SCHEDULE 14 INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
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[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Saks Incorporated
--------------------------
(Name of Registrant as Specified in Its Charter)
Saks Incorporated
---------------------------
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<PAGE>
750 Lakeshore Parkway
Birmingham, Alabama 35211
April 28, 1999
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of
the Shareholders to be held at 8:30 a.m. Eastern Daylight
Time on Wednesday, June 16, 1999, at Proffitt's Foothills
Mall Store (Store for Women), 173 Foothills Mall, Maryville,
Tennessee 37801.
The notice of the meeting and proxy statement accompanying
this letter describe the specific business to be acted upon.
Your vote is very important, and your cooperation in
completing, signing, and returning your proxy promptly in
the enclosed return envelope will be appreciated.
At the meeting, there will be a report on the progress of
the Company and an opportunity to ask questions of general
interest to the shareholders.
Shareholders attending the meeting are invited to shop at
our Foothills Mall Proffitt's store and will be given a
special discount on the day's purchases.
I hope you will be able to join us, and I look forward to
seeing you.
Sincerely,
/s/ R. Brad Martin
R. Brad Martin
Chairman of the Board and
Chief Executive Officer
750 Lakeshore Parkway
Birmingham, Alabama 35211
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Saks Incorporated:
Notice is hereby given that the Annual Meeting of the Shareholders of Saks
Incorporated (the "Company;" formerly Proffitt's, Inc.) will be held at 8:30
a.m. Eastern Daylight Time on Wednesday, June 16, 1999, at Proffitt's
Foothills Mall Store (Store for Women), 173 Foothills Mall, Maryville,
Tennessee 37801, for the following purposes:
1. To elect ten Directors to hold office for the terms specified or
until their respective successors have been elected and qualified;
2. To approve and adopt the Saks Incorporated Amended and Restated
1994 Long-Term Incentive Plan;
3. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for the current fiscal year ending
January 29, 2000; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on April 19, 1999 are entitled
to notice of, and to vote at, the meeting.
Shareholders are cordially invited to attend the meeting in person.
By order of the Board of
Directors,
Julia Bentley
Secretary
April 28, 1999
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, YOU ARE URGED TO MARK,
SIGN, AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE
PROVIDED.
PROXY STATEMENT
Information Concerning the Solicitation
This proxy statement is furnished in connection with the solicitation of
proxies to be used at the Annual Meeting of the Shareholders (the "Annual
Meeting") of Saks Incorporated (the "Company"), a Tennessee corporation, to be
held on June 16, 1999.
The solicitation of proxies in the enclosed form is made on behalf of the
Board of Directors of the Company. Certain Directors, officers, and employees
of the Company may solicit proxies by telephone, telecopier, telegram, mail,
or personal contact. In addition, the Company has retained Georgeson &
Company, Inc., New York, New York, to assist in the solicitation of proxies
and will pay such firm a base fee, estimated not to exceed $8,500, plus
reimbursement of expenses. Arrangements will be made with brokers, nominees,
and fiduciaries to send proxies and proxy materials at the Company's expense
to their principals. The proxy materials are first being mailed to
shareholders on or about April 30, 1999.
A shareholder signing and returning a proxy on the enclosed form has the power
to revoke it at any time before the shares subject to it are voted by
notifying the Secretary of the Company in writing. Attendance at the Annual
Meeting by a shareholder who has given a proxy will not have the effect of
revoking it unless he or she gives such written notice of revocation to the
Secretary before the proxy is voted. Votes cast by proxy or in person at the
Annual Meeting will be tabulated by the election inspectors appointed for the
meeting and will determine whether or not a quorum is present. The election
inspectors will treat abstentions as shares that are present and entitled to
vote for purposes of determining the presence of a quorum. If a broker
indicates on the proxy that it does not have discretionary authority as to
certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter. The
nominees for Director receiving a plurality of the votes cast at the meeting
in person or by proxy shall be elected. Abstentions and broker non-votes have
no affect on the plurality vote for the election of Directors. All other
matters will be approved if the votes cast favoring the action exceed the
votes opposing the action.
Outstanding Voting Securities
Only shareholders of record at the close of business on April 19, 1999 are
entitled to vote at the Annual Meeting. On that day, there were issued and
outstanding 144,436,755 shares of Common Stock. Each share has one vote.
Listed in the following table are the number of shares owned by each Director,
certain executive officers, and all Directors and officers of the Company as a
group as of March 15, 1999. The table also includes the beneficial owners as
of March 15, 1999 of more than 5% of the Company's outstanding Common Stock
who are known to the Company.
Name of Beneficial Owner Total Shares Percentage of
(and Address if "Beneficial Beneficially Common Stock
Ownership" Exceeds 5%) Owned (1) Ownership
--------------------------- ------------ --------------
Directors:
Bernard E. Bernstein 39,402(2) *
Stanton J. Bluestone 323,058 *
John W. Burden, III 11,598 *
Edmond D. Cicala 26,472 *
James A. Coggin 317,009 *
Ronald de Waal 2,2,779,152 1.92%
Julius W. Erving 7,989 *
Michael S. Gross 11,551 *
Donald E. Hess 704,724(3) *
G. David Hurd 20,651 *
R. Brad Martin 2,62,814,551(4) 1.94%
Name of Beneficial Owner Total Shares Percentage of
(and Address if "Beneficial Beneficially Common Stock
Ownership" Exceeds 5%) Owned (1) Ownership
--------------------------- ------------ -------------
Philip B. Miller 667,027 *
Robert M. Mosco 365,873(5) *
C. Warren Neel 22,214 *
Charles J. Philippin 17,603 *
Stephen I. Sadove 8,791 *
Marguerite W. Sallee 9,400 *
Gerald Tsai, Jr. 17,000 *
Named Executive Officers:
Douglas E. Coltharp 145,596 *
Brian J. Martin 162,009 *
All Directors and Officers
as a group (22 persons) 8,699,255 5.93%
Other 5% Owners:
Fidelity Management and 23,010,572(6) 15.93%
Research Corporation
82 Devonshire Street
Boston, Massachusetts
Investcorp S.A. 8,357,657(7) 5.79%
SIPCO Limited 8,346,177(8) 5.78%
* Owns less than 1% of the total outstanding Common Stock
of the Company.
(1) Includes shares that the following persons have a right to
acquire within sixty days after March 15, 1999 through the
exercise of stock options: Bernstein (9,000), Bluestone
(317,000), Burden (4,200), Cicala (9,000), Coggin (160,000),
deWaal (12,000), Erving (4,200), Gross (9,000), Hess
(3,000), Hurd (9,940), R. Brad Martin (672,341), Miller
(553,109), Mosco (207,280), Neel (9,000), Philippin
(3,000), Sadove (4,640), Sallee (5,400), Tsai (9,000),
Coltharp (78,000), and Brian J. Martin (91,606).
(2) Includes 6,000 shares owned by the Bernard E. Bernstein
Defined Benefit Pension Plan.
(3) Includes: (i) 324,816 shares owned directly by Mr. Hess,
(ii) 307,732 shares held by Mr. Hess as trustee or co-
trustee for his children, and (iii) 69,176 shares held by
him as trustee for the children of his sister. Does not
include: (i) 4,580 shares owned directly by his wife,
(ii) 14,660 shares held by his wife as co-trustee for
one of their children, or (iii) 159,842 shares held
by another individual as trustee for Mr. Hess' children.
(4) Includes: (i) 20,227 shares held by the RBM Family Limited
Partnership, (ii) 3,700 shares owned by RBM Venture Company,
a company of which Mr. Martin is sole shareholder, (iii)
338,929 shares held by Mr. Martin as trustee or co-trustee
for his children, (iv) 14,277 shares owned by the R. Brad
and Jean L. Martin Family Foundation, (v) 25,000 shares of
restricted stock which were fully vested by March 30, 1999,
(vi) 40,000 shares of restricted stock which will fully vest
by October 2, 2001, (vii) 200,000 shares of restricted
stock, the restrictions on which lapse based on performance
measurements and length of service, and (viii) 50,000 shares
held in a trust to be settled in accordance with a deferral
agreement.
