Exhibit 10.11
To: Xxxxxx X. Xxxxxxxxx
From: Xxxxx Xxxx and Xxx Xxxx
Date: July 20, 2005
You currently have an employment agreement and a change in control severance
agreement (hereinafter "CIC agreement"). Federated and May would like you to
stay and help with the transition following the date of the merger. We want
you to have some specific assurances concerning your CIC agreement. The
following assurances are premised on the assumption that the merger between
Federated and May occurs as expected.
First, Federated and May will honor your employment agreement and your CIC
agreement. Those agreements will remain in effect in accordance with their
terms. Equally important, we believe that after the change in control, there
will be a significant adverse alteration in the nature or status of your
responsibilities so that we agree that Good Reason under your CIC agreement
will be deemed to have occurred whenever your employment subsequently
terminates (without cause, as defined in the CIC agreement). Voluntary
termination will not be deemed to be cause, provided that at such time, there
are no grounds on which the Company could terminate your employment for cause,
as defined in the CIC agreement.
However, Federated and May want you to agree to stay through a release date, to
help in the transition.
- Your release date would be March 1, 2006 (hereinafter "Release Date").
- You would help in the transition in your current position as Executive Vice
President and Chief Financial Officer of May by providing the transition
services requested by May or Federated.
We think that your willingness to work through the Release Date will help the
people you work with, the people who report to you and the ongoing business.
In exchange for your agreement to work on the transition until the Release
Date, we want to give you the following additional assurances.
Before the Release Date,
- you and Federated may agree to regular, full-time employment, on terms
acceptable to you, or
- you and Federated may agree to extend the transition period on terms
acceptable to you, or
- if neither of those two events occurs, your employment will terminate no
later than the Release Date and you will be paid all amounts payable under
the CIC arrangements and the other benefits you accrue through your Release
Date or termination date as outlined below.
During the transition period,
- your base pay will not be less than your base pay in effect prior to the
change in control and your bonus opportunity and benefits (excluding annual
equity grants) will be consistent with those provided to you before the
change in control (subject to applicable plan limits and provisions in the
merger agreement).
- you will continue to participate in, and your service and compensation will
count under, all of May's benefit plans, including the retirement plan,
SRP, and PSP.
- If you work through the Release Date, your bonus for each full and partial
year during the transition period will be the higher of target or actual.
In the case of a partial year, your bonus will be calculated based on the
portion of the year preceding your Release Date or termination date, as
applicable. This bonus will be coordinated with any bonus payments made
pursuant to the Merger Agreement so that no duplication of bonus payment
occurs.
Termination before the Release Date:
- If May or Federated terminates your employment involuntarily (without
cause, as defined in the CIC agreement) before the Release Date, we will
give you at least 30 days advance notice in writing, and
- we will pay you the salary and bonus (at the higher of target or actual)
through your Release Date,
- your service through the Release Date will count for purposes of the SRP,
retirement plan and PSP, and
- we will pay you all amounts payable under the CIC agreement as of your
termination date.
- If you voluntarily quit after March 1, 2006 and before your then-current
Release Date, and give us at least 30 days notice in writing, provided that
at such time there are no grounds on which the Company could terminate your
employment for cause, as defined in the CIC agreement,
- we will pay your salary and actual bonus, if any is owed through your
voluntary termination date,
- your service through your voluntary termination date will count for
purposes of the SRP, the retirement plan and the PSP, and
- we will pay you all amounts payable under the CIC agreement as of your
voluntary termination date.
- If you die during the time you are providing transition services hereunder
but before the Release Date, your CIC agreement and death benefits under
your life insurance arrangements will become payable and you will be paid a
bonus at the higher of target or actual through the date of death.
- If you become disabled and entitled to long-term disability benefits under
May's long-term disability plan during the time you are providing
transition services hereunder but before the Release Date, your CIC
agreement and long-term disability benefits under May's long-term
disability plan will become payable and you will be paid a bonus at the
higher of target or actual through the date of eligibility for long term
disability benefits.
- If we terminate your employment involuntarily with cause, as defined in the
CIC agreement, you will not receive any payments under the CIC agreement or
pursuant to this letter.
We know that there are still several matters to be worked out in the future,
and some that could change. We are still working on ways that we may be able
to understand the potential impact of excise taxes and alternatives we may
have. In addition, we anticipate that the IRS will issue guidance about new
"deferred compensation" rules, which may drive us to change some features in
order to minimize adverse tax consequences for you. For example, to permit you
to avoid certain tax penalties under the deferred compensation rules, we may
propose (subject to your consent) that payments to you be delayed for six (6)
months following a termination of your employment, if you are a "key employee"
under the tax regulations. In any event, you will be responsible for the tax
consequences of all payments and benefits that are provided to you.
Furthermore, if you and Federated ultimately agree to a regular, full-time
position, we would expect to reflect that in a formal, detailed agreement.
Until then, you may rely on the assurances in this letter.
Please sign the enclosed copy of this letter to indicate your agreement to
provide the transition services on the basis described above.
The May Department Stores Company Federated Department Stores, Inc.
/s/ Xxxxx X. Xxxx /s/ Xxxxxx X. Xxxx
Xxxxx X. Xxxx Xxxxxx X. Xxxx
Agreed to:
/s/ Xxxxxx X. Xxxxxxxxx / 8-29-05
