’s Fiscal Year.

 

(e)          Upon a Plan termination on account of a Change-in-Control under Section 8.3.2, the Plan Administrator shall credit to a Participant’s Account as of the Plan termination effective date an SPP Benefit Transfer Credit as determined in this Section 3.3.3 as of the Plan termination effective date.

 

(f)           Notwithstanding the foregoing, a Participant’s final SPP Benefit Transfer Credit will be determined within 60 days following his or her Termination of Employment as defined under Section 1.2.44(a).

 

3.3.4     Forfeiture.  A Participant’s SPP Benefit Transfer Credits under this Section 3.3 and corresponding earnings adjustments under Section 4 are subject to forfeiture at the time and in the amount provided under Sections 3.3.3(b) and 5.4 and Section A-5 of Appendix A.

 

3.4         ESBP Benefit Transfer Credits.

 

3.4.1     Eligibility.  A Participant who satisfies Section 2.1, who has received an initial ESBP Benefit Transfer Credit under the Plan, who is employed by a Participating Employer during the a Plan Year, and who has provided advance written notice of his retirement/termination date prior to January 11, 2006 will receive an annual ESBP Benefit Transfer Credit to his Account under the Plan.

 

(a)          For each Plan Year, the annual ESBP Benefit Transfer Credit will be the difference between (i) the ESBP Benefit determined as of the last day of the Plan Year as expressed as the actuarial lump sum present value on the determination date, and (ii) the aggregate amount of the previous ESBP Benefit Transfer Credits to the Participant’s Account increased by earnings at an annual rate equal to the sum of the average of the applicable Stable Value Crediting Rate Alternatives plus two percent (2%), from the crediting dates through the earlier of June 5, 2012 or the determination date and after June 5, 2012 at an annual rate equal to the sum of the average of the applicable Intermediate-Term Bond Crediting Rate Alternative for the Plan Year plus two percent (2%) from the later of June 5 or the crediting date through the determination date.

 

(b)          The credit to the Participant’s Account will be made as of the April 30 (or immediately preceding business day) following the determination date.

 

(c)          For purposes of this section, “determination date” means on or about March 30.

 

(d)          Upon a Change-in-Control, the Plan Administrator shall credit to a Participant’s Account as of the date of the Change-in-Control an ESBP Benefit Transfer Credit as determined in this Section 3.4. as of the date of the Change-in-Control.

 

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(e)          Notwithstanding the foregoing, a final annual ESBP Benefit Transfer Credit will be made to the Participant’s Account 60 days following a Participant’s Termination of Employment as defined under Section 1.2.44(a).

 

3.4.2     Forfeiture.  A Participant who has a Termination of Employment as defined under Section 1.2.44(a) prior to the attainment of age 55 and completion of 5 Years of Service will forfeit his or her ESBP Benefit Transfer Credits, and an amount of Earnings Credits and Enhancement equal to the investment adjustments that would have been credited on the ESBP Benefit Transfer Credits at the Stable Value Crediting Rate Alternative plus an annual rate of two percent (2%) through the earlier of June 5, 2012 or his or her Termination of Employment and for periods after June 5, 2012, at the Intermediate-Term Bond Crediting Rate Alternative plus an annual rate of two percent (2%).  The amount to be forfeited will be made prorata among all distribution options of the Plan.

 

3.5         Discretionary Credits.  The Company in its sole and absolute discretion may determine in writing for each Participant an amount that shall be credited the Participant’s Account as a Discretionary Credit.  Any Discretionary Credit to an executive officer will require the approval of the Compensation Committee of the Board.  The Plan Administrator shall credit to a Participant’s Account the amount of a Participating Employer’s Discretionary Credit, if any, determined for that Participant under this Section.  Such amount shall be credited as nearly as practicable as of the time or times fixed by the Participating Employer when awarding such credit.  Any special provisions relating to Discretionary Credits made on behalf of a Participating Employer’s Employees will be set forth on an exhibit to the Plan Statement.

 

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SECTION 4

ADJUSTMENTS OF ACCOUNTS

 

4.1                            Establishment of Accounts.  There shall be established for each Participant an Account which shall be adjusted as provided under Section 4.

 

4.2                            Adjustments of Accounts.  On each Valuation Date, the Plan Administrator shall cause the value of the Account (or subaccount) to be increased (or decreased) for distributions, withdrawals, credits, debits and investment income, gains or losses charged to the Account.

 

4.3                            Investment Adjustment.  The investment income, gains and losses shall be determined for the Accounts in accordance with the following:

 

4.3.1                Participant Elections.  In accordance with Plan Rules and procedures established by the Plan Administrator, each Participant shall prospectively elect, as part of the initial enrollment process, and from time to time thereafter, one or more Crediting Rate Alternatives that shall be used to measure income, gains and losses until the next Valuation Date.

 

4.3.2                Default Rate.  If a Participant fails to designate one or more Crediting Rate Alternatives to be used to measure income, gains and losses with respect to amounts credited to his or her Account, such amounts will be deemed to be invested in a default Crediting Rate Alternative designated by the Plan Administrator in accordance with Plan Rules.

 

4.3.3                Crediting.  As of each Valuation Date, each Participant’s Account shall be adjusted for income, gains and losses as if the Account had in fact been invested in the Crediting Rate Alternative(s) so selected.

 

4.3.4                Responsibility for Investing Adjustments.  The Plan Administrator will not be responsible in any manner to any Participant, Beneficiary or other person for any damages, losses or liabilities, costs or expenses of any kind arising in connection with any designation or elimination of a Crediting Rate Alternative or a Participant’s election of a Crediting Rate Alternative.

 

4.4                            Enhancement.

 

4.4.1                General Rule.  The Account of each Participant who is employed by the Company or other Affiliate for the entire calendar month will be credited by an amount equal to the Enhancement multiplied by the balance of the Account on the first day of the month.  On the last business day of each month, this amount will be credited according to the Crediting Rate Alternatives in effect for new Deferral Credits.

 

4.4.2                Exception.  No Enhancement will be credited with respect to the Participant during the remainder of the Company’s Fiscal Year in which the Participant becomes an executive committee member or during any of the Company’s Fiscal Years beginning after the date the Participant becomes an executive committee member; provided that the Plan Administrator, in its sole discretion, can cause the forfeiture of the Enhancement credited to a Participant’s Account during the Company’s Fiscal Year in which a Participant initially becomes an executive committee member.  In addition, no Enhancement will be credited with respect to a Participant for any month in a calendar year following the calendar year in which the Participant’s employment is transferred to a Canadian Affiliate, unless and until the Participant’s employment is transferred back to the Company or a U.S. Affiliate.

 

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4.5                            Account Adjustments Upon a Change-in-Control or Plan Termination.

 

4.5.1                In the event of a Plan termination following a Change-in-Control under Section 8.3.2 that causes a Trust to be established and funded pursuant to Section 7.3 where distribution of a Participant’s Account may not be made from the Trust within 60 days of the event because of restrictions imposed by Code section 409A, then the Participant’s Account as of the date of such event will no longer receive adjustments determined pursuant to Sections 4.3 and 4.4.

 

4.5.2                On and after the date of an event described in Section 4.5.1, the Account will have an investment adjustment determined at an annual rate equal to the sum of the 10-Year U.S. Treasury Note plus 2%.  The 10-Year U.S. Treasury Note rate will be determined as of the date of the Plan termination under Section 8.3.2, or if no such rate is available on that date, the immediately preceding date such rate is available, and reset each calendar quarter as necessary.

 

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SECTION 5

VESTING

 

5.1                            Deferral Credits and Restoration Match Credits.  Deferral Credits and Restoration Match Credits (and related Earnings Credits) of each Participant shall be fully (100%) vested and nonforfeitable at all times except as otherwise provided.

 

5.2                            Discretionary Credits.  A Participant will be vested in any Discretionary Credits (and related Earnings Credits) as provided by the Plan Administrator when such amounts are credited to the Participant’s Account.

 

5.3                            Enhancement.

 

5.3.1                General Rule.  Except as provided under Section 4.4.2, the Enhancement credited to a Participant’s Account will become fully vested and nonforfeitable upon the earliest occurrence of any of the following events while the Participant is still in the employment of a Participating Employer or other Affiliate:  (i) the Participant’s death; (ii) the last day of the calendar month in which a Participant attains age sixty-five (65) years; (iii) the determination that the Participant is Disabled; (iv) the occurrence of a Change-in-Control; (v) the Participant’s completion of five (5) Years of Service; or (vi) such other date as provided in writing to a Participant from the Plan Administrator.

 

5.3.2                Forfeiture.  Any forfeiture of the Enhancement will occur as soon as practicable after the Participant’s Termination of Employment.  Forfeiture of the Enhancement that is not vested under Section 5.3.1 is limited to the aggregate amount of the Enhancement credited with respect to such amounts determined without regard to Earnings Credits on such Enhancement.  The amount of the Enhancement to be forfeited will be debited prorata against the Participant’s distribution options.

 

5.4                            SPP Benefit Transfer Credit.  A Participant has a forfeiture of the SPP Benefit to the extent there is a debit as provided in Section 3.3 or Appendix A.  The forfeiture amount will be debited against a Participant’s Account.  The debit will be made prorata among all distribution options of the Plan.

 

5.5                            ESBP Benefit Transfer Credit.  A Participant has a forfeiture of the ESBP Benefit to the extent there is a forfeiture as provided in Section 3.4.2.  The forfeiture amount will be debited against a Participant’s Account.  The debit will be made prorata among all the Participant’s distribution options under the Plan.

 

5.6                            Failure to Cooperate; Misinformation or Failure to Disclose.  A Participant’s Account is subject to forfeiture as provided under Sections 2.6.1.

 

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SECTION 6

DISTRIBUTION

 

6.1                            Distribution Elections.  Except as otherwise specifically provided in this Plan, a Participant may irrevocably elect for each Plan Year the form and time of distribution of the credits made to his or her Account for such Plan Year.

 

6.2                            General Rule.  A Participant’s distribution election relating to Deferral Credits must be made prior to the date the Participant’s deferral election becomes irrevocable.  The election shall be made in the form and manner prescribed by Plan Rules.  Distribution elections for Base Salary deferrals will also apply to Restoration Match Credits related to the same Plan Year.  Earnings Credits and Enhancements will be distributed in the same form and time as in effect for the related Account credit.  All Discretionary Credits will be distributed in the form of a single lump sum as of the time determined under Section 6.2.2(b).

 

6.2.1                Form of Distribution.  The Participant may elect among the following forms of distribution.

 

(a)                               Installments.  A series of annual installments made over either five (5) years or ten (10) years commencing at a time provided under Section 6.2.2(a) or (b).  For purposes of Code section 409A, installment payments will be treated as a series of separate payments at all times.

 

(b)                              Lump Sum.  A single lump sum payment.

 

6.2.2                Time of Payment.  The Participant may elect among the distribution commencement times described in this section; provided that: (y) SPP Benefit Transfer Credits determined pursuant to Appendix A, Section A-4.3 will be distributed as provided in Section 6.2.5(b), and (z) SPP Benefit Transfer Credits, other than those pursuant to Appendix A, Section A-4.3, as well as unvested ESBP Benefit Transfer Credits may not be distributed on a fixed payment date as described in paragraph (c).

 

(a)                               Termination of Employment.  Within 60 days following the Participant’s Termination of Employment.

 

(b)                              One-Year Anniversary of Termination of Employment.  Within 60 days following the one-year anniversary of the Participant’s Termination of Employment.

 

(c)                               Fixed Payment Date.  Within 60 days of January 1 of the calendar year elected by the Participant at the time of deferral.  If a Participant has a Termination of Employment as defined in Section 1.2.44 prior to the fixed payment date, such amount shall be paid on the earlier of: (i) within 60 days following January 1 in the tenth year following the year of the Termination of Employment, or (ii) January 1 of the calendar year elected by the Participant at the time of deferral.  The Plan Administrator will establish Plan Rules, procedures and limitations on establishing the number and times of the fixed payment dates available for Participants to elect.

 

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(d)                              Payouts in 2008 and 2009.  During 2007 and 2008, consistent with transition relief available under Code section 409A, and subject to Plan Rules:

 

(i)                                  Participants had an opportunity to elect during 2007 to receive a distribution of all or a portion of their Account valued as of December 31, 2007 to be distributed in January 2008.

 

(ii)                              Participants had an opportunity to elect during 2007 to receive a distribution of all or a portion of their Bonus Deferral Credits for 2007 and Performance Share Awards in 2004, if any, to be credited under this Plan in 2008, to be distributed on the date such Bonus Deferral Credits or Performance Share Awards would otherwise have been credited to this Plan, or, with respect to such Performance Share Awards, such other date as specified in the election form.

 

(iii)                          Participants had an opportunity to elect during 2008 to receive a distribution of all or a portion of their Account valued as of December 31, 2008 to be distributed in January 2009.

 

(iv)                          Participants had an opportunity to elect during 2008 to receive a distribution of all or a portion of their Bonus Deferral Credits for 2008, if any, to be credited under this Plan in 2009, to be distributed on the date such Bonus Deferral Credits would otherwise have been credited to this Plan.

 

6.2.3                Installment Amounts.  The amount of the annual installments shall be determined by dividing the amount of the vested portion of the Account as of the most recent Valuation Date preceding the date the installment is being paid by the number of remaining installment payments to be made (including the payment being determined).

 

6.2.4                Small Benefit.  Subject to Section 6.3,  in the event that the vested Account balance of a Participant who has died or experienced a Termination of Employment under the Plan is less than the applicable dollar amount under Code section 402(g)(1)(B) for that Plan Year as of the date on which the Plan Administrator makes such determinations, the Plan Administrator (on behalf of the Company) reserves the right to have the Participant’s entire Account paid in the form of a single lump sum payment, provided the Plan Administrator’s exercise of discretion (on behalf of the Company) complies with the requirements of Treas. Reg. Sec. 1.409A-3(j)(4)(v).

 

6.2.5                Default.  If for any reason a Participant shall have failed to make a timely designation of the form or time of distribution with respect to credits for a Plan Year (including reasons entirely beyond the control of the Participant), except as provided in Section 6.2.6, the distribution shall be made as indicated below:

 

(a)                               In the case of SPP Benefit Transfer Credits, other than those pursuant to Appendix A, Section A-4.3 -  a single lump sum within 60 days following the one-year anniversary of the Participant’s Termination of Employment.

 

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(b)                              In the case of SPP Benefit Transfer Credits pursuant to Appendix A, Section A-4.3:

 

(i)                               Twenty-four (24) monthly installment payments commencing within 60 days following the Participant’s Termination of Employment;

 

(ii)                            Each monthly installment payment will be determined by dividing: (A) the amount of the vested portion of the Account attributable to Appendix A, Section A-4.3 and an amount of Earnings Credits equal to the investment adjustment that would have been credited on such SPP Benefit Transfer Credits at the Stable Value Crediting Rate Alternative through the most recent Valuation Date preceding the earlier of June 5, 2012 or date the installment is due, and after June 5, 2012, at the Intermediate-Term Bond Crediting Rate Alternative through the most recent Valuation Date preceding the date the installment is due, by (B) twenty-four (24), less the number of monthly installment payments that have previously been made from the Plan.

 

(c)                               In all other cases - a single lump sum payment within 60 days following the Participant’s Termination of Employment.

 

6.2.6                Crediting of Amounts after Benefit Distribution.  Notwithstanding any provision in this Plan Statement to the contrary other than Section 6.3:

 

(a)                               Deferral and Restoration Match Credits.

 

(i)                                Lump Sum Distribution.  If Deferral or Restoration Match Credits are due after the complete distribution of the Participant’s vested Account balance, or subaccount balance to which such Deferral or Restoration Match Credit relate, then such subsequent credits will be made to the Account and paid to the Participant in a single lump sum cash payment within 60 days of being credited to the Account.

 

(ii)                            Installment Distribution.  If Deferral or Restoration Match Credits are due after a related installment distribution occurs, then such subsequent credits will be made to the Account and included to determine the amount of the remaining scheduled payments as applicable.

 

(b)                              SPP or ESBP Benefit Transfer Credit.  The SPP Benefit Transfer Credit other than those pursuant to Appendix A, Section A-4.3 or ESBP Benefit Transfer Credit, as applicable, arising after a Participant’s Termination of Employment pursuant to Sections 3.3.3(f) and 3.4.1(e) shall be distributed in a single lump sum within 60 days following the Termination of Employment.

 

6.2.7                Vesting in Benefits After the Distribution Date.  No portion of a Participant’s Account will be distributed prior to being vested.  Subject to Section 6.3, if Participant is scheduled to receive a distribution of a portion of his or her Account that is not vested, such unvested amount will not be paid until subsequently vested, at which time it will be paid out in accordance with the respective distribution election.

 

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6.2.8                No Spousal Rights.  No spouse, former spouse, Beneficiary or other person shall have any right to participate in the Participant’s designation of a form or time of payment.

 

6.3                            Six-Month Suspension for Specified Employees.  Notwithstanding any other provision in this Section 6 to the contrary, if a Participant is a Specified Employee at Termination of Employment, then any distributions arising on account of the Participant’s Termination of Employment (other than on account of death) that are due shall be suspended and not be made until (6) months have elapsed since such Participant’s Termination of Employment (or, if earlier, upon the date of the Participant’s death).  Any payments that were otherwise payable during the six-month suspension period referred to in the preceding sentence, will be paid within 60 days after the end of such six-month suspension period.

 

6.4                            Distribution on Account of Death.  Upon the death of a Participant, the Participant’s Account balance will be paid to the Participant’s Beneficiary in a single lump sum within 90 days following the Participant’s death.

 

6.5                            Distribution on Account of Unforeseeable Emergency.

 

6.5.1                When Available.  A Participant may receive a distribution from the vested portion of his or her Account (which shall be deemed to include the deferral that would have been made but for the cancellation under Section 6.5.3) if the Plan Administrator determines that such distribution is on account of an Unforeseeable Emergency and the conditions in Section 6.5.2 have been fulfilled.  To receive such a distribution, the Participant must request a distribution by filing an application with the Plan Administrator and furnish such supporting documentation as the Plan Administrator may require.  In the application, the Participant shall specify the basis for the distribution and the dollar amount to be distributed.  If such request is approved by the Plan Administrator, distribution shall be made in a lump sum payment within 60 days following the approval by the Plan Administrator of the completed application.

 

6.5.2                Limitations.  The amount that may be distributed with respect to a Participant’s Unforeseeable Emergency shall not exceed the amounts necessary to satisfy the emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such Unforeseeable Emergency is or may be relieved through reimbursement or compensation by insurance or otherwise by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship), and/or cancellation of deferrals pursuant to Section 6.5.3, provided the determination of such limitation is consistent with the requirements of Code section 409A(a)(2)(B)(ii).

