Document:

TGT_Exhibit_10S_FY2014_10-K

Exhibit (10)S

DIP FACILITY TERM SHEET
Dated: January 14, 2015
WHEREAS, Target Canada Co., a Nova Scotia unlimited company, has requested that the DIP Lender (as defined below) provide it funding in order to assist with certain restructuring  proceedings under the Companies’ Creditors Arrangement Act (the “CCAA”) to be commenced before the Ontario Superior Court of Justice (the “Court”) involving itself and its subsidiaries in accordance with the terms set out herein;
NOW THEREFORE, the parties, in consideration of the foregoing and the mutual agreements contained herein (the receipt and sufficiency of which are hereby acknowledged), agree as follows:
	
						
	DIP BORROWER
	Target Canada Co. and its subsidiaries (collectively, the “Borrower”)

	DIP LENDER
	Target Corporation (the “DIP Lender”)

	STATUS OF EXISTING FACILITY
	Effective upon the date upon which the Borrower obtains the Initial Order under the CCAA (the “Filing Date”), the Borrower acknowledges and agrees the amount owing to Nicollet Enterprise 1 S.à r.l. (the “Parent”) pursuant to the Loan Facility Agreement dated as of May 18, 2011, between Borrower and Parent (f/k/a TSS S.à r.l.), as amended on March 28, 2014, on October 30, 2014 and on January 2, 2015 (as so amended, the “Existing Credit Agreement”) is CDN $3,068,729,437.67 (together with fees, costs, expenses and other charges now or hereafter payable by the Borrower pursuant thereto), and is subject to the stay of proceedings contained in the Initial Order, but is owing without offset, right of compensation, defence or counterclaim of any nature, kind or description whatsoever.  Notwithstanding the foregoing, Borrower and Parent have entered into a Subordination and Postponement Agreement dated as of January 12, 2015 pursuant to which the claims and rights of the Parent under the Existing Credit Agreement may be subordinated to other Proven Claims in the CCAA proceeding, all as more fully set forth therein.

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	USE OF PROCEEDS AND PROJECTED CASH FLOWS
	The Borrower has provided to the DIP Lender prior to the execution of this Term Sheet the cash flow projections (as the same may be amended from time to time as described below, the “Cash Flow Projections”) set out in Schedule A reflecting the projected cash requirements of the Target Canada Group for the 13 week period commencing on the Filing Date calculated on a weekly basis.  The expenditures set out in the Cash Flow Projections may not be exceeded without the consent of the DIP Lender other than a cumulative variance in the actual  expenditures from the Filing Date forward in an aggregate amount less than 20% which variance has been approved by the Monitor and nonetheless still subject to the Maximum Amount (as defined below), 

	 
	Every four weeks, the Borrower will provide the DIP Lender with an updated weekly budget of the following 13 week period in reasonably similar form to the Cash Flow Projections attached as Schedule A hereto (as updated, the “Updated Cash Flow Projections”) describing the Borrower’s updated cash flow requirements which shall be prepared by the Borrower in good faith and approved by the Monitor. Updated Cash Flow Projections which have been approved by the Monitor and do not project the DIP Facility exceeding the Maximum Amount then shall be the Cash Flow Projections for the purpose of this Term Sheet.

	 
	Advances under the DIP Facility (“DIP Advances”) shall only be used for working capital and general corporate purposes of the Borrower and its subsidiaries while under CCAA protection to pay those expenses contemplated by the Initial Order, any other Restructuring Court Order (as defined below) and in conformance with the Cash Flow Projections (the “Contemplated Expenses”). 

	 
	All material expenditures by the Borrower shall be consistent with Cash Flow Projections and shall be subject in each case to the overall limit on the availability of DIP Advances imposed by the Maximum Amount.

	 
	Notwithstanding anything to the contrary herein, none of the proceeds of the DIP Advances may be used in connection with (a) any investigation (including discovery proceedings), initiation or prosecution of any claims, causes of action, motions, applications, actions, or other litigation against the DIP Lender, or (b) the initiation or prosecution of any claims, causes of action, motions, applications, actions, or other 

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	litigation against the DIP Lender in such capacity in respect of this Term Sheet.

	MAXIMUM AMOUNT
	The maximum amount (“Maximum Amount”) available under the credit facility (the “DIP Facility”) will be USD $175,000,000.

	MATURITY DATE
	The earlier of (i) the date on which the stay of proceedings pursuant to the Initial Order, as amended from time to time, finally expires without being extended, (ii) the date on which the CCAA proceedings are terminated or (iii) January 15, 2016, or such later date as may be agreed to in writing by the DIP Lender, in its sole discretion (the “Maturity Date”).

	 
	The commitment in respect of the DIP Facility shall expire on the Maturity Date and all amounts outstanding under the DIP Facility (the “Obligations”) shall be repaid in full on the Maturity Date without the DIP Lender being required to make demand upon the Borrower or to give notice that the DIP Facility has expired and the Obligations are due and payable, subject to the order of the Court. 

	DIP FACILITY
	The DIP Facility will be a non-revolving term multi-draw credit facility up to the Maximum Amount, and will be available until the Maturity Date, subject to and upon the terms and conditions set out in this Term Sheet and the DIP Credit Documentation.  All DIP Advances shall be deposited into the Borrower’s existing bank accounts at Bank of America (the “Borrower’s Accounts”) and withdrawn strictly to pay those Contemplated Expenses and otherwise in accordance with the terms hereof and the Initial Order.  Each Borrower under the DIP Facility shall be jointly and severally liable for the amounts borrowed by any Borrower and interest thereon.

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	INTEREST RATE
	The Borrower shall pay the DIP Lender interest (“Interest”) on the principal outstanding amount of the DIP Advances and all other Obligations from time to time owing hereunder from the date of each DIP Advance or the date such other Obligation arises, as applicable, both before and after maturity, demand, default, or judgment and until actual payment in full, at the rate of 5% per annum payable on the Maturity Date; provided, however, that upon the occurrence of an Event of Default that is continuing the rate shall automatically become 7% per annum until the Maturity Date.
All payments under or in respect of the DIP Facility shall be made free and clear of any withholding tax unless the Borrower is required to make such withholding under applicable law. If such withholding is required, any payments under the DIP Facility shall be made net of applicable withholding and there shall be no additional amounts payable by the Borrower in respect of withholding tax.

	 
	For the purpose of the Interest Act (Canada), the yearly rate of interest applicable to amounts owing under this note will be calculated on the basis of a 365 day year.

