Exhibit 10.36
Employment
Agreement
April 5,
2006
This Employment Agreement (this
“ Agreement ”) is between Saks
Incorporated (“ SKS ”) and its
subsidiaries listed on the signature page of this Agreement and
Charles G. Tharp (the “ Executive
”).
Terms and
Conditions
The parties to this Agreement agree
as follows:
1. Employment
. Effective January 9, 2006,
the Company (as defined in the next sentence) employs the
Executive, and during the Executive’s employment the
Executive will serve, as SKS’s Executive Vice President-Human
Resources or in such other capacity of equal or greater status and
responsibility with SKS or its subsidiaries as the Chief Executive
Officer of SKS designates. In this Agreement the term “
the Company ” means SKS or one of its
subsidiaries that employs the Executive in accordance with this
Agreement at the time of determination or reference. During the
Executive’s employment the Executive’s place of
business will be located in New York, New York and the Executive
will report directly to the Chief Executive Officer of
SKS.
2. Duties
. During the Executive’s
employment the Executive will (a) devote substantially all of
the Executive’s working time, energies, and skills to the
benefit of the Company’s business and (b) serve the
Company diligently and to the best of the Executive’s ability
and to use the Executive’s best efforts to follow the
policies and directions of the Executive’s supervisors and
the Board of Directors of Saks.
3. Compensation
. During the Executive’s
employment the Executive’s compensation and benefits under
this Agreement will be as follows:
(a) Base Salary
. The Company will pay the Executive
a base salary at a rate of not less than $500,000 per year (“
Base Salary ”). Base Salary will be paid in
installments in accordance with the Company’s normal payment
schedule but not less frequently than monthly. All payments will be
subject to the deduction of payroll taxes and similar assessments
as required by law.
(b) Bonus . In addition to Base
Salary, the Executive will be eligible for an annual cash bonus.
The bonus for plan achievement at the target level will be 50% of
Base Salary and the bonus for plan achievement at the maximum level
will be 75% of Base Salary, in all circumstances in accordance with
and subject to the terms and conditions of the Company’s
bonus program in effect from time to time.
(c) Effect Of Change in Control On Stock-Based
Awards . Except as provided in section 5(b), SKS’s
2004 Long-Term Incentive Plan (the “ 2004 Plan
”) will govern
the vesting of awards made to the
Executive in accordance with such plan if a Change in Control (for
all purposes of this Agreement as defined in the 2004 Plan)
occurs.
(d) Performance Shares . Subject to
the terms and conditions of the 2004 Plan and the following
sentences of this subsection (d), SKS will award to the Executive
30,000 performance shares pursuant to Section 8 of the 2004
Plan with respect to each of the SKS’s 2007 and 2008 fiscal
years. Each of the two annual awards of 30,000 performance shares
will include performance targets and performance measures as
determined by the Human Resources and Compensation Committee of the
SKS Board of Directors (the “ Committee
”) in accordance with Section 8(e) of the 2004 Plan.
Each of the three annual awards of 30,000 performance shares will
reflect (i) a 10,000-share payout at the threshold level of
performance, (ii) a 20,000-share payout at the target level of
performance, and (iii) a 30,000-share payout at the maximum
level of performance. The Committee in accordance with the 2004
Plan will determine whether an award has been earned. To receive
the performance shares subject to an award, the Executive must be
continuously employed by the Company to the last day of the
restriction period except as provided in section 5(a) of this
Agreement. Each award to be made as described in this subsection
(d) is subject to Committee authorization and the
Executive’s execution and delivery to SKS of a performance
share agreement in the form that in all material respects is the
same form as executed and delivered by executives of the Company in
positions that are comparable to the Executive’s position.
Performance shares awarded in accordance with this subsection
(d) but not earned by the Executive will terminate and will
not be delivered to the Executive.
(e) Substituted Cash Payment . The
Company’s offer of employment to the Executive referred to an
award by the Company of 20,000 shares of restricted stock that
would vest in two installments of 10,000 shares each, the first
installment to vest on the first anniversary of the award date and
the second installment to vest on the second anniversary of the
award date. Subject to the last sentence of this subsection, in
lieu of, and in substitution for, the award of 20,000 shares of
restricted stock, the Company will pay to the Executive within five
business days after each of February 22, 2007 and
February 22, 2008 an amount in cash equal to the sum of
(i) and (ii), with (i) being the product of (A) the
New York Stock Exchange closing price of the Company’s Common
Stock on the applicable February 22 and (B) 10,000, and
(ii) being the product of (A) the total per-share
dividends paid with respect to the Company’s Common Stock
(valued at fair market value if paid other than in cash) from and
after the date of this Agreement to and including the applicable
February 22 and (B) 10,000, in each case less deductions
for payroll taxes and similar assessments as required by law. Each
of the two payments referred to in the preceding sentence is
referred to as a “ Cash Payment .” Except
as provided in subsection 5(a) of this Agreement, to receive the
first Cash Payment the Executive must be continuously employed by
the Company to and including February 22, 2007 and to receive
the second Cash Payment the Executive must be continuously employed
by the Company to and including February 22, 2008.