 

6.5.3                Cancellation of Deferral Elections.  As provided by Section 2.12, in the event of a distribution under Section 6.5.1 the Plan Administrator will cancel the Participant’s deferral elections for the balance of the applicable Plan Year.

 

6.6                            Designation of Beneficiaries.

 

6.6.1                Right to Designate or Revoke.

 

(a)                               Each Participant may designate one or more primary Beneficiaries or secondary Beneficiaries to receive all or a specified part of such Participant’s vested Account in the event of such Participant’s death.  If fewer than all designated primary or secondary Beneficiaries predecease the Participant, then the amount

 

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of such predeceased Beneficiary’s portion shall be allocated to the remaining primary or secondary Beneficiaries, as the case may be.

 

(b)                              The Participant may change or revoke any such designation from time to time without notice to or consent from any spouse, any person named as Beneficiary or any other person.

 

(c)                               No such designation, change or revocation shall be effective unless completed and filed with the Plan Administrator in accordance with Plan Rules during the Participant’s lifetime.

 

6.6.2                Failure of Designation.  If a Participant:

 

(a)                               fails to designate a Beneficiary,

 

(b)                              designates a Beneficiary and thereafter revokes such designation without naming another Beneficiary, or

 

(c)                             designates one or more Beneficiaries and all such Beneficiaries so designated fail to survive the Participant, such Participant’s vested Account, shall be payable to the first class of the following classes of automatic Beneficiaries:

 

Participant’s surviving spouse

Representative of Participant’s estate

 

6.6.3                Disclaimers by Beneficiaries.  A Beneficiary entitled to a distribution of all or a portion of a deceased Participant’s vested Account may disclaim an interest therein subject to the Plan Rules.

 

6.6.4                Special Rules.  Unless the Participant has otherwise specified in the Participant’s Beneficiary designation, the following rules shall apply:

 

(a)                               If there is not sufficient evidence that a person designated as a Beneficiary was living at the time of the death of the Participant, it shall be deemed that the Beneficiary was not living at the time of the death of the Participant.

 

(b)                              The automatic Beneficiaries specified in Section 6.6.2 and the Beneficiaries designated by the Participant shall become fixed at the time of the Participant’s death (subject to Section 6.6.3) so that, if a Beneficiary survives the Participant but dies before the receipt of all payments due such Beneficiary hereunder, such remaining payments shall be payable to the representative of such Beneficiary’s estate.

 

(c)                               If the Participant designates as a Beneficiary the person who is the Participant’s spouse on the date of the designation, either by name or by relationship, or both, the dissolution, annulment or other legal termination of the marriage between the Participant and such person shall automatically revoke such designation.  The foregoing shall not prevent the Participant from designating a former spouse as a beneficiary on a form that is both executed by the Participant and received by the Plan Administrator (i) after the date of the legal termination of the marriage

 

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between the Participant and such former spouse and (ii) during the Participant’s lifetime.

 

(d)                              A finalized marriage (other than a common law marriage) of a Participant subsequent to the date of filing of a Beneficiary designation shall revoke such designation unless the Participant’s new spouse had previously been designated as the Beneficiary.

 

(e)                               Any designation of a nonspouse Beneficiary by name that is accompanied by a description of relationship to the Participant shall be given effect without regard to whether the relationship to the Participant exists either then or at the Participant’s death.

 

(f)                                Any designation of a Beneficiary only by statement of relationship to the Participant shall be effective only to designate the person or persons standing in such relationship to the Participant at the Participant’s death.

 

6.7                            Facility of Payment.

 

6.7.1                Legal Disability.  In case of the legal disability, including minority, of an individual entitled to receive any payment under this Plan, payment shall be made, if the Plan Administrator shall be advised of the existence of such condition:

 

(a)                               to the duly appointed guardian, conservator or other legal representative of such individual, or

 

(b)                              to a person or institution entrusted with the care or maintenance of the incompetent or disable Participant or Beneficiary, provided such person or institution has satisfied the Plan Administrator that the payment will be used for the best interest and assist in the care of such individual, and provided further, that no prior claim for said payment has been made by a duly appointed guardian, conservator or other legal representative of such individual.

 

6.7.2                Discharge of Liability.  Any payment made in accordance with the foregoing provisions of this Section 6.7 shall constitute a complete discharge of any liability or obligation of the Participating Employers under this Plan.

 

6.8                            Tax Withholding.  The Participating Employer (or any other person legally obligated to do so) shall withhold the amount of any federal, state or local income tax, payroll tax or other tax that the payer reasonably determines is required to be withheld under applicable law with respect to any amount payable under this Plan.  All benefits otherwise due hereunder shall be reduced by the amount to be withheld.

 

6.9                            Payments Upon Rehire.  If a Participant who is receiving installment payments or due a deferred lump sum payment under this Plan is rehired, the payments will continue in accordance with the prior distribution elections.

 

6.10                    Application for Distribution.  A Participant may be required to make application to receive payment and to complete other forms and furnish other documentation required by the Plan Administrator.  Distribution shall not be made to any Beneficiary until such Beneficiary shall have filed an application for benefits in a form acceptable to the Plan Administrator and

 

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such application shall have been approved by the Plan Administrator and the Plan Administrator has determined that the applicant is entitled to payment.

 

6.11                    Acceleration of Distributions.  The Plan Administrator in its sole discretion may exercise discretion on behalf of the Company to accelerate the distribution of any payment under this Plan to the extent allowed under Code section 409A.

 

6.12                    Delay of Distributions.  The Plan Administrator in its sole discretion may exercise discretion on behalf of the Company to delay the distribution of any payment under this Plan to the extent allowed under Code section 409A, including, but not limited to, as necessary to maximize the Company’s tax deductions as allowed pursuant to Code section 162(m) or to avoid violation of federal securities or other applicable law.

 

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SECTION 7

SOURCE OF PAYMENTS; NATURE OF INTEREST

 

7.1                            Source of Payments.

 

7.1.1                General Assets.  Each Participating Employer will pay, from its general assets, the distribution of the Participant’s Account under Section 6, and all costs, charges and expenses relating thereto.

 

7.1.2                Trust.  Upon a Change-in-Control that causes the Plan to be terminated under Section 8.3.2, the trustee of the Trust will make distributions to Participants and Beneficiaries from the Trust in satisfaction of a Participating Employer’s obligations to make distributions under this Plan in accordance with and subject to the terms of the Trust to the extent such payments are not otherwise made directly by the Participating Employer.

 

7.2                            Unfunded Obligation.  The obligation of the Participating Employers to make payments under this Plan constitutes only the unsecured (but legally enforceable) promise of the Participating Employers to make such payments.  Participants and their Beneficiaries, heirs, successors and assigns shall have no legal or equitable rights, claims or interests in any specific property or assets of the Company or a Participating Employer, nor shall they be beneficiaries of, or have any rights, claims or interests in any life insurance policies, annuity contracts or the proceeds therefrom owned or which may be acquired by the Company.

 

7.3                            Establishment of Trust.  The Participating Employers shall have no obligation to establish or maintain any fund, trust or account (other than a bookkeeping account or reserve) for the purpose of funding or paying the benefits promised under this Plan except as provided in the Trust.  The Participating Employers may from time to time transfer to the Trust cash, or other marketable securities or other property acceptable to the trustee in accordance with the terms of the Trust.  If the Participating Employers have deposited funds in the Trust, such funds shall remain the sole and exclusive property of the Participating Employer that deposited such funds.

 

7.4                            Spendthrift Provision.  Except as otherwise provided in this Section 7.4, no Participant or Beneficiary shall have any interest in any Account which can be transferred nor shall any Participant or Beneficiary have any power to anticipate, alienate, dispose of, pledge or encumber the same while in the possession or control of the Participating Employers.  The Plan Administrator shall not recognize any such effort to convey any interest under this Plan.  No benefit payable under this Plan shall be subject to attachment, garnishment, or execution following judgment or other legal process before actual payment to such person.

 

7.4.1                Right to Designate Beneficiary.  The power to designate Beneficiaries to receive the Account of a Participant in the event of such Participant’s death shall not permit or be construed to permit such power or right to be exercised by the Participant  so as thereby to anticipate, pledge, mortgage or encumber such Participant’s Account or any part thereof, and any attempt of a Participant so to exercise said power in violation of this provision shall be of no force and effect and shall be disregarded by the Participating Employers.

 

7.4.2                Plan Administrator’s Right to Exercise Discretion.  This Section 7.4 shall not prevent the Plan Administrator from exercising, in its discretion, any of the applicable powers and options granted to it under any applicable provision hereof.

 

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7.5                            Compensation Recovery (Recoupment).  Notwithstanding any other provision of the Plan, a Participant who engaged in intentional misconduct that contributed directly or indirectly, in whole or in part, to the need for a restatement of the Company’s consolidated financial statements and who becomes subject to the Company’s recoupment policy as adopted by the Compensation Committee of the Company’s Board of Directors and amended from time to time (“Recoupment Policy”) may have all or a portion of his or her benefit under this Plan forfeited and/or all or a portion of any distributions payable to the Participant or his or her Beneficiary recovered by the Company.

 

7.5.1                Any Deferral Credit and related Earnings Credits resulting from the deferral of Eligible Compensation that is subject to recovery under the Recoupment Policy may be forfeited and, in such event, a corresponding adjustment will be made to the Participant’s Account balance.

 

7.5.2                If a Participant has commenced distributions and is subject to a claim for recovery under the Recoupment Policy, then the Company may, subject to any limitations under Code section 409A, retain all or any portion of the Participant’s (or his or her Beneficiary’s) taxable distribution, net of state, federal or foreign tax withholding, to satisfy such claim.

 

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SECTION 8

ADOPTION, AMENDMENT AND TERMINATION

 

8.1                            Adoption.  With the prior approval of the Plan Administrator, an Affiliate may adopt the Plan and become a Participating Employer by furnishing to the Plan Administrator a certified copy of a resolution of its board of directors adopting this Plan.

 

8.2                            Amendment.

 

8.2.1                General Rule.  The Company, by action of its Board of Directors, or by action of a person so authorized by resolution of the Board of Directors and subject to any limitations or conditions in such authorization, may at any time amend the Plan, in whole or in part, for any reason, including but not limited to tax, accounting or insurance changes, a result of which may be to terminate the Plan for future deferrals provided, however, that no amendment shall be effective to decrease the benefits, nature or timing thereof payable under the Plan to any Participant with respect to deferrals made (and benefits thereafter accruing) prior to the date of such amendment.  Written notice of any amendment shall be given each Participant then participating in the Plan.

 

8.2.2                Amendment to Benefit of Executive Officer.  Any amendment to the benefit of an executive officer under this Plan, to the extent approval of such amendment by the Board would be required by the Securities and Exchange Commission and its regulations or the rules of any applicable securities exchange, will require the approval of the Board.

 

8.2.3                No Oral Amendments.  No modification of the terms of this Plan Statement shall be effective unless it is in writing.  No oral representation concerning the interpretation or effect of this Plan Statement shall be effective to amend this Plan Statement.

 

8.3                            Termination and Liquidation.

 

8.3.1                General Rule.

 

(a)                               To the extent necessary or reasonable to comply with any changes in law, the Board may at any time terminate and liquidate this Plan, provided such termination and liquidation satisfies the requirements of Code section 409A.

 

(b)                              To the extent that a Participant’s benefit under the Plan will be immediately included in the income of the Participant, as determined by a court of competent jurisdiction or the Internal Revenue Service, to the extent permitted under Code section 409A, the Board may terminate and liquidate this Plan,  in whole or in part, as it relates to the impacted Participant.

 

8.3.2                Plan Termination and Liquidation on Account of a Change-in-Control.  Upon a Change-in-Control, the Plan will terminate and payment of all amounts under the Plan will be accelerated if and to the extent provided in this Section 8.3.2.

 

(a)                               The Plan will be terminated effective as of the first date on which there has occurred both (i) a Change-in-Control under Section 1.2.8, and (ii) a funding of the Trust on account of such Change-in-Control (referred to herein as the “Plan termination effective date”) unless, prior to such Plan termination effective date, the Board affirmatively determines that the Plan will not be terminated as of such

effective date. The Board will be deemed to have taken action to irrevocably terminate the Plan as of the Plan termination effective date by its failure to affirmatively determine that the Plan will not terminate as of such date.

 

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(b)                              The determination by the Board under paragraph (a) constitutes a determination that such termination will satisfy the requirements of Code section 409A, including an agreement by the Company that it will take such additional action or refrain from taking such action as may be necessary to satisfy the requirements necessary to terminate and liquidate the Plan under paragraph (c) below.

 

(c)                               In the event the Board does not affirmatively determine not to terminate the Plan as provided in paragraph (a), such termination shall be subject to either (i) or (ii), as follows:

 

(i)                                  If the Change-in-Control qualifies as a “change in control event” for purposes of Code section 409A, payment of all amounts under the Plan will be accelerated and made in a lump sum as soon a administratively practicable but not more than 90 days following the Plan termination effective date, provided the requirements of Treasury Regulation Section 1.409A-3(j)(4)(ix)(B) have been satisfied.

 

(ii)                              If the Change-in-Control does not qualify as a “change in control event” for purposes of Code section 409A, payment of all amounts under the Plan will be accelerated and made in a lump sum as soon as administratively practicable but not more than 60 days following the 12 month anniversary of the Plan termination effective date, provided the requirements of Treasury Regulation Section 1.409A-3(j)(4)(ix)(C) have been satisfied.

 

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SECTION 9

CLAIM PROCEDURES

 

9.1                            Claims Procedure.  Until modified by the Plan Administrator, the claim and review procedures set forth in this Section shall be the mandatory claim and review procedures for the resolution of disputes and disposition of claims filed under this Plan.  An application for a distribution or withdrawal shall be considered as a claim for the purposes of this Section.

 

9.1.1                Initial Claim.  An individual may, subject to any applicable deadline, file with the Plan Administrator a written claim for benefits under this Plan in a form and manner prescribed by the Plan Administrator.

 

(a)                               If the claim is denied in whole or in part, the Plan Administrator shall notify the claimant of the adverse benefit determination within ninety (90) days after receipt of the claim.

 

(b)                              The ninety (90) day period for making the claim determination may be extended for ninety (90) days if the Plan Administrator determines that special circumstances require an extension of time for determination of the claim, provided that the Plan Administrator notifies the claimant, prior to the expiration of the initial ninety (90) day period, of the special circumstances requiring an extension and the date by which a claim determination is expected to be made.

 

9.1.2                Notice of Initial Adverse Determination.  A notice of an adverse determination shall set forth in a manner calculated to be understood by the claimant.

 

(a)                               The specific reasons for the adverse determinations,

 

(b)                              references to the specific provisions of this Plan Statement (or other applicable Plan document) on which the adverse determination is based,

 

(c)                               a description of any additional material or information necessary to perfect the claim and an explanation of why such material or information is necessary, and

 

(d)                              a description of the claim and review procedures, including the time limits applicable to such procedure, and a statement of the claimant’s right to bring a civil action under ERISA section 502(a) following an adverse determination on review.

 

9.1.3                Request for Review.  Within sixty (60) days after receipt of an initial adverse benefit determination notice, the claimant may file with the Plan Administrator a written request for a review of the adverse determination and may, in connection therewith submit written comments, documents, records and other information relating to the claim benefits.  Any request for review of the initial adverse determination not filed within sixty (60) days after receipt of the initial adverse determination notice shall be untimely.

 

9.1.4                Claim on Review.  If the claim, upon review, is denied in whole or in part, the Plan Administrator shall notify the claimant of the adverse benefit determination within sixty (60) days after receipt of such a request for review.

 

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(a)                               The sixty (60) day period for deciding the claim on review may be extended for sixty (60) days if the Plan Administrator determines that special circumstances require an extension of time for determination of the claim, provided that the Plan Administrator notifies the claimant, prior to the expiration of the initial sixty (60) day period, of the special circumstances requiring an extension and the date by which a claim determination is expected to be made.

 

(b)                              In the event that the time period is extended due to a claimant’s failure to submit information necessary to decide a claim on review, the claimant shall have sixty (60) days within which to provide the necessary information and the period for making the claim determination on review shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information or, if earlier, the expiration of sixty (60) days.

 

(c)                               The Plan Administrator’s review of a denied claim shall take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

 

9.1.5                Notice of Adverse Determination for Claim on Review.  A notice of an adverse determination for a claim on review shall set forth in a manner calculated to be understood by the claimant.

 

(a)                               the specific reasons for the denial,

 

(b)                              references to the specific provisions of this Plan Statement (or other applicable Plan document) on which the adverse determination is based,

 

(c)                               a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all  documents, records, and other information relevant to the claimant’s claim for benefits,

 

(d)                              a statement describing any voluntary appeal procedures offered by the Plan and the claimant’s right to obtain information about such procedures, and

 

(e)                               a statement of the claimant’s right to bring an action under ERISA section 502(a).

 

9.2                            Rules and Regulations.

 

9.2.1                Adoption of Rules.  Any rule not in conflict or at variance with the provisions hereof may be adopted by the Plan Administrator.

 

9.2.2                Specific Rules.

 

(a)                               No inquiry or question shall be deemed to be a claim or a request for a review of a denied claim unless made in accordance with the established claim procedures.  The Plan Administrator may require that any claim for benefits and any request for a review of a denied claim be filed on forms to be furnished by the Plan Administrator upon request.

 

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(b)                              All decisions on claims and on requests for a review of denied claims shall be made by the Plan Administrator unless delegated as provided for in the Plan, in which case references in this Section 9 to the Plan Administrator shall be treated as references to the Plan Administrator’s delegate.

 

(c)                               Claimants may be represented by a lawyer or other representative at their own expense, but the Plan Administrator reserves the right to require the claimant to furnish written authorization and establish reasonable procedures for determining whether an individual has been authorized to act on behalf of a claimant.  A claimant’s representative shall be entitled to copies of all notices given to the claimant.

 

(d)                              The decision of the Plan Administrator on a claim and on a request for a review of a denied claim may be provided to the claimant in electronic form instead of in writing at the discretion of the Plan Administrator.

 

(e)                               In connection with the review of a denied claim, the claimant or the claimant’s representative shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information necessary to make a benefit determination accompanies the filing.

 

(f)                                The time period within which a benefit determination will be made shall begin to run at the time a claim or request for review is filed in accordance with the claims procedures, without regard to whether all the information necessary to make a benefit determination accompanies the filing.

 

(g)                               The claims and review procedures shall be administered with appropriate safeguards to that benefit claim determinations are made in accordance with governing plan documents and, where appropriate, the plan provisions have been applied consistently with respect to similarly situated claimants.