	 
	If any provision of this Term Sheet or the DIP Credit Documentation would obligate the Borrower to make any payment of interest or other amount payable to the DIP Lender in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by the DIP Lender of interest at a criminal rate (as construed under the Criminal Code (Canada)), then notwithstanding that provision, that amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by law or result in a receipt by the DIP Lender of interest at a criminal rate.

	DIP SECURITY
	All Obligations of the Borrower under or in connection with the DIP Facility and any of the DIP Credit Documentation shall be secured by a Court Ordered Charge on all real and personal property now leased, owned or hereafter acquired by the Borrower (the “DIP Lender’s Charge”) without need for any further loan or security documentation or filings in any personal property security registration regime or real property system.

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	MANDATORY REPAYMENTS
	1.
	Unless otherwise agreed by the DIP Lender, the Borrower shall make the following mandatory prepayments of the outstanding principal amount of the DIP Advances, if any, at the time of receipt of the net cash proceeds described below (subject in each case to payment or reserves for Court Ordered Charges, taxes and payment of Permitted Priority Liens):

	 
	 
	(a)    
	Prepayments in an amount equal to (i) 100% of the net cash proceeds received from the incurrence of indebtedness by the Borrower or any of its subsidiaries which, for greater certainty, may only be incurred with the consent of the DIP Lender, and (ii) 100% of the net cash proceeds from the receipt of any extraordinary income or receipts (including, without limitation, insurance proceeds (excluding business interruption, workers compensation or liability insurance), tax refunds and similar receipts outside of the ordinary course) by the Borrower or any of its subsidiaries; and
	 

	 
	 
	(b)
	Prepayments in an amount equal to 100% of the net cash proceeds of any sale or other disposition (including as a result of casualty or condemnation) by the Borrower or any of its subsidiaries of any assets other than inventory   (whether such inventory is sold or disposed of through return to the vendor or wholesaler, the liquidation of the inventory by the Agent once appointed by the Court or otherwise).
	 

	 
	2.
	All net cash proceeds payable to the DIP Lender from any of the events described above shall be applied, except as otherwise agreed to by the DIP Lender in writing, as follows:

	 
	 
	(a)
	first, to pay accrued and unpaid Interest on the Obligations under the DIP Facility;
	 

	 
	 
	(b)
	second, to repay any principal amounts outstanding in respect of the DIP Facility; and

	 

	 
	 
	(c)
	third, the balance to be paid to the Borrower.

	 

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	Any repayment of principal hereunder will not increase or decrease the remaining amount available under the DIP Facility then available under this Term Sheet.

	ADDITIONAL CONDITIONS PRECEDENT TO DIP FUNDING TO THE BORROWER
	The DIP Lender’s obligation to make any DIP Advance hereunder  is subject to, and conditional upon, all of the following conditions precedent being satisfied at the time each such DIP Advance is to be made:

	 
	1.
	The Borrower shall have commenced proceedings under the CCAA and an Initial Order in form and substance acceptable to the DIP Lender, acting reasonably, shall have been entered by the Court (as amended from time to time, the “Initial Order”) and shall be in full force and effect and shall have not been stayed, reversed, vacated, rescinded, modified or amended in any respect materially adversely affecting the DIP Lender solely in its capacity as DIP Lender, unless otherwise agreed by the DIP Lender, acting reasonably.

	 
	2.
	There shall not exist any continuing Event of Default or Pending Event of Default as hereinafter defined (including any Event of Default or Pending Event of Default that would result from making the contemplated DIP Advance).

	 
	3.
	Other than the proceedings contemplated by the Initial Order and regulatory compliance matters, there shall not exist in Canada in respect of the Borrower or any subsidiary any action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental authority which is not stayed by the Initial Order. 

	 
	4.
	Each Restructuring Court Order (defined below) shall be in full force and effect and not have been stayed, reversed, vacated, rescinded, modified or amended in any respect materially adversely affecting the DIP Lender, solely in its capacity as DIP Lender unless otherwise agreed by the DIP Lender, acting reasonably.

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	5.
	The Borrower shall have complied in all material respects with all applicable laws, regulations and policies in relation to its business and the Initial Order, except to the extent stayed or excused under applicable provisions of the CCAA or any Restructuring Court Order (defined below).

	 
	6.
	There shall be no Liens ranking ahead of the DIP Lender’s Charge, except for the other Court Ordered Charges and Permitted Priority Liens arising by operation of law in the ordinary course of business without any contractual grant of security.

	AFFIRMATIVE COVENANTS
	The Borrower covenants and agrees, and agrees to cause each of its subsidiaries, to do the following:

	 
	1.
	Allow the DIP Lender and its financial advisor(s) (the “DIP Advisors”) full access to the books and records of the Target Canada Group on reasonable notice and during normal business hours and cause management thereof to fully co-operate with all reasonable requests of the DIP Advisors.

	 
	2.
	Provide to the DIP Lender an oral or brief written weekly status update and plan regarding the restructuring process and information which may otherwise be confidential subject to same being maintained as confidential by the DIP Lender and the DIP Advisors, subject to usual exceptions.

	 
	3.
	Use reasonable efforts to keep the DIP Lender and the DIP Advisors apprised on a timely basis of all material developments with respect to the activities and affairs of the Target Canada Group.

	 
	4.
	Deliver to the DIP Lender such information as may from time to time be reasonably requested by the DIP Lender or the DIP Advisors (including any information pertaining to non-debtor affiliates and/or subsidiaries of the Target Canada Group), at the reasonable times requested.

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	5.
	Consult with the DIP Lender with respect to the asset sale and disposition process established in the CCAA proceedings (the “Approved Sale Process”), and any amendments thereto, and deliver to the DIP Lender draft copies of any court materials in respect of the CCAA Proceeding (including, without limitation, any notices of motion, affidavits, other evidence, and forms of orders) which the Borrower intends to file with the Court for review and comment by the DIP Lender no later than 2 Business Days prior to the date on which the Borrower serves and files such court materials (or as soon as possible in exigent circumstances where it is not reasonably practicable to provide copies 2 Business Days in advance).

	 
	6.
	Use the proceeds of the DIP Facility only for the purposes of working capital and general corporate purposes of the Borrower consistent with the restrictions set out herein.