(5) Excludes 32,564 shares reserved by the Company for issuance
to Mr. Mosco with respect to a deferred compensation
arrangement.
(6) Based solely on information provided by the beneficial
owner.
(7) Investcorp does not directly own any shares of Common Stock.
Beneficial ownership includes 4,625,495 shares owned by
three indirect, wholly-owned subsidiaries of Investcorp. The
remainder of the shares shown as beneficially owned by
Investcorp consists of the shares owned by certain Cayman
Islands corporations, none of which is a beneficial owner of
five percent or more of the Common Stock. Investcorp may
be deemed to share beneficial ownership of the shares of
Common Stock held by such entities because such entities
or their stockholders or principals have entered into
revocable management services or similar agreements
with an affiliate of Investcorp pursuant to which each such
entity has granted such affiliate the authority to direct
the voting and disposition of the stock owned by such
entity for so long as such agreement is in effect.
Investcorp is a Luxembourg corporation, with its registered
address at 37 rue Notre-Dame, Luxembourg.
(8) SIPCO Limited ("SIPCO") does not directly own any Common
Stock. The number of shares shown as owned by SIPCO consists
of the shares Investcorp is deemed to beneficially own.
SIPCO may be deemed to control Investcorp through its
ownership of a majority of the stock of a company which
indirectly owns a majority of Investcorp's outstanding
stock. SIPCO is a Cayman Islands corporation with its
address at P.O. Box 1111, West Wind Building, George
Town, Grand Cayman, Cayman Islands, British West Indies.
ELECTION OF DIRECTORS
(Proposal No. 1)
The Company's Charter, as amended, provides that the Board of Directors be
divided into three classes, designated as Class I, Class II, and Class III.
The terms of Class I, II, and III will expire in 2001, 2002, and 2000,
respectively. The Board of Directors proposes the election of two Directors to
Class I, six Directors to Class II, and two Directors to Class III. These ten
Directors, together with the eight Directors whose terms continue beyond this
year's Annual Meeting, will comprise the Board of Directors. Each Director
will hold office for the term specified and until his or her successor is
elected and qualified. Each Director nominee is currently a Director. Unless
otherwise instructed by the shareholder, the persons named in the enclosed
form of proxy intend to vote for the election of the persons listed in this
proxy statement. If any nominee becomes unavailable for any reason or should a
vacancy occur before the election (which events are not anticipated), the
proxies will be voted for the election of a substitute nominee to be selected
by the persons named in the proxy.
Nominees for the term expiring in 2001 (Class I): Robert M. Mosco and Stephen
I. Sadove.
Nominees for the term expiring in 2002 (Class II): John W. Burden, III; James
A. Coggin; Michael S. Gross; G. David Hurd; Philip B.
Miller, and Gerald Tsai, Jr.
Nominees for the term expiring in 2000 (Class III): Edmond D. Cicala and
Charles J. Philippin.
We have provided below certain information about the nominees and Directors.
The business association as shown has been continued for more than five years
unless otherwise noted.
Director
Name, Principal Occupation, and Directorship Age Since
NOMINEES FOR DIRECTOR
Class I (terms expiring in 2001):
Robert M. Mosco 50 1998
President of Merchandising and Chief Operating Officer of
Saks Incorporated. Mr. Mosco served as President and Chief
Executive Officer Proffitt's Merchandising Group between
October 1996 and November 1998. Between February 1996 and
October 1996, Mr. Mosco served as President and Chief Executive
Officer of the Younkers group of Proffitt's, Inc. Mr. Mosco served
as President and Chief Operating Officer of Younkers, Inc.
between 1992 and January 1996.
Stephen I. Sadove 47 1998
President Bristol-Myers Squibb Co. Worldwide Beauty Care and
Nutritionals since December 1997. Since 1991, Mr. Sadove has held
various executive positions with Bristol-Myers Squibb, including
President of Clairol, Inc.
Class II (terms expiring in 2002):
John W. Burden, III 62 1998
Retail consultant. Mr. Burden was a partner in Retail Options
between November 1993 and October 1997. Mr. Burden
is the Retired Chairman of Federated Department Stores,
Inc. and Allied Stores Corporation. He serves on the Board of
Directors of Chico's, Inc.
Director
Name, Principal Occupation, and Directorship Age Since
James A. Coggin 56 1998
President and Chief Administrative Officer of Saks Incorporated.
Mr. Coggin served as President and Chief Operating Officer of the
Company between March 1995 and November 1998 and served
as Executive Vice President and Chief Administrative Officer of
the Company between March 1994 and March 1995. Prior to that,
Mr. Coggin held various executive positions with McRae's, Inc.
Michael S. Gross 37 1994
Vice President of Apollo Capital Management, Inc., the general
partner of Apollo Advisors, L.P. Mr. Gross serves on the Boards of
Directors of Alliance Imaging, Inc., Allied Waste Industries, Inc.,
Converse, Inc., Florsheim Group, Inc., and United Rentals, Inc.
G. David Hurd 69 1996
Emeritus Chairman of Principal Financial Group. Mr. Hurd
served as Chairman and Chief Executive Officer of Principal
Financial Group from 1989 until his retirement in December 1994.
Philip B. Miller 60 1998
Chairman and Chief Executive Officer of the Saks Fifth Avenue
group of Saks Incorporated. Mr. Miller served as Chairman
and Chief Executive Officer of Saks Holdings, Inc. (the holding
company for Saks & Company, a wholly-owned subsidiary that
did business as Saks Fifth Avenue ("SFA")) between March 1996
and September 1998. He held the same positions with SFA
between June 1993 and September 1998. He joined SFA in 1990.
Gerald Tsai, Jr. 70 1993
Private investor. Mr. Tsai served as Chairman, President,
and Chief Executive Officer of Delta Life Corporation from
February 1993 to October 1997. Mr. Tsai serves on the Boards of
Directors of Meditrust, Rite Aid Corporation, Sequa Corporation,
Triarc Companies, Inc., United Rentals, Inc., and Zenith
National Insurance Corporation.
Class III (terms expiring in 2000):
Edmond D. Cicala 73 1987
President of Edmond Enterprises, Inc. Retired Chairman and
Chief Executive Officer of the Goldsmith's Division of Federated
Department Stores. Mr. Cicala serves on the Boards of Directors
of Evans, Inc. and National Commerce Bancorporation.
Charles J. Philippin 49 1998
Executive of Investcorp, S.A. Mr. Philippin has served as an Executive
of Investcorp, its predecessor, or one or more of its wholly-owned
subsidiaries since October 1994. Prior to joining Investcorp, he
was a partner with Coopers & Lybrand, L.L.P. Mr. Philippin serves
on the Boards of Directors of CSK Auto Corporation, Falcon
Building Products, Inc., Harborside Healthcare, Inc., Star Markets,
Inc., The William Carter Company, and Werner Company.
THE BOARD OF DIRECTORS RECOMMENDS THE SHAREHOLDERS VOTE "FOR" THE ELECTION AS
DIRECTORS THE ABOVE LISTED NOMINEES.
Director
Name, Principal Occupation, and Directorship Age Since
CONTINUING DIRECTORS
Class I (terms expiring in 2001):
Bernard E. Bernstein 68 1987
Partner in the Knoxville, Tennessee law firm of Bernstein,
Stair & McAdams LLP.
Stanton J. Bluestone 64 1998
Chairman of the Carson Pirie Scott group of Saks Incorporated
from February 1998 until his retirement in January 1999.
Mr. Bluestone served as Chairman and Chief Executive Officer
of Carson Pirie Scott & Co. ("Carson's") between March 1996 and
January 1998. He was the President and Chief Executive Officer
of Carson's between August 1993 and March 1996. Mr. Bluestone
serves on the Board of Directors of Hills Stores Company.
Julius W. Erving 49 1997
President of the Erving Group and Executive Vice President of the
Orlando Magic since September 1997. Mr. Erving was employed by the
National Broadcasting Company between December 1994 and
June 1997, and by the National Basketball Association between 1987
and September 1997. Mr. Erving serves on the Boards of Directors of
Converse, Inc., The Sports Authority, and Darden Restaurants, Inc.