 

(h)                              The Plan Administrator may, in its discretion, rely on any applicable statute of limitation or deadline as a basis for denial of any claim.

 

9.3                            Limitations and Exhaustion.

 

9.3.1                Claims.  No claim shall be considered under these administrative procedures unless it is filed with the Plan Administrator within two (2) years after the Participant knew (or reasonably should have known) of the general nature of the dispute giving rise to the claim.  Every untimely claim shall be denied by the Plan Administrator without regard to the merits of the claim.

 

9.3.2                Lawsuits.  No suit may be brought by or on behalf of any Participant or Beneficiary on any matter pertaining to this Plan unless the action is commenced in the proper forum within two (2) years from the earlier of:

 

(a)                               the date the Participant knew (or reasonably should have known) of the general nature of the dispute giving rise to the action, or

 

(b)                              the date the claim was denied.

 

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9.3.3                Exhaustion of Remedies.  These administrative procedures are the exclusive means for resolving any dispute arising under this Plan.  As to such matters:

 

(a)                               no Participant or Beneficiary shall be permitted to litigate any such matter unless a timely claim has been filed under these administrative procedures and these administrative procedures have been exhausted, and

 

(b)                              determinations by the Plan Administrator (including determinations as to whether the claim was timely filed shall be afforded the maximum deference permitted by law.

 

9.3.4                Imputed Knowledge.  For the purpose of applying the deadlines to file a claim or a legal action, knowledge of all facts that a Participant knew or reasonably should have known shall be imputed to every claimant who is or claims to be a Beneficiary of the Participant or otherwise claims to derive an entitlement by reference to the Participant for the purpose of applying the previously specified periods.

 

34

 

SECTION 10

PLAN ADMINISTRATION

 

10.1                    Plan Administration

 

10.1.1        Administrator.  The Company’s Vice President, Pay & Benefits (or any successor thereto) is the “administrator” of the Plan for purposes of section 3(16)(A) of ERISA.  Except as otherwise expressly provided herein, the Plan Administrator shall control and manage the operation and administration of this Plan and make all decisions and determinations.

 

10.1.2        Authority and Delegation.  The Plan Administrator is authorized to:

 

(a)                               Appoint one or more individuals or entities and delegate such of his or her powers and duties as he or she deems desirable to any individual or entity, in which case every reference herein made to Plan Administrator shall be deemed to mean or include the individual or entity as to matters within their jurisdiction.  Such individual may be an officer or other employee of a Participating Employer or Affiliate, provided that any delegation to an employee of a Participating Employer or Affiliate will automatically terminate when he or she ceases to be an employee.  Any delegation may be rescinded at any time; and

 

(b)                              Select, employ and compensate from time to time such agents or consultants as the Plan Administrator may deem necessary or advisable in carrying out its duties and to rely on the advice and information provided by them.

 

10.1.3        Determination.  The Plan Administrator shall make such determinations as may be required from time to time in the administration of this Plan.  The Plan Administrator shall have the discretionary authority and responsibility to interpret and construe this Plan Statement and to determine all factual and legal questions under this Plan, including but not limited to the entitlement of Participants and Beneficiaries, and the amounts of their respective interests.  Each decision of the Plan Administrator shall be final and binding upon all parties.  Benefits under the Plan will be paid only if the Plan Administrator decides in its discretion that the applicant is entitled to them.

 

10.1.4        Reliance.  The Plan Administrator may act and rely upon all information reported to it hereunder and need not inquire into the accuracy thereof, nor be charged with any notice to the contrary.

 

10.1.5        Rules and Regulations.  Any rule, regulation, policy, practice or procedure not in conflict or at variance with the provisions hereof may be adopted by the Plan Administrator.

 

10.2                    Conflict of Interest.  If any individual to whom authority has been delegated or redelegated hereunder shall also be a Participant in this Plan, such Participant shall have no authority with respect to any matter specially affecting such Participant’s individual interest hereunder or the interest of a person superior to him or her in the organization (as distinguished from the interests of all Participants and Beneficiaries or a broad class of Participants and Beneficiaries), all such authority being reserved exclusively to other individuals as the case may be, to the exclusion of such Participant, and such Participant shall act only in such Participant’s individual capacity in connection with any such matter.

 

35

 

10.3                    Service of Process.  In the absence of any designation to the contrary by the Plan Administrator, the General Counsel of the Company is designated as the appropriate and exclusive agent for the receipt of service of process directed to this Plan in any legal proceeding, including arbitration, involving this Plan.

 

10.4                    Choice of Law.  Except to the extent that federal law is controlling, this Plan Statement will be construed and enforced in accordance with the laws of the State of Minnesota.

 

10.5                    Responsibility for Delegate.  No person shall be liable for an act or omission of another person with regard to a responsibility that has been allocated to or delegated to such other person pursuant to the terms of the Plan Statement or pursuant to procedures set forth in the Plan Statement.

 

10.6                    Expenses.  All expenses of administering the benefits due under this Plan shall be borne by the Participating Employers.

 

10.7                    Errors in Computations.  It is recognized that in the operation and administration of the Plan certain mathematical and accounting errors may be made or mistakes may arise by reason of factual errors in information supplied to the Plan Administrator or trustee.  The Plan Administrator shall have power to cause such equitable adjustments to be made to correct for such errors as the Plan Administrator, in its sole discretion, considers appropriate.  Such adjustments shall be final and binding on all persons.

 

10.8                    Indemnification.  In addition to any other applicable provisions for indemnification, the Participating Employers jointly and severally agree to indemnify and hold harmless, to the extent permitted by law, each director, officer and Employee of the Participating Employers against any and all liabilities, losses, costs or expenses (including legal fees) of whatsoever kind and nature which may be imposed on, incurred by or asserted against such person at any time by reason of such person’s services as an administrator in connection with this Plan, but only if such person did not act dishonestly, or in bad faith, or in willful violation of the law or regulations under which such liability, loss, cost or expense arises.

 

10.9                    Notice.  Any notice required under this Plan Statement may be waived by the person entitled thereto.

 

36

 

SECTION 11

CONSTRUCTION

 

11.1                    ERISA Status.  This Plan was adopted and is maintained with the understanding that it is an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees as provided in section 201(2), section 301(a)(3) and section 401(a)(1) of ERISA.  This Plan shall be interpreted and administered accordingly.

 

11.2                    IRC Status.  This Plan is intended to be a nonqualified deferred compensation arrangement that will comply in form and operation with the requirements of Code section 409A and this Plan will be construed and administered in a manner that is consistent with and gives effect to such intention.

 

11.3                    Rules of Document Construction.  In the event any provision of this Plan Statement is held invalid, void or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provision of this Plan.  The titles given to the various Sections of this Plan Statement are inserted for convenience of reference only and are not part of this Plan Statement, and they shall not be considered in determining the scope, purpose, meaning or intent of any provision hereof.  The provisions of this Plan Statement shall be construed as a whole in such manner as to carry out the provisions thereof and shall not be construed separately without relation to the context.

 

11.4                    References to Laws.  Any reference in this Plan Statement to a statute or regulation shall be considered also to mean and refer to any subsequent amendment or replacement of that statute or regulation unless, under the circumstances, it would be inappropriate to do so.

 

11.5                    Appendices.  The Plan provisions that have application to a limited number of Participants or that otherwise do not apply equally to all Participants may be described in an appendix to this Plan Statement.  In the event of a conflict between the terms of an appendix and the terms of the remainder of this Plan Statement, the appendix will control.

 

37

 

APPENDIX A

 

SPP Benefit

 

A-1                        Purpose and Application.  The purpose of this Appendix A to this Plan Statement is to establish the rules for determining the amount of the SPP Benefit Transfer Credit under this Plan.

 

A-2                        Background.

 

A-2.1            Transfer Credits.  The Company has adopted and maintained several nonqualified supplemental pension plans to provide retirement income to a select group of highly compensated and key management employees in excess of the retirement income that can be provided under the Target Pension Plan on account of limitations imposed by the Code.  Effective April 30, 2002, the Company began converting the accrued supplemental pension benefits of certain participants to credits under this Plan as adjusted annually to reflect changes in such benefits.

 

A-2.2            Cash Balance Formula.  Effective January 1, 2003, the Target Pension Plan was amended to add a cash balance pension plan formula (referred to as the “personal pension account”).  Depending on the date participation commences or an election was made, a Participant who has a benefit under the Target Pension Plan may have his or her accrued benefit under such plan based solely on the final average pay formula (the “traditional formula”), solely on the personal pension account, or a combination of the traditional formula (frozen as of December 31, 2002) and the personal pension account.

 

A-3                        Definitions.

 

A-3.1            SPP I     “SPP I” means the Target Corporation SPP I.

 

A-3.2            SPP II   “SPP II” means the Target Corporation SPP II.

 

A-3.3            SPP III  “SPP III” means the Target Corporation SPP III.

 

A-4                        SPP Benefit.  Each Participant’s SPP Benefit is equal to the sum of the benefits under Section A-4.1, Section A-4.2 and Section A-4.3.

 

A-4.1            Traditional Formula Benefit.  A Participant’s SPP Benefit is the excess, if any, of the monthly pension benefit under (a) over the monthly pension benefit under (b):

 

(a)                               The monthly pension benefit the Participant would be entitled to under the Target Pension Plan, based on the “traditional formula,” if such formula were applied

 

(i)                 without regard to the maximum benefit limitation required by Code section 415;

 

(ii)               without regard to the maximum compensation limitation under Code section 401(a)(17);

 

(iii)             as if the definition of “certified earnings” under the Target Pension Plan for a plan year included compensation that would have been paid in the plan year in the absence of the Participant’s election to defer payment of

 

38

 

the compensation to a later date pursuant to the provisions of a deferred compensation plan;

 

(iv)             without regard to the alternative benefit formula of Sections 4.6(a)(3) and 4.6(b)(2) of the Target Pension  Plan.

 

(b)                              The monthly pension benefit the Participant is entitled to receive under the Target Pension Plan on account of the “traditional formula.”

 

A-4.2            Personal Pension Account.  A Participant’s SPP Benefit includes the excess, if any, of the amount determined under (a) over the amount determined under (b):

 

(a)                               The amount that would have been credited each quarter (including both “pay credits” and “interest credits”) to the Participant’s “personal pension account” under the Target Pension Plan, if such account were applied:

 

(i)                 without regard to the maximum benefit limitations required by Code section 415;

 

(ii)               without regard to the maximum compensation limitation under Code section 401(a)(17);

 

(iii)             as if the definition of “certified earnings” under the Target Pension Plan for a calendar quarter included compensation that would have been paid during such calendar quarter in the absence of the Participant’s election to defer payment of the compensation to a later date pursuant to the provisions of a deferred compensation plan;

 

(iv)             as if a distribution had been made from such account equal to any SPP Benefit Transfer Credits made under Section 3.3.

 

(b)                              The amount of the credits actually made to the Participant’s “personal pension account” under the Target Pension Plan.

 

A-4.3            SPP III.  For a Participant who was participating in SPP III, the Participant’s SPP Benefit includes the actuarial equivalent lump sum present value of the monthly pension benefit under (a) over the monthly pension benefit under (b):

 

(a)                               The monthly pension benefits determined under Section A-4.1(a) determined by treating the Participant as five (5) years older than his or her actual age solely for purposes of determining the early reduction factor (but in no case shall the Participant’s age be deemed to be greater than age 65).

 

(b)                              The monthly pension benefits determined under Section A-4.1(a).

 

A-4.4            Company Determination.  The actuarial lump sum present value of a Participant’s benefit determined under this Appendix A will be determined by the Company, in its sole and absolute discretion, by using such factors and assumptions as the Company considers appropriate in its sole and absolute discretion as of the date of distribution or transfer.

 

39

 

A-5                        Forfeiture of SPP III Benefit.

 

A-5.1            Pre-Age 55 SPP III Forfeiture.  A Participant who has a Termination of Employment prior to attaining age 55 will forfeit that portion of his or her SPP Benefit Transfer Credit and Earnings Credit determined under Section A-5.3.

 

A-5.2            ICP Eligibility SPP III Forfeiture.  A Participant who becomes entitled to receive payments under an income continuation plan or policy of an Affiliate on account of his or her Termination of Employment after attaining age 55 will forfeit that portion of his or her SPP Benefit Transfer Credit and Earnings Credit determined under Section A-5.3.

 

A-5.3            Amount of SPP III Forfeiture.  A Participant’s forfeiture under Sections A-5.1 or A-5.2 is that portion of the SPP Benefit Transfer Credits attributable to his or her SPP Benefit determined under Section A-4.3 of Appendix A, and an amount of Earnings Credits equal to the investment adjustment that would have been credited on such SPP Benefit Transfer Credits at the Stable Value Crediting Rate Alternative through June 5, 2012 and for periods after June 5, 2012, at the Intermediate-Term Bond Crediting Rate Alternative.

 

40

 

APPENDIX B

 

Participants on Temporary Assignment to Canada

 

 

B-1.                     Purpose; Application.  The purpose of this Appendix B to this Plan Statement is to set forth the application of specific provisions or exceptions to the general provisions of the Plan as they relate to those Participants who are transferred to Canada on a temporary assignment as a Seconded Participant.

 

B-2.                     Definitions.  The following terms when used herein with initial capital letters, have the following meanings:

 

(a)                               Letter of Assignment.  “Letter of Assignment” means the written instrument provided to and executed by a Seconded Participant, as amended, that, among other things, establishes the date of the Seconded Participant’s transfer to Canada.

 

(b)                              Participation End Date.  “Participation End Date” means the last day of the full calendar month that includes the 34-month anniversary of the Seconded Participant’s date of transfer to Canada as a Seconded Participant or, if earlier, the last day of the calendar month that immediately precedes the month during which the Seconded Participant is scheduled, in his or her Letter of Assignment, to return to the United States.  The Participation End Date as established by a Seconded Participant’s Letter of Assignment will become irrevocable on the January 1 of the calendar year that includes such Participation End Date.

 

(c)                               Seconded Participant.  A “Seconded Participant” is a Participant under the Plan (i) who is transferred to Canada for a temporary assignment, (ii) who is employed by Target Corporation or a U.S. Affiliate on its U.S. payroll, (iii) who has executed a Letter of Assignment, and (iv) whose employment is seconded to a Canadian Affiliate.

 

B-3.                     Eligibility.  A Seconded Participant is eligible to participate in the Plan until the last day of the calendar month that includes the Seconded Participant’s Participation End Date.  A Seconded Participant who has ceased to be eligible to participate in the Plan under this Appendix B is again eligible to participate in the Plan as of the first day of the Plan Year following the Plan Year during which the Participant ceased to be a Seconded Participant.

 

B-4.                     Deferral Elections.  A Participant’s deferral election for the calendar year that includes the Participation End Date:

 

(a)                               may not include an election to defer any Bonus Amount;

 

(b)                              may only defer specified dollar amounts of Base Salary for each of the calendar months through the Participation End Date, unless guidance under Section 409A of the Internal Revenue Code allows an alternative (e.g., percentage of Base Salary) election to be made for a partial year); and

 

(c)                               may not include any Base Salary deferrals for the calendar months following the Participation End Date.

 

41

 

B-5.                     Restoration Match Credit.  A Seconded Participant who is eligible to receive a Restoration Match Credit under Section 3.2.1 shall be subject to the following rules for the Plan Year that includes such Participant’s Participation End Date and for each subsequent Plan Year during which the Participant is a Seconded Participant:

 

(a)                               For each entire calendar month through the Participation End Date (which includes the calendar month that ends with the Participation End Date), the Seconded Participant shall receive a Restoration Match Credit equal to the amount of the Restoration Match Credit the Seconded Participant would have received if Section 3.2.1(ii) were applicable and the Participation End Date was his or her Termination of Employment.

 

(b)                              The amount of the Restoration Match Credit for the Plan Year that includes the Participation End Date, determined without regard to Section B-3, that is in excess of the amount determined in Paragraph (a) shall be paid in cash to the Participant on the last business day of the Plan Year.

 

(c)                               For any Plan Year following the Plan Year that includes the Participant’s Participation End Date and during which the Participant is a Seconded Participant, the Participant will receive a cash payment on the last business day of the Plan Year equal to the Restoration Match Credit the Participant would have received if Section B-3 did not apply.

 

B-6.                     Enhancement.  A Seconded Participant who is eligible to receive the Enhancement credit under Section 4.4 (and is not subject to exclusion or forfeiture under Section 4.4.2) shall be subject to the following rules for the Plan Year that includes the Participant’s Participation End Date and for each subsequent Plan Year during which the Participant is a Seconded Participant:

 

(a)                               For each entire calendar month through the Participation End Date (which includes the calendar month that ends with the Participation End Date), the Seconded Participant shall be eligible to receive the Enhancement as a credit to his or her Account, subject to the conditions set forth in Section 4.4.

 

(b)                              For each calendar month following the Participation End Date during which the Seconded Participant is employed by the Company or an Affiliate for the entire calendar month, the Participant will receive a cash payment on the last day of the calendar year that includes such month in an amount equal to the Enhancement multiplied by the balance of the Account on the first day of the month; provided, however, no cash payment will be made with respect to any period during which the Seconded Participant satisfies the conditions for exclusion or forfeiture under Section 4.4.2.  The cash payment under this Paragraph (b) will be made whether or not the Participant would be treated as vested under Section 5.3.