4. Insurance And Benefits . During
the Executive’s employment the Company will allow the
Executive to participate in each employee benefit plan and receive
each executive benefit applicable to executives in positions that
are comparable to the Executive’s position.
2
5. Termination Without Cause; Death;
Disability .
(a) Termination Without Cause . The
Company may terminate this Agreement without Cause (as defined
below in section 6) at any time and upon such termination the
Executive’s employment will terminate. Except as provided in
this subsection, if the Company terminates this Agreement without
Cause, then
(i)(A) SKS will pay to the Executive
as severance in a lump sum an amount equal to the sum of
(1) the Executive’s Base Salary for twenty-four months
at the rate in effect at the time of termination and (2) the
Executive’s target bonus potential amount for the fiscal year
during which the termination of this Agreement occurs (and no other
bonus will be payable) (such sum, the “ Severance
Payment ”), and (B) each unvested restricted
stock award (and not performance share awards) will immediately
vest in an amount equal to the product of the number of shares
subject to the award multiplied by a fraction the numerator of
which is the number of days elapsed during the three-year vesting
period for the award to and including the effective date of the
termination of the Executive’s employment and the denominator
of which is 1,095, and each unvested Cash Payment will immediately
vest in an amount equal to the product of the Cash Payment
multiplied by a fraction the numerator of which is the number of
days elapsed during the one-year Cash Payment vesting period to and
including the effective date of the termination of the
Executive’s employment and the denominator of which is 365,
and all awards of restricted stock that do not vest, all Cash
Payments that do not vest, and all unvested performance share
awards, will be immediately forfeited, and
(ii) if the Company’s
termination occurs primarily in anticipation of or as a result of
or due to, directly or indirectly, a Change in Control (this and
all subsequent references to “ Change in
Control ” refer to the definition of that term in the
2004 Plan), in addition to the Company’s payment of the
Severance Payment to the Executive, all of the Executive’s
restricted stock awards, the target amount of performance share
awards, and each unpaid Cash Payment will immediately
vest.
With respect to the immediate
vesting of the unpaid Cash Payments, the Company will make them
within five business days following the termination of the
Executive’s employment. To calculate a Cash Payment any
portion of which immediately vests in accordance with this
subsection (a), the Company will use the New York Stock Exchange
closing price of the Company’s common stock on the date of
termination of the Executive’s employment, and if termination
occurs as described in clause (ii) of this subsection
(a) the Company will use the per-share consideration paid to
the Company’s shareholders with respect to their shares of
the Company’s common stock as a result of the Change in
Control instead of the New York Stock Exchange closing
price.
SKS’s obligations to provide
the benefits described in this subsection (a) are subject to
SKS’s receipt of a written release, in form and substance
reasonably satisfactory to SKS, executed and delivered by the
Executive in which the Executive releases SKS and its affiliates
from all claims of, and liabilities and obligations to, the
Executive arising out of this Agreement and the Executive’s
employment by the Company. Termination of this Agreement in
accordance with
3
this subsection (a) will not terminate the
Executive’s obligations under section 8 of this Agreement or
SKS’s obligations under section 7 of this Agreement. If the
Company terminates this Agreement without Cause and as a result the
Executive would be entitled to receive a severance payment in
accordance with the terms of SKS’s 2000 Change of Control and
Material Transaction Severance Plan, as amended from time to time
(the “ 2000 Plan ”), if then in effect,
that would be greater than the Severance Payment, then only in that
circumstance and solely for purposes of 2000 Plan the Executive may
elect to waive the Executive’s rights to receive the
Severance Payment and upon the waiver the Executive will not be
entitled to receive the Severance Payment and this Agreement will
not constitute an Existing Program as defined in the 2000 Plan. If
the Executive directly or indirectly engages in an association that
constitutes an Association (as defined in section 8(b)(iv)(D) of
this Agreement), SKS’s obligations to provide the benefits
described in the second sentence of this subsection will
immediately terminate.
(b) Medical Plan Benefits . If the
termination of the Executive’s employment occurs in
anticipation of, or on or after, a Change in Control, during the
eighteen-month period following the termination of the
Executive’s employment the Company will, subject to the next
sentence, reimburse the Executive monthly for the costs of medical
insurance for the Executive and the Executive’s family under
COBRA less the then-applicable monthly associate contribution
amount for comparable participation under the Company’s
medical insurance plan. If prior to the end of the eighteen-month
period and as a result of employment the Executive becomes eligible
for medical insurance the coverage and the cost of which is
comparable in all material respects to the coverage and the cost of
participation in the Company’s medical insurance plan then in
effect, the Company’s obligations in the preceding sentence
will immediately terminate. Unless the Company’s obligations
in the first sentence of this paragraph have terminated in
accordance with the preceding sentence, at the end of the
eighteen-month period the Company will pay to the Executive in a
lump sum an amount sufficient to enable the Executive to obtain
equivalent medical insurance plan coverage for six months, no
amount of which the Executive will be obligated to return upon
subsequent employment. If termination of the Executive’s
employment occurs as described in clause (B) of the first
sentence of paragraph (i) of this subsection (b), the
Company’s obligation with respect to the Executive’s
participation under the Company’s medical insurance plan will
be limited to the Executive’s COBRA rights, which the
Executive may exercise at the Executive’s expense.