	 
	7.
	Every week (by noon Central time on the 5th Business Day for the preceding week) provide to the DIP Lender and DIP Advisors the following:

	 
	 
	(i)
	statement of receipts and disbursements for the past week, showing variances on a weekly and cumulative basis (with reference to the Cash Flow Projections) and, for all material variances (favourable or unfavourable) for any line item, an explanation of such variance;

	 

	 
	 
	(ii)
	statement of accounts receivable and accounts payable; and

	 

	 
	 
	(iii)
	asset sales process update report regarding the Approved Sale Process  from the Financial Advisor (defined below), senior management and/or the Monitor;

	 

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	8.
	Maintain all cash and cash equivalents, and deposit all proceeds of receivables of the Borrower in the Borrower’s Accounts unless otherwise agreed by the DIP Lender.

	 
	9.
	Comply with the provisions of the Court orders made in the CCAA Proceedings (the “Restructuring Court Orders” and each a “Restructuring Court Order”).

	 
	10.
	Forthwith notify the DIP Lender and DIP Advisors of the occurrence of any Event of Default or Pending Event of Default, or of any event or circumstance that may constitute a material adverse change from the Cash Flow Projections.

	 
	11.
	Duly and punctually pay or cause to be paid to the DIP Lender all principal and interest payable by it under this Term Sheet and under any other DIP Credit Documentation on the dates, at the places and in the amounts and manner set forth herein.

	 
	12.
	Comply in all material respects with all applicable laws, rules and regulations applicable to their businesses in the CCAA Proceedings, including, without limitation, environmental laws.

	 
	13.
	Retain Lazard Freres & Co. LLC as financial advisor (the “Financial Advisor”), such retention to be ratified by the Court, on terms and conditions acceptable to the Borrower and the DIP Lender acting reasonably, to conduct the Approved Sale Process in the CCAA Proceedings in accordance with a plan approved by the Monitor, the DIP Lender and the Court as it may be amended from time to time in accordance with the terms hereof.

	 
	14.
	Conclude substantially all “going out of business” sales and disposition of its retail inventory by June 1, 2015 or as may otherwise be agreed by Monitor and DIP Lender.

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	NEGATIVE COVENANTS
	The Borrower covenants and agrees, and covenants and agrees to cause its subsidiaries, not to do the following other than with the prior written consent of the DIP Lender:

	 
	1.
	Transfer, lease or otherwise dispose of all or any part of its assets outside the ordinary course of business (but excluding disposition of retail inventory by the Agent through “going out of business sales” or similar sales) except in accordance with the Initial Order and Approved Sale Process without the prior written consent of the DIP Lender. For greater certainty, in the case of any transfer, lease or disposition of any property, assets or undertaking of any of the Borrower or any subsidiaries thereof, all proceeds of such transfer, lease or disposition shall be subject to the provisions herein under “Mandatory Repayments” to the extent applicable and subject to the exceptions contained therein.

	 
	2.
	Make any payment of principal or interest in respect of existing (pre-Filing Date) indebtedness (other than indebtedness secured by Permitted Priority Liens) or declare or pay any dividends except as contemplated by the Cash Flow Projections and as approved by the Monitor and the DIP Lender or the Court, it being understood that such covenant shall not require consent for critical supplier/service provider payments made in accordance with the Initial Order.

	 
	3.
	Create or permit to exist indebtedness for borrowed money other than existing (pre-Filing Date) debt and debt contemplated by this DIP Facility.

	 
	4.
	Enter into or amend any material transaction, agreement, contract, guarantee, or arrangement of any kind or nature outside the ordinary course of business, or make any payments, except for those transactions, agreements, contracts, arrangements or payments which are contemplated by the Cash Flow Projections, effected pursuant to the wind down and liquidation process and approved by the Monitor or approved by the DIP Lender.

	 
	5.
	Enter into or agree to enter into any investments other than cash equivalents or acquisitions of any kind, direct or indirect, in any business.

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	6.
	Create or permit to exist any Liens on any of its properties or assets other than the Court Ordered Charges and Permitted Priority Liens. 

	 
	7.
	Amalgamate, consolidate with or merge into, or enter into any similar transaction with any other entity other than in accordance with any Plan of Compromise or Arrangement.

	 
	8.
	Amend its corporate charter or take any action to cause the dissolution of the Borrower entity other than in accordance with any Plan of Compromise or Arrangement.

	 
	9.
	Seek or obtain any Restructuring Court Order that materially adversely affects the DIP Lender solely in its capacity as DIP Lender except with the prior written consent of the DIP Lender.

	EVENTS OF DEFAULT
	The occurrence of any one or more of the following events shall constitute an event of default (“Event of Default”) under this Term Sheet

	 
	 
	(a)
	breach by the Borrower in the observance or performance of any material provision, covenant (affirmative or negative) or agreement contained in this Term Sheet or other DIP Credit Documentation and such breach shall continue unremedied for more than 10 Business Days after the Borrower becomes aware of such breach (or such other period as may be mutually agreed); provided, however, that a breach of the reporting requirements under “Affirmative Covenants” Section 7 must be remedied within 3 Business Days after such report was due; 

	 

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	(b)
	(i) any order shall be entered reversing, amending, varying, supplementing, staying, vacating or otherwise modifying in any respect in a manner materially affecting the DIP Lender any Restructuring Court Order without the prior written consent of the DIP Lender, (ii) any Restructuring Court Order shall cease to be in full force and effect in a manner that has a material adverse effect on the interests of the DIP Lender, or (iii) Borrower or any subsidiary shall fail to comply in any material respect that has an adverse affect on the interests of the DIP Lender with any Restructuring Court Order;

	 

	 
	 
	(c)
	this Term Sheet or any other DIP Credit Documentation shall cease to be effective or shall be contested by the Borrower;

	 

	 
	 
	(d)
	any Restructuring Court Order is issued by the Court (or any other court of competent jurisdiction) that materially adversely affects the DIP Lender, without the prior written consent of the DIP Lender;

	 

	 
	 
	(e)
	the CCAA proceedings are terminated or dismissed or converted to a receivership, proposal in bankruptcy or bankruptcy proceeding or any order is granted by the Court (or any court of competent jurisdiction) granting relief from the stay of proceedings in the Initial Order (as extended from time to time until the Maturity Date with the consent of the DIP Lender, which the DIP Lender will consent to provided that no Event of Default has occurred hereunder, the “Stay of Proceedings”), unless agreed by the DIP Lender in its sole discretion;

	 

	 
	 
	(f)
	the Stay of Proceedings expires without being extended;

	 

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	(g)
	any plan of compromise or arrangement is proposed, filed or sanctioned by the Court in a form and in substance that is not acceptable to the DIP Lender if such plan of compromise or arrangement does not either provide for the repayment of the obligations under the DIP Facility in full by the Maturity Date or designate the DIP Lender as unaffected by such plan;

	 