 

42Exhibit 4.2

 

PHH CORPORATION,

 

as Issuer

 

and

 

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

 

as Trustee

 

SECOND SUPPLEMENTAL INDENTURE

 

Dated as of August 23, 2012

 

to

 

INDENTURE

 

Dated as of January 17, 2012

 

7.375% Senior Notes due 2019

 

 

TABLE OF CONTENTS

 

 

	
 
    	
PAGE
    
	
 
    
	
ARTICLE 1
    
	
RELATION TO BASE INDENTURE;   DEFINITIONS
    
	
 
    
	
Section   1.01. Scope of Supplemental Indenture
    	
2
    
	
Section   1.02. Definitions
    	
2
    
	
Section   1.03. Rules of Construction
    	
14
    
	
 
    	
 
    
	
ARTICLE 2
    
	
TERMS AND ISSUANCE
    
	
 
    	
 
    
	
Section   2.01. Issue of Notes; Terms
    	
14
    
	
Section   2.02. Additional Notes
    	
16
    
	
Section   2.03. Global Securities
    	
16
    
	
 
    	
 
    
	
ARTICLE 3
    
	
OPTIONAL REDEMPTION; OFFER TO   PURCHASE
    
	
 
    	
 
    
	
Section   3.01. Optional Redemption
    	
17
    
	
Section   3.02. Repurchase of Notes upon a Change of Control
    	
17
    
	
 
    	
 
    
	
ARTICLE 4
    
	
ADDITIONAL COVENANTS
    
	
 
    	
 
    
	
Section   4.01. Payment of Notes
    	
20
    
	
Section   4.02. Existence
    	
20
    
	
Section   4.03. Payment of Taxes and other Claims
    	
21
    
	
Section   4.04. Maintenance of Properties and Insurance
    	
21
    
	
Section   4.05. Limitation on Subsidiary Debt
    	
21
    
	
Section   4.06. Limitation on Restricted Payments
    	
23
    
	
Section   4.07. Limitations on Liens
    	
24
    
	
Section   4.08. Financial Reports
    	
28
    
	
Section   4.09. Debt/Tangible Equity Ratio
    	
29
    
	
Section   4.10. Applicability of Covenants Contained in the Base   Indenture
    	
29
    
	
Section   4.11. Suspension of Certain Covenants
    	
30
    
	
 
    	
 
    
	
ARTICLE 5
    
	
CONSOLIDATION, MERGER OR SALE OF   ASSETS
    
	
 
    	
 
    
	
Section   5.01. Base Indenture
    	
30
    
	
Section   5.02. Consolidation, Merger or Sale of Assets
    	
30
    

 

 

	
ARTICLE 6
    
	
EVENTS OF DEFAULT
    
	
 
    	
 
    
	
Section   6.01. Base Indenture
    	
32
    
	
Section   6.02. Events of Default
    	
32
    
	
Section   6.03. Waiver of Stay, Extension or Usury Laws
    	
33
    
	
 
    
	
ARTICLE 7
    
	
SATISFACTION AND DISCHARGE
    
	
 
    	
 
    
	
Section   7.01. Discharge of the Company’s Obligations
    	
33
    
	
 
    	
 
    
	
ARTICLE 8
    
	
DEFEASANCE
    
	
 
    	
 
    
	
Section   8.01. Legal Defeasance
    	
35
    
	
Section   8.02. Covenant Defeasance
    	
36
    
	
Section   8.03. Application of Trust Money
    	
36
    
	
Section   8.04. Repayment to Company
    	
36
    
	
Section   8.05. Reinstatement
    	
37
    
	
 
    	
 
    
	
ARTICLE 9
    
	
AMENDMENTS
    
	
 
    	
 
    
	
Section 9.01.   Amendments Without Consent of Holders
    	
37
    
	
Section   9.02. Amendments With Consent Of Holders
    	
38
    
	
Section   9.03. Effect of Consent
    	
39
    
	
 
    	
 
    
	
ARTICLE 10
    
	
FUTURE GUARANTEES
    
	
 
    	
 
    
	
Section   10.01. Future Guarantees
    	
40
    
	
 
    	
 
    
	
ARTICLE 11
    
	
MISCELLANEOUS
    
	
 
    	
 
    
	
Section   11.01. Provisions of Base Indenture Not Applicable
    	
40
    
	
Section   11.02. Registration of Transfers and Exchange
    	
40
    
	
Section   11.03. Certain Trustee Matters
    	
40
    
	
Section   11.04. Severability
    	
41
    
	
Section   11.05. Provisions Binding on Company’s Successors
    	
41
    
	
Section   11.06. Effect of Headings
    	
41
    
	
Section   11.07. No Liability of Directors, Officers, Employees,   Incorporators, Members and Stockholders
    	
41
    
	
Section   11.08. No Adverse Interpretation Of Other Agreements
    	
41
    
	
Section   11.09. Governing Law
    	
41
    

 

A-ii

 

	
Section   11.10. Counterparts
    	
41
    
	
 
    	
 
    
	
Exhibit A
    	
A-1
    
	
Exhibit B
    	
B-1
    

 

A-iii

 

SECOND SUPPLEMENTAL INDENTURE, dated as of August 23, 2012 (this “Supplemental Indenture”), between PHH CORPORATION, a corporation duly organized and existing under the laws of the State of Maryland (the “Company”), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as trustee (the “Trustee”), supplementing the Indenture dated as of January 17, 2012 between the Company and the Trustee (the “Base Indenture” and as supplemented by this Supplemental Indenture, the “Indenture”).

 

RECITALS OF THE COMPANY

 

WHEREAS, the Company and the Trustee have executed and delivered the Base Indenture to provide for the issuance from time to time of the Company’s Securities to be issued in one or more series, the terms of which are to be determined as set forth in Section 301 of the Base Indenture; and

 

WHEREAS, pursuant to Section 901 of the Base Indenture, without the consent of any Holder, the Company and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental to the Base Indenture, in form satisfactory to the Trustee, to establish the form or terms of Securities of any series as contemplated by Sections 201 and 301 of the Base Indenture; and

 

WHEREAS, the Company desires to create a new series of Securities under the Base Indenture, to be designated as its 7.375% Senior Notes due 2019 (together with any Additional Notes, if and when issued, the “Notes”) and, pursuant to this Supplemental Indenture, to establish the form and the terms, conditions, rights and preferences (and limitations on such rights and preferences) thereof; and

 

WHEREAS, the Company now wishes to issue Notes in an initial aggregate principal amount of $275,000,000; and

 

WHEREAS, the conditions set forth in the Base Indenture for the execution and delivery of this Supplemental Indenture have been complied with; and

 

WHEREAS, the Company has duly authorized the execution and delivery of this Supplemental Indenture, and all things necessary to make this Supplemental Indenture and the Notes, when executed by the Company and authenticated and delivered hereunder, legal, valid and binding obligations of the Company, in accordance with their respective terms, have been done;

 

NOW, THEREFORE, for and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the Company and the equal and proportionate benefit of all Holders of

 

1

 

the Notes, that the Base Indenture is supplemented and amended, to the extent expressed herein, as follows:

 

ARTICLE 1
  RELATION TO BASE INDENTURE; DEFINITIONS

 

Section 1.01.  Scope of Supplemental Indenture.  This Supplemental Indenture supplements, and to the extent inconsistent therewith, replaces, the provisions of the Base Indenture, to which provisions reference is hereby made.

 

The changes, modifications and supplements to the Base Indenture effected by this Supplemental Indenture shall be applicable only with respect to, and govern the terms of, the Notes and shall not apply to any other Securities that have been or may be issued under the Base Indenture unless a supplemental indenture with respect to such other Securities specifically incorporates such changes, modifications and supplements.

 

Section 1.02.  Definitions.  (a) The terms defined in the Recitals of the Company herein shall have the meanings specified therein.

 

(b)                                 Section 101 of the Base Indenture is hereby amended by adding the following definitions in their proper alphabetical order which, in the event of a conflict with the definition of terms in the Base Indenture, shall govern.  Except as otherwise expressly provided herein, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned thereto in the Base Indenture.

 

“Additional Notes” means any Notes issued under the Indenture, in addition to the Initial Notes, having the same terms in all respects as the Initial Notes (although they may bear a different CUSIP number), or in all respects except with respect to the date of issuance and issue price, interest paid or payable on or prior to the first Interest Payment Date after the issuance of such Additional Notes and designated as Additional Notes in respect of the Notes.

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”) with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

 

2

 

“Asset Securitization Subsidiary” means (i) any Subsidiary engaged solely or substantially in the business of effecting asset securitization transactions and activities incidental thereto, or (ii) any Subsidiary whose primary purpose is to hold title or ownership interests in vehicles, equipment, leases, mortgages, relocation assets, financial assets and related assets under management and mortgage servicing advances, but not, for the avoidance of doubt, mortgage servicing rights.

 

“bankruptcy default” has the meaning assigned to such term in Section 6.02.

 

“Capital Lease” shall mean as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee which, in accordance with GAAP, is or should be accounted for as a capital lease on the balance sheet of that Person.

 

“Capital Stock” means any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock or similar interests in any other form of entity, including, without limitation, with respect to partnerships, partnership interests (whether general or limited) and any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership (but not including any Debt or other securities convertible or exchangeable into Capital Stock).

 

“Certificated Note” means a Note in registered individual form without interest coupons.

 

“Change of Control” means:

 

(1)                       any Person acquires beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, of shares of the Company’s Capital Stock entitling the Person to exercise 50% or more of the total voting power of all shares of the Company’s Capital Stock entitled to vote generally in elections of directors, other than an acquisition by the Company or any of the Company’s Subsidiaries; provided that a Change of Control shall not occur as a result of this clause (1) if, in such purchase, merger, acquisition or other transaction, all or substantially all of the Common Stock is exchanged for or converted into cash, securities or other property, in which case clause (2) below shall apply; or

 

(2)                       the Company (i) merges or consolidates with or into any other Person, another Person merges with or into the Company, or the Company conveys, sells, transfers or leases all or substantially all of the 

 

3

 

Company’s assets to another Person (excluding a pledge of securities issued by any of the Company’s Subsidiaries, but not excluding any transfer or other disposition resulting from the foreclosure or other exercise of creditors’ remedies pursuant to such pledge) or (ii) engages in any recapitalization, reclassification or other acquisition transaction or series of transactions in which all or substantially all of the Company’s common stock is exchanged for or converted into cash, securities or other property, in each case other than any merger, consolidation, recapitalization, reclassification or other acquisition transaction or series of transactions pursuant to which the holders of the Company’s common stock immediately prior to the transaction have the entitlement to exercise, directly or indirectly, 50% or more of the voting power of all shares of Capital Stock entitled to vote generally in the election of directors of either (x) the continuing or surviving corporation immediately after the transaction or (y) the corporation that directly or indirectly owns 100% of the Capital Stock of such continuing or surviving corporation; or

 

(3)                       the Company is liquidated or dissolved or holders of the Company’s common stock approve any plan or proposal for the Company’s liquidation or dissolution.

 

For the purposes of this definition, whether a “Person” is a “beneficial owner” shall be determined in accordance with Rule 13d-3 under the Exchange Act and “Person” includes any syndicate or group that would be deemed to be a “Person” under Section 13(d)(3) of the Exchange Act.

 

“Company” means the party named as such in the first paragraph of this Supplemental Indenture or any successor obligor under the Indenture and the Notes pursuant to Article 5 hereto.

 

“Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Notes being redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate notes of comparable maturity to the remaining term of such Notes.

 

“Comparable Treasury Price” means, for any redemption date, (1) the average of four Reference Treasury Dealer Quotations for the redemption date, after excluding the highest and lowest Reference Treasury Dealer Quotations for that redemption date, or (2) if the Company obtains fewer than four Reference Treasury Dealer Quotations, the average of all the Reference Treasury Dealer Quotations obtained.

 

4

 

“Consolidated Net Worth” of any Person means the consolidated stockholders’ equity of such Person and its consolidated subsidiaries, as determined on a consolidated basis in accordance with GAAP plus amounts representing mandatorily redeemable preferred securities issued by such Person or its Subsidiaries.

 

“Convertible Debt” means Debt (including, for the avoidance of doubt, the Company’s existing 6.00% Convertible Senior Notes due 2017 and the Company’s 4.00% Convertible Senior Notes due 2014) that is either (a) convertible into the Company’s Capital Stock (and cash in lieu of fractional shares) and/or cash (in an amount determined by reference to the price of the Company’s Capital Stock) or (b) sold as units with call options, warrants or rights to purchase (or substantially equivalent derivative transactions) that are exercisable or exchangeable for the Company’s Common Stock and/or cash (in an amount determined by reference to the price of the Company’s Capital Stock).

 

“Debt” means

 

(1)                       all debt, Obligations and other liabilities of the Company and the Company’s Subsidiaries which are, at the date as of which Debt is to be determined, includable as liabilities in a consolidated balance sheet of the Company and the Company’s Subsidiaries prepared in accordance with GAAP, other than

 

(v)                                 accounts payable, trade payables, accrued fees and expenses,

 

(w)                               derivative transactions entered into in the ordinary course of business,

 

(x)                                 current and deferred income taxes and other similar liabilities,

 

(y)                                 minority interest, and

 

(z)                                  liabilities attributable to the conversion option in any Convertible Debt, plus

 

(2)                       without duplicating any items included in Debt pursuant to the foregoing clause (1), (but excluding reinsurance obligations of Atrium Reinsurance Corporation and its successors and assigns) the maximum aggregate amount of all liabilities of the Company or any of the Company’s Subsidiaries under any Guarantee, indemnity or similar undertaking given or assumed of, or in respect of, the indebtedness, Obligations or other liabilities, assets, revenues, income or dividends of

 

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any Person other than the Company or one of the Company’s Subsidiaries and;

 

(3)                       without duplicating any items included in Debt pursuant to the foregoing clauses (1) or (2), all other Obligations or liabilities of the Company or any of the Company’s Subsidiaries in relation to the discharge of the Obligations of any Person other than the Company or one of the Company’s Subsidiaries.

 

For purposes of this definition, accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Debt will not be deemed to be an incurrence of Debt.

 

“Debt/Tangible Equity Ratio” means the ratio of (x) principal amount of Debt to (y) Tangible Net Worth.

 

“Default” means any event that is, or after notice or passage of time or both would be, an Event of Default.

 

“Depositary” means the depositary of each Global Security, which will initially be DTC.

 

“Disqualified Stock” means any Capital Stock which, by its terms, or by the terms of any security into which it is convertible or for which it is putable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable, other than as a result of a change of control, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, other than as a result of a change of control, in whole or in part, in each case prior to the date 91 days after the earlier of the maturity date of the Notes or the date the Notes are no longer outstanding.  Notwithstanding the foregoing, any Capital Stock shall be deemed Disqualified Stock if the terms governing such mandatory or optional redemption pursuant to a change of control (A) are materially more favorable to the holders than the terms described in Section 3.02 hereof taken as a whole (including for the avoidance of doubt, if the terms governing such mandatory or optional redemption pursuant to a change of control could be triggered without triggering an Offer to Purchase upon a Change of Control with respect to the Notes), or (B) do not specifically state that repurchase or redemption pursuant thereto will not occur prior to the Company’s repurchase of the Notes as required by the Indenture.

 

“DTC” means The Depository Trust Company, a New York corporation, and its successors.

 

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“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.

 

“Event of Default” means the Events of Default that apply to the Notes under Section 6.02 of this Supplemental Indenture.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.

 

“Fitch” means Fitch, Inc. and its successors.

 

“Foreign Subsidiary” means any Subsidiary of the Company that is not organized under the laws of the United States or any State thereof or the District of Columbia.

 

“GAAP” means generally accepted accounting principles in the United States of America as in effect as of the Issue Date.

 

“Government Sponsored Enterprise” shall mean (i) the Federal National Mortgage Association or any successor thereto, (ii) the Federal Home Loan Mortgage Corporation or any successor thereto, (iii) the Government National Mortgage Association and any successor thereto and (iv) any other U.S. Department of Housing and Urban Development entity.

 

“Guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Debt and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm’s-length terms and are entered into in the ordinary course of business), to take-or-pay, or to maintain financial statement conditions or otherwise) or (2) entered into for purposes of assuring in any other manner the obligee of such Debt of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.

 

“Independent Investment Banker” means one of the Reference Treasury Dealers that the Company has appointed.

 

“Initial Notes” means the Notes issued on the Issue Date and any Notes issued in replacement thereof.

 

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“Interest Rate Protection Agreement” means any interest rate swap agreement, interest rate cap agreement or other similar financial agreement or arrangement.

 

“Investment Grade Rating” means BBB- or higher by S&P, Baa3 or higher by Moody’s and BBB- by Fitch, or the equivalent of such ratings by S&P, Moody’s or Fitch (or, in each case, if such Rating Agency ceases to rate the Notes for reasons outside of the Company’s control, the equivalent investment grade credit rating from any Rating Agency selected by the Company as a replacement Rating Agency).

 

“Issue Date” means August 23, 2012.

 

“Lien” means any mortgage, pledge, lien, security interest or encumbrance.

 

“Material Subsidiary” means any Subsidiary which together with its Subsidiaries at the time of determination had assets constituting 10% or more of consolidated assets, accounts for 10% or more of Consolidated Net Worth, or accounts for 10% or more of the revenues of the Company and the Company’s consolidated Subsidiaries for the Rolling Period immediately preceding the date of determination.

 

“Moody’s” means Moody’s Investors Service, Inc. and its successors.

 

“Note Guarantee” means a Guarantee of the Company’s Obligations under the Indenture and the Notes by any Subsidiary of the Company.

 

“Obligations” means, with respect to any Debt, all obligations (whether in existence on the issue date or arising afterwards, absolute or contingent, direct or indirect) for or in respect of principal (when due, upon acceleration, upon redemption, upon mandatory repayment or repurchase pursuant to a mandatory offer to purchase, or otherwise), premium, interest, penalties, fees, indemnification, reimbursement and other amounts payable and liabilities with respect to such Debt, including all interest accrued or accruing after the commencement of any bankruptcy, insolvency or reorganization or similar case or proceeding at the contract rate (including, without limitation, any contract rate applicable upon default) specified in the relevant documentation, whether or not the claim for such interest is allowed as a claim in such case or proceeding.

 

“Offer to Purchase” has the meaning assigned to such term in Section 3.02(b) hereof.

 

“Parent Holding Company” means any Subsidiary of the Company that has no assets and conducts no operations other than the direct or indirect holding

 

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of Capital Stock in a Foreign Subsidiary or activities incidental thereto, including participation in financing arrangements of the Foreign Subsidiary, and the receipt, reinvestment or distribution of dividends, interest and other distributions.

 

“Parent Holding Company Guarantee” means with respect to Debt of a Foreign Subsidiary, any Guarantee of the Debt by the Parent Holding Company, including a pledge by the Parent Holding Company of the Capital Stock held in the Foreign Subsidiary.

 

“Permitted Bond Hedge Transaction” means any call option (or substantively equivalent derivative transaction) on the Company’s Capital Stock purchased by the Company in connection with any Convertible Debt, with a strike price or exercise price (howsoever defined) initially equal to the conversion or exchange price (howsoever defined) of the related Convertible Debt (subject to rounding); provided that the purchase price for such Permitted Bond Hedge Transaction, less the proceeds received by the Company from the sale of any related Permitted Warrant Transaction, if any, does not exceed the net proceeds received by the Company from the sale of such Convertible Debt.

 

“Permitted Capped Call Transaction” means any call option (or substantively equivalent derivative transaction) on the Company’s Capital Stock purchased by the Company in connection with the issuance of any Convertible Debt, with a strike price or exercise price (howsoever defined) initially equal to the conversion or exchange price (howsoever defined) of the related Convertible Debt (subject to rounding) and with a limit on the amount deliverable to the Company upon exercise thereof based on a cap or upper strike price (howsoever defined); provided that the purchase price for such Permitted Capped Call Transaction does not exceed the net proceeds received by us from the sale of such Convertible Debt.

