EXHIBIT 10.1
EMPLOYMENT AGREEMENT
SAKS INCORPORATED AND SUBSIDIARIES
FIFTH AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Fifth Amended and Restated Employment Agreement
("Agreement") is entered into as of the 1st day of May 1999, by and
between Saks Incorporated ("Company"), and R. Xxxx Xxxxxx
("Executive").
Company and Executive agree as follows:
1. Employment. Company hereby employs Executive as Chief
Executive Officer of Company. It is anticipated that Executive
will be elected Chairman of the Board.
2. Duties. During his employment, Executive shall devote
substantially all of his working time, energies, and skills to the
benefit of Company's business. Executive agrees to serve Company
diligently and to the best of his ability and to use his best
efforts to follow the policies and directions of Company's Board of
Directors.
3. Compensation. Executive's compensation and benefits under
this Agreement shall be as follows:
(a) Base Salary. Company shall pay Executive a base
salary ("Base Salary") at a rate of no less than $950,000 per year.
In addition, the Board of Directors of Company shall, in good
faith, consider granting increases in such Base Salary based upon
such factors as Executive's performance and the growth and/or
profitability of Company. Executive's Base Salary shall be paid in
installments in accordance with Company's normal payment schedule
for its senior management. All payments shall be subject to the
deduction of payroll taxes and similar assessments as required by
law.
(b) Bonus. In addition to the Base Salary, Executive
shall be eligible pursuant to the 1998 Senior Executive Bonus Plan,
as long as he holds the position stated in paragraph 1, for a
yearly cash bonus with a target of 75% ("Bonus Target Potential")
of Base Salary based upon his performance, in accordance with
specific annual objectives, set in advance, all as approved by the
Board of Directors.
(c) End of Five-Years Service Stock Grants. In
accordance with Executive's prior employment agreements, Company
shall issue to Executive fifty thousand (50,000) shares of common
stock as soon as possible after October 11, 2001, provided
Executive has served the Company continuously for five years
following October 11, 1996, the date of Executive's Second Amended
and Restated Employment Agreement. In the event of Executive's
death prior to October 11, 2001, Executive's estate shall be issued
a pro rata portion of the shares, on the basis of 10,000 shares per
year.
(d) Stock Grant. Pursuant to the 1998 Senior Executive
Bonus Plan, an amount up to twenty thousand (20,000) shares of
Company common stock may be issued to Executive as soon as possible
after the end of each fiscal year of Company, based upon annual
targeted growth in intrinsic value of the Company or other factors,
as determined by the Human Resources Committee of the Board of
Directors. The Human Resources Committee, subject to approval from
the Board of Directors, shall have sole and exclusive discretion to
grant or withhold any portion of such yearly stock grant.
(e) Stock Bonus. Pursuant to the 1998 Senior Executive
Bonus Plan, Company shall award Executive a bonus of up to 20,000
(twenty thousand) shares of Company common stock on the basis of
growth in earnings per share with the Human Resources Committee of
the Board of Directors setting the objectives in advance. The
Human Resources Committee shall have sole and exclusive discretion
to determine whether that objective has been met, and the Committee
may consider matters such as nonrecurring and extraordinary items.
(f) Incentive Compensation. Executive is hereby granted
a non-qualified option ("Option") to purchase 57,290 shares of
Company common stock at an option price equal to the closing price
of the stock at the close of business on April 30, 1999 (the "Grant
Date"), as reported in the Wall Street Journal. The Option is
granted pursuant to the Company's 1994 Long-Term Incentive Plan
("1994 LTIP"), and shall be subject to the terms and conditions
thereof. The Option shall be exercisable on or after the "Grant
Date" to the extent of 20% of the shares covered thereby;
exercisable to the extent of an additional 20% of the shares
covered thereby on and after the first anniversary of the Grant
Date; exercisable to the extent of an additional 20% of the shares
covered thereby on and after the second anniversary of the Grant
Date; exercisable to the extent of an additional 20% of the shares
covered thereby on an after the third anniversary of the Grant
Date; and exercisable to the extent of any remaining shares on and
after the fourth anniversary of the Grant Date; provided, however,
that no portion of the Option shall be exercisable any earlier than
six months from the Grant Date. The Option may be exercised up to
ten (10) years from the Grant Date. Any portion of the Option not
exercised within said ten (10) year period shall expire.