	 
	 
	(h)
	any Updated Cash Flow Projections delivered to the DIP Lender reflect a material adverse change to the Borrower or there occurs any negative variance greater than 20% for all expenditures, on a cumulative basis from the Filing Date as compared to the Cash Flow Projections, excluding timing variances; 

	 

	 
	 
	(i)
	the Borrower makes any material payments of any kind not permitted by the Initial Order or the Term Sheet;

	 

	 
	 
	(j)
	there occurs a material amendment, waiver, modification or alteration to the Approved Sale Process without the prior written consent of the Monitor or approval of the Court;

	 

	 
	 
	(k)
	if one or more of the Monitor, counsel to the Monitor, counsel to the Borrower, or the Financial Advisor withdraws its services on behalf of the Borrower and/or terminates its engagement with the Borrower in accordance with the provisions of the Initial Order or otherwise, and an alternative professional is not appointed (which, in the case of the Financial Advisor or Monitor, any such alternative professional must be approved by the DIP Lender), or if alternative arrangements are not made acceptable to the DIP Lender, in each case, within 5 Business Days;

	 

	 
	 
	(l)
	failure of the Borrower to pay principal or interest when due under this Term Sheet or any other DIP Credit Documentation;

	 

	 
	 
	(m)
	borrowings under the DIP Facility exceed the Maximum Amount.

	 

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	REMEDIES
	Upon the occurrence of an Event of Default, the DIP Lender may, upon three (3) Business Days’ prior written notice to the Borrower and the Monitor, (i) terminate the DIP Facility, (ii) apply to the Court for the appointment of an interim receiver or a receiver and manager of the undertaking, property and assets of the Borrower or for the appointment of a trustee in bankruptcy of the Borrower, (iii) exercise the powers and rights of a secured party under the Personal Property Security Act (Ontario) or any legislation of similar effect applicable to the DIP Lender’s Charge, and (iv) exercise all such other rights and remedies under the DIP Credit Documentation and the Restructuring Court Orders.

	FURTHER ASSURANCES
	The Borrower shall at its expense, from time to time do, execute and deliver, or will cause to be done, executed and delivered, all such further acts, documents (including, without limitation, certificates, declarations, affidavits, reports and opinions) and things as the DIP Lender may reasonably request for the purpose of giving effect to this Term Sheet and the DIP Lender’s Charge, perfecting, protecting and maintaining the Liens created by the DIP Lender’s Charge or establishing compliance with the representations, warranties and conditions of this Term Sheet or any other DIP Credit Documentation.

	CURRENCY
	Unless otherwise specified herein, all references to dollar amounts (without further description) shall mean Canadian Dollars.  All payments hereunder shall be made in U.S. Dollars.

	ENTIRE AGREEMENT
	This Term Sheet, including the Schedules hereto and the DIP Credit Documentation, constitutes the entire agreement between the parties relating to the subject matter hereof.  To the extent that there is any inconsistency between this Term Sheet and any of the other DIP Credit Documentation, this Term Sheet shall govern.

	AMENDMENTS, WAIVERS, ETC.
	No waiver or delay on the part of the DIP Lender in exercising any right or privilege hereunder or under any other DIP Credit Documentation will operate as a waiver hereof or thereof unless made in writing and signed by an authorized officer of the DIP Lender.  Any consent to be provided by the DIP Lender shall be granted or withheld solely in its capacity as and having regard to its interests as DIP Lender.

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	ASSIGNABILITY
	The DIP Lender’s rights and obligations under this Term Sheet are fully assignable, to an affiliate of the DIP Lender or with the consent of the Borrower, acting reasonably, before an Event of Default to any other entity and are freely assignable after an Event of Default has occurred and is continuing.  The Target Canada Group hereby consents to the disclosure of any confidential information in respect of the Target Canada Group to any potential assignee provided such potential assignee agrees in writing to keep such information confidential.

	SEVERABILITY
	Any provision in any DIP Credit Documentation which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

	COUNTERPARTS AND FACSIMILE SIGNATURES
	This Term Sheet may be executed in any number of counterparts and by facsimile or e-mail transmission, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same instrument.  Any party may execute this Term Sheet by signing any counterpart of it.

	GOVERNING LAW AND JURISDICTION
	This Term Sheet shall be governed by, and construed in accordance with, the laws of the Province of Ontario and the federal laws of Canada applicable therein.  The Borrower irrevocably submits to the non-exclusive courts of the Province of Ontario, waives any objections on the ground of venue or forum non conveniens or any similar grounds, and consents to service of process by mail or in any other manner permitted by relevant law.

	ADDITIONAL DEFINITIONS
	Capitalized terms not otherwise defined herein shall have the following meanings:

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	“Agent” means the party that shall liquidate the inventory and furniture, fixtures and equipment of the Borrower and its subsidiaries during the CCAA proceedings pursuant to an agency agreement to be approved by the Court.
“Business Day” means each day other than a Saturday or Sunday or a statutory or civic holiday that banks are open for business in both Toronto, Ontario, Canada and Minneapolis, Minnesota, United States.
“Court Ordered Charges” means charges granted by the Court over the assets, properties and undertakings of the Borrower pursuant to the Initial Order and any other Restructuring Court Order, which shall include, without limitation, an administration charge, DIP Lender's Charge, directors' charge, Agent’s charge and key employee retention plan charge.

	 
	 
	“DIP Credit Documentation” means this Term Sheet, the Order of the Court approving it and any other definitive documentation in respect of the DIP Facility that are in form and substance satisfactory to the DIP Lender.

	 
	 
	“Filing Date” means the date upon which the Borrower obtains the Initial Order under the CCAA.

	 
	 
	“Liens” means all mortgages, pledges, charges, encumbrances, hypothecs, liens and security interests of any kind or nature whatsoever.

	 
	 
	“Pending Event of Default” means an event that, but for the requirement for the giving of notice, lapse of time, or both, would constitute an Event of Default.

	 
	 
	“Permitted Priority Liens” means: (i) specific purchase-money security interests or capital leases; (ii) statutory superpriority deemed trusts and liens for unpaid employee source deductions; (iii) liens for unpaid municipal property taxes or utilities that are given first priority over other liens by statute; and (iv) such other permitted liens as may be agreed to in writing by the DIP Lender.

	 
	 
	“Target Canada Group” means the Borrower and its direct and indirect subsidiaries.

[REMAINDER OF PAGE INTENTIONALLY BLANK]

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IN WITNESS HEREOF, the parties hereby execute this Term Sheet as of the date first written above.
	