 

“Permitted Warrant Transaction” means any call option, warrant or right to purchase (or substantively equivalent derivative transaction) on the Company’s Capital Stock sold by the Company substantially concurrently with any purchase by the Company of a Permitted Bond Hedge Transaction and having an initial strike or exercise price (howsoever defined) greater than the strike or exercise price (howsoever defined) of such Permitted Bond Hedge Transaction.

 

“principal” of any Debt means the principal amount of such Debt, (or if such Debt was issued with original issue discount, the face amount of such Debt less the remaining unamortized portion of the original issue discount of such Debt), together with, unless the context otherwise indicates, any premium then payable on such Debt.

 

“Rating Agencies” means:

 

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(a)                                 S&P;

 

(b)                                 Moody’s;

 

(c)                                  Fitch; or

 

(d)                                 to the extent any of S&P, Moody’s or Fitch do not make a rating on the Notes publicly available for reasons outside of the Company’s control, a nationally recognized securities rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for S&P, Moody’s or Fitch, as the case may be.

 

“Reference Treasury Dealer Quotations” means, for each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by any Reference Treasury Dealer at 5:00 p.m. New York City time on the third Business Day preceding the redemption date for the Notes.

 

“Reference Treasury Dealer” means (1) any of Merrill Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities LLC, in each case, its respective successors; provided, however, that if any of them ceases to be a primary U.S. Government securities dealer in New York City, the Company may appoint another primary U.S. Government securities dealer as a substitute and (2) any other primary U.S. Government securities dealers that the Company selects.

 

“REO Assets” of a Person means a real estate asset owned by such Person and acquired as a result of the foreclosure or other enforcement of a Lien on such asset securing a Servicing Advance or loans and other mortgage-related receivables purchased or originated by the Company or any of the Company’s Subsidiaries in the ordinary course of business.

 

“Restricted Payment” has the meaning assigned to such term in Section 4.06.

 

“Reversion Date” has the meaning assigned to such term in Section 4.11.

 

“Revolving Lien” means any Lien which extends to property in existence on the date of creation of such Lien and also to any property of substantially the same characteristics subsequently acquired in the ordinary course of the Company’s business or that of a Material Subsidiary of the Company.

 

“Rolling Period” means with respect to any fiscal quarter, such fiscal quarter and the three immediately preceding fiscal quarters considered as a single accounting period for which internal financial statements are available.

 

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“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor thereto.

 

“Servicing” means loan servicing, sub-servicing rights and master servicing rights and obligations including, without limitation, one or more of the following functions (or a portion thereof): (a) the administration and collection of payments for the reduction of principal and/or the application of interest on a loan; (b) the collection of payments on account of taxes and insurance; (c) the remittance of appropriate portions of collected payments; (d) the provision of full escrow administration; (e) the right to receive fees and other compensation and any ancillary fees arising from or connected to the assets serviced, earnings and other benefits of the related accounts and, in each case, all rights, powers and privileges incident to any of the foregoing, and expressly including the right to enter into arrangements with third Persons that generate ancillary fees and benefits with respect to the serviced assets; (f) the realization on the security for a loan; and (g) any other obligation imposed on a servicer pursuant to a Servicing Agreement.

 

“Servicing Advances” means advances made by the Company or any of the Company’s Subsidiaries in the capacity as servicer of any mortgage-related receivables to fund principal, interest, escrow, foreclosure, insurance, tax or other payments or advances when the borrower on the underlying receivable is delinquent in making payments on such receivable; to enforce remedies, manage and liquidate REO Assets; or that the Company or any of the Company’s Subsidiaries otherwise advance in the capacity as servicer pursuant to any Servicing Agreement.

 

“Servicing Advance Facility” means any funding arrangement with lenders, any Government-Sponsored Enterprise or any other counterparty based in whole or in part upon Servicing Advances under which funding is provided to the Company or any of the Company’s Subsidiaries.

 

“Servicing Agreements” means any agreement between one or more Persons pursuant to which the Company or any of the Company’s Subsidiaries effects a Servicing, including pooling and servicing agreements, sale and servicing agreements, transfer and servicing agreements and agreements with third parties, in each case, however denominated.

 

“Special Purpose Vehicle Subsidiary” means PHH Caribbean Leasing, Inc. and any Subsidiary of the Company engaged in the fleet-leasing management business which (i) is, at any one time, a party to one or more lease agreements with only one lessee and (ii) finances, at any one time, its investment in lease agreements or vehicles with only one lender, which lender may be the Company.

 

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“Stated Maturity” means (i) with respect to any Debt, the date specified as the fixed date on which the final installment of principal of such Debt is due and payable or (ii) with respect to any scheduled installment of principal of or interest on any Debt, the date specified as the fixed date on which such installment is due and payable as set forth in the documentation governing such Debt, not including any contingent obligation to repay, redeem or repurchase prior to the regularly scheduled date for payment.

 

“Subsidiary” means with respect to any Person, any corporation, association, joint venture, partnership, limited liability company or other business entity of which at least a majority of the Voting Stock or other ownership interests having voting power for the election of directors, managers or trustees (or the equivalent) is, at the time as of which any determination is being made, owned or controlled by such Person or one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person, other than shares, interests, participations or other equivalents having such power by reason of the occurrence of any contingency. For the avoidance of doubt, Fleet Leasing Receivables Trust is not a Subsidiary of the Company.

 

“Subsidiary Guarantor” means each Subsidiary that enters into a Note Guarantee subsequent to the Issue Date pursuant to Article 10 hereof by executing a supplemental indenture in the form of Exhibit B hereto, for so long as such Note Guarantee remains in effect.

 

“Suspended Covenants” has the meaning assigned to such term in Section 4.11.

 

“Suspension Period” has the meaning assigned to such term in Section 4.11

 

“Tangible Net Worth” means, with respect to any Person at any date, the Consolidated Net Worth of such Person, less the aggregate book value of all intangible assets of such Person (as determined in accordance with GAAP).

 

“Treasury Rate” means, for any redemption date, (1) the yield to maturity as of such redemption date of the Comparable Treasury Issue (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519), or any successor publication which is published weekly by the Board of Governors of the Federal Reserve System and which establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption “Treasury Constant Maturities,” for the maturity corresponding to the applicable Comparable Treasury Issue, that has become publicly available at least three Business Days prior to the redemption date) or (2) if such release (or any successor release) is not published during the week preceding the calculation date or does not contain such yields, the rate per year equal to the semi-annual

 

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equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

 

“Unencumbered Borrowing Base” means, at any time, the sum of (a) the book value of all unencumbered and unrestricted tangible assets of the Company and its Subsidiaries’ other than mortgage servicing rights; plus (b) the book value of the Company’s and its Subsidiaries’ Unencumbered Mortgage Servicing Rights; provided that cash, cash equivalents and accounts receivable will be excluded in calculating the Unencumbered Borrowing Base.  For purposes of determining the Unencumbered Borrowing Base on any date, Unencumbered Mortgage Servicing Rights will be marked-to-market as of the Business Day prior to such date of determination.  For the avoidance of doubt, assets and mortgage servicing rights will not be included in the Borrowing Base if there are legal or contractual restrictions impairing or preventing the pledge of such assets or mortgage servicing rights in whole or in part (other than, in the case of mortgage servicing rights, restrictions imposed by guidelines of Government-Sponsored Enterprises).

 

“Unencumbered Mortgage Servicing Rights” of a Person means mortgage servicing rights owned by such Person free and clear of any Liens and for which no payment obligations are owed by such Person, or are required to be distributed, to any third parties.

 

“Unsecured Debt” means, without duplication, (i) the aggregate principal amount of all unsecured Debt for borrowed money of the Company and its Subsidiaries, (ii) the aggregate amount of unsecured reimbursement obligations in respect of drawn letters of credit issued for the account of the Company or any Subsidiary of the Company, (iii) the aggregate principal amount of any unsecured notes and debt securities issued by the Company or any Subsidiary of the Company, including, without limitation, the Notes, and (iv) the aggregate principal amount of any unsecured Guarantee by the Company or any of the its Subsidiaries of obligations of third Persons of the type described in clauses (i) through (iii).

 

“U.S. Government Obligations” means obligations issued or directly and fully guaranteed or insured by the United States of America or by any agent or instrumentality thereof, provided that the full faith and credit of the United States of America is pledged in support thereof.

 

“Voting Stock” means, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.

 

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“Wholly Owned” means, with respect to any Subsidiary, a Subsidiary all of the outstanding Capital Stock of which (other than any director’s qualifying shares) is owned by the Company and one or more Wholly Owned Material Subsidiaries (or a combination thereof).

 

Section 1.03.  Rules of Construction.  Unless the context otherwise requires or except as otherwise expressly provided, an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP.

 

ARTICLE 2
  TERMS AND ISSUANCE

 

Section 2.01.  Issue of Notes; Terms.  As provided in Section 301 of the Base Indenture, the following terms (the numbered clauses set forth below corresponding to the numbered subsections of Section 301 of the Base Indenture) are hereby established:

 

(1)                                 The title of the Notes shall be “7.375% Senior Notes due 2019.” The Notes shall initially be issued in the form of one or more Global Securities in the form of Exhibit A hereto, the terms of which are incorporated herein by reference.  The Notes may have notations, legends or endorsements required by law, rules of, or agreements with, national securities exchanges to which the Company or any Subsidiary Guarantor are subject, or usage (provided that such notation, legend or endorsement is in a form acceptable to the Company).

 

(2)                                 The Notes will be initially limited to an aggregate principal amount of $275,000,000, except for Notes authenticated and delivered upon registration or transfer of, or in exchange for, or in lieu of, other Notes pursuant to Sections 304, 305, 306, 906 or 1107 of the Base Indenture, but may be issued in unlimited amounts as set forth in Section 2.02 of this Supplemental Indenture.

 

(3)                                 The Notes shall be Guaranteed by those Subsidiaries of the Company that become Subsidiary Guarantors pursuant to Article 10 of this Supplemental Indenture.

 

(4)                                 The date on which principal of the Notes is payable is September 1, 2019.

 

(5)                                 The price at which the Notes shall be issued is 100.000%.

 

(6)                                 The rate at which the Notes shall bear interest is 7.375% per annum.  Subject to the terms provided for in Exhibit A hereto and incorporated by reference herein, interest on the Notes shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issue Date.

 

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The Interest Payment Dates on which such interest shall be payable are each March 1 and September 1 of each year, commencing March 1, 2013.  The Regular Record Dates for the payment of interest on any Interest Payment Date shall be the February 15 or August 15 (whether or not a Business Day) next preceding such Interest Payment Date. The Company shall pay interest on overdue principal, premium, if any, and, to the extent lawful, interest at the rate of 7.375% per annum.  Section 307(b) of the Base Indenture relating to optional interest reset shall not apply to the Notes.

 

(7)                                 Payments of principal, premium, if any, and interest on Global Securities will be made to the Depositary by wire transfer, in same day funds.  The Company has the option, however, to pay interest by check mailed to the address of the Person in whose name the applicable Note is registered at the close of business on the relevant Regular Record Date as shown on the applicable Security Register.

 

(8)                                 The Notes shall be subject to optional redemption as provided for in Section 3.01 of this Supplemental Indenture within the period, at the price, and upon the terms and conditions set forth in such Section 3.01.

 

(9)                                 The Notes may become subject to an Offer to Purchase as provided for in Section 3.02 of this Supplemental Indenture within the period, at the price, and upon the terms and conditions set forth in such Section 3.02.

 

(10)                          The Notes shall be issued in registered form, without interest coupons, in denominations of $2,000 and higher integral multiples of $1,000.

 

(11)                          Not applicable.

 

(12)                          The additional covenants set forth in Article 4 of this Supplemental Indenture shall apply with respect to the Notes.  The Events of Default with respect to the Notes are as set forth in Section 6.02 of this Supplemental Indenture.

 

(13)                          The provisions relating to the satisfaction and discharge of the Notes shall be as set forth in Article 7 of this Supplemental Indenture.

 

(14)                          Not applicable.

 

(15)                          Not applicable.

 

(16)                          The defeasance provisions shall be as set forth in Article 8 of this Supplemental Indenture.

 

(17)                          Not applicable.

 

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(18)                          The Notes shall initially be issued as Global Securities the form of one or more Global Securities and The Depository Trust Company shall initially be the Depositary for the Global Securities.  The Global Securities will be deposited on or about the Issue Date with, or on behalf of, DTC and registered in the name of Cede & Co., as nominee of the Depositary.

 

(19)                          Not applicable.

 

(20)                          The Events of Default with respect to the Notes are as set forth in Section 6.02 of this Supplemental Indenture.  Section 502 shall be amended by replacing the phrase “an Event of Default specified in Section 501(5) or 501(6)” in each place in which it occurs with the phrase “a bankruptcy default with respect to the Company.”

 

(21)                          Not applicable.

 

(22)                          Not applicable.

 

(23)                          The Company hereby appoints the Trustee as Paying Agent and as the agent upon whom notices and demands may be served with respect to the Notes.

 

(24)                          The Notes shall be subject to the terms, conditions, rights and preferences (or limitations on such rights and preferences) set forth in this Supplemental Indenture.

 

Section 2.02. Additional Notes.

 

(a)                                 Upon the execution of this Supplemental Indenture, or from time to time thereafter, Notes may be executed by the Company and delivered to the Trustee for authentication, and the Trustee shall thereupon authenticate and deliver Notes upon a written Company Order, without any further action by the Company hereunder.  The Trustee shall authenticate Additional Notes from time to time for original issue in aggregate principal amounts specified by the Company upon delivery by the Company of such Additional Notes together with a Company Order for the authentication and delivery of such Additional Notes.  Each Company Order relating to the authentication of Additional Notes shall specify that the issuance of such Additional Notes does not contravene any provision of Article 4 of this Supplemental Indenture.

 

Section 2.03.  Global Securities.  The following provisions shall apply to Global Securities in addition to the provisions set forth in Section 311 of the Base Indenture:

 

(a)                                 If an Event of Default has occurred and is continuing and the Trustee has received a request from the Depositary, the Trustee will promptly

 

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exchange each beneficial interest in a Global Security for one or more Certificated Notes in authorized denominations having an equal aggregate principal amount registered in the name of the owner of such beneficial interest, as identified by the Trustee to the Depositary, and thereupon such Global Security will be deemed cancelled. An exchange pursuant to this Section 2.03(a) may result in a transfer tax or other similar governmental charge, as provided for in Section 305 of the Base Indenture.

 

(b)           The transfer or exchange of any Global Security (or a beneficial interest therein) may only be made in accordance with the applicable rules and procedures of the Depositary.  The Trustee shall refuse to register any requested transfer or exchange that does not comply with the preceding sentence.

 

ARTICLE 3
  OPTIONAL REDEMPTION; OFFER TO PURCHASE

 

Section 3.01. Optional Redemption.  (a) The Company may redeem the Notes, at its option, at any time and from time to time, in whole or in part, at a redemption price equal to the greater of (1) the principal amount of the Notes being redeemed or (2) the sum of the present values of the remaining scheduled payments of the principal and interest (other than accrued interest) on the Notes being redeemed, discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points, plus in the case of both (1) and (2), any accrued and unpaid interest to, but not including, the redemption date.

 

(b)           Article 11 of the Base Indenture shall apply with respect to any Optional redemption pursuant to this Section 3.01.

 

(c)           Notwithstanding anything to the contrary in Article 11 of the Base Indenture, any optional redemption may, at the Company’s discretion, be subject to one or more conditions precedent, provided that such conditions precedent shall  be included in any notice of redemption provided pursuant to Section 1104 of the Base Indenture.

 

Section 3.02. Repurchase of Notes upon a Change of Control.  (a) Not later than 30 days following the occurrence of a Change of Control, the Company will make an offer to purchase (an “Offer to Purchase”) all outstanding Notes at a purchase price equal to 101% of the principal amount plus accrued and unpaid interest to, but not including, the date of purchase.

 

(b)           An Offer to Purchase must be made by written offer sent to the Holders in a form described in clause (c) of this Section 3.02.  The Company will notify the Trustee at least 15 days (or such shorter period as is acceptable to the

 

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Trustee) prior to sending the offer to Holders of its obligation to make an Offer to Purchase, and the offer will be sent by the Company or, at the Company’s request and provision of such offer information to the Trustee, by the Trustee in the name and at the expense of the Company.

 

(c)           The Offer to Purchase must include or state the following as to the terms of the Offer to Purchase:

 

(i)         the principal amount of Notes subject to the offer (the “purchase amount”);

 

(ii)        the purchase price, including the portion thereof representing accrued interest;

 

(iii)       an expiration date (the “expiration date”) not less than 30 days or more than 60 days after the date of the offer, and a settlement date for purchase (the “purchase date”) not more than five Business Days after the expiration date;

 

(iv)       a Holder may tender all or any portion of its Notes pursuant to an Offer to Purchase, subject to the requirement that any portion of a Note tendered must be in a minimum principal amount of $2,000 and multiples of $1,000 in excess thereof;

 

(v)        the place or places where Notes are to be surrendered for tender pursuant to the Offer to Purchase;

 

(vi)       each Holder electing to tender a Note pursuant to the offer will be required to surrender such Note at the place or places specified in the offer prior to the close of business on the expiration date (such Note being, if the Company or the Trustee so requires, duly endorsed or accompanied by a duly executed written instrument of transfer);

 

(vii)      interest on any Note not tendered, or tendered but not purchased by the Company pursuant to the Offer to Purchase, will continue to accrue;

 

(viii)     on the purchase date, the purchase price will become due and payable on each Note accepted for purchase pursuant to the Offer to Purchase, and interest on Notes purchased will cease to accrue on and after, but not including, the purchase date;

 

(ix)       Holders are entitled to withdraw Notes tendered up to the close of business on the expiration date by giving notice, which must be received by the Company or the Trustee not later than the close of business on the expiration date, setting forth the name of the Holder, the

 

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principal amount of the tendered Notes, the certificate number of the tendered Notes and a statement that the Holder is withdrawing all or a portion of the tender;

 

(x)        if any Note is purchased in part, new Notes equal in principal amount to the unpurchased portion of the Note will be issued; and

 

(xi)       if any Note contains a CUSIP or CINS number, no representation is being made as to the correctness of the CUSIP or CINS number either as printed on the Notes or as contained in the offer and that the Holder should rely only on the other identification numbers printed on the Notes.

 

(d)           Prior to the purchase date, the Company will accept tendered Notes for purchase as required by the Offer to Purchase and deliver to the Trustee all Notes so accepted together with an Officers’ Certificate specifying which Notes have been accepted for purchase.  On the purchase date, the purchase price will become due and payable on each Note accepted for purchase pursuant to the Offer to Purchase, and interest on Notes purchased will cease to accrue on and after the purchase date.  The Trustee will promptly return to Holders any Notes not accepted for purchase and send to Holders new Notes equal in principal amount to any unpurchased portion of any Notes accepted for purchase in part.