Donald E. Hess 50 1996
Chief Executive Officer of Southwood Partners. Chairman
Emeritus of Parisian. Mr. Hess served as Chairman of the
Parisian group of Saks Incorporated until his retirement in
December 1997 and served as President and Chief Executive
Officer of Parisian from 1986 to April 1997.
Class III (terms expiring in 2000):
Ronald de Waal 47 1985
Chairman of We International, B.V., a Netherlands corporation,
which operates more than 250 fashion specialty stores in
Belgium, the Netherlands, Switzerland, Germany, and France.
R. Brad Martin 47 1984
Chief Executive Officer of the Company since 1989, Chairman
of the Board of the Company since 1987, and President from
July 1989 until March 1994 and from September 1994 to March
1995. Mr. Martin serves on the Boards of Directors of First Tennessee
National Corporation and Harrah's Entertainment, Inc.
C. Warren Neel 60 1987
Dean of the College of Business Administration at the University
of Tennessee, Knoxville. Dr. Neel serves on the Boards of
Directors of American Healthcorp, Inc., Clayton Homes, Inc.,
O'Charley's, Inc., and The Promus Companies, Inc.
Marguerite W. Sallee 53 1996
Chief Executive Officer of Bright Horizons Family Solutions. Ms. Sallee
served as President and Chief Executive Officer of CorporateFamily
Solutions between February 1987 and July 1998. Ms. Sallee serves on
the Board of Directors of MagneTek, Inc.
Further Information Concerning Directors
Directors' Fees
Directors who are not officers of the Company each receive an annual fee of
$15,000, $2,000 for attendance at each board meeting, and $1,000 for
attendance at each meeting of a committee of which he is a member (or $750 for
participation by telephone in a board or committee meeting). Effective June
1999, the annual fee will be increased to $17,500. Committee chairpersons each
receive an additional annual fee of $2,500. Directors are reimbursed for
expenses in connection with their services as Directors of the Company.
Directors not employed by the Company may elect to: (i) receive fees earned in
Company Common Stock, (ii) receive one-half of fees earned in Company Common
Stock with the balance in cash, or (iii) participate in the Company's Deferred
Compensation Plan for Non-Employed Directors and defer all such compensation
in lieu of immediate cash payments. The deferred compensation is tied to the
value of the Company's Common Stock.
Pursuant to the Company's 1994 Long-Term Incentive Plan (the "1994 Plan") and
the 1997 Stock-Based Incentive Plan (the "1997 Plan"),
each non-employee Director of the Company annually is granted a nonqualified
stock option to purchase 2,000 shares of Company Common Stock (7,000 shares
for the Company's Vice Chairman of the Board). This amount will be increased
to 3,000 shares (8,000 shares for the Vice Chairman) effective with the Annual
Meeting in June 1999. Options are priced at fair market value at the date of
grant and vest in one-fifth installments commencing six months from the date
of grant (with each subsequent installment vesting on the anniversary date of
grant) with full vesting occurring on the fourth anniversary date of grant. In
addition, each non-employee Director has been awarded 2,000 shares of
restricted Common Stock which vest in one-tenth installments commencing on the
first anniversary of the award date. The Company's Vice Chairman of the Board
also receives an annual Common Stock grant of 2,000 shares which vests
immediately upon grant.
In October 1998, each non-employee Director of the Company was granted a
nonqualified stock option to purchase 15,000 shares of Company Common Stock,
priced at $18.9375 per share (the fair value at the October 2, 1998 grant
date). These options will vest in accordance with the schedule outlined in the
preceding paragraph.
Committees of the Board of Directors and Meeting Attendance
The Board met five times during the last fiscal year. The Board of Directors
has established Audit, Human Resources/Option, Strategic Planning/Corporate
Governance, and Executive Committees. All Committees except the Executive
Committee are comprised of non-employee Directors.
The Audit Committee includes C. Warren Neel (Chairman), Bernard E. Bernstein,
John W. Burden, III, and Charles J. Philippin. The Committee met four times
during the last fiscal year. The Audit Committee: (i) recommends the
appointment of the Company's independent accountants; (ii) reviews the scope,
results, and recommendations of the audits conducted by the independent
accountants and the internal auditors; (iii) oversees the scope and adequacy
of the Company's internal accounting controls and record-keeping systems; (iv)
reviews the objectivity, effectiveness, and resources of the internal audit
function, which reports directly to the Committee; (v) confers independently
with the independent accountants and internal auditors; (vi) reviews the
nature and scope of non-audit services to be performed by independent
accountants or consultants; (vii) determines the appropriateness of fees for
audit and non-audit services performed by the independent accountants; and
(viii) determines when it is appropriate to accept proposals from different
independent accountants for audit and non-audit services to be performed.
The Human Resources/Option Committee includes Edmond D. Cicala (Chairman),
Julius W. Erving, Marguerite W. Sallee, and Gerald Tsai, Jr. The Committee met
three times during the last fiscal year. The Committee: (i) evaluates the
performance of the Chief Executive Officer ("CEO") annually; (ii) reviews and
recommends to the Board salary and incentive compensation, including bonus,
stock options, and stock grants, for the CEO; (iii) reviews the salaries and
incentive compensation for certain senior corporate officers and executives;
(iv) reviews and approves the incentive compensation programs; (v) reviews and
makes decisions regarding the structure of and awards granted under the
Company's stock option and incentive plans; and (vi) recommends Director
compensation to the Board.
The Strategic Planning/Corporate Governance Committee includes Ronald de Waal
(Chairman), Stanton J. Bluestone, Michael S. Gross, G. David Hurd, Stephen I.
Sadove, and Marguerite W. Sallee. The Committee met twice during the last
fiscal year. The Committee: (i) reviews the Company's strategic plan with
management and coordinates presentation of the strategic plan to the full
Board; (ii) assesses Board and Committee effectiveness; (iii) screens and
recommends new Director candidates; and (iv) provides counsel to the Chairman
of the Board on Committee composition. The Committee also considers any
nominees for Director recommended by shareholders.
The Executive Committee includes R. Brad Martin (Chairman), Edmond D. Cicala,
Ronald de Waal, and C. Warren Neel. The Committee acted by unanimous written
consent nine times during the last fiscal year. The Executive Committee
exercises all of the powers of the full Board of Directors (with certain
specified exceptions required by law) during intervals between full Board
meetings.
All Directors attended 75% or more of the aggregate number of meetings of the
Board of Directors and the committee(s) on which he or she served, except for
Mr. Gross. Mr. Gross was unable to participate in one telephonic Committee
meeting and one regular Board meeting due to unavoidable business conflicts.
The overall average percentage for all Directors' meeting attendance was 95%.
Executive Compensation
Summary Compensation Table
The following table sets forth, for the fiscal years ended January 30, 1999
("1998"), January 31, 1998 ("1997"), and February 1, 1997 ("1996"), the cash
compensation paid by the Company, as well as other compensation paid or
accrued for these years, as to the Company's Chief Executive Officer and to
each of the other four highest compensated executive officers ("Named
Officers"). As used in this Proxy Statement, the term "executive officer" has
the meaning set forth in Rule 3b-7 under the Securities Exchange Act of 1934.
As a consequence, the table is not a list of the most highly compensated
employees of the Company.