				
	 
	 
	TARGET CANADA CO., as Borrower

	By:
	/s/ Aaron E. Alt

	 
	Name:   Aaron E. Alt

	 
	Title:     Chief Executive Officer, President and Treasurer

	
				
	 
	 
	TARGET CORPORATION, as DIP Lender

	By:
	/s/ Sara J. Ross

	 
	Name:   Sara J. Ross

	 
	Title:     Assistant Treasurer

	
				
	 
	 
	TARGET CANADA HEALTH CO., as Borrower

	By:
	/s/ Mark J. Wong

	 
	Name:   Mark J. Wong

	 
	Title:     Vice President and Secretary

	
				
	 
	 
	TARGET CANADA MOBILE GP CO., as Borrower

	By:
	/s/ Mark J. Wong

	 
	Name:   Mark J. Wong

	 
	Title:     President and Secretary

	
				
	 
	 
	TARGET CANADA PHARMACY (BC) CORP., as Borrower

	By:
	/s/ Mark J. Wong

	 
	Name:   Mark J. Wong

	 
	Title:     Vice President and Secretary

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	TARGET CANADA PHARMACY (ONTARIO) CORP., as Borrower

	By:
	/s/ Mark J. Wong

	 
	Name:   Mark J. Wong

	 
	Title:     Vice President and Secretary

	
				
	 
	 
	TARGET CANADA PHARMACY CORP., as Borrower

	By:
	/s/ Mark J. Wong

	 
	Name:   Mark J. Wong

	 
	Title:     Vice President and Secretary

	
				
	 
	 
	TARGET CANADA PHARMACY (SK)  
CORP., as Borrower

	By:
	/s/ Mark J. Wong

	 
	Name:   Mark J. Wong

	 
	Title:     Vice President and Secretary

	
				
	 
	 
	TARGET CANADA PHARMACY FRANCHISING LP, as Borrower
by its general partner, TARGET CANADA HEALTH CO.

	By:
	/s/ Mark J. Wong

	 
	Name:   Mark J. Wong

	 
	Title:     Vice President and Secretary

	
				
	 
	 
	TARGET CANADA MOBILE LP, as Borrower
by its general partner, TARGET CANADA MOBILE GP CO.

	By:
	/s/ Mark J. Wong

	 
	Name:   Mark J. Wong

	 
	Title:     Vice President and Secretary

SCHEDULE A 
 
CASH FLOW PROJECTIONS
See attached.

	
																																													
	13-Week Cash Flow Forecast
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	($ in 000's CAD)
	 
	Wk-1
	Wk-2
	Wk-3
	Wk-4
	Wk-5
	Wk-6
	Wk-7
	Wk-8
	Wk-9
	Wk-10
	Wk-11
	Wk-12
	Wk-13
	 
	13-Week

	Week Ending ==>
	 
	17-Jan
	24-Jan
	31-Jan
	07-Feb
	14-Feb
	21-Feb
	28-Feb
	07-Mar
	14-Mar
	21-Mar
	28-Mar
	04-Apr
	11-Apr
	 
	Total

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	OPERATING RECEIPTS
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	Sales Receipts
	 
	$
	8,300
	

	$
	43,921
	

	$
	43,125
	

	$
	51,769
	

	$
	59,167
	

	$
	45,359
	

	$
	42,220
	

	$
	47,832
	

	$
	46,518
	

	$
	46,541
	

	$
	31,838
	

	$
	24,093
	

	$
	17,122
	

	 
	$
	507,804
	

	Other Receipts
	 
	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	 
	—
	

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	TOTAL RECEIPTS
	 
	8,300
	

	43,921
	

	43,125
	

	51,769
	

	59,167
	

	45,359
	

	42,220
	

	47,832
	

	46,518
	

	46,541
	

	31,838
	

	24,093
	

	17,122
	

	 
	507,804
	

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	OPERATING DISBURSEMENTS
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	Employee Payments
	 
	16,085
	

	303
	

	17,393
	

	303
	

	16,321
	

	305
	

	17,161
	

	285
	

	14,376
	

	269
	

	14,944
	

	250
	

	13,077
	

	 
	111,072
	

	Rent & Occupancy
	 
	—
	

	9,558
	

	354
	

	6,558
	

	608
	

	6,812
	

	608
	

	6,812
	

	791
	

	6,995
	

	791
	

	6,995
	

	791
	

	 
	47,669
	

	DC / Logistics
	 
	10,094
	

	18,941
	

	2,235
	

	7,396
	

	2,211
	

	7,073
	

	1,181
	

	6,235
	

	—
	

	5,625
	

	—
	

	5,625
	

	—
	

	 
	66,616
	

	Normal Course Taxes
	 
	4,400
	

	12,871
	

	437
	

	11,474
	

	328
	

	18,812
	

	328
	

	11,365
	

	262
	

	20,491
	

	262
	

	262
	

	262
	

	 
	81,555
	

	Professional Fees
	 
	—
	

	3,747
	

	—
	

	3,810
	

	—
	

	3,977
	

	—
	

	3,047
	

	—
	

	2,477
	

	—
	

	2,477
	

	—
	

	 
	19,536
	

	All Other
	 
	5,429
	

	9,313
	

	4,879
	

	3,821
	

	5,080
	

	4,758
	

	5,153
	

	4,161
	

	4,869
	

	3,684
	

	3,728
	

	3,451
	

	3,328
	

	 
	61,654
	

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	Current Operating Disbursements
	 
	36,007
	

	54,733
	

	25,299
	

	33,363
	

	24,547
	

	41,737
	

	24,431
	

	31,905
	

	20,298
	

	39,541
	

	19,725
	

	19,060
	

	17,458
	

	 
	388,102
	

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	OPERATING CASH FLOW
	 
	(27,707
	)
	(10,811
	)
	17,826
	

	18,406
	

	34,620
	

	3,622
	

	17,789
	

	15,927
	

	26,220
	

	7,000
	

	12,113
	

	5,033
	

	(336
	)
	 
	119,702
	

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	INTERCOMPANY DISBURSEMENTS
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	Intercompany Services
	 
