EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of
the 3rd day of September 1998, by and between Saks Holdings, Inc.
("Company"), ▇▇▇▇▇▇▇▇'▇, Inc. ("▇▇▇▇▇▇▇▇'▇"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
("Executive").
WHEREAS, Company and Executive are parties to a certain
Amended and Restated Employment Agreement, dated as of March 1,
1996 (the "Old Agreement"); and
WHEREAS, Company, ▇▇▇▇▇▇▇▇'▇ and Executive wish to enter into
this Agreement to replace the Old Agreement,
NOW THEREFORE, effective as of the Effective Time, as that
phrase is used in the Agreement and Plan of Merger among
▇▇▇▇▇▇▇▇'▇, Fifth Merger Corporation and Saks Holdings, Inc. dated
July 4, 1998 (the "Merger Agreement"), the terms of the Old
Agreement will become void and this Agreement will govern
Executive's employment with Company. In the event that the Merger
Agreement terminates without consummation of the merger
transaction, the Old Agreement shall remain in effect.
1. Positions; Duties; Place of Employment. (a)Executive shall
serve as Chief Executive Officer of Company and Saks Fifth Avenue
through June 30, 2001, with duties, authority and status normally
associated with such position within the ▇▇▇▇▇▇▇▇'▇ organization.
Executive shall report directly to the Chief Executive Officer of
▇▇▇▇▇▇▇▇'▇. While serving as Chief Executive Officer of Company
and Saks Fifth Avenue, and excluding any periods of vacation and
sick leave to which he is entitled, Executive shall devote his best
efforts and substantially all of his business time and attention to
the performance of his duties; provided, however, that it shall not
be a violation of this Agreement for Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements, or teach, and (C) manage
personal investments, so long as such activities do not
unreasonably interfere with the performance of Executive's
responsibilities hereunder. It is expressly understood and agreed
that to the extent that any such activities have been conducted
regularly by Executive prior to the Effective Time, the continued
conduct of such activities (or the conduct of activities similar in
nature and scope thereto) after the Effective Time shall not
thereafter be deemed to unreasonably interfere with the performance
of Executive's responsibilities hereunder.
(b) As of the Effective Time, the Board of Directors of
▇▇▇▇▇▇▇▇'▇ (the "Board") shall nominate Executive(and the Board
shall elect Executive) as a director of ▇▇▇▇▇▇▇▇'▇. So long as
Executive serves as Chief Executive Officer of Company or as a
consultant hereunder, ▇▇▇▇▇▇▇▇'▇ shall cause Executive to be
included in the slate of nominees recommended by the Board to
▇▇▇▇▇▇▇▇'▇ shareholders for election as directors at each annual
meeting of shareholders of ▇▇▇▇▇▇▇▇'▇ at which his class of
directors is standing for election, and ▇▇▇▇▇▇▇▇'▇ shall use its
reasonable best efforts to cause the election of Executive,
including soliciting proxies in favor of election of Executive.
(c) Executive's employment shall be principally at
Company's offices in New York City, except for business travel.
(d) After June 30, 2001, when Executive is no longer
serving as Chief Executive Officer of Company and Saks Fifth
Avenue, he shall be employed as a consultant to Company and
▇▇▇▇▇▇▇▇'▇ through June 30, 2003. During the consultancy period,
Executive agrees to make himself reasonably available from time to
time on reasonable notice to consult and cooperate with and advise
Company with respect to such matters involving the business of
Company as may reasonably be requested by the Chief Executive
Officer of ▇▇▇▇▇▇▇▇'▇; provided, however, that it is expressly
understood that Executive may pursue other personal or full-time
business interests during the consultancy period (subject to the
non-competition provisions hereof).
2. Compensation. Executive's compensation and benefits under
this Agreement shall be as follows:
(a) Base Salary. Company shall pay Executive abase
salary ("Base Salary") at a rate of no less than $1,350,000 per
year through June 30, 2003. 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 for a yearly cash bonus of up to 55%of Base
Salary as long as he is serving as Chief Executive Officer of
Company. The method for determining whether such a bonus is
earned, or the portion thereof earned, shall be based on Saks
Fifth Avenue's divisional profit, as calculated in a manner and in
accordance with the policies that ▇▇▇▇▇▇▇▇'▇ applies consistently
to its operating divisions. The Annual Bonus shall be paid in
accordance with the Company's payroll policies and practices for
executive employees.