<TABLE>
Other Securities All
Annual Restricted Underlying Other
Salary Bonus Compensation Stock Options Compensation
Name & Principal Position Year ($) ($)(1) ($) Awards ($) Granted($) ($)
------------------------- ---- ---------- ---------- ---------- ------------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
R. Brad Martin 1998 825,000 1,351,344 (2) 137,918(3) 3,211,642(4)(5)(6) 866,341 54,517(7)
Chairman of the Board and 1997 613,474 1,629,882 (8) 134,282(3) 1,223,968 (4)(9) 400,000 19,742(7)
Chief Executive Officer 1996 536,031 606,882(10) 27,700(3) 664,589 (4)(11) 7,800(7)
James A. Coggin 1998 700,000 252,000 1,525,157(4)(5)(6) 300,000
President and Chief 1997 508,667 440,945 (8) 587,500 (4)(9)
Administrative Officer 1996 450,000 375,200(10) 362,500 (4)(11)
Robert M. Mosco 1998 700,000 252,000 1,463,827(4)(5)(6) 300,000
President of Merchandising 1997 510,090 300,000 538,532 (4)(9) 50,000(12)
and Chief Operating Officer 1996 450,000 229,167 151,036 (4) 120,000 37,500(12)
Douglas E. Coltharp (13) 1998 350,000 105,000 703,023(4)(5)(6) 140,000
Executive Vice President 1997 281,318 134,063 514,063 (4)(9)
and Chief Financial Officer 1996 28,205 70,000 239,688(14)
Brian J. Martin 1998 350,000 105,000 703,023(4)(5)(6) 130,493
Executive Vice President of 1997 250,333 128,500 470,000 (4)(9)
Law and General Counsel 1996 213,981 108,500 199,375 (4)(11) 30,000 164,875(12)
</TABLE>
(1) Amounts awarded under the Company's bonus compensation plans and
arrangements for the respective fiscal years, even if deferred.
(2) Includes a stock grant to R. Brad Martin ("Martin") of 39,500 shares of
Company Common Stock. This grant was priced as of March 30, 1999 and
was valued at $980,094 (at a market price of $24.8125).
(3) In February 1989, the Company entered into a compensation agreement
with Martin which provided for a $500,000 interest-free loan due
January 31, 1999 or upon Martin's termination of employment with the
Company. Pursuant to Martin's amended employment agreement, beginning
in 1997, one-fifth of the loan balance is being forgiven annually.
Other Annual Compensation represents one-fifth of the principal balance
being forgiven and imputed interest on that interest-free loan.
(4) In 1996, Martin, Coggin, Mosco, and Brian Martin were granted 50,000,
30,000, 25,000, and 18,000 shares of Company Common Stock,
respectively, under a Restricted Stock Grant Agreement pursuant to the
Company's 1994 Long-Term Incentive Plan. Restrictions lapse as a
function of the Company achieving certain performance goals and time.
Shares shall be earned ("Earned Shares") on the basis of achieving
these goals for 1996, 1997, and 1998. Restrictions shall be removed
from 25% of such Earned Shares at the time they are earned, and
restrictions shall be removed from an additional 25% of such Earned
Shares at the end of each of the following three years. In 1996,
16,667, 10,000, 8,333, and 6,000 shares were earned for Martin, Coggin,
Mosco, and Brian Martin, respectively. As of February 1, 1997, the
market price of the Common Stock was $18.125, and the value of the
shares earned was $302,089, $181,250, $151,036, and $108,750 for
Martin, Coggin, Mosco, and Brian Martin, respectively. In late 1996,
Coltharp was granted 15,000 shares of Company Common Stock under a
Restricted Stock Grant Agreement. In 1997, 16,667, 10,000, 8,333,
5,000, and 6,000 shares were earned for Martin, Coggin, Mosco,
Coltharp, and Brian Martin, respectively. As of January 31, 1998, the
market price of the Common Stock was $29.375, and the value of the
shares earned was $489,593, $293,750, $244,782, $146,875, and $176,250
for Martin, Coggin, Mosco, Coltharp, and Brian Martin, respectively. In
1998, 16,666, 10,000, 8,334, 5,000, and 6,000 shares were earned for
Martin, Coggin, Mosco, Coltharp, and Brian Martin, respectively. As of
January 30, 1999, the market price of the Common Stock was $36.8125,
and the value of the shares earned was $613,517, $368,125, $306,795,
$184,063, and $220,875 for Martin, Coggin, Mosco, Coltharp, and Brian
Martin, respectively. The value of the Earned Shares is included in
total Restricted Stock Awards, even if not fully vested.
(5) In 1998, Martin, Coggin, Mosco, Coltharp, and Brian Martin were granted
150,000, 75,000, 75,000, 20,000, and 20,000 shares of Company Common
Stock, respectively, under a Restricted Stock Grant Agreement pursuant
to the Company's 1997 Stock-Based Incentive Plan. Restrictions lapse as
a function of the Company achieving certain performance goals and time.
Shares shall be earned ("Earned Shares") on the basis of achieving
these goals for 1998, 1999, and 2000. Restrictions shall be removed
from 25% of such Earned Shares at the time they are earned, and
restrictions shall be removed from an additional 25% of such Earned
Shares at the end of each of the following three years. In 1998,
50,000, 25,000, 25,000, 6,667, and 6,667 shares were earned for Martin,
Coggin, Mosco, Coltharp, and Brian Martin, respectively. As of January
30, 1999, the market price of the Common Stock was $36.8125, and the
value of the shares earned was $1,840,625, $920,313, $920,313,
$245,429, and $245,429 for Martin, Coggin, Mosco, Coltharp, and Brian
Martin, respectively, as of that date. The value of the Earned Shares
is included in total Restricted Stock Awards, even if not fully vested.
(6) Includes restricted stock awards of 40,000, 12,500, 12,500, 15,000, and
12,500 for Martin, Coggin, Mosco, Coltharp, and Brian Martin,
respectively, which were granted at the market price of $18.9375 on the
October 2, 1998 date of grant (valued at $757,500, $236,719, $236,719,
$284,063, and $236,719 for Martin, Coggin, Mosco, Coltharp, and Brian
Martin, respectively). 25% of these awards vested on the date of grant,
with 100% vesting by October 2, 2001. The entire value of the award is
included, even if not fully vested.
(7) Represents economic benefit of split dollar life insurance policy for
1996. For 1997, represents economic benefit of split dollar life
insurance policy ($9,480) and estate planning services ($10,262). For
1998, represents economic benefit of split dollar life insurance policy
($10,860), estate planning services ($17,200), and usage of Company
aircraft ($26,457). All of these amounts were in accordance with
Martin's employment agreement.
(8) Includes stock grants to Martin and Coggin of 40,000 and 5,000 shares
of Company Common Stock, respectively. These grants were priced as of
January 31, 1998 and were valued at $1,175,000 and $146,875 for Martin
and Coggin, respectively (at a market price of $29.375).
(9) Includes restricted stock awards of 25,000, 10,000, 10,000, 12,500, and
10,000 shares for Martin, Coggin, Mosco, Coltharp, and Brian Martin,
respectively, which were granted at the market price of $29.375 on the
January 30, 1998 date of grant (valued at $734,375, $293,750, $293,750,
$367,188, and $293,750 for Martin, Coggin, Mosco, Coltharp, and Brian
Martin, respectively). 25% of these awards vested on the date of grant,
with 100% vesting by March 30, 1999.
(10) Includes stock grants to Martin and Coggin of 10,000 and 5,000 shares
of Company Common Stock, respectively. These grants were priced as of
April 9, 1997 and were valued at $190,000 and $95,000 for Martin and
Coggin, respectively (at a market price of $19.00).
(11) Includes restricted stock awards of 20,000, 10,000, and 5,000 shares of
Company Common Stock for Martin, Coggin, and Brian Martin,
respectively, which were granted at the market price of $18.125 on the
January 31, 1997 date of grant (valued at $362,500, $181,250, and
$90,625 for Martin, Coggin, and Brian Martin, respectively). The awards
fully vested one year from the date of grant.
(12) Relocation reimbursements and bonuses.
(13) Coltharp's initial date of employment with the Company was November 25,
1996.
(14) Initial bonus comprised of $150,000 in cash compensation and a stock
grant of 5,000 shares of Company Common Stock which was granted at the
market price of $17.9375 on the January 3, 1997 date of grant (valued
at $89,688).
Note 1: As of January 30, 1999, the number and value (based on the $36.8125
closing price of Common Stock as of January 30, 1999) of shares of unvested
restricted stock held by each of the Named Officers were as follows:
Martin, 205,000 shares ($7,546,563); Coggin, 98,125 shares ($3,612,227);
Mosco, 95,625 shares ($3,520,195); Coltharp, 47,083 shares ($1,733,255);
and Brian Martin, 41,708 shares ($1,535,388).