	—
	

	—
	

	—
	

	6,247
	

	—
	

	—
	

	—
	

	8,329
	

	—
	

	—
	

	—
	

	—
	

	10,411
	

	 
	24,986
	

	DIP Interest
	 
	—
	

	—
	

	—
	

	—
	

	—
	

	129
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	 
	129
	

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	Intercompany Disbursements
	 
	—
	

	—
	

	—
	

	6,247
	

	—
	

	129
	

	—
	

	8,329
	

	—
	

	—
	

	—
	

	—
	

	10,411
	

	 
	25,116
	

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	NET CASH FLOW
	 
	$
	(27,707
	)
	$
	(10,811
	)
	$
	17,826
	

	$
	12,160
	

	$
	34,620
	

	$
	3,493
	

	$
	17,789
	

	$
	7,599
	

	$
	26,220
	

	$
	7,000
	

	$
	12,113
	

	$
	5,033
	

	$
	(10,747
	)
	 
	$
	94,586
	

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	WEEKLY LIQUIDITY
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	Beginning Bank Cash Balance
	 
	$
	1,000
	

	$
	13,293
	

	$
	10,000
	

	$
	10,000
	

	$
	10,000
	

	$
	27,086
	

	$
	30,579
	

	$
	48,369
	

	$
	55,967
	

	$
	82,187
	

	$
	89,187
	

	$
	101,300
	

	$
	106,333
	

	 
	$
	1,000
	

	Weekly Cash Flow
	 
	(27,707
	)
	(10,811
	)
	17,826
	

	12,160
	

	34,620
	

	3,493
	

	17,789
	

	7,599
	

	26,220
	

	7,000
	

	12,113
	

	5,033
	

	(10,747
	)
	 
	94,586
	

	DIP Funding
	 
	40,000
	

	7,519
	

	(17,826
	)
	(12,160
	)
	(17,534
	)
	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	 
	—
	

	Total
	 
	13,293
	

	10,000
	

	10,000
	

	10,000
	

	27,086
	

	30,579
	

	48,369
	

	55,967
	

	82,187
	

	89,187
	

	101,300
	

	106,333
	

	95,586
	

	 
	95,586
	

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	FX Translation
	 
	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	 
	—
	

	Change in Float
	 
	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	—
	

	 
	—
	

	Ending Bank Cash Balance
	 
	$
	13,293
	

	$
	10,000
	

	$
	10,000
	

	$
	10,000
	

	$
	27,086
	

	$
	30,579
	

	$
	48,369
	

	$
	55,967
	

	$
	82,187
	

	$
	89,187
	

	$
	101,300
	

	$
	106,333
	

	$
	95,586
	

	 
	$
	95,586
	

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 
	 

	Ending DIP Balance
	 
	$
	40,000
	

	$
	47,519
	

	$
	29,693
	

	$
	17,534
	

	$
	—
	

	$
	—
	

	$
	—
	

	$
	—
	

	$
	—
	

	$
	—
	

	$
	—
	

	$
	—
	

	$
	—
	

	 
	$
	—TGT_Exhibit_10V_10-K_FY2014

Exhibit (10)V

 
Target Corporation 2011 Long-Term Incentive Plan

AMENDED AND RESTATED EXECUTIVE
NON-QUALIFIED STOCK OPTION AGREEMENT
(U.S. and Canada)

THIS NON-QUALIFIED STOCK OPTION AGREEMENT (the “Agreement”) is made in Minneapolis, Minnesota as of the date of grant (the “Grant Date”) set forth in the award letter (the “Award Letter”) by and between the Company and the person (the “Executive”) identified in the Award Letter.  This award of Options (collectively, may be referred to as the “Option”), provided to you as a Service Provider, is being issued under the Target Corporation 2011 Long-Term Incentive Plan (the “Plan”), subject to the following terms and conditions.

1.    Definitions.  Except as otherwise provided in this Agreement, the defined terms used in this Agreement shall have the same meaning as in the Plan.  The term “Committee” shall also include those persons to whom authority has been delegated under the Plan.  

2.    Grant of Option.  Subject to the relevant terms of the Plan and this Agreement, as of the Grant Date, the Company has granted the Executive the number of Options set forth in the Award Letter.

3.    Purchase Price.  The purchase price of each Share covered by the Option, which is 100% or more of the Fair Market Value of a Share on the Grant Date, shall be as set forth in the Award Letter.  

4.    Exercise.  Subject to Section 4(a), the Executive may exercise all or any part of the vested and previously unexercised portion of the Option at any time and from time to time until the Option expires, subject to the following provisions and subject to the terms of the Plan:

(a)    Shares Vested and Purchasable.  The right to purchase 25% of the Shares subject to the Option shall vest on the first anniversary of the Grant Date and the right to purchase an additional 25% of the Shares subject to the Option shall vest on each succeeding anniversary of the Grant Date until the Option is 100% vested (on the fourth anniversary of the Grant Date).  The unvested portion of the Option may not be exercised. 

(b)    Exercisable Only by the Executive.  Only (i) the Executive, (ii) the Executive’s guardian or legal representative on behalf of the Executive, or (iii) the Executive’s family member to the extent the Option or any part thereof is transferred to such family member pursuant to Section 7(b), may exercise the Option during the Executive’s lifetime.

(c)    Option Term.  Except as provided in Section 4(d) or the Plan, the Option shall expire on the tenth anniversary of the Grant Date.

(d)    Termination of Service.  The Executive may exercise the Option after the Executive’s termination of Service only as follows:

(i)    Early Retirement. Subject to Section 4(f), if the Executive’s termination of Service occurs after attaining age 45 and prior to attaining age 60, the Executive has been providing Service for 15 years or more (which 15 years need not be continuous), and the Executive has been providing Service continuously from the Grant Date to the Executive’s date of termination, the Executive may exercise the vested portion of the Option within the applicable extension period or 10 years after the Grant Date, whichever is earlier.  The applicable extension period shall be: (A) 2 years, if the Executive’s termination of Service occurs prior to attaining age 48, (B) 3 years, if the Executive’s termination of Service occurs after attaining age 48 and prior to attaining age 52, (C) 4 years, if the Executive’s termination of Service occurs after attaining age 52 and prior to attaining age 55, and (D) 5 years, if the Executive’s termination of Service occurs after attaining age 55.  The Option shall continue to vest pursuant to Section 4(a) during this post-termination exercise period.

(ii)    Normal Retirement.  Subject to Section 4(f), if the Executive’s termination of Service occurs at age 60 or older, the Executive has been providing Service for 10 years or more (which 10 years need not be continuous), and the Executive has been providing Service continuously from the Grant Date to the Executive’s date of termination, the Executive may exercise the vested portion of the Option within 10 years after the Grant Date.  The Option shall continue to vest pursuant to Section 4(a) during this post-termination exercise period.