(c) Incentive Compensation. At the Effective Time of
the Merger (the "Grant Date"), Executive shall be granted
anon-qualified option ("Option") to purchase one-hundred and sixty
thousand (160,000) shares of ▇▇▇▇▇▇▇▇'▇ common stock at an option
price equal to the closing price of the stock on the last date the
market was open before the Effective Time, as reported in the Wall
Street Journal. This Option shall be granted pursuant to
▇▇▇▇▇▇▇▇'▇ 1997 Stock-Based Incentive Plan ("1997 Plan") and shall
be subject to the terms and conditions thereof. The Option shall be
vested and exercisable on or after the first anniversary of the
Grant Date to the extent of one-third of the shares covered
thereby; vested and exercisable to the extent of an additional
one-third of the shares covered thereby on and after the second
anniversary of the Grant Date; and vested and exercisable to the
extent of the remaining one-third of the shares covered thereby on
and after June 30, 2001; provided, however, that the Option shall
become fully vested and exercisable upon Executive's death,
Disability, termination of Executive's employment by Company
without Cause or termination of Executive's employment for Good
Reason. Executive must exercise the vested portion of the Option
within three months after termination of employment, unless his
employment is terminated by death, Disability, Company without
Cause, or Executive for Good Reason, in which case, Executive must
exercise the Option before the earlier of three years from the date
of termination or July 1, 2004. As long as Executive serves as
Chief Executive Officer of Company, he shall be eligible for future
option grants pursuant to ▇▇▇▇▇▇▇▇'▇ generally applicable policies
for persons at Executive's level.
(d) Insurance and Benefits. During the term of this
Agreement, 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. Notwithstanding the foregoing, during the term of this
Agreement, (1) Company shall reimburse Executive(through insurance
or otherwise) for the full amount of any medical, dental and
vision-care expenses incurred by Executive and his spouse and
dependent children during the term of this Agreement, and (2)
Company shall provide life insurance coverage(through its life
insurance plan or otherwise) to Executive in an amount equal to
twice his Base Salary, and Executive may purchase at his own
expense additional coverage in an amount equal to his Base Salary.
(e) Other Perquisites: As long as Executive serves as
Chief Executive Officer of Company and Saks Fifth Avenue, he shall
be provided with a $40,000 per year personal expense account, car
service for work-related travel, and reimbursement for his wife's
travel expenses for work-related travel.
3. Term. This Agreement shall expire on June 30,2003;
provided, however, Company, ▇▇▇▇▇▇▇▇'▇, and Executive may terminate
this Agreement and Executive's employment at an earlier time
pursuant to the provisions of Section 4 of this Agreement. The
non-competition provisions in Section 5 shall survive termination
or expiration of this Agreement.
In addition, this Agreement shall terminate upon the death of
Executive, except as to: (a) Executive's estate's right to exercise
the Option pursuant to this Agreement and other unexercised stock
options pursuant to Company's and ▇▇▇▇▇▇▇▇'▇ stock option plans
then in effect (the "Stock Option Rights"),(b) compensation for
services previously rendered and reimbursements for expenses
previously incurred (the "Accrued Benefits") (c) 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 employee benefit
arrangement or plan maintained by Company or ▇▇▇▇▇▇▇▇'▇ ("Statutory
Rights"); (d)the right of Executive's spouse, upon written notice
to Company, to continue to receive for her life, at her cost, the
benefits provided under the health care plan of Company then in
effect, which benefits may but need not be provided under said
plan; and(e) the payment or provision to or in respect of Executive
of any other amounts or benefits required to be paid or provided or
which Executive is eligible to receive under any plan, program,
policy or practice or contract or arrangement of ▇▇▇▇▇▇▇▇'▇ and its
affiliated companies (the "Other Benefits").
This Agreement may also be terminated by the Company upon
Executive's Disability (as hereinafter defined), except as to: (a)
the Stock Option Rights; (b) the Accrued Benefits; (c)the Statutory
Rights; (d) the right of the Executive and his spouse or
representative within 45 days of such termination, to continue to
receive for his life and that of his spouse, at Executive's cost or
the cost of his spouse, the benefits provided under the health care
plan of Company, then in effect, which benefits may but need not be
provided under said plan (the"Continuing Health Benefits"); and (e)
the Other Benefits. For purposes of this Agreement, "Disability"
shall mean the absence of Executive from his duties with Company on
a full-time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined to
be total and permanent by a physician selected by Company or its
insurers and acceptable to Executive or his legal representative.