Note 2: All Common Stock amounts reflect the 2-for-1 stock split effected
in October 1997.
Employment Contracts
All of the Named Officers and certain other officers have employment
agreements with the Company. All agreements fix the Named Officers' minimum
base compensation for the fiscal year and provide for participation by such
officers in employment benefit plans as the Company may adopt. The current
agreement for Martin expires on February 2, 2003 and the current agreements
for Coggin, Mosco, Coltharp, and Brian Martin expire on February 2, 2001.
Under the terms of each agreement, each Named Officer is entitled to receive
his base salary for the remainder of his employment period in the event he is
terminated without cause. If the termination is involuntary and due to a
change in control or a potential change in control, he is entitled to receive
his base salary then in effect for the greater of the remaining term of his
agreement or twenty-four months (thirty-six months in the case of Coltharp).
Annual base salaries currently in effect are as follows: Martin, $825,000;
Coggin, $700,000; Mosco, $700,000; Coltharp, $350,000; and Brian Martin,
$350,000. A "Change in Control" is defined as: (i) the acquisition of 25% or
more of the combined voting power of the Company's outstanding securities,
(ii) a tender offer, merger, sale of assets, or other business combination
which results in the transfer of a majority of the combined voting power of
the Company or any successor entity, or (iii) during any two consecutive year
period, the failure to elect a majority of the individuals constituting the
Board of Directors of the Company prior to the commencement of such period,
unless the election or nomination of any replacement Directors was approved by
vote of at least two-thirds of the Directors of the Company then still in
office who were Directors of the Company at the beginning of such period. A
"Potential Change in Control" is defined as: (i) the approval by the
shareholders of the Company of an agreement which, if consummated, will result
in a change of control or (ii) the acquisition of 5% or more of the
outstanding voting securities of the Company and the adoption by the Company's
Directors of a resolution to the effect that a potential change in control of
the Company has occurred.
The Company entered into an employment agreement with Robert M. Mosco in
conjunction with the Company's February 3, 1996 business combination with
Younkers, Inc. Under the terms of that Employment Agreement, Mr. Mosco had the
right to terminate his employment with the Company in the 13th month after the
business combination. In such event, he would have received a lump-sum
severance payment in an amount equal to (i) salary through the date of
termination and bonus for the then-current year, (ii) three times Mr. Mosco's
highest annual salary in effect during the 12-month period prior to
termination and three times Mr. Mosco's average bonus in respect of the three
immediately preceding fiscal years, (iii) any unvested benefit under Younkers'
defined benefit pension plan, and (iv) any unvested employer contributions
under Younkers' defined contribution plan. In connection with Mr. Mosco
entering into a new Employment Contract, Mr. Mosco waived his right to
terminate employment and receive such compensation. In connection with that
waiver, the Company paid Mr. Mosco $1,064,387 on February 3, 1997.
Stock Options
The following table contains information concerning the grant of stock options
under the Company's incentive plans to the Named Officers as of fiscal year
end.
Option Grants in Last Fiscal Year
<TABLE>
Potential Realizable
Value
at Assumed Annual Rates
of Stock Price
Appreciation
Individual Grants for Option Term (3)
------------------------------------ ------------------------
% of Total
Options Exercise
ranted to or
Options Employees Base Expir-
Granted in Fiscal Price ation
(#)(1) Year (#/share)(2) Date 5%($) 10%($)
--------- ------ ---------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
R. Brad Martin 100,000(4) 2.8 30.75 2/2/08 1,933,851 4,900,758
17,500(4) .5 39.63 6/16/08 436,100 1,105,161
500,000(4) 14.0 18.94 10/2/08 5,954,846 15,090,749
112,776(5) 3.2 23.25 7/1/03 675,576 1,481,214
136,065(5) 3.8 23.25 4/1/04 964,060 2,155,667
James A. Coggin 100,000(4) 2.8 30.75 2/2/08 1,933,851 4,900,758
200,000(4) 5.6 18.94 10/2/08 2,381,938 6,036,300
Robert M. Mosco 100,000(4) 2.8 30.75 2/2/08 1,933,851 4,900,758
200,000(4) 5.6 18.94 10/2/08 2,381,938 6,036,300
Douglas E. Coltharp 40,000(4) 1.1 30.75 2/2/08 773,540 1,960,303
100,000(4) 2.8 18.94 10/2/08 1,190,969 3,018,150
Brian J. Martin 40,000(4) 1.1 30.75 2/2/08 773,540 1,960,303
75,000(4) 2.1 18.94 10/2/08 893,227 2,263,613
15,493(5) .4 17.25 6/6/04 85,193 191,597
</TABLE>
(1) Under the terms of the 1994 Plan and the 1997 Plan, the Human
Resources/Option Committee administers the option program.
(2) All options were granted at the market closing price on the date of
grant. No incentive stock options were granted. The exercise price and
tax withholding obligations related to exercise may be paid by delivery
of already owned shares, subject to certain conditions.
(3) Potential gains are reported net of the option exercise price but
before taxes associated with exercise. These amounts represent certain
assumed rates of appreciation only. Actual gains, if any, on stock
option exercises are dependent on the future performance of the Common
Stock of the Company and overall stock conditions, as well as the
optionholder's continued employment through the vesting period. The
amounts reflected in this table may not necessarily be achieved.
(4) Options are exercisable in cumulative one-fifth installments commencing
six months from the date of grant (with each subsequent installment
vesting on the anniversary date of grant) with full vesting occurring
on the fourth anniversary of the date of grant.
(5) Options are fully vested six months from the date of grant. These
options were granted when the Named Officers exercised previously
vested options by tendering shares of Common Stock that they owned to
pay the exercise price and the tax withholding obligation. The new
options equal the amount of shares used by the Named Officers to pay
for those items, and thus the Human Resources/Option Committee granted
the new options to restore the equity position of the Named Officers.
The Named Officers did not receive cash on the exercise of these
options, but instead received shares equal to the spread between the
exercise price and the fair market value of the stock on the exercise
date. The Committee permitted these exercises to promote outright
ownership of shares of Company Common Stock, and this method of
exercising options currently is available to all senior officers.
Option Exercises and Holdings
The following table sets forth information with respect to the Named Officers
concerning the exercise of options during 1998 and unexercised options held at
fiscal year end.
<TABLE>
Aggregated Option Exercises in Last Fiscal Year End and Fiscal Year-End
Option Values
Value of
Unexercised Unexercised
Options Held Options Held
Shares at Fiscal at Fiscal
Acquired on Value Year Ended (#) Year Ended (3)
Exercise Realize Exercisable/ Exercisable/
(#) ($) Unexercisable Unexercisable
--------- ------- ---------------- -----------------
<S> <C> <C> <C> <C>
R. Brad Martin 390,000 4,179,920 215,500/1,090,841 3,743,250/17,265,406
James A. Coggin 0 0 92,000/288,000 1,875,750/4,253,000
Robert M. Mosco 122,931 3,684,070 127,280/328,000 2,734,081/5,178,000
Douglas E. Coltharp 0 0 50,000/160,000 775,625/2,466,250
Brian J. Martin 18,887 94,435 43,113/138,493 903,963/2,228,957
</TABLE>
(1) Represents the difference between the closing price of the Company's
Common Stock on January 29, 1999 ($36.8125) and the exercise price of
the options.
Report of the Human Resources/Option Committee of
the Board of Directors on Executive Compensation
Executive Compensation
The Human Resources/Option Committee of the Board of Directors (the
"Committee") is composed of four independent Directors who are not employees
of the Company: Mr. Cicala, Chairman of the Committee; Mr. Erving; Ms. Sallee;
and Mr. Tsai. The Committee approves the amount and form of compensation for
certain executive officers of the Company. The Committee reviews the key
performance standards of the executive officers of the corporation and
measures individual and corporate achievement of those standards. The
Committee conducts an extensive evaluation of the annual performance of the
Chief Executive Officer ("CEO") and communicates the results of this
evaluation to the other independent Directors and to the CEO.