(iii)    Disability.  If the Executive’s termination of Service occurs because of Disability, the Committee determines that the Executive is totally and permanently disabled as such term is defined for purposes of Code Section 409A and the Executive has been providing Service continuously from the Grant Date to the date of termination, then the Executive may exercise the vested portion of the Option (A) within 5 years after such termination of Service or 10 years after the Grant Date, whichever is earlier, or (B) within 10 years after the Grant Date, if on or prior to such termination of Service, the Executive has satisfied the age and years of Service requirements of “Normal Retirement” in Section 4(d)(ii).  The Option shall continue to vest pursuant to Section 4(a) during the extended Option exercise period under this Section 4(d)(iii).  The Executive shall inform the Company or a Subsidiary to which the Executive is providing Service (the “Service Recipient”) of any change in the Executive’s Disability status.  In the event the Executive ceases to be permanently and totally disabled in the judgment of the Committee, the Option shall terminate 90 days after notice is mailed by the Committee to the Executive stating that the Executive is no longer eligible for an extension under this Section 4(d)(iii), or 10 years after the Grant Date, whichever is earlier.  

(iv)Death.  In the event the Executive dies while a Service Provider and if the Executive was providing Service continuously from the Grant Date to the Executive’s date of death, the otherwise unvested portion of the Option shall become fully vested and

2.

exercisable on the Executive’s date of death.  The Option may be exercised by the Executive’s beneficiary as designated on the form prescribed by the Company (the “Designated Beneficiary”), or if none has been designated, the representative of the Executive’s estate or the person who acquired the right to exercise the Option by will or the laws of descent and distribution, subject to the provisions of this Agreement, within 5 years from the Executive’s date of death, or 10 years after the Grant Date, whichever is earlier, provided that in either case the period for exercising the Option shall not be less than one year from the Executive’s date of death.  Notwithstanding the preceding sentence, if on or prior to the Executive’s date of death, the Executive has satisfied the age and years of Service requirements of “Normal Retirement” in Section 4(d)(ii), the Option may be exercised within 10 years after the Grant Date, provided that the period for exercising the Option shall not be less than one year from the Executive’s date of death.  In the event the Executive dies after termination of Service and prior to exercising all Shares under the Option, the Designated Beneficiary or the representative of the Executive’s estate or the person who acquired the right to exercise the Option by will or the laws of descent and distribution may exercise the Option, subject to the provisions of this Agreement, but only to the extent vested on the Executive’s date of death, and only within the time the Executive could have exercised the Option had the Executive survived, or one year from the Executive’s date of death, whichever is later, but in no event later than 10 years after the Grant Date.

(v)Cause.  Notwithstanding any other provisions of this Agreement to the contrary, if the Committee concludes, in its sole discretion, that the Executive’s Service was terminated in whole or in part for Cause, the Option shall terminate immediately and the Executive shall have no rights hereunder. 

(vi)    Other Termination.  If the Executive’s termination of Service occurs for any reason other than as specified in Sections 4(d)(i) through 4(d)(v) and the Executive has been continuously providing Service from the Grant Date to such date of termination, the Executive may exercise the Option within 90 days after such termination of Service (210 days if the Executive would be subject to the provisions of Section 16 of the Exchange Act on the date of termination), but only with respect to the portion of the Option that is vested at the time the Executive’s Service terminates.  No additional vesting of the Option shall occur during this period.

(e)    Changes of Service.  Service shall not be deemed terminated in the case of (i) any approved leave of absence, or (ii) transfers among the Company and any Subsidiaries in the same Service Provider capacity; however, a termination of Service shall occur if (x) the relationship the Executive had with the Company or a Subsidiary at the Grant Date terminates, even if the Executive continues in another Service Provider capacity with the Company or a Subsidiary, or (y) the Executive experiences a “separation from service” within the meaning of Code Section 409A.

(f)    Conditions to Extension.  As a condition to granting the post-termination extension periods described in Sections 4(d)(i) and 4(d)(ii), the Executive must enter into and not revoke a valid agreement with the Company containing a release of claims, a covenant not to engage in competitive employment and/or other provisions deemed appropriate by the 

3.

Committee, in its sole discretion.  As a further condition to granting a post-termination extension period described in Sections 4(d)(i) and 4(d)(ii), if the Executive’s termination of Service is voluntary, the Executive must have commenced discussions with the Company’s Chief Executive Officer or most senior human resources executive regarding the Executive’s consideration of termination at least six months in advance of the Executive’s termination of Service.

5.    Manner of Exercise.  Subject to the terms and conditions of this Agreement and the Plan, the Option may be exercised by following the then-current procedures for exercise that are established by the Company; provided, however, that if the Executive is subject to taxation on any portion of his or her Service income in Canada, he or she may not exercise the Option using the stock swap method.

6.    Taxes.  The Executive acknowledges that (a) the ultimate liability for any and all income tax, social insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”) legally due by him or her is and remains the Executive’s responsibility and may exceed the amount actually withheld by the Company and/or the Service Recipient and (b) the Company and/or the Service Recipient or a former Service Recipient, as applicable, (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Option, including, but not limited to, the grant, vesting and/or exercise of the Option; (ii) do not commit and are under no obligation to structure the terms of the grant or any aspect of the Option to reduce or eliminate the Executive’s liability for Tax-Related Items; (iii) may be required to withhold or account for Tax-Related Items in more than one jurisdiction if the Executive has become subject to tax in more than one jurisdiction between the Grant Date and the date of any relevant taxable event; and (iv) may refuse to honor the exercise or refuse to deliver the Shares to the Executive if he or she fails to comply with his or her obligations in connection with the Tax-Related Items as provided in this Section.

The Executive authorizes and consents to the Company and/or the Service Recipient, or their respective agents, satisfying all applicable Tax-Related Items which the Company reasonably determines are legally payable by him or her by withholding from the Executive’s wages or other cash compensation paid to the Executive by the Company and/or the Service Recipient.  In lieu thereof, the Executive may elect at the time of exercise such other then-permitted method or combination of methods established by the Company and/or the Service Recipient to satisfy the Executive’s Tax-Related Items.  The Executive shall pay in cash to the Company or the Service Recipient any amount of Tax-Related Items that the Company or the Service Recipient reasonably determines may be required to withhold as a result of his or her participation in the Plan or his or her Option exercise that cannot be satisfied by the means previously described.