(g) Effect of Change of Control on Options. In the
event of a Change of Control (as defined in the Company's 1994
LTIP), any Options granted to Executive prior to such Change of
Control shall immediately vest.
(h) Forgiveness of Loan. Company shall continue to
forgive the original $500,000 interest-free loan due January 31,
1999, in $100,000 increments, at the end of each fiscal year;
provided, however, that Executive must continue to be employed by
Company for any portion of the loan to be forgiven, and provided
further that Executive must repay any outstanding balance if he
terminates employment.
(i) Company Aircraft. Company requires Executive to use
Company aircraft for personal or family use, whenever possible.
Such use is important for the safety of Executive and so that
Executive may remain in communications with other Company officials
as necessary. Executive may use Company aircraft or charter
aircraft for such uses without further reimbursement to Company.
(j) Restricted Stock Agreement. Beginning in fiscal
year 2001, Company shall enter into a new restricted stock
agreement patterned after Executive's prior restricted stock
agreement entered into in 1998, following the significant terms of
the 1998 agreement as it relates to number of shares and vesting.
4. Insurance and Other Expenses and Benefits. Company shall
allow Executive to participate in each employee benefit plan and to
receive each executive benefit that Company provides for senior
executives at the level of Executive's position.
(a) Company shall pay the reasonable costs for
Executive's tax and financial planning, and shall continue to buy
split-dollar life insurance for Executive in accordance with the
directions of the Human Resources Committee of the Board.
(b) Company shall provide security for Executive's
residences or shall reimburse Executive for such expenses.
(c) Because Company requires Executive to spend time in
New York City, Company shall provide Executive with a driver for
the New York area, and shall provide a New York apartment or
reimburse Executive for all the costs of such apartment, including
but not limited to utilities, insurance, housekeeping, and capital
costs. Executive shall cooperate with Company to determine the
proper method of providing these services or reimbursing the
Executive for such expenses.
5. Term; termination without Cause or for good reason. The
term of this Agreement shall be for five (5) years, provided,
however, that Company may terminate this Agreement at any time
without Cause, as defined below, upon thirty (30) days' prior
written notice and Executive may terminate this Agreement for good
reason, which shall mean only a mandatory relocation from the
Memphis, Tennessee area or in the event Executive is no longer the
Chief Executive Officer of Company and, if applicable, its ultimate
parent (at which time this Agreement shall terminate except for
Section 8, which shall continue in effect as set forth in Section
8). In the event of such termination by Company without Cause or
by Executive for good reason, Executive shall be entitled, in
addition to all earned but unpaid wages and benefits, to the
following severance benefits:
(a) a sum equal to the Base Salary then in effect plus 50% of
Executive's Bonus Target Potential times the longer of 3 years or
the balance of the time remaining in the Term, and
(b) immediate vesting of all stock options and restricted
stock awards with the ability to exercise the stock options for the
shorter of two years or the original expiration period of the
option, and
(c) participation in Company's health plans, with family
coverage, for his life and the life of his wife, and continuation
of split-dollar insurance agreements for five years,
(d) vesting at the retirement rate in the Company's
Supplemental Savings Plan, and
(e) if any payment, right or benefit provided for in this
Agreement or otherwise paid to Executive by Company is treated as
an "excess parachute payment" under Section 280(G)(b) of the
Internal Revenue Code of 1986, as amended, (the "Code"), Company
shall indemnify and hold harmless and make whole, on an after-tax
basis, Executive for any adverse tax consequences, including but
not limited to providing to Executive on an after-tax basis the
amount necessary to pay any tax imposed by Code Section 4999.