The compensation programs of the Company are designed to align compensation
with business objectives and performance and to enable the Company to attract,
retain, and reward executives who contribute to the long-term success of the
Company. The Committee believes that executive pay should be linked to level
of responsibility and performance. The executive compensation philosophy of
the Company is to provide base salary levels at or below the mid-point of
market compensation for comparable positions, to provide cash bonus incentives
which relate to the short-term operating performance of the corporation, and
to provide substantial equity-based incentives, which relate to strategic
leadership and long-term value creation. Currently, executive officers can
earn annual cash bonuses under the 1998 Senior Executive Bonus Plan ("1998
Plan") based upon the achievement of targeted growth in earnings per share.
Long-term incentives are provided through awards of stock options, stock
grants, and restricted stock awards (containing provisions for acceleration of
vesting upon achievement of corporate performance criteria) to the Named
Officers and other key employees pursuant to the Company's 1994 Long-Term
Incentive Plan ("1994 Plan") and the 1997 Stock-Based Incentive Plan ("1997
Plan"). Stock options are granted at or above the prevailing market value and
will only have value if the Company's stock price increases. Currently,
options vest in five equal installments, and executives must be employed by
the Company at the time of vesting in order to exercise the option grants. The
Committee administers these plans.
CEO Compensation
R. Brad Martin has served as Chairman and CEO of the corporation since July
1989. While serving in this capacity, the Company's revenues have grown, from
a combination of mergers and acquisitions and internal growth, from $94.8
million for the year ended February 3, 1990 ("1989") to over $6.2 billion for
the year ended January 30, 1999 ("1998"). Income (before non-routine charges)
increased from $.8 million in 1989 to $153.5 million in 1998. Shareholders'
equity grew from $20.2 million in 1989 to $2.0 billion in 1998. The price of
the Company's Common Stock increased from $3.00 at February 3, 1990 to $36.81
at January 30, 1999. This share price performance has outpaced the relevant
department store indices and the S&P composite index. Market capitalization of
the Company increased from $22.8 million at February 3, 1990 to over $5.0
billion at January 30, 1999.
Effective February 2, 1998, Mr. Martin entered into an employment agreement
("Agreement"), approved by the Committee. The terms of this Agreement provide
for an annual base salary of $825,000. The CEO may earn an annual cash bonus
of up to 75% of base salary through his participation in the 1998 Plan. For
1998, the potential cash bonus award was based solely upon the achievement of
earnings per share growth of the corporation. Mr. Martin was awarded 60% of
his total bonus potential. For 1998, Mr. Martin's cash compensation totaled
$1,196,250, which was comprised of $825,000 in base salary and $371,250 in
bonus.
Pursuant to the terms of the Agreement and the 1998 Plan, the CEO is also
eligible for an annual bonus of up to 40,000 shares of Company Common Stock.
For 1998, the potential to earn 20,000 of the shares was based upon the
achievement of earnings per share growth rates, and the potential to earn the
remaining 20,000 was based upon the achievement of certain objective targets
(cash flow growth, new unit growth, and stock price growth) and upon the
achievement of objectives in his personal plan. Mr. Martin was awarded 39,500
shares of Common Stock of the corporation pursuant to these provisions, valued
at $980,094 as of the March 30, 1999 grant date.
During 1996, the CEO was granted 50,000 restricted shares of Company Common
Stock pursuant to a Restricted Stock Grant Agreement under the 1994 Plan.
Restrictions lapse as a function of the Company achieving certain performance
goals and time. Shares shall be earned ("Earned Shares") on the basis of
achieving those goals for 1996, 1997, and 1998. Restrictions shall be removed
from 25% of such Earned Shares at the time they are earned, and restrictions
shall be removed from an additional 25% of such Earned Shares at the end of
each of the following three years. For the three years ended January 30, 1999,
the CEO earned all 50,000 shares, and 25,000 shares are now vested. The three
years of Earned Shares were valued at $1,840,625 on January 30, 1999, and the
vested shares were valued at $920,313 on that date.
Effective January 31, 1998, under the 1997 Plan, the Company entered into a
Restricted Stock Grant Agreement with the CEO. The CEO was granted 150,000
restricted shares of Company Common Stock under this agreement. Restrictions
lapse as a function of the Company achieving certain performance goals and
time. Shares shall be earned on the basis of achieving those goals for 1998,
1999, and 2000. Restrictions shall be removed from 25% of such Earned Shares
at the time they are earned, and restrictions shall be removed from an
additional 25% of such Earned Shares at the end of each of the following three
years. For the year ended January 31, 1999, 50,000 shares were earned, and
12,500 shares are now vested. The Earned Shares were valued at $1,840,625 on
January 30, 1999, and the vested shares were valued at $460,156 on that date.
On February 2, 1998, Mr. Martin was granted the option to purchase 100,000
shares of Company Common Stock under the 1994 Plan. These options were priced
at $30.75, the market price of the Company's stock on the date of grant.
In accordance with the terms of Mr. Martin's employment agreement executed in
1993, he was entitled to receive 50,000 shares of Company Common Stock if he
remained CEO for five years until July 1, 1998. On June 16, 1998, Mr. Martin
entered into an agreement with the Company whereby he agreed to defer receipt
of these shares. In exchange for entering into this deferral agreement, Mr.
Martin was granted options to purchase 17,500 shares of Company Common Stock,
priced at $39.625, the market price on the grant date.
In recognition of the extraordinary efforts of the CEO in dramatically growing
the business during 1998, including the store base, revenues, and operating
income, the CEO was granted 40,000 restricted shares of Company Common Stock
under the 1997 Plan. These shares were valued at $757,500 on the October 2,
1998 grant date. 25% of these shares vested on the date of grant, with 100%
being vested by October 2, 2001. Also on October 2, 1998, Mr. Martin was
granted options to purchase 500,000 shares of Company Common Stock, priced at
$18.9375, the market price on the grant date.
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code (the "Code") limits the tax
deductibility of compensation in excess of $1 million paid to the Named
Officers, unless the payments are made under a performance-based plan as
defined in Section 162(m). The Committee believes the payments in 1998 under
the 1994 Plan and the 1998 Plan (both of which were previously approved by the
shareholders of the Company) meet the requirements of deductibility as
specified under the applicable provisions of the Code. While some portion of
other compensation may not qualify as wholly-deductible in certain years, any
such amount is not expected to be material to the Company. Awards under the
Restricted Stock Grant Agreements will not qualify as performance-based
compensation under Section 162(m); however, these agreements qualify for
favorable accounting treatment, thus reducing the program's expense. It is the
Committee's intention to continue to utilize performance-based compensation in
order to obtain maximum deductibility of executive compensation, while
providing a compensation program that will attract, retain, and reward the
executive talent necessary to maximize shareholder return.
Human Resources/Option Committee
Edmond D. Cicala, Chairman
Julius W. Erving
Marguerite W. Sallee
Gerald Tsai, Jr.
March 30, 1999
Approval of the Saks Incorporated
Amended and Restated 1994 Long-term Incentive Plan
(Proposal No. 2)
Shareholders of the Company are being asked to approve and adopt an Amended
and Restated 1994 Long-Term Incentive Plan (the "Amended Plan"): (i) to
increase the number of shares of the Company's Common Stock issuable
thereunder, (ii) to increase the number of shares subject to options which may
be granted to one grantee in any twelve-month period to 1,000,000, (iii) to
specify in the tax withholding provisions of the Amended Plan that, with
respect to the withholding of shares, only the minimum amount of withholding
required by tax law may be withheld, (iv) to increase the number of
nonqualified options automatically granted to each nonemployee director from
2,000 per year to 3,000, and (v) make it clear that options will be awarded at
or above fair market value and will not be repriced.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPROVAL OF AND ADOPTION OF THE AMENDED PLAN.
The Company's long-term success depends upon its ability to attract, retain,
and encourage dedicated, competent, and resourceful key employees. To further
these goals, the Company's Board of Directors adopted the 1994 Long-Term
Incentive Plan (the "Incentive Plan") on March 1, 1994, and the shareholders
approved the Incentive Plan at the Company's Annual Meeting of the
Shareholders held on June 16, 1994. At a Special Meeting on February 2, 1996,
the shareholders approved an amendment to the Incentive Plan increasing the
number of shares of the Company's Common Stock issuable under the Incentive
Plan.