 

(e)           The Company will comply with Rule 14e-1 under the Exchange Act and all other applicable laws in making any Offer to Purchase.  To the extent that the provisions of any securities laws or regulations conflict with the Change of Control provisions hereof, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 3.02, by virtue of such compliance.

 

The Company will not be required to make an Offer to Purchase upon a Change of Control if (i) a third party makes the Offer to Purchase in the manner, at the times and otherwise in compliance with the requirements set forth in the  Indenture, applicable to an Offer to Purchase made by the Company and purchases all Notes validly tendered and not withdrawn under such Offer to Purchase or (ii) notice of optional redemption pursuant to Section 3.01 hereof has been given in accordance with the Indenture, unless and until there is a Default in payment of the applicable redemption price.  Notwithstanding anything to the contrary contained herein, an Offer to Purchase may be made in advance of a Change of Control, conditioned upon the consummation of such Change of Control, if a definitive agreement is in place for the Offer to Purchase at the time the Change of Control is made.

 

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(f)            The Company shall not be required (i) to issue, register the transfer of or exchange any Notes subject to an Offer to Purchase during a period beginning at the opening of business 15 days before the purchase under the Offer to Purchase and ending at the close of business on the day of the mailing of notice pursuant to such Offer to Purchase, (ii) to register the transfer of or exchange any Note to be purchased in whole or in part, except in the case of a partial purchase, that portion of any Note not being purchased or (iii) if a purchase pursuant to an Offer to Purchase is to occur after a Regular Record Date but on or before the corresponding Interest Payment Date, to register the transfer or exchange of any Note on or after the Regular Record Date and before the date of purchase.

 

ARTICLE 4
  ADDITIONAL COVENANTS

 

Section 4.01. Payment of Notes.  This Section 4.01 shall replace the provisions contained in Section 1001 of the Base Indenture in their entirety:

 

(a)           The Company agrees to pay the principal of and interest on the Notes on the dates and in the manner provided in the Notes and the Indenture.  Not later than 10:00 A.M. (New York City time) on the due date of any principal of or interest on any Notes, or any redemption or purchase price of the Notes, the Company will deposit with the Trustee (or Paying Agent) money in immediately available funds sufficient to pay such amounts, provided that if the Company or any Affiliate of the Company is acting as Paying Agent, it will, on or before each due date, segregate and hold in a separate trust fund for the benefit of the Holders a sum of money sufficient to pay such amounts until paid to such Holders or otherwise disposed of as provided in the Indenture.  In each case the Company will promptly notify the Trustee of its compliance with this paragraph.

 

(b)           An installment of principal or interest will be considered paid on the date due if the Trustee (or Paying Agent, other than the Company or any Affiliate of the Company) holds on that date money designated for and sufficient to pay the installment.  If the Company or any Affiliate of the Company acts as Paying Agent, an installment of principal or interest will be considered paid on the due date only if paid to the Holders.

 

Section 4.02. Existence.  The Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and the existence of each of its Material Subsidiaries in accordance with their respective organizational documents, and the material rights, licenses and franchises of the Company and each Material Subsidiary, provided that the Company is not required to preserve any such right, license or franchise, or the existence of any Material Subsidiary, or preserve its corporate formation, if the Company shall determine that the maintenance or preservation thereof is no longer desirable in

 

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the conduct of the business of the Company and its Subsidiaries taken as a whole; and provided  further that this Section does not prohibit any transaction otherwise permitted by Article 5 hereof.

 

Section 4.03. Payment of Taxes and other Claims.  The Company will pay or discharge, and cause each of its Material Subsidiaries to pay or discharge before the same become delinquent (i) all material taxes, assessments and governmental charges levied or imposed upon the Company or any Material Subsidiary or its income or profits or property, and (ii) all material lawful claims for labor, materials and supplies that, if unpaid, might by law become a Lien upon the property of the Company or any Material Subsidiary, other than any such tax, assessment, charge or claim the amount, applicability or validity of which is being contested in good faith by appropriate negotiations or proceedings or where the failure to effect such payment or discharge is not adverse in any material respect to the Holders.

 

Section 4.04. Maintenance of Properties and Insurance.

 

(a)           The Company will cause all properties used or useful in the conduct of its business or the business of any of its Material Subsidiaries to be maintained and kept in good condition, repair and working order as in the judgment of the Company may be necessary so that the business of the Company and its Material Subsidiaries may be properly and advantageously conducted at all times; provided that nothing in this Section 4.04 shall prevent the Company or any Material Subsidiary from discontinuing the use, operation or maintenance of any of such properties or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Company, desirable in the conduct of the business of the Company and its Subsidiaries taken as a whole.

 

(b)           The Company will provide or cause to be provided, for itself and its Material Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds customarily insured against by corporations similarly situated and owning like properties, including, but not limited to, products liability insurance and public liability insurance, with reputable insurers, in such amounts, with such deductibles and by such methods as are customary for corporations similarly situated in the industry in which the Company and its Material Subsidiaries are then conducting business.

 

Section 4.05. Limitation on Subsidiary Debt.  (a) The Company will not permit any Material Subsidiary of the Company that is not a Subsidiary Guarantor to create, incur, issue, assume, Guarantee or otherwise become liable for any Debt (any Debt of a Subsidiary that is not a Subsidiary Guarantor, “Subsidiary Debt”), without guaranteeing the payment of the principal of, premium, if any, and interest on the Notes pursuant to Article 10 hereof.

 

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(b)           The foregoing restriction set forth in clause(a) of this Section 4.05 shall not apply to, and there shall be excluded from Debt in any computation under such restriction, Subsidiary Debt constituting:

 

(i)         Debt of a Person who in connection with the Company’s acquisition of the stock or equity of such Person becomes a Material Subsidiary, which such Debt existed before the time of the Company’s acquisition of such Person, was not created in anticipation thereof and is not Guaranteed by any other Subsidiary of the Company;

 

(ii)        Purchase money Debt (including Capital Leases) to the extent permitted under Section 4.07(a)(ii) hereof;

 

(iii)       Debt owed to the Company or any Subsidiary;

 

(iv)       Debt outstanding on the date of this Supplemental Indenture or any extension, renewal, replacement or refunding (collectively, “refinancing”) of any Debt existing on the date of this Supplemental Indenture or referred to in Section 4.05(b)(i) or Section 4.05(b)(ii) hereof; provided that the principal amount of the new Debt shall not exceed the principal amount of the Debt being refinanced plus any premium, including tender premium, or fees or transaction costs payable in connection with any such refinancing;

 

(v)        Debt of an Asset Securitization Subsidiary, a Special Purpose Vehicle Subsidiary or a Foreign Subsidiary or any Parent Holding Company Guarantee;

 

(vi)       Debt (other than Debt of Asset Securitization Subsidiaries) consisting of the obligation to repurchase mortgages and related assets or secured by, or financing, mortgages and related assets in connection with mortgage warehouse financing arrangements;

 

(vii)      Debt incurred in connection with any Servicing Advance Facility;

 

(viii)     Debt pursuant to any software licensing agreement that is treated as a Capital Lease for accounting purposes of the Company and the Company’s consolidated Subsidiaries;

 

(ix)       Debt (including securitizations) incurred in connection with the financing of mortgage servicing rights; provided that at no time may more than $350,000,000 of mortgage servicing rights of the Company and its Material Subsidiaries (valued as of the day any encumbrances in respect thereof were first created or given) be subject to encumbrances in 

 

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respect of such Debt; provided that on a pro forma basis after giving effect to the incurrence of such Debt and the application of the proceeds therefrom, the Company’s Unencumbered Borrowing Base is equal to at least 1.2 times the amount of Unsecured Debt at such time;

 

(x)        Any recourse, liability or obligation incurred in connection with the sale or financing of fleet vehicle leases; provided that the aggregate amount of such recourse, liability or obligation shall not exceed $50,000,000 at any time; and

 

(xi)       Debt in an aggregate principal amount that (together without duplication with the aggregate principal amount of secured Debt then outstanding under Section 4.07(a)(xxiii) does not exceed the greater of (x) $300,000,000 or (y) 15% of Tangible Net Worth.

 

(c)           For purposes of determining compliance with this covenant, in the event that an item of Subsidiary Debt meets the criteria of more than one of the categories of permitted Subsidiary Debt described in Section 4.05(b)(i) through Section 4.05(b)(xi) hereof, the Company, in its sole discretion, may classify or reclassify such item of Subsidiary Debt in any manner that complies with this covenant and the Company may divide and classify an item of Subsidiary Debt in more than one of the types of Subsidiary Debt described in Section 4.05(b)(i) through Section 4.05(b)(xi) hereof.

 

Section 4.06. Limitation on Restricted Payments.  (a) The Company shall not, directly or indirectly, declare or pay any dividend, or make any distribution on account of its Capital Stock, or purchase, repurchase, redeem, acquire or retire for value any such Capital Stock (such transactions being referred to herein as “Restricted Payments”), if, after giving effect to such Restricted Payment, the Company’s Debt/Tangible Equity Ratio, calculated as of the most recently completed month end for which internal financial statements are available, would exceed 6.0 to 1.

 

(b)           Notwithstanding the foregoing, the foregoing provision shall not prohibit the following actions:

 

(i)         the payment of any dividend within 60 days after the date of declaration thereof, if at such date of declaration such payment was permitted by the provisions of the Indenture;

 

(ii)        the making of a Restricted Payment out of the proceeds of a substantially concurrent issuance and sale for cash (other than to a  Subsidiary) of the Company’s Equity Interests (other than Disqualified Stock);

 

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(iii)       the making of a Restricted Payment by the Company in its Equity Interests (other than Disqualified Stock) or in options, warrants or other rights to purchase such Equity Interests;

 

(iv)       (y) a Restricted Payment to pay for the repurchase, retirement or other acquisition or retirement for value or of the Company’s common Equity Interests or (z) the payment of cash in settlement of any Equity Interest that by its terms may, or is required to, be settled in cash, in each case, held by any future, present or former employee, director or consultant of the Company or any of the Company’s Subsidiaries pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or other agreement or arrangement; provided that the aggregate cash consideration paid therefor or in settlement thereof in any twelve-month period after the Issue Date does not exceed an aggregate amount of $5.0 million (with unused amounts carried over to future periods up to $10.0 million in any twelve-month period);

 

(v)        repurchases of Equity Interests deemed to occur upon exercise of stock options, warrants or other securities if such Equity Interests represent a portion of the exercise price of such options or warrants and repurchases of Equity Interests in connection with the exercise of stock options, warrants or other securities to the extent necessary to pay applicable withholding taxes;

 

(vi)       the payment of cash in lieu of the issuance of fractional shares upon the exercise of options or warrants or upon the conversion or exchange of Capital Stock of any such Person;

 

(vii)      the purchase by the Company of fractional shares arising out of stock dividends, splits or combinations or business combinations or other similar transactions; and

 

(viii)     (y) any payments or deliveries in connection with (including, without limitation, purchases of) any Permitted Bond Hedge Transaction or Permitted Capped Call Transaction and (z) payments made to exercise, settle or terminate any Permitted Warrant Transaction (1) by delivery of our Capital Stock, (2) by set-off against the related Permitted Bond Hedge Transaction or (3) with cash payments in an aggregate amount not to exceed the aggregate amount of any payments received by us pursuant to the exercise, settlement or termination of any related Permitted Bond Hedge Transaction.

 

Section 4.07. Limitations on Liens.  (a) The Company will not, and will not permit any Material Subsidiary of the Company to, incur any Lien (the

 

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“Initial Lien”) to secure Debt without equally and ratably securing the Notes except (each of the following, a “Permitted Lien”):

 

(i)         deposits under worker’s compensation, unemployment insurance and social security laws or to secure statutory obligations or surety or appeal bonds or performance or other similar bonds in the ordinary course of business, or statutory Liens of landlords, carriers, warehousemen, mechanics and materialmen and other similar Liens, in respect of liabilities which are not yet due or which are being contested in good faith, Liens for taxes not yet due and payable, and Liens for taxes due and payable, the validity or amount of which is currently being contested in good faith by appropriate proceedings and as to which foreclosure and other enforcement proceedings shall not have been commenced (unless fully bonded or otherwise effectively stayed);

 

(ii)        purchase money Liens granted to the vendor or Person financing the acquisition or development of property, plant or equipment if:

 

(A)    limited to the specific assets acquired and, in the case of tangible assets, other property which is an improvement to or is acquired for specific use in connection with such acquired property or which is real property being improved by such acquired property; and

 

(B)    the Debt secured by such Lien is the unpaid balance of the acquisition cost of the specific assets on which the Lien is granted;

 

(iii)       Liens and/or Revolving Liens upon real and/or personal property, each of which Liens or Revolving Liens existed before the time of the Company’s acquisition of such property or the Company owning such property and was not created in anticipation thereof; provided that no such Lien or Revolving Lien shall extend to or cover any property of the Company or a Material Subsidiary other than the respective property so acquired and improvements thereon;

 

(iv)       Liens and Revolving Liens upon real and/or personal property of a Person who in connection with the Company’s acquisition of the stock or equity of such Person becomes a Material Subsidiary, each of which Liens or Revolving Liens existed before the time of the Company’s acquisition of such Person and was not created in anticipation thereof; provided that no such Lien shall extend to or cover any property of the Company or a Material Subsidiary other than of the Material Subsidiary (and its acquired Affiliates) so acquired;

 

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(v)        Liens arising out of attachments, judgments or awards as to which an appeal or other appropriate proceedings for contest or review are promptly commenced (and as to which foreclosure and other enforcement proceedings

 

(A)       shall not have been commenced (unless fully bonded or otherwise effectively stayed) or

 

(B)       in any event shall be promptly fully bonded or otherwise effectively stayed);

 

(vi)       Liens securing Debt of any Material Subsidiary owing to the Company or any Material Subsidiary;

 

(vii)      Liens securing Debt and related Obligations (including in connection with asset securitization transactions), or securing interests in asset sale transactions which could alternatively be characterized as Debt, or securing obligations to pay rent incurred in connection with asset securitization transactions, which Debt or securitized assets are not reported on the Company’s consolidated balance sheet or that of the Company’s Material Subsidiaries, and which Liens cover only the assets securitized in the applicable asset securitization transaction or other assets identified in connection with an asset securitization transaction, and Liens on the stock or equity of any special purpose vehicle the sole purpose of which is to effectuate such asset securitization transaction;

 

(viii)     Liens securing Debt and related Obligations of an Asset Securitization Subsidiary issued in asset securitization transactions, which Debt or securitized assets are reported on the Company’s consolidated balance sheet or that of the Company’s Material Subsidiaries, and which Liens cover only the assets securitized in the applicable asset securitization transaction or other assets identified in connection with an asset securitization transaction, and Liens on the stock of such Asset Securitization Subsidiary;

 

(ix)       Liens covering only the property or other assets of any Special Purpose Vehicle Subsidiary and securing only the Debt of any such Special Purpose Vehicle Subsidiary;

 

(x)        other Liens incidental to the conduct of the Company’s business or the ownership of the Company’s property and other assets, which do not secure any Debt and did not otherwise arise in connection with the borrowing of money or the obtaining of advances or credit and which do not, in the aggregate, materially detract from the value of the

 

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Company’s property or other assets or materially impair the use thereof in the operation of the Company’s business;

 

(xi)                              Liens covering only (a) the property, Capital Stock, or other assets of any Foreign Subsidiary or (b) the property or other assets (but not Capital Stock) of the Parent Holding Company with respect to any Foreign Subsidiary; provided that in the case of (b), the Liens secure Debt only of the relevant Foreign Subsidiary and, if applicable, a Parent Holding Company Guarantee permitted to be incurred under the Indenture;

 

(xii)                           Liens existing prior to the date of this Supplemental Indenture;

 

(xiii)                        Liens on cash of Atrium Reinsurance Corporation and its successors and assigns in connection with its reinsurance business;

 

(xiv)                       any extension, renewal or replacement of Liens referred to in Section 4.07(a)(ii), 4.07(a)(iii), 4.07(a)(iv), 4.07(a)(xii), and Section 4.07(a)(xviii) hereof; provided that any such extension, renewal or replacement Lien shall be limited to the property covered by the Lien extended, renewed or replaced and that the obligation secured by such new Lien shall not be greater in amount than the Obligations secured by the Lien extended, renewed or replaced (plus any premium, including tender premium, or fees or transaction costs payable in connection with any such refinancing);

 

(xv)                          Liens incurred in the ordinary course of business to secure Debt utilized to fund net investment in leases and leased vehicles, mortgages and related assets and other assets under management programs which shall not include Liens on mortgage servicing rights;

 

(xvi)                       Liens on mortgages and related assets securing Obligations described under Section 4.05(b)(vi) and (vii) hereof;

 

(xvii)                    Liens in connection with Debt permitted under Section 4.05(b)(viii);

 

(xviii)                 Liens created as a result of a sale and leaseback transaction relating to assets not in excess of $100,000,000 in the aggregate on a cumulative basis;

 

(xix)                       Liens on cash or cash equivalents posted as collateral securing obligations of the Company or any Subsidiary of the Company in respect of Interest Rate Protection Agreements, mortgage repurchases, letters of credit and surety bonds;

 

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(xx)                          Liens on mortgage servicing rights and proceeds thereof securing Debt (and related obligations) permitted by Section 4.05(b)(ix);

 

(xxi)                       Liens securing judgments for the payment of money, provided that enforcement of such Liens has been stayed;

 

(xxii)                    Liens securing the Company’s and the Company’s Subsidiaries’ cash management obligations; and

 

(xxiii)                 Liens to secure Debt not otherwise permitted by any of Section 4.07(a)(i) through Section 4.07(a)(xxii) hereof if, at the time any such Liens are incurred, the aggregate principal amount of Debt secured by such Liens (together without duplication with the aggregate principal amount of Subsidiary Debt then outstanding under Section 4.05(b)(xi) hereof does not exceed the greater of (x) $300,000,000 or (y) 15% of Tangible Net Worth.

 

(b)                                 Any Lien created for the benefit of the Holders of the Notes pursuant to clause (a) of this Section 4.07 shall provide by its terms that such Lien shall be automatically and unconditionally released and discharged, without any additional action on the part of a Holder of Notes, upon the release and discharge of the Initial Lien.

 

(c)                                  For purposes of determining compliance with this Section 4.07, (A) Permitted Liens need not be incurred solely by reference to one category of Permitted Liens described in Section 4.07(a) but are permitted to be incurred in part under any combination thereof and (B) in the event that a Lien (or any portion thereof) meets the criteria of one or more of the categories of Permitted Liens described in Section 4.07(a), the Company may, in its sole discretion, classify or reclassify such item of Permitted Liens (or any portion thereof) in any manner that complies with this Section 4.07 and the Company may divide and classify a Lien in more than one of the types of Permitted Liens in one of the clauses in Section 4.07(a).