In addition, this Agreement shall terminate upon the death of
Executive, except as to: (a) Executive's estate's right to exercise
any unexercised stock options pursuant to Company's stock option
plan then in effect, with it being understood that Company would
follow its traditional policy of vesting all of Executive's stock
options upon death, (b) other entitlements under this contract that
expressly survive death, (c) vesting at the retirement rate of
benefits under Company's Supplemental Savings Plan, (d) payment of
earned but unpaid wages and benefits, and (e) any rights which
Executive's estate or dependents may have under COBRA or any other
federal or state law or which are derived independent of this
Agreement by reason of his participation in any plan maintained by
Company.
6. Termination by Company for Cause. (a) Company shall have
the right to terminate Executive's employment under this Agreement
for Cause, in which event no salary or bonus shall be paid after
termination for Cause except for (i) earned but unpaid wages and
benefits, and (ii) Company shall vest a pro rata fractional portion
of Executive's stock options based on the number of days Executive
was employed since the last vesting of such options. Termination
for Cause shall be effective immediately upon notice sent or given
to Executive. For purposes of this Agreement, the term "Cause"
shall mean and be strictly limited to: (i) conviction of
Executive, after all applicable rights of appeal have been
exhausted or waived, for any crime that materially discredits
Company or is materially detrimental to the reputation or goodwill
of Company; or (ii) Executive's material breach of his obligations
under paragraph 2 of the Agreement, as so determined by at least
three-fourths of the Board of Directors, after notice of such
breach has been given to Executive and Executive has been given a
reasonable opportunity to cure the breach.
(b) In the event that Executive's employment is
terminated, Executive agrees to resign as an officer and/or
director of Company (or any of its subsidiaries or affiliates),
effective as of the date of such termination, and Executive agrees
to return to Company upon such termination any of the following
which contain confidential information: all documents, instruments,
papers, facsimiles, and computerized information which are the
property of Company or such subsidiary or affiliate.
7. Disability. If Executive becomes disabled at any time
during the term of this Agreement, he shall after he becomes
disabled continue to receive all payments and benefits provided
under the terms of this Agreement for a period of twelve
consecutive months, or for the remaining term of this Agreement,
whichever period is shorter. In the event that Executive is
disabled for more than twelve consecutive months during the term of
this Agreement, Executive shall, at the expiration of the initial
twelve consecutive month period, be entitled to receive under this
Agreement 50% of his Base Salary plus the insurance and benefits
described in Section 4 of this Agreement for the remaining term of
this Agreement. While Executive is disabled, he shall remain
employed for purposes of vesting of restricted stock and stock
options, and, after his employment ends, he shall be entitled to
the lifetime benefits set forth in Section 5(c). For purposes of
this Agreement, the term "disabled" shall mean the inability of
Executive (as the result of a physical or mental condition) to
perform the duties of his position under this Agreement with
reasonable accommodation and which inability is reasonably expected
to last at least one (1) full year.
8. Non-competition; Unauthorized Disclosure.
(a) Non-competition. During the period Executive is
employed under this Agreement, and for a period of three years
thereafter, Executive:
(i) shall not engage in any activities, whether as
employer, proprietor, partner, stockholder (other than the holder
of less than 5% of the stock of a corporation the securities of
which are traded on a national securities exchange or in the over-
the-counter market), director, officer, employee or otherwise, in
competition with (i) the businesses conducted at the date hereof by
Company or any subsidiary or affiliate, or (ii) any business in
which Company or any subsidiary or affiliate is substantially
engaged at any time during the employment period;
(ii) shall not solicit, in competition with Company,
any person who is a customer of the businesses conducted by Company
at the date hereof or of any business in which Company is
substantially engaged at any time during the term of this
Agreement; and
(iii) shall not induce or attempt to persuade any
employee of Company or any of its divisions, subsidiaries or then
present affiliates to terminate his or her employment relationship
in order to enter into competitive employment.