4. Termination Of Employment.
(a) Company and ▇▇▇▇▇▇▇▇'▇ 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 the Accrued Benefits. 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 felony that is materially
and demonstrably injurious to Company; or (ii) willful commission
of any material act of fraud or dishonesty by Executive against
Company. For purposes of this provision, no act or failure to
act, on the part of Executive, shall be considered "willful" unless
it is done, or omitted to be done, by Executive in bad faith or
without reasonable belief that Executive's action or omission was
in the best interests of Company. Any act, or failure to act,
based upon authority given pursuant to a resolution of the Board or
upon the instructions of the Chief Executive Officer of ▇▇▇▇▇▇▇▇'▇
or based upon the advice of counsel for ▇▇▇▇▇▇▇▇'▇ or Company shall
be conclusively presumed to be done, or omitted to be done, by
Executive in good faith and in the best interests of Company. The
cessation of employment of Executive shall not be deemed to be for
Cause unless and until there shall have been delivered to Executive
a copy of a resolution duly adopted by the affirmative vote of not
less than two-thirds of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice is provided to Executive and Executive is given
an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board,
Executive is guilty of the conduct described in subparagraph (i) or
(ii) above and specifying the particulars thereof in detail.
(b) Executive shall have the right to terminate his
employment for good reason and to receive the benefits under
Section 4(d) or 4(e) as the case may be. The term "good
reason"shall mean (1) a material breach by Company or ▇▇▇▇▇▇▇▇'▇ of
any of their obligations under this Agreement (including, but not
limited to, a mandatory relocation of Executive from the New York
City area and, prior to June 30, 2001, a demotion from the position
of Chief Executive Officer of Company and Saks Fifth Avenue), which
breach is not cured within 20 business days of the receipt of
written notice of such breach by Company or ▇▇▇▇▇▇▇▇'▇ from
Executive, or (2) the occurrence of a "change in control" of
▇▇▇▇▇▇▇▇'▇ as that phrase is defined in the 1997 Plan.
(c) Company and ▇▇▇▇▇▇▇▇'▇ shall have the right to
terminate Executive's employment under this Agreement at anytime
without cause by paying the benefits set forth in Section 4(d) or
4(e) as the case may be.
(d) In the event that Executive's employment is
terminated by Company or ▇▇▇▇▇▇▇▇'▇ without Cause or by Executive
with good reason on or before June 30, 2001, Company shall: (i) pay
Executive within 30 days of such termination, the Accrued Benefits
and an amount in cash equal to the sum of (a)the product of 125% of
Executive's Base Salary times the number of years (including
partial years) remaining through June 30,2001, plus (b) 200% of
Executive's Base Salary; provided, however, that this sum shall be
capped so that the payment does not exceed 3.75 times Executive's
Base Salary (ii) immediately cause the full vesting and
exercisability of all options granted on or after the Effective
Time of the Merger and Executive shall thereafter possess the Stock
Option Rights; (iii) provide Executive continued participation in
Company's benefits plans for three years, (iv), ensure that
Executive has a minimum of 26 years of credited service for
purposes of Company's pension plan and supplemental pension plan;
and (v) provide Executive(and, to the extent applicable, his spouse
and dependent children) with the Statutory Rights, Continuing
Health Benefits and Other Benefits. The amount of the compensation
paid under this Section 4(d) that will be allocated as
consideration for Executive's entering into the non-competition
provisions of Section 5 shall be determined by Company and
▇▇▇▇▇▇▇▇'▇ in light of relevant market factors.
(e) In the event that Executive's employment as a
consultant is terminated by Company without cause or by Executive
with good reason after June 30, 2001 and before June 30, 2003,
Company shall: (i) pay within 30 days of such termination an amount
in cash equal to what Executive would have received as cash
compensation through June 30, 2003; (ii)immediately cause the full
vesting and exercisability of all options granted on or after the
Effective Time of the Merger;(iii) provide Executive continued
participation in Company's benefits plans through June 30, 2003;
(iv) ensure that Executive has a minimum of 26 years of credited
service for purposes of the Company's pension plan and supplemental
pension plan; and(v) provide Executive (and, to the extent
applicable, his spouse and dependent children) with the Statutory
Rights, Continuing Health Benefits and Other Benefits. The amount
of the compensation paid under this Section 4(e) that will be
allocated as consideration for Executive's entering into then
on-competition provisions of Section 5 shall be determined by
Company and ▇▇▇▇▇▇▇▇'▇ in light of relevant market factors.
(f) If Executive's employment is terminated, Executive
agrees to resign as a director of ▇▇▇▇▇▇▇▇'▇ (and 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 its affiliates.