 

Section 4.08. Financial Reports.  (a) The Company will file with the Trustee, such information, documents and other reports that are required to be filed with the Commission pursuant to Section 13 or 15(d) of the Exchange Act within 15 days after the same would be required to be filed with the Commission by a registrant that is not an accelerated filer or a large accelerated filer.  Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates).

 

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(b)                                 If at any time the Company is not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company must provide the Trustee with (and the Trustee shall promptly make available to Holders of the Notes) within 15 days after the time periods specified in those sections for a registrant that is not an accelerated filer or a large accelerated filer:

 

(1)                                 all quarterly and annual reports that would be required to be filed with the Commission on Forms 10-Q and 10-K if the Company were required to file such reports, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to annual information only, a report thereon by the Company’s certified independent accountants, and

 

(2)                                 all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports.

 

In addition, whether or not required by the Commission, the Company will, if the Commission will accept the filing, file a copy of all of the information and reports referred to in clauses (1) and (2) with the Commission for public availability within the time periods specified in the Commission’s rules and regulations for a registrant that is not an accelerated filer or a large accelerated filer (unless the Company is required to file reports under the Exchange Act and are an accelerated filer or a large accelerated filer).

 

(c)                                  Any failure to comply with this covenant will be automatically cured when the Company files all required reports with the Commission.

 

(d)                                 To the extent any such information, documents and reports referred to in this Section 4.08 are (i) filed by the Company electronically on the Commission’s Electronic Data Gathering and Retrieval System (or any successor system) or (ii) posted on the Company’s Website, such information, documents and reports shall be deemed to have been provided to the Trustee and the Holders of the Notes.

 

(e)                                  All obligors on the Notes will comply with Section 314(a) of the Trust Indenture Act.

 

Section 4.09. Debt/Tangible Equity Ratio.  The Company shall maintain, as of the last day of each fiscal quarter, a Debt/Tangible Equity Ratio of not more than 8.5 to 1.

 

Section 4.10. Applicability of Covenants Contained in the Base Indenture.  Each of the agreements and covenants of the Company contained in Sections 1002 through 1005 of the Base Indenture shall apply to the Notes.

 

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Section 4.11. Suspension of Certain Covenants.  If on any date following the Issue Date (i) the Notes have Investment Grade Ratings from two out of three of the Rating Agencies, and (ii) no Default or Event of Default has occurred and is continuing under the Indenture, (the occurrence of the events described in the foregoing clauses (i) and (ii) being collectively referred to as a “Covenant Suspension Event”), the Company and its Material Subsidiaries, as applicable, will not be subject to the covenants in Section 4.05 and Section 4.06 (collectively, the “Suspended Covenants”).

 

In the event that the Company and its Material Subsidiaries are not subject to the Suspended Covenants under the Indenture, for any period of time as a result of the foregoing, and on any subsequent date (the “Reversion Date”) one or more of the Rating Agencies (a) withdraw their Investment Grade Rating or downgrade the rating assigned to the Notes below an Investment Grade Rating (leaving less than two of the Rating Agencies with an Investment Grade Rating for the Notes) and/or (b) the Company enters into an agreement to effect a transaction that would result in a Change of Control and one or more of the Rating Agencies indicate that if consummated, such transaction (alone or together with any related recapitalization or refinancing transactions) would cause such Rating Agency to withdraw its Investment Grade Rating or downgrade the ratings assigned to the Notes below an Investment Grade Rating (in either case leaving less than two of the Rating Agencies with an Investment Grade Rating for the Notes) and/or (c) a Default or Event of Default has occurred and is continuing under the Indenture, then the Company and its Material Subsidiaries will thereafter again be subject to the Suspended Covenants under the Indenture, with respect to future events, including, without limitation, a proposed transaction described in clause (b) above.

 

The period of time between the Covenant Suspension Event and the Reversion Date is referred to as the “Suspension Period.”  In the event of any such reinstatement, no action taken or omitted to be taken by the Company or any of its Material Subsidiaries prior to such reinstatement that would violate any Suspended Covenant will give rise to a Default or Event of Default under the Indenture, with respect to Notes; provided that all Debt of Material Subsidiaries incurred during the Suspension Period will be classified to have been incurred or issued pursuant to Section 4.05(b)(iv).

 

ARTICLE 5

CONSOLIDATION, MERGER OR SALE OF ASSETS

 

Section 5.01.  Base Indenture.  This Article 5 replaces in its entirety the corresponding provisions set forth in Article Eight of the Base Indenture.

 

Section 5.02.  Consolidation, Merger or Sale of Assets.  (a) The Company will not (i) consolidate with or merge with or into any Person, or (ii) sell, convey,

 

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transfer, or otherwise dispose of all or substantially all of its assets as an entirety or substantially an entirety, in one transaction or a series of related transactions, to any Person, or (iii) permit any Person to merge with or into the Company; unless

 

(1)                                 either (x) the Company is the continuing Person or (y) the resulting, surviving or transferee Person is a corporation organized and validly existing under the laws of the United States of America or any jurisdiction thereof and expressly assumes by supplemental indenture all of the obligations of the Company under the Indenture, and the Notes;

 

(2)                                 immediately after giving effect to the transaction, no Default has occurred and is continuing;

 

(3)                                 the Company’s Debt/Tangible Equity Ratio is not more than 8.5 to 1 as of the most recently completed month end for which internal financial statements are available, calculated after giving effect to the transaction on a pro forma basis; and

 

(4)                                 the Company delivers to the Trustee an Officers’ Certificate stating that the consolidation, merger or transfer and the supplemental indenture (if any) comply with the Indenture, and an opinion of counsel stating that the consolidation, merger or transfer complies with clause (1) above and the supplemental indenture (if any) complies with the Indenture;

 

provided, that (x) the foregoing does not apply to any sales, conveyances, transfers or other dispositions from any of the Company’s Subsidiaries to the Company or one of the Company’s Subsidiaries and (y) clauses (2) and (3) do not apply (i) to the consolidation or merger of the Company with or into a Wholly Owned Subsidiary or the consolidation or merger of a Wholly Owned Subsidiary with or into the Company or (ii) if, in the good faith determination of the Company’s Board of Directors, whose determination is evidenced by a Board Resolution, the sole purpose of the transaction is to change the Company’s jurisdiction of incorporation.

 

(b)                                 The Company shall not lease all or substantially all of its assets, whether in one transaction or a series of transactions, to one or more other Persons (other than to the Company or the Company’s Subsidiaries).

 

(c)                                  Upon the consummation of any transaction effected in accordance with these provisions, if the Company is not the continuing Person, the resulting, surviving or transferee Person will succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture, and the Notes with the same effect as if such successor Person had been named as the Company in the Indenture.  Upon such substitution, except in the case of a sale,

 

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conveyance, transfer or disposition of less than all the Company’s assets or in the case of a sale, conveyance, transfer or disposition of all or substantially all of the Company’s assets to a Subsidiary, the Company will be released from its obligations under the Indenture, and the Notes.

 

ARTICLE 6

EVENTS OF DEFAULT

 

Section 6.01. Base Indenture. Section 6.02 replaces in its entirety the corresponding provisions set forth in Section 501 of the Base Indenture.

 

Section 6.02. Events of Default. (a) The following shall constitute the Events of Default with respect to the Notes:

 

(i)                                     Default for a period of 30 days in payment of any interest on the Notes when due;

 

(ii)                                  Default in payment of principal of (or premium, if any, on) the Notes;

 

(iii)                               the Company’s failure to make an Offer to Purchase and thereafter accept and pay for Notes tendered when and as required pursuant to Section 3.02 hereof or to comply with Article 5 hereof;

 

(iv)                              the Company defaults in the performance of any other covenant in the Indenture, with respect to the Notes, including violations of the other covenants included in Article 4 hereof, continued for 90 days after written notice to the Company by the Trustee or by the Holders of at least 25% in aggregate principal amount of the Notes; and

 

(v)                                 an involuntary case or other proceeding is commenced against the Company or any Material Subsidiary with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of its or any substantial part of its property, and such involuntary case or other proceeding remains undismissed and unstayed for a period of 60 days; or an order for relief is entered against the Company or any Material Subsidiary under the federal bankruptcy laws as now or hereafter in effect;

 

(vi)                              the Company or any of its Material Subsidiaries (1) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (2) consents

 

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to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or any of its Material Subsidiaries or for all or substantially all of the property and assets of the Company or any of its Material Subsidiaries or (3) effects any general assignment for the benefit of creditors (an event of default specified in clause (v) or (vi) a “bankruptcy default”).

 

(b)                                 Notwithstanding anything to the contrary, the Company may cure the covenant described in Section 4.09 by being in compliance with the ratio described thereunder as of any date within 45 days following the last day of the applicable fiscal quarter.

 

Section 6.03.  Waiver of Stay, Extension or Usury Laws.  The Company and each Subsidiary Guarantor covenants, to the extent that it may lawfully do so, that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company or the Subsidiary Guarantor from paying all or any portion of the principal of, or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of the Indenture.  The Company and each Subsidiary Guarantor hereby expressly waives, to the extent that it may lawfully do so, all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

 

ARTICLE 7

SATISFACTION AND DISCHARGE

 

Section 7.01.  Discharge of the Company’s Obligations.  This Section 7.01 shall replace Sections 401, 402 and 403 of the Base Indenture in their entirety.

 

(a)                                 Subject to clause (b), the Company’s obligations under the Notes and the Indenture, and each Subsidiary Guarantor’s obligations under its Note Guarantee, if any, will terminate if:

 

(1)                                 all Notes previously authenticated and delivered (other than (i) destroyed, lost or stolen Notes that have been replaced or (ii) Notes that are paid pursuant to Section 4.01 or (iii) Notes for whose payment money or U.S. Government Obligations have been held in trust and then repaid to the Company pursuant to Section 8.04) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder; or

 

33

 

(2)                                 (A) the Notes mature within one year, or all of them are to be called for redemption within one year under arrangements satisfactory to the Trustee for giving the notice of redemption,

 

(B)                               the Company irrevocably deposits in trust with the Trustee, as trust funds solely for the benefit of the Holders, money or U.S. Government Obligations or a combination thereof sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certificate delivered to the Trustee, without consideration of any reinvestment, to pay principal of (and premium, if any) and interest on the Notes to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder,

 

(C)                               no Default (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Debt and, in each case, the granting of Liens in connection therewith) has occurred and is continuing on the date of the deposit,

 

(D)                               the deposit will not result in a breach or violation of, or constitute a default under, any other agreement or instrument (other than the Indenture) to which the Company is a party or by which it is bound (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Debt and, in each case, the granting of Liens in connection therewith), and

 

(E)                                the Company delivers to the Trustee an Officers’ Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the satisfaction and discharge of the Indenture have been complied with.

 

(b)                                 After satisfying the conditions in clause (1), only the Company’s obligations under Section 607 of the Base Indenture will survive.  After satisfying the conditions in clause (2), only the Company’s obligations in Article Three of the Base Indenture (as modified by this Supplemental Indenture), Sections 607, 609, 610 and 1002 of the Base Indenture and Sections 4.01, 8.04 and 8.05 hereof will survive.  In either case, the Trustee upon request will acknowledge in writing the discharge of the Company’s obligations under the Notes and the Indenture other than the surviving obligations.

 

34

 

ARTICLE 8
  DEFEASANCE

 

Section 8.01. Legal Defeasance.  After the deposit referred to in clause (1) below, the Company will be deemed to have paid and will be discharged from its obligations in respect of the Notes and the Indenture, other than its obligations in Article Three of the Base Indenture (as modified by this Supplemental Indenture), Section 607, 609, 610 and 1002 of the Base Indenture and Sections 4.01, 8.04 and 8.05, and each Subsidiary Guarantor’s obligations under the Note Guarantee, if any, will terminate, provided the following conditions have been satisfied:

 

(1)                                 The Company has irrevocably deposited in trust with the Trustee, as trust funds solely for the benefit of the Holders, money or U.S. Government Obligations or a combination thereof sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certificate thereof delivered to the Trustee, without consideration of any reinvestment, to pay principal of and interest on the Notes to maturity or redemption, as the case may be, provided that any redemption before maturity has been irrevocably provided for under arrangements satisfactory to the Trustee.

 

(2)                                 No Default (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Debt and, in each case, the granting of Liens in connection therewith) has occurred and is continuing on the date of the deposit.

 

(3)                                 The deposit will not result in a breach or violation of, or constitute a default under, or any other agreement or instrument (other than the Indenture) to which the Company is a party or by which it is bound (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Debt and, in each case, the granting of Liens in connection therewith).

 

(4)                                 The Company has delivered to the Trustee

 

(A)                               either (x) a ruling received from the Internal Revenue Service to the effect that the beneficial owners for U.S. federal income tax purposes will not recognize income, gain or loss for federal income tax purposes as a result of the defeasance and will be subject to federal income tax on the same amounts and in the same manner and at the same times as would otherwise have been the case or (y) an Opinion of Counsel, based on a change in law after the date of this Supplemental Indenture, to the same effect as the ruling described in clause (x), and

 

(B)                               an Opinion of Counsel to the effect that the creation of the defeasance trust does not violate the Investment Company Act of 1940.

 

35

 

(5)                                 If the Notes are listed on a national securities exchange, the Company has delivered to the Trustee an Opinion of Counsel to the effect that the deposit and defeasance will not cause the Notes to be delisted.

 

(6)                                 The Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance have been complied with.

 

The Trustee upon request will acknowledge in writing the discharge of the Company’s obligations under the Notes and the Indenture, except for the surviving obligations specified above.

 

Section 8.02.  Covenant Defeasance.  After the deposit referred to in clause (1), the Company’s obligations set forth in Section 4.05, through Section 4.09 inclusive and Section 5.01(a)(3) of this Supplemental Indenture and Section 704 of the Base Indenture will terminate, and Section 6.02(a)(iii) and Section 6.02(a)(iv) will no longer constitute Events of Default, provided the following conditions have been satisfied:

 

(1)                                 The Company has complied with clauses (1), (2), (3), 4(B), (5) and (6) of Section 8.01 hereof; and

 

(2)                                 The Company has delivered to the Trustee either (x) a ruling received from the Internal Revenue Service to the effect that the beneficial owners for U.S. federal income tax purposes will not recognize income, gain or loss for federal income tax purposes as a result of the defeasance and will be subject to federal income tax on the same amounts and in the same manner and at the same times as would otherwise have been the case or (y) an Opinion of Counsel to the same effect as the ruling described in clause (x).

 

Except as specifically stated above, none of the Company’s obligations under the Indenture, will be discharged.

 

Section 8.03. Application of Trust Money.  Subject to Section 8.04 hereof, the Trustee will hold in trust the money or U.S. Government Obligations deposited with it pursuant to Section 7.01, Section 8.01 or Section 8.02 hereof, and apply the deposited money and the proceeds from deposited U.S. Government Obligations to the payment of principal of and interest on the Notes in accordance with the Notes and the Indenture.  Such money and U.S. Government Obligations need not be segregated from other funds except to the extent required by law.

 

Section 8.04. Repayment to Company.  Subject to Section 607 of the Base Indenture, Section 7.01 hereof, Section 8.01 hereof and Section 8.02 hereof, the Trustee will promptly pay to the Company upon request any excess money held by the Trustee at any time and thereupon be relieved from all liability with respect

 

36

 

to such money.  The Trustee will pay to the Company upon request any money held for payment with respect to the Notes that remains unclaimed for two years, provided that before making such payment the Trustee may at the expense of the Company publish once in a newspaper of general circulation in New York City, or send to each Holder entitled to such money, notice that the money remains unclaimed and that after a date specified in the notice (at least 30 days after the date of the publication or notice) any remaining unclaimed balance of money will be repaid to the Company.  After payment to the Company, Holders entitled to such money must look solely to the Company for payment, unless applicable law designates another Person, and all liability of the Trustee with respect to such money will cease.

 

Section 8.05. Reinstatement.  If and for so long as the Trustee is unable to apply any money or U.S. Government Obligations held in trust pursuant to Section 7.01, Section 8.01 or Section 8.02 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s obligations under the Indenture, and the Notes will be reinstated as  though no such deposit in trust had been made.  If the Company makes any payment of principal of or interest on any Notes because of the reinstatement of its obligations, it will be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held in trust.

 

ARTICLE 9
  AMENDMENTS

 

Section 9.01.  Amendments Without Consent of Holders.  With respect to the Notes, the following provisions shall replace in their entirety the provisions identified in Section 901 of the Base Indenture. The Company and the Trustee may modify, amend or supplement the Indenture, without the consent of any Holder of Notes to:

 

(i)            cure any ambiguity, defect, mistake or inconsistency in the Indenture;

 

(ii)           provide for uncertificated Notes in addition to or in place of Certificated Notes;

 

(iii)          comply with Article 5 or Section 4.05 of this Supplemental Indenture;

 

37

 

(iv)          if required by the requirements of the Commission, comply with any requirements of the Commission in connection with the qualification of the Indenture under the Trust Indenture Act;

 

(v)           evidence and provide for the acceptance of appointment by a successor Trustee;

 

(vi)          make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture, of any such Holder;

 

(vii)         add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Company or any Subsidiary Guarantor;

 

(viii)        secure the Notes;

 

(ix)        provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture; and

 

(x)         conform the text of the Indenture, the Notes or Note Guarantees, if any, to any provision of the “Description of Notes” contained in the Final Prospectus Supplement.

 

Section 9.02.  Amendments With Consent Of Holders.  With respect to the Notes, the following provisions shall replace in their entirety the provisions set forth in Section 902 of the Base Indenture.

 

(a)        Except as otherwise provided in Sections 508 and 513 of the Base Indenture hereof and in paragraph (b) below, the Company and the Trustee may amend the Indenture or the Notes with the written consent of the Holders of a majority in principal amount of the outstanding Notes, and the Holders of a majority in principal amount of the outstanding Notes by written notice to the Trustee may waive future compliance by the Company with any provision of the Indenture or the Notes.

 

(b)       Notwithstanding the provisions of clause (a) above, without the consent of each Holder affected, no such modification shall:

 

(i)            change the Stated Maturity of the principal, or any installment of principal or interest, of any Note or change the redemption price;

 

(ii)           reduce the principal amount of or the rate of interest on or any premium payable on redemption of any Note;

 

38

 

(iii)          modify the manner of determination of the rate of interest so as to affect adversely the interest of a Holder or reduce the amount of the principal due and payable upon acceleration;

 

(iv)          change the place or currency of payment of principal of or interest on any Note;

 

(v)           impair the right to institute suit for the enforcement of any payment on or with respect to any Note; or

 

(vi)          modify the provisions relating to modification or amendment of the Indenture, or to waiver of compliance with or defaults of certain restrictive provisions of the Indenture, except to increase the percentage in principal amount of Notes required, or to provide that certain other provisions of the Base Indenture cannot be modified or amended without the consent of the Holder of each note affected thereby.