(b) Unauthorized Disclosure. During the period Executive
is employed under this Agreement, and for a further period of three
years thereafter, Executive shall not, except as required by any
court or administrative agency, without the written consent of the
Board of Directors, or a person authorized thereby, disclose to any
person, other than an employee of Company or a person to whom
disclosure is reasonably necessary or appropriate in connection
with the performance by Executive of his duties as an executive for
Company, any confidential information obtained by him while in the
employ of Company; provided, however, that confidential information
shall not include any information now known or which becomes known
generally to the public (other than as a result of unauthorized
disclosure by Executive).
(c) Scope of Covenants; Remedies. The following
provisions shall apply to the covenants of Executive contained in
this Section 8:
(i) the covenants contained in paragraph (i) and
(ii) of Section 8(a) shall apply within all the territories in
which Company is actively engaged in the conduct of business while
Executive is employed under this Agreement, including, without
limitation, the territories in which customers are then being
solicited;
(ii) without limiting the right of Company to pursue
all other legal and equitable remedies available for violation by
Executive of the covenants contained in this Section 8, it is
expressly agreed by Executive and Company that such other remedies
cannot fully compensate Company for any such violation and that
Company shall be entitled to injunctive relief to prevent any such
violation or any continuing violation thereof;
(iii) each party intends and agrees that if, in any
action before any court or agency legally empowered to enforce the
covenants contained in this Section 8, any term, restriction,
covenant or promise contained therein is found to be unreasonable
and accordingly unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent
necessary to make it enforceable by such court or agency; and
(iv) the covenants contained in this Section 8 shall
survive the conclusion of Executive's employment by Company.
9. General Provisions.
(a) Notices. Any notice to be given hereunder by either
party to the other may be effected by personal delivery, in writing
or by mail, registered or certified, postage prepaid with return
receipt requested. Mailed notices shall be addressed to the
parties at the addresses set forth below, but each party may change
his or its address by written notice in accordance with this
Section 9(a). Notices shall be deemed communicated as of the
actual receipt or refusal of receipt.
If to Executive: R. Xxxx Xxxxxx
0000 Xxxxxx Xxxx Xxxxx
Xxxxxxx, XX 00000
If to Company: Saks Incorporated
000 Xxxxxxxxx Xxxxxxx
Xxxxxxxxxx, XX 00000
(b) Partial Invalidity. If any provision in this
Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions shall,
nevertheless, continue in full force and without being impaired or
invalidated in any way.
(c) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
Tennessee.
(d) Entire Agreement. Except for any prior grants of
options, restricted stock, or other forms of incentive compensation
evidenced by a written instrument -- some of which are attached
hereto as Exhibit A -- or by an action of the Board or Directors,
this Agreement supersedes any and all other agreements, either oral
or in writing, between the parties hereto with respect to
employment of Executive by Company and contains all of the
covenants and agreements between the parties with respect to such
employment. Each party to this Agreement acknowledges that no
representations, inducements or agreements, oral or otherwise, that
have not been embodied herein, and no other agreement, statement or
promise not contained in this Agreement, shall be valid or binding.
Any modification of this Agreement will be effective only if it is
in writing signed by the party to be charged.
(e) No Conflicting Agreement. By signing this
Agreement, Executive warrants that he is not a party to any
restrictive covenant, agreement or contract which limits the
performance of his duties and responsibilities under this Agreement
or under which such performance would constitute a breach.
(f) Headings. The Section, paragraph, and subparagraph
headings are for convenience or reference only and shall not define
or limit the provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
SAKS INCORPORATED
BY: _____________________
Xxxxx X. Xxxxxx
President and CAO
_____________________
Xxxxx X. Xxxxxx
General Counsel
__________________
R. Xxxx Xxxxxx
Executive