The purpose of the Amended Plan is to direct the attention and efforts of
participating employees to the long-term performance of the Company and its
subsidiaries, by relating incentive compensation to the achievement of long-
term corporate economic objectives. The Amended Plan is designed to retain,
reward, and motivate participating employees by providing an opportunity for
investment in the Company and the advantages inherent in stock ownership in
the Company. The Amended Plan also is designed to structure and limit
executive compensation to the extent necessary to preserve the tax
deductibility under Section 162(m) of the Internal Revenue Code (the "Code")
of the performance-based compensation paid by the Company. The Amended Plan
must be approved by the shareholders in order for the compensation paid under
the Amended Plan to be deductible as performance-based compensation under
Section 162 of the Code.
Plan Benefits
The following table shows the maximum number of shares subject to options that
have been granted to date under the Amended Plan to the named executive
officers and directors and groups, subject to approval of the Amended Plan by
the shareholders. No other awards have been granted under the Amended Plan.
The Human Resources/Option Committee of the Board made these awards on October
2, 1998 in connection with the end of the Company's first fiscal month after
the merger with Saks Holdings, Inc.
Name and Position Number of Options (1)
R. Brad Martin 500,000
Chairman of the Board and Chief Executive Officer
James A. Coggin 200,000
President and Chief Administrative Officer
Robert M. Mosco 200,000
President of Merchandising and Chief Operating Officer
Douglas E. Coltharp 100,000
Executive Vice President and Chief Financial Officer
Brian J. Martin 75,000
Executive Vice President of Law and General Counsel
Donald E. Wright 50,000
Senior Vice President of Finance and Chief Accounting Officer
Julia A. Bentley 15,000
Senior Vice President of Investor Relations and
Communications and Secretary
Current Executive Officer 1,140,000
Group (7 persons)
Non-Executive Director ---
Group (15 persons)
All Employees, including Officers who are not ---
Executive Officers as a Group (approx. 60,000 persons)
(1) All options granted under the Amended Plan as of October 2, 1998 have
an exercise price of $18.9375 per share, the market price as of the
date of the award. The actual value, if any, a person may realize will
depend on the excess of the stock price over the exercise price on the
date the option is exercised. The closing price of the Company's
Common Stock on April 12, 1999 was $27.6875.
Proposed Incentive Plan Amendments
The total number of shares of the Company's Common Stock currently authorized
for issuance under the Incentive Plan is 5,822,000 (as adjusted for stock
splits). As of April 12, 1999, options to purchase 5,208,000 shares of the
Company's Common Stock had been granted and not forfeited, 346,000 shares of
restricted Company Common Stock had been granted, and 78,000 shares of the
Company's Common Stock had been reserved for specific future awards under the
Incentive Plan. Thus, as of April 12, 1999, 190,000 shares of the Company's
Common Stock remain available for issuance under the Incentive Plan. The
Amended Plan would increase the number of shares of the Company's Common Stock
authorized for issuance under the Incentive Plan by 5,000,000 shares from
5,822,000 shares to 10,822,000 shares. A copy of the Amended Plan is attached
as Exhibit A to this Proxy Statement and is incorporated by reference herein.
The Amended Plan will permit the Company to grant options to purchase up to
1,000,000 shares of the Company's Common Stock to any one grantee in any
twelve-month period. The Amended Plan also increases the number of
nonqualified options granted annually to each nonemployee director from 2,000
to 3,000. The Board concluded that the increases are necessary to reflect the
growth of the Company and the resulting increase in responsibilities of the
Company's directors and executive officers.
The Amended Plan conforms the plan document to Company policy by stating that
all options shall be granted with an exercise price at least equal to the
market price of the stock on the date of the grant and that exercise prices
for options will not be changed after the option is granted. The Amended Plan
also makes it clear that restricted stock awarded under the Amended Plan will
have at least a three-year restricted period unless the restrictions lapse on
the basis of achieving performance targets.
The Amended Plan also clarifies that, when shares of the Company's Common
Stock are withheld from the recipient to satisfy income tax withholding
requirements, only the minimum amount required to be withheld under tax laws
may be withheld.
The Company's Board of Directors believes that the Amended Plan is necessary
in order to recruit and retain a pool of skilled and experienced executives.
Approval of the Amended Plan by the shareholders is necessary to preserve the
tax deductibility under Section 162(m) of the Code of executive compensation
paid by the Company pursuant to the Amended Plan.
On April 7, 1999, the Company's Board of Directors approved the Amended Plan
and recommended that it be submitted to the Company's shareholders for
approval.
Summary of Incentive Plan
The following is a description of the principal features of the Amended Plan.
This description is qualified in its entirety by reference to the Amended
Plan, as amended, attached as Exhibit A to this Proxy Statement. Except as
summarized above for the proposed amendments, and changes to reflect past
stock splits and the change of the Company's corporate name, the Amended Plan
is identical to the Incentive Plan approved by shareholders in 1994.
The Amended Plan provides for the grant to directors, executive officers, and
key employees of the Company and its subsidiaries ("Participants") the
following types of incentive awards: stock options, stock appreciation rights,
restricted stock, and performance units.
The Committee has the exclusive discretion to select the Participants and to
determine the type, size, and terms of each award, to modify the terms of
awards within the limits set forth in the Amended Plan, to determine when
awards will be granted and paid, and to make all other determinations which it
deems necessary or desirable in the interpretation and administration of the
Amended Plan. The Amended Plan remains in effect until all awards under the
Amended Plan have been satisfied by the issuance of shares of the Company's
Common Stock or the payment of cash or have expired or otherwise terminated;
provided, however, that no awards may be granted more than ten years after the
date of the Amended Plan's approval. Generally, a Participant's rights and
interest under the Amended Plan will not be transferable except by will or by
the laws of the descent and distribution.
Options, which include non-qualified stock options and incentive stock
options, are rights to purchase a specified number of shares of the Company's
Common Stock at a price fixed by the Committee. The exercise price for stock
options issued under the Amended Plan shall not be less than 100% of the fair
market value as of the date of grant. The option exercise price may be
satisfied in cash or by exchanging shares of the Company's Common Stock owned
by the optionee, or a combination of cash and shares. If the exercise price is
paid by tendering shares of the Company's Common Stock, the Committee, in its
discretion, may grant the optionee a new stock option for the number of shares
used to pay the exercise price. The Committee has broad discretion as to the
terms and conditions upon which options granted shall be exercised, but the
Committee cannot change the exercise price after an option has been granted.
Options have a maximum term of ten years from the date of grant. Options
granted to date generally have a ten-year term and become exercisable on a
cumulative basis in annual installments over a four-year period.
Stock Appreciation Rights ("SAR") are rights to receive cash or shares, or a
combination thereof, as the Committee may determine, in an amount equal to the
excess of (i) the fair market value of the shares with respect to which the
SAR is exercised over (ii) a specified price which must not be less than 100%
of the fair market value of the shares at the time the SAR is granted, or, if
the SAR is granted in connection with a previously issued stock option, not
less than 100% of the fair market value of shares at the time such option is
granted.
SARs may be granted in connection with a previously or contemporaneously
granted stock option or independently. If a SAR is granted in relation to a
stock option, (i) the SAR will be exercisable only at such times and by such
persons as the related option is exercisable, and (ii) the grantee's right to
exercise either the related option or the SAR will be canceled to the extent
that the other is exercised. No SAR may be exercised earlier than six months
or later than ten years after the date of grant. The Committee may provide in
the SAR agreement circumstances under which SARs will become immediately
exercisable and may, not withstanding the foregoing restriction on time of
exercise, accelerate the exerciseability of any SAR at any time. No SARs have
been granted to date under the Amended Plan.