(c) Death . This Agreement will
terminate upon the Executive’s death, except as to:
(i) the right of the Executive’s estate to exercise all
unexercised stock options, if any, in accordance with and subject
to SKS’s stock option plan under which the unexercised stock
options were granted, (ii) other entitlements under this
Agreement that expressly survive death, (iii) any rights that
the Executive’s estate or dependents may have under COBRA or
any other federal or state law or that are derived independent of
this Agreement by reason of the Executive’s participation in
any employee benefit arrangement or plan maintained by the Company,
and (iv) the right of the Executive’s estate to receive
all shares of restricted awarded to the Executive that are vested
as of the date of the Executive’s death.
(d) Disability . If the Executive
becomes disabled at any time prior to the termination of this
Agreement, the Executive will after the Executive becomes disabled
continue to receive all payments and benefits provided by this
Agreement, less all disability payments
4
received, for twelve months. The
Executive will be deemed to be disabled when the Executive becomes
entitled to receive disability benefits under SKS’s Long-Term
Disability Plan.
(e) Application of IRC Code
Section 409A . If the Company or the Executive
reasonably and in good faith determines that any payment to be made
or benefit to be provided to the Executive upon the
Executive’s termination of employment would be subject to
Section 409A(a)(1) of the Internal Revenue Code of 1986, as
amended (the “ Code ”), the Company will,
to the extent necessary, delay making the payment or providing the
benefit until the earliest date on which the Company in good faith
determines that the payment can be paid or the benefit can be
provided without causing the payment or the benefit to be subject
to the Section 409A(a)(1).
6. Termination by the Company for
Cause . The Company may terminate this Agreement for Cause
at any time and upon such termination the Executive’s
employment will terminate, in which event no salary or bonus will
be paid after such termination. For purposes of this Agreement, the
term “ Cause ” will mean and be strictly
limited to: (i) conviction of the Executive, after all
applicable rights of appeal have been exhausted or waived, for any
crime that materially discredits the Company or is materially
detrimental to the reputation or goodwill of the Company;
(ii) commission of any material act of fraud or dishonesty by
the Executive against the Company or commission of an immoral or
unethical act that materially reflects negatively on the Company;
if first the Executive is provided with written notice of the claim
and with an opportunity to contest it before the Board of
Directors; (iii) the Executive’s violation of the
Company’s Code of Business Conduct and Ethics, which
violation the Executive knows or reasonably should know could
reasonably be expected to result in a material adverse effect on
the Company, if first the Executive is provided with written notice
of the violation and with an opportunity to contest it before the
Board of Directors, or (iv) the Executive’s continual
and material breach of the Executive’s obligations under
section 2 of this Agreement as determined by the Committee after
the Executive has been given written notice of the breach and a
reasonable opportunity to cure the breach. Termination for Cause
will be effective immediately upon notice sent or given to the
Executive. Termination of this Agreement in accordance with this
section 6 will not terminate the Executive’s obligations
under section 8 of this Agreement or SKS’s obligations under
section 7 of this Agreement.
7. Tax Gross-Up.
(a) Amount of Gross-Up
Payment. Anything in
this Agreement to the contrary notwithstanding, if any payment or
distribution by SKS or its affiliated companies to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise,
but determined without regard to any additional payments required
under this section 7) (a “ Payment ”)
becomes or would become subject to the excise tax imposed by
Section 4999 of the Code, or any interest or penalties are
incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are
together referred to as the “ Excise Tax
”), then, subject to the next sentences of this subsection
(a), SKS will make an additional payment to the Executive (a
“ Gross-Up Payment ”) in an amount such
that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed
upon the
5
Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. The Executive will be entitled to a
Gross-Up Payment in accordance with this section 7(a) only if the
Executive’s “parachute payments” (as such term is
defined in Section 280G of the Code) exceed three hundred
thirty percent of the Executive’s “base amount”
(as determined under Section 280G(b) of the Code) (such
product, the “ Threshold ”). If the
Payment does not exceed the Threshold, the Executive will not
receive a Gross-Up Payment and the amount of the Payment will be
reduced to an amount that is one dollar less than the largest
amount that would not become subject to the tax imposed by
Section 4999 of the Code and that SKS could pay to the
Executive without loss of deduction under Section 280G(a) of
the Code.
(b) Calculations; When
Paid. Subject to the
provisions of section 7(c), all dete
