Target 2006 Annual Report Download - page 58

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26. Share-Based Compensation
We maintain a long-term incentive plan for key team members and non-employee members of our
Board of Directors. Our long-term incentive plan allows us to grant equity-based compensation awards,
including stock options, performance share unit awards, restricted stock unit awards, or a combination of
awards. A majority of granted awards are nonqualified stock options that vest annually in equal amounts
over a four-year period and expire no later than 10 years after the grant date. Options granted to the
non-employee members of our Board of Directors become exercisable after one year and have a 10-year
term. We have issued performance share or performance share unit awards annually since January 2003.
These awards represent shares potentially issuable in the future based upon the attainment of performance
criteria including compound annual growth rates in revenue and EPS. In 2006, we issued restricted stock
units with three-year cliff vesting to our executive officers other than our chief executive officer. We also
issued restricted stock and restricted stock units to our Board of Directors. The number of unissued common
shares reserved for future grants under the share-based compensation plans was 42,974,387 at
February 3, 2007 and 47,659,572 at January 28, 2006.
Share-Based Compensation Awards
Stock Options
Total Outstanding Currently Exercisable
(number of options and Number Exercise Intrinsic Number Exercise Intrinsic Performance Restricted
shares in thousands) of Options Price (a) Value (b) of Options Price (a) Value (b) Share Units Stock Units
January 31, 2004 36,159 $28.28 $363 23,689 $24.48 $326 1,125 (c) —
Granted 4,072 49.12 629 (d) —
Canceled/forfeited (513) 35.32 (73) —
Exercised (7,727) 20.95 (73) —
January 29, 2005 31,991 $32.59 $540 22,102 $28.79 $458 1,608 —
Granted 4,057 53.94 597 (e) —
Canceled/forfeited (691) 40.67 (252) —
Exercised (6,643) 26.58 — —
January 28, 2006 28,714 $36.82 $505 19,229 $31.64 $438 1,953 —
Granted 4,980 56.84 119 (e) 221
Canceled/forfeited (607) 48.06 (177) —
Exercised (5,177) 27.08 — —
February 3, 2007 27,910 $41.95 $558 17,659 $35.32 $470 1,895 (f) 221
(a) Weighted average.
(b) Represents stock price appreciation subsequent to the grant date, in millions.
(c) Awards will be earned based on performance during four years ending February 3, 2007 and February 2, 2008.
(d) Awards will be earned based on performance during three years ending February 2, 2008.
(e) Awards will be earned based on performance during three years ending January 31, 2009.
(f) Approximately 32 percent of these performance share units, if and when earned, will be paid in cash or deferred through a credit to the
deferred compensation accounts of the participants in an amount equal to the value of any earned performance shares.
The Black-Scholes valuation model was used to estimate the fair value of the options at grant date
based on the assumptions noted in the following table. Volatility represents an average of market quotes for
implied volatility of 5.5-year options on Target common stock. The expected life is estimated based on
analysis of options already exercised and any foreseeable trends or changes in behavior. The risk-free
interest rate is an interpolation of the relevant U.S. Treasury security maturities as of each applicable grant
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