(g) If any payment, right or benefit provided for in
this Agreement or otherwise paid to Executive by Company or
▇▇▇▇▇▇▇▇'▇ is treated as an "excess parachute payment" under
Section 280G(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 federal 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; provided, however, that in determining
whether any adverse federal tax consequences have occurred, the
denial of a tax deduction to Company or ▇▇▇▇▇▇▇▇'▇ with respect to
the amount of a payment made to or other benefit conferred on
Executive shall not be treated as giving rise to an adverse federal
tax consequence with respect to Executive. Company, ▇▇▇▇▇▇▇▇'▇,
and Executive shall use their reasonable efforts to ensure that any
payments, rights or benefits provided for herein or in connection
with Executive's providing services to Company and ▇▇▇▇▇▇▇▇'▇ are
not treated as excess parachute payments.
5. Non-competition; Unauthorized Disclosure.
(a) Non-competition. During the period Executive is
employed under this Agreement, and for a period of two 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,
on behalf of any retailer which directly competes with Company's
luxury retail business; and.
(ii) shall not induce or attempt to persuade any
employee of Company or any of its divisions, subsidiaries or then
present affiliates to terminate their employment relationship.
(b) Unauthorized Disclosure. During the period
Executive is employed under this Agreement, and for a further
period of two years thereafter, Executive shall not, except as
required by any court or administrative agency, without the written
consent of the Board, or a person authorized thereby, disclose to
any person, other than an employee of Company or ▇▇▇▇▇▇▇▇'▇, 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 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 5:
(i) the covenants contained in paragraph 5(a)shall
be limited to the markets in which Company or its subsidiaries are
actively engaged in the conduct of a luxury retail business at the
time of Executive's termination of employment;
(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 5, 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 5, 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 5 shall
survive the conclusion of Executive's employment by Company.
6. General Provisions.
(a) Notices. Any notice to be given hereunder maybe
effected in writing by personal delivery, mail, overnight courier,
or facsimile. 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 6(a).
Notices shall be deemed communicated as of the actual receipt or
refusal of receipt.
If to Executive: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Saks Fifth Avenue
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
If to Company
or ▇▇▇▇▇▇▇▇'▇: Office of the General Counsel
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(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 New York.
(d) Entire Agreement. Except for any prior grants of
options, restricted stock, or other forms of incentive compensation
evidenced by a written instrument or by an action of Company's
Board or ▇▇▇▇▇▇▇▇'▇ Board, and except for ▇▇▇▇▇▇▇▇'▇ and Company's
obligations pursuant to Section 5.13 of the Merger Agreement (which
is incorporated herein by reference), 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) Indemnification. To the fullest extent permitted by
law, Company and ▇▇▇▇▇▇▇▇'▇ shall indemnify Executive (including
the advancement of expenses) for any judgments, fines, amounts paid
in settlement and reasonable expenses, including attorneys' fees,
incurred by Executive in connection with the defense of any lawsuit
or other claim to which he is made a party by reason of being an
officer, director or employee of Company or ▇▇▇▇▇▇▇▇'▇ or any of
their affiliates during the term of this Agreement. For a period
of at least six years after cessation of Executive's employment
hereunder, Company and ▇▇▇▇▇▇▇▇'▇ shall make every reasonable
effort to maintain customary director and officer liability
insurance covering Executive for acts and omissions during
Executive's employment. Any termination of Executive's employment
or of this Agreement shall have no effect on the continuing
operation of this Section 6(e).
(f) No Mitigation. Executive shall not be obligated to
seek other employment or take any other action byway of mitigation
of the amounts payable to Executive under any of the provisions of
this Agreement and such amounts shall not be reduced whether or not
Executive obtains other employment.
(g) Headings. The Section, paragraph, and subparagraph
headings are for convenience or reference only and shall not define
or limit the provisions hereof.
(h) Attorney's Fees. Company agrees to pay or promptly
reimburse Executive for all reasonable costs and expenses
(including all reasonable legal fees and expenses)which Executive
may reasonably incur in connection with any action or proceeding
relating to the validity or enforceability of, or liability under,
any provision of this Agreement(including as a result of any claim
by Executive regarding the amounts of any payment pursuant to this
Agreement), in which Executive materially prevails.
(i) Successors, etc. This Agreement is personal to
Executive and without the prior written consent of Company shall
not be assignable by Executive otherwise than by will or the laws
of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by Executive's legal representatives.
This Agreement shall inure to the benefit of and be binding upon
Company, ▇▇▇▇▇▇▇▇'▇, and their respective successors and assigns.
Company and ▇▇▇▇▇▇▇▇'▇ shall each require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of their business and/or
assets to assume expressly and agree to perform this Agreement in
the same manner and to the same extent that Company or ▇▇▇▇▇▇▇▇'▇
would be required to perform it if no such succession had taken
place.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
▇▇▇▇▇▇▇▇'▇, INC.
By: _____________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
SAKS HOLDINGS, INC.
By:______________________
▇▇▇▇ ▇. ▇▇▇▇
_________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