 

(c)        It is not necessary for Holders to approve the particular form of any proposed amendment, supplement or waiver, but is sufficient if their consent approves the substance thereof.

 

(d)        After an amendment, supplement or waiver under this Section becomes effective, the Company will send to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver.  The Company will send supplemental indentures to Holders upon request.  Any failure of the  Company to send such notice, or any defect therein, will not, however, in any way impair or affect the validity of such supplemental indenture or waiver.

 

Section 9.03.  Effect of Consent.  Section 904 of the Base Indenture is amended by adding to the end of the paragraph the following:

 

“If the amendment, supplement or waiver is of the type requiring the consent of each Holder affected, the amendment, supplement or waiver will bind each Holder that has consented to it and every subsequent Holder of a Note that evidences the same debt as the Note of the consenting Holder.”

 

39

 

ARTICLE 10
  FUTURE GUARANTEES

 

Section 10.01. Future Guarantees.  (a) Any Subsidiaries required to guarantee the Notes pursuant to Section 4.05 hereof shall execute a supplemental indenture in the form of Exhibit B hereof to evidence their Note Guarantee.

 

(b)        Any such Note Guarantee shall be automatically and unconditionally released, without any additional action on the part of a Holder of Notes, upon (i) the release or discharge of the Debt of such Subsidiary Guarantor which resulted in the obligation to guarantee the Notes, (ii) the disposition of the Capital Stock of such Subsidiary Guarantor (including by way of merger or consolidation) such that it no longer is a Subsidiary of the Company, (iii) such Subsidiary Guarantor no longer being a Material Subsidiary of the Company, or (iv) defeasance or discharge of the Notes.

 

(c)        The Company may choose to cause any Subsidiary to guarantee the Notes by executing a supplemental indenture in the form of Exhibit B hereof, and may cause such Note Guarantee to be released at any time, without any additional action on the part of a Holder of Notes, provided that after giving effect to such release, the Company would be in compliance with the provision described under Section 4.05 hereof.

 

(d)        The Trustee shall, at the Company’s expense, execute and deliver such instruments as the Company or such Subsidiary Guarantor may reasonably request to evidence the termination of any Note Guarantee.

 

ARTICLE 11
  MISCELLANEOUS

 

Section 11.01. Provisions of Base Indenture Not Applicable.  Notwithstanding anything to the contrary in the Indenture, Section 307(b), Section  312, Article Twelve and Article Thirteen of the Base Indenture shall not apply with respect to the Notes.

 

Section 11.02. Registration of Transfers and Exchange.  The final paragraph of Section 305 of the Base Indenture shall be amended to provide a clause (iii), which shall read in its entirety: “(iii) if a redemption is to occur after a Regular Record Date but on or before the corresponding Interest Payment Date, to register the transfer or exchange of any Note on or after the Regular Record Date and before the date of redemption.”

 

Section 11.03.  Certain Trustee Matters.  The Recitals of the Company contained herein shall be taken as the statements of the Company, and the Trustee 

 

40

 

assumes no responsibility for their correctness.  The Trustee makes no representations as to the validity or sufficiency of this Supplemental Indenture or the Notes or the proper authorization or the due execution hereof or thereof by the Company.

 

Section 11.04.  Severability.  To the extent permitted by applicable law, in case any one or more of the provisions contained in this Supplemental Indenture or in the Notes shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Supplemental Indenture or of the Notes.

 

Section 11.05. Provisions Binding on Company’s Successors.  All the covenants, stipulations, promises and agreements in this Supplemental Indenture and the Notes shall bind the Company’s successors and assigns whether so expressed or not.

 

Section 11.06.  Effect of Headings.  The Article and Section headings herein and in the Table of Contents are for convenience only and shall not affect the construction hereof.

 

Section 11.07.  No Liability of Directors, Officers, Employees, Incorporators, Members and Stockholders.  No director, officer, employee, incorporator, member or stockholder of the Company or any Subsidiary Guarantor, as such, will have any liability for any obligations of the Company or any Subsidiary Guarantor under the Notes, any Note Guarantee or the Indenture or for any claim based on, in respect of, or by reason of, such obligations.  Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.

 

Section 11.08.  No Adverse Interpretation Of Other Agreements.  The Indenture may not be used to interpret another indenture or loan or debt agreement of the Company or any Subsidiary of the Company and no such indenture or loan or debt agreement may be used to interpret the Indenture.

 

Section 11.09. Governing Law.  THE SUPPLEMENTAL INDENTURE, INCLUDING ANY NOTE GUARANTEES, AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

Section 11.10.  Counterparts.  This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

 

(Signature Pages Follow)

 

41

 

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the day and year first above written.

 

	
 
    	
PHH CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 /s/ Richard   J. Bradfield
    
	
 
    	
 
    	
Name: Richard J.   Bradfield
    
	
 
    	
 
    	
Title: Senior Vice   President and Treasurer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. as Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 /s/ R.   Tarnas
    
	
 
    	
 
    	
Authorized   Signatory
    

 

[Signature Page of Second Supplemental Indenture]

 

42

 

Exhibit A

 

[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS A BENEFICIAL INTEREST HEREIN.](1)

 

PHH CORPORATION

 

7.375% Senior Note Due 2019

 

	
 
    	
[CUSIP] [CINS]
    

 

	
No.
    	
$
    

 

PHH Corporation, a Maryland corporation (the “Company”, which term includes any successor under the Indenture hereinafter referred to), for value received, promises to pay to                      , or its registered assigns, the principal sum of                        DOLLARS ($                     ) [or such other amount as indicated on the Schedule of Exchange Notes attached hereto](2) on September 1, 2019.

 

Interest Rate:   7.375% per annum.

 

Interest Payment Dates:  March 1 and September 1, commencing March 1, 2013.

 

Regular Record Dates:  February 15 and August 15.

 

(1)  Insert in Global Securities only.

 

(2)  Insert text in Global Securities only.

 

A-1

 

Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which will for all purposes have the same effect as if set forth at this place.

 

A-2

 

IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers.

 

	
Date:
    	
PHH CORPORATION
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

A-3

 

(Form of Trustee’s Certificate of Authentication)

 

This is one of the Securities of the series designated herein (7.375% Senior Notes Due 2019) issued under the within-mentioned Indenture.

 

	
 
    	
The Bank of New York Mellon Trust Company, N.A., as Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Authorized Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
Date:
    	
 
    	
 
    	
 
    
					

 

A-4

 

[REVERSE SIDE OF NOTE]

 

PHH CORPORATION

 

7.375% Senior Note Due 2019

 

No.

 

1.                                      Principal and Interest.

 

The Company promises to pay the principal of this Note on September 1, 2019.

 

The Company promises to pay interest on the principal amount of this Note on each interest payment date, as set forth on the face of this Note, at the rate of 7.375% per annum (subject to adjustment as provided below).

 

Interest will be payable semiannually (to the holders of record of the Notes at the close of business on the February 15 or August 15 immediately preceding the interest payment date) on each interest payment date, commencing March 1, 2013.

 

Interest on this Note will accrue from the most recent date to which interest has been paid on this Note (or, if there is no existing default in the payment of interest and if this Note is authenticated between a regular record date and the next interest payment date, from such interest payment date) or, if no interest has been paid, from [the Issue Date].(3)  Interest will be computed on the basis of a 360-day year of twelve 30-day months.

 

The Company will pay interest on overdue principal, premium, if any, and, to the extent lawful, interest at the rate applicable to this Note.

 

Interest not paid when due and any interest on principal, premium or interest not paid when due will be paid to the Persons that are Holders on a special record date pursuant to Section 307 of the Base Indenture.

 

2.                                      Indentures.

 

This is one of the Notes issued and to be issued in one or more series under an Indenture (the “Base Indenture”) dated as of January 17, 2012, between the Company and The Bank of New York Mellon Trust Company, N.A., as 

 

(3)  For Additional Notes may be different.

 

A-5

 

Trustee, as supplemented by the Second Supplemental Indenture (the “Second Supplemental Indenture”) dated as of August 23, 2012 (the Base Indenture, assupplemented by the Second Supplemental Indenture, as amended from time to time, the “Indenture”).  Capitalized terms used herein are used as defined in the Indenture, unless otherwise indicated.  The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act.  The Notes are subject to all such terms, and Holders are referred to the Indenture and the Trust Indenture Act for a statement of all such terms.  To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture will control.

 

The Notes are general unsecured obligations of the Company.  The Indenture limits the original aggregate principal amount of the Notes to $275,000,000, but Additional Notes may be issued pursuant to the Indenture, and the originally issued Notes and all such Additional Notes vote together for all purposes as a single class.

 

3.                                      Redemption and Repurchase; Discharge Prior to Redemption or Maturity.

 

This Note is subject to optional redemption, and may be the subject of an Offer to Purchase, as further described in the Indenture.  There is no sinking fund or mandatory redemption applicable to this Note.

 

If the Company deposits with the Trustee money or U.S. Government Obligations sufficient to pay the then outstanding principal of, premium, if any, and accrued interest on the Notes to redemption or maturity, the Company may in certain circumstances be discharged from the Indenture and the Notes or may be discharged from certain of its obligations under certain provisions of the Indenture.

 

4.                                      Registered Form; Denominations; Transfer; Exchange.

 

The Notes are in registered form, without interest coupons, in denominations of $2,000 and higher integral multiples of $1,000.  A Holder may register the transfer or exchange of Notes in accordance with the Indenture.  The Trustee may require a Holder to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture.  Pursuant to the Indenture, there are certain periods during which the Trustee will not be required to issue, register the transfer of or exchange any Note or certain portions of a Note.

 

A-6

 

5.                                      Defaults and Remedies.

 

If an Event of Default with respect to the Notes shall occur and be continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes may declare the principal and accrued interest of all of the Notes to be due and payable immediately.  If a bankruptcy or insolvency default with respect to the Company occurs and is continuing, the Notes automatically become due and payable.  Holders may not enforce the Indenture or the Notes except as provided in the Indenture.  The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes.  Subject to certain limitations, Holders of a majority in principal amount of the Notes then outstanding may direct the Trustee in its exercise of remedies.

 

6.                                      Amendment and Waiver.

 

Under the Indenture, the Company’s rights and obligations and the rights of the Holders of the Notes may be changed and compliance with certain covenants or a past default may be waived. Subject to certain exceptions, any change requires the consent of the Holders of a majority in principal amount of the outstanding Notes; provided that no such modification shall, without the consent of the Holder of each Note affected thereby change certain rights of the Holders of the Notes specified in the Indenture.  Without the consent of any Holder, the Company and the Trustee may modify, amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect, mistake or inconsistency in the Indenture.

 

7.                                      Authentication.

 

This Note is not valid until the Trustee (or Authenticating Agent) signs the certificate of authentication on the other side of this Note.

 

8.                                      Governing Law.

 

This Note shall be governed by, and construed in accordance with, the laws of the State of New York.

 

9.                                      Abbreviations.

 

Customary abbreviations may be used in the name of a Holder or an assignee, such as:  TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A/ (= Uniform Gifts to Minors Act).

 

The Company will furnish a copy of the Indenture and the Second Supplemental Indenture to any Holder upon written request and without charge.

 

A-7

 

[FORM OF TRANSFER NOTICE](4)

 

FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto

 

	
Insert Taxpayer   Identification No.
    
	
 
    
	
 
    
	
 
    
	
Please   print or typewrite name and address including zip code of assignee
    
	
 
    
	
 
    
	
the within Note   and all rights thereunder, hereby irrevocably constituting and appointing                           attorney   to transfer said Note on the books of the Company with full power of   substitution in the premises.
    
	
 
    
	
 
    

 

 

	
 
    	
 
    
	
 
    	
Signature
    
	
Date:
    	
 
    	
 
    	
 
    
				

 

(4)  Insert in definitive securities only

 

A-8

 

SCHEDULE TO
 PHH CORPORATION 7.375% SENIOR NOTE DUE 2019

 

No.

 

	
Date
    	
 
    	
Amount of decrease
   in principal amount
   of this Global
   Security
    	
 
    	
Amount of increase
   in principal amount
   of this Global
   Security
    	
 
    	
Principal amount of
   this Global Security
   following such
   decrease (or
   increase)
    	
 
    	
Signature of
   authorized officer of
   Trustee
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

A-9

 

Exhibit B

 

SUPPLEMENTAL INDENTURE

 

dated as of                     ,              

 

among

 

PHH CORPORATION,

 

The Subsidiary Guarantor(s) Party Hereto

 

and

 

The Bank of New York Mellon Trust Company, N.A.,
 as Trustee

 

 

7.375% Senior Notes due 2019

 

 

THIS SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), entered into as of                     ,         , among PHH CORPORATION, a Maryland corporation (the “Company”), [insert each Guarantor executing this Supplemental Indenture and its jurisdiction of incorporation] (each an “Undersigned”) and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”).

 

RECITALS

 

WHEREAS, the Company and the Trustee entered into the Indenture (the “Base Indenture”), dated as of January 17, 2011, between the Company and the Trustee, as supplemented by the Second Supplemental Indenture (the “Second Supplemental Indenture”) dated as of August 23, 2012 (the Base Indenture, as supplemented by the Second Supplemental Indenture, the “Indenture”), relating to the Company’s 7.375% Senior Notes due 2019 (the “Notes”);

 

WHEREAS, as a condition to the Trustee entering into the Second Supplemental Indenture and the purchase of the Notes by the Holders, the Company agreed pursuant to the Indenture to cause certain Subsidiaries to provide Guaranties in certain circumstances.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and intending to be legally bound, the parties to this Supplemental Indenture hereby agree as follows:

 

Section 1.  Capitalized terms used herein and not otherwise defined herein are used as defined in the Indenture.

 

Section 2.  Each Undersigned, by its execution of this Supplemental Indenture, agrees to be a Guarantor under the Indenture and to be bound by the terms of the Indenture.

 

Section 2.01.  The Guaranties.  Subject to the provisions of this Section 2, each Guarantor hereby irrevocably and unconditionally guarantees, jointly and severally, on an unsecured basis, the full and punctual payment (whether at Stated Maturity, upon redemption, purchase pursuant to an Offer to Purchase or acceleration, or otherwise) of the principal of, premium, if any, and interest on, and all other amounts payable under, each Note, and the full and punctual payment of all other amounts payable by the Company under the Indenture.  Upon failure by the Company to pay punctually any such amount, each Guarantor shall forthwith on demand pay the amount not so paid at the place and in the manner specified in the Indenture.

 

Section 2.02.  Guarantee Unconditional.  The obligations of each Guarantor hereunder are unconditional and absolute and, without limiting the

 

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generality of the foregoing, will not be released, discharged or otherwise affected by:

 

(1)                                 any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Company under the Indenture or any Note, by operation of law or otherwise;

 

(2)                                 any modification or amendment of or supplement to the Base Indenture or the Second Supplemental Indenture or any Note;

 

(3)                                 any change in the corporate existence, structure or ownership of the Company, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Company or its assets or any resulting release or discharge of any obligation of the Company contained in the Indenture or any Note;

 

(4)                                 the existence of any claim, set-off or other rights which the Guarantor may have at any time against the Company, the Trustee or any other Person, whether in connection with the Indenture or any unrelated transactions, provided that nothing herein prevents the assertion of any such claim by separate suit or compulsory counterclaim;

 

(5)                                 any invalidity or unenforceability relating to or against the Company for any reason of the Indenture or any Note, or any provision of applicable law or regulation purporting to prohibit the payment by the Company of the principal of or interest on any Note or any other amount payable by the Company under the Indenture; or

 

(6)                                 any other act or omission to act or delay of any kind by the Company, the Trustee or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of or defense to such Guarantor’s obligations hereunder.

 

Section 2.03.  Discharge; Reinstatement.  Except as provided in Article 10 of the Second Supplemental Indenture, each Guarantor’s obligations hereunder will remain in full force and effect until the principal of, premium, if any, and interest on the Notes and all other amounts payable by the Company under the Indenture, have been paid in full.  If at any time any payment of the principal of, premium, if any, or interest on any Note or any other amount payable by the Company under the Indenture, is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Company or otherwise, each Guarantor’s obligations hereunder with respect to such payment will be reinstated as though such payment had been due but not made at such time.

 

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Section 2.04.  Waiver by the Guarantors.  Each Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and any notice not  provided for herein, as well as any requirement that at any time any action be taken by any Person against the Company or any other Person.

 

Section 2.05.  Subrogation and Contribution.  Upon making any payment with respect to any obligation of the Company under this Section 2, the Guarantor making such payment will be subrogated to the rights of the payee against the Company with respect to such obligation, provided that the Guarantor may not enforce either any right of subrogation, or any right to receive payment in the nature of contribution, or otherwise, from any other Guarantor, with respect to such payment so long as any amount payable by the Company hereunder or under the Notes remains unpaid.

 

Section 2.06.  Stay of Acceleration.  If acceleration of the time for payment of any amount payable by the Company under the Indenture or the Notes is stayed upon the insolvency, bankruptcy or reorganization of the Company, all such amounts otherwise subject to acceleration under the terms of the Indenture are nonetheless payable by the Guarantors hereunder forthwith on demand by the Trustee or the Holders.

 

Section 2.07.  Limitation on Amount of Guarantee.  Notwithstanding anything to the contrary in this Article, each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent conveyance under applicable fraudulent conveyance provisions of the United States Bankruptcy Code or any comparable provision of state law.  To effectuate that intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of each Guarantor under its Note Guarantee are limited to the maximum amount that would not render the Guarantor’s obligations subject to avoidance under applicable fraudulent conveyance provisions of the United States Bankruptcy Code or any comparable provision of state law.

 

Section 2.08.  Execution and Delivery of Guarantee.  The execution by each Guarantor of this supplemental indenture evidences the Note Guarantee of such Guarantor.

 

Section 2.09.  Release of Guarantee.  The Note Guarantee of a Guarantor will be released in accordance with the provisions of Article 10 of the Second Supplemental Indenture

 

Section 3.  This Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York.

 

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Section 4.  This Supplemental Indenture may be signed in various counterparts, which together will constitute one and the same instrument.

 

Section 5.  This Supplemental Indenture is an amendment supplemental to the Indenture, and the Base Indenture, the Second Supplemental Indenture and this Supplemental Indenture will henceforth be read together.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

 

 

	
 
    	
PHH Corporation,   as Issuer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
[GUARANTOR]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
The Bank of New   York Mellon Trust Company, N.A., as Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

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