7.    Limitations on Transfer.  The Option shall not be sold, assigned, transferred, exchanged or encumbered by the Executive other than (a) pursuant to the terms of the Plan, or (b) by gift to a “family member” of the Executive (as defined in General Instruction A(5) to Form S-8 under the Securities Act of 1933), provided that there is no consideration for any such transfer.  Subsequent transfers of a transferred Option shall be prohibited except for a re-transfer or re-assignment for no consideration by any of the persons or entities listed in

4.

clause (b) above back to the Executive.  Following transfer, this Option shall continue to be subject to the same terms and conditions that were applicable to the Option immediately before the transfer.  For purposes of any provision of this Agreement or the Plan relating to notice to the Executive or to acceleration or termination of the Option upon death or termination of Service of the Executive, the references to “Executive” shall mean the original grantee of the Option and not any transferee.

8.    Change in Control.  In the event of a Change in Control, the extent to which the Option shall become vested and exercisable shall be determined pursuant to the Plan.  

9.    Recoupment Provision.  In the event of a restatement of the Company’s consolidated financial statements that is caused, in whole or in part, by the intentional misconduct of the Executive, the Company may take one or more of the following actions with respect to the Option, as determined by the Compensation Committee of the Board (the “Compensation Committee”) in its sole discretion, and the Executive shall be bound by such determination:

(a)    cancel all or a portion of the Option, whether vested or unvested; and 

(b)    require repayment of all or any portion of the amounts realized or received by the Executive resulting from the exercise of all or any portion of the Option or the sale of Shares related to the Option.  

The term “restatement” shall mean the result of revising financial statements previously filed with the Securities and Exchange Commission to reflect the correction of an error.  The term “intentional misconduct” shall be limited to conduct that the Compensation Committee determines indicates intent to mislead management, the Board, or the Company’s shareholders, but shall not include good faith errors in judgment made by the Executive.  

The Executive agrees that the Company may setoff any amounts it is entitled to recover under this Section against any amounts owed by the Company to the Executive under any of the Company’s deferred compensation plans to the extent permitted under Code Section 409A.  The Executive further agrees that the terms of this Section shall survive the Executive’s termination of Service and any exercise of the Option.  This Section 9 shall not apply, and no amounts may be recovered hereunder, following a Change in Control.

10.    No Employment Rights.  Nothing in this Agreement, the Plan or the Award Letter shall confer upon the Executive any right to continued Service with the Company or any Subsidiary, as applicable, nor shall it interfere with or limit in any way any right of the Company or any Subsidiary, as applicable, to terminate the Executive’s Service at any time with or without Cause or change the Executive’s compensation, other benefits, job responsibilities or title provided in compliance with applicable local laws and permitted under the terms of the Executive’s Service contract, if any.

(a)    The Executive’s rights to vest in or exercise the Option after termination of Service shall be determined pursuant to Sections 4(d) and 5.  Those rights and the Executive’s 

5.

date of termination of Service will not be extended by any notice period mandated under local law (e.g., active service would not include a period of “garden leave” or similar notice period pursuant to local law).

(b)    This Agreement, the Plan and the Award Letter are separate from, and shall not form, any part of the contract of Service of the Executive, or affect any of the rights and obligations arising from the Service relationship between the Executive and the Company and/or the Service Recipient.

(c)    No Service Provider has a right to participate in the Plan.  All decisions with respect to future grants, if any, shall be at the sole discretion of the Company and/or the Service Recipient.

(d)    The Executive will have no claim or right of action in respect of any decision, omission or discretion which may operate to the disadvantage of the Executive.

11.    Nature of Grant.  In accepting the grant, the Executive acknowledges, understands, and agrees that: 

(a)    the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, unless otherwise provided in the Plan and this Agreement, and any such modification, amendment, suspension or termination will not constitute a constructive or wrongful dismissal;

(b)    the Option is an extraordinary item and is not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or welfare or retirement benefits or similar payments; 

(c)    in no event should the Option be considered as compensation for, or relating in any way to, past services for the Company or the Service Recipient, nor is the Option or the underlying Shares intended to replace any pension rights or compensation;

(d)    the future value of the underlying Shares is unknown and cannot be predicted with certainty; 

(e)    if the underlying Shares do not increase in value, the Option will have no value; 

(f)    the Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Executive’s participation in the Plan, the exercise of the Option and the sale of Shares at or after exercise; 

(g)    no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from termination of the Executive’s Service (for any reason whatsoever and whether or not in breach of local labor laws), and in consideration of the grant

6.

of the Option to which the Executive is otherwise not entitled, the Executive irrevocably (i) agrees never to institute any such claim against the Company or the Service Recipient, (ii) waives the Executive’s ability, if any, to bring any such claim, and (iii) releases the Company and the Service Recipient from any such claim.  If, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, the Executive shall be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claims; and

(h)    the Executive is hereby advised to consult with personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to this Option or the Plan.

12.    Governing Law; Venue; Jurisdiction.  To the extent that federal laws do not otherwise control, this Agreement, the Award Letter, the Plan and all determinations made and actions taken pursuant to the Plan shall be governed by the laws of the State of Minnesota without regard to its conflicts-of-law principles and shall be construed accordingly.  The exclusive forum and venue for any legal action arising out of or related to this Agreement shall be the United States District Court for the District of Minnesota, and the parties submit to the personal jurisdiction of that court. If neither subject matter nor diversity jurisdiction exists in the United States District Court for the District of Minnesota, then the exclusive forum and venue for any such action shall be the courts of the State of Minnesota located in Hennepin County, and the Executive, as a condition of this Agreement, consents to the personal jurisdiction of that court.

13.    Currencies and Dates.  Unless otherwise stated, all dollars specified in this Agreement and the Award Letter shall be in U.S. dollars and all dates specified in this Agreement shall be U.S. dates.

14.    Language Consent.  The parties acknowledge that it is their express wish that the Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.  Les parties reconnaissent avoir exigé la rédaction en anglais de cette convention, ainsi que de tous documents, avis et procédures judiciaires, exécutés, donnés ou intentés en vertu de, ou liés directement ou indirectement à la présente convention.  If the Executive has received this Agreement or any other Plan document translated into a language other than English, the English version shall control.

15.    Imposition of Other Requirements.  The Company reserves the right to impose other requirements on the Executive’s participation in the Plan, on the Option and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require the Executive to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

7.

16.    Plan and Award Letter Incorporated by Reference; Electronic Delivery.  The Plan, as hereafter amended from time to time, and the Award Letter shall be deemed to be incorporated into this Agreement and are integral parts hereof.  In the event there is any inconsistency between the provisions of this Agreement and the Plan, the provisions of the Plan shall govern.  The Company or a third party designated by the Company may deliver to the Executive by electronic means any documents related to his or her participation in the Plan. The Executive acknowledges receipt of a copy of the Plan and the Award Letter.

[End of Agreement]

8.

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