Awards of restricted shares under the Amended Plan may be made at the
discretion of the Committee and consist of shares of stock granted to a
participant and subject to a stock restriction agreement. The Amended Plan
also provides for the automatic grant of restricted stock to outside directors
of the Company. At the time of an award, a Participant may have the benefits
of ownership in respect of such shares, including the right to vote such
shares and receive dividends thereon and other distributions subject to the
restrictions set forth in the Amended Plan and in the stock restriction
agreement. Any shares of the Company's Common Stock issued as restricted
shares are legended and may not be sold, transferred, or disposed of until
such restrictions have elapsed. Restrictions shall last for at least three
years unless tied to achieving performance targets. Upon the expiration,
lapse, or removal of restrictions, shares free of restrictive legend will be
granted to the grantee. The Committee has broad discretion as to the specific
terms and conditions of each award, including applicable rights upon certain
terminations of employment. No restricted shares have been granted under the
Amended Plan to date.
Performance unit awards entitle grantees to future payments based upon the
achievement of pre-established long-term performance objectives. A performance
unit agreement will establish with respect to each unit award (i) a
performance period of not fewer than two years, (ii) a value for each unit
which will not thereafter change, or which may vary thereafter pursuant to
criteria specified by the Committee, and (iii) maximum and minimum performance
targets to be achieved during the applicable performance period. Under each
agreement, the grantee will be entitled to full value of a unit award for
achievement of maximum targets and a portion of a unit award for performance
exceeding minimum targets but less than maximum targets. The Committee has
discretion to determine the Participants to whom performance unit awards are
to be made, the times in which such awards are to be made, the size of such
awards, and all other conditions of such awards, including any restriction,
deferral periods, or performance requirements. No performance unit awards have
been awarded to date under the Amended Plan.
Federal Income Tax Consequences for Option Holders
No income will be realized by an optionee upon the optionee's purchase of
shares pursuant to the exercise of an Incentive Stock Option. In order to
avail himself of this tax benefit, the optionee must not dispose of the shares
before he has held such shares for at least one year after the date of
exercise and at least two years after the date of grant. Assuming compliance
with this and other applicable tax provisions, an optionee will recognize
long-term capital gain or loss when the optionee disposes of the shares,
measured by the difference between the option price and the amount realized
for the shares at the time of disposition. If the optionee disposes of shares
purchased upon the exercise of the option before the expiration of the above-
noted periods, any amount realized from such disqualifying disposition will be
taxable as ordinary income in the year of disposition to the extent of the
lesser of the amount realized by the optionee in excess of the option price,
or the spread between the option price and the fair market value of the shares
at the time the option is exercised. Any amount realized in excess of the fair
market value of the shares on the date of exercise will be treated as long-or
short-term capital gain, depending upon the holding period of the shares. No
deduction will be allowed to the Company for federal income tax purposes at
the time of the grant or exercise of an Incentive Stock Option. At the time of
a disqualifying disposition by an optionee, the Company will be entitled to a
deduction for the amount taxable to the optionee as ordinary income.
The exercise of a Nonqualified Stock Option will result in the recognition of
ordinary income by the optionee for federal income tax purposes in an amount
equal to the difference between the option price and the fair market value of
the shares acquired upon the exercise of the option. The Company will be
entitled to a deduction equal to the amount of income recognized by the
optionee. Upon the later sale of any shares acquired upon the exercise of a
Nonqualified Stock Option, any amount realized by the optionee in excess of
the amount recognized by the optionee as ordinary income will be treated as
long-or short-term capital gain to the optionee, depending upon the holding
period of the shares.
The foregoing description of tax consequences is based upon present federal
income tax laws and is subject to change as the laws change. The summary does
not cover any State or local tax consequences of participation in the Amended
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDED AND
RESTATED 1994 LONG-TERM INCENTIVE PLAN.
Approval of the Amended Plan requires that more votes are cast in favor of
approval of the Amended Plan than are cast in opposition to the Amended Plan,
at a meeting at which a quorum is present. Abstentions and broker non-votes
will be counted for purposes of determining whether a quorum is present, but
will not otherwise affect the outcome of the shareholder vote.
Ratification of Appointment of Independent Accountants
(Proposal No. 3)
Subject to ratification by the shareholders, the Board of Directors has
reappointed PricewaterhouseCoopers LLP as independent accountants to audit the
financial statements of the Company for the fiscal year ending January 29,
2000. PricewaterhouseCoopers LLP (or their predecessor firm Coopers & Lybrand)
has examined the financial statements of the Company since 1991.
Representatives of PricewaterhouseCoopers LLP will be present at the Annual
Meeting and will have an opportunity to make a statement, if they so desire,
and will be available to respond to appropriate questions.
THE AUDIT COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND THE SHAREHOLDERS VOTE
"FOR" SUCH RATIFICATION.
Section 16(a) of the Securities Exchange Act of 1934
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors, executive officers, and persons who own more than 10% of the
Company's Common Stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of stock of
the Company.
To the Company's knowledge, based solely on a review of copies of reports
provided by such individuals to the Company and written representations of
such individuals that no other reports were required, during the fiscal year
ended January 30, 1999, all Section 16(a) filing requirements applicable to
its officers, Directors, and 10% or greater beneficial owners were satisfied.
Other Matters
The Board of Directors of the Company knows of no other matters that may come
before the meeting. However, if any other matters should properly come before
the meeting or any adjournment thereof, it is the intention of the persons
named in the proxy to vote the proxy in accordance with their best judgment.
Shareholders' Proposals or Nominations for 2000 Annual
Meeting
Proposals for shareholder action which eligible shareholders wish to have
included in the Company's proxy mailed to shareholders in connection with the
Company's 2000 Annual Meeting must be received by the Company at its corporate
headquarters, 750 Lakeshore Parkway, Birmingham, Alabama, 35211, by December
31, 1999. Under the Company's bylaws, in order for a matter to be brought
before the 2000 Annual Meeting, or for a shareholder to nominate persons for
election to the Board of Directors at the 2000 Annual Meeting, the shareholder
must give the Company notice at its corporate headquarters by December 31,
1999.
If you wish to make a nomination to the Board, your notice must include the
following information: (a) the name, age, business address, and residence
address of the nominee, (b) the principal occupation or employment of such
person, (c) the number of shares of Common Stock of the Company that are
beneficially owned by such person, (d) any other information about such person
that is required to be disclosed in solicitations of proxies with respect to
nominees for election as directors pursuant to Regulation 14A under the
Securities Exchange Act of 1934, (e) the name and address of the shareholder
giving notice, (f) the number of shares of Common Stock that are beneficially
owned by such shareholder, and (g) descriptions of all arrangements or
understandings between the shareholder and each nominee and any other person
pursuant to which the nomination or nominations are to be made by the
shareholder. Nominations by the Board of Directors of the Company are proper
if they are made in compliance with the proxy rules of the Securities and
Exchange Commission.
If you wish to propose an item of business, your notice must include the
following information: (a) a brief description of the proposal desired to be
brought before the Annual Meeting and the reasons for conducting such business
at the Annual Meeting, (b) the name and address, as they appear on the
Company's books, of the shareholder proposing such business, (c) the number of
shares of Common Stock of the Company that are beneficially owned by the
shareholder, and (d) any financial interest of the shareholder in such
proposal.
Listing of Shareholders
A complete list of the shareholders entitled to vote at the Annual Meeting of
the Shareholders, to be held on June 16, 1999, will be available for
inspection during normal business hours at the principal office of the Company
for a period of at least 10 days prior to the meeting, upon written request to
the Company by a shareholder, and at all times during the Annual Meeting at
the place of the meeting.
Annual Report
The Company's annual report for the year ended January 30, 1999 is being
mailed with this proxy statement but is not to be considered as a part hereof.
A copy of the Company's annual report on Form 10-K, including the financial
statements and schedules thereto, required to be filed with the Securities and
Exchange Commission, may be obtained without charge by any shareholder whose
proxy is solicited upon written request to:
Senior Vice President of Investor Relations
Saks Incorporated
P.O. Box 9388
Alcoa, Tennessee 37701-9388
By order of the Board of Directors,
/s/ Julia Bentley
Julia Bentley
Secretary
Birmingham, Alabama
April 28, 1999
EXHIBIT A
Saks Incorporated
Amended and Restated
1994 Long-Term Incentive Plan
1. Purpose
The purpose of the Saks Incorporated Amended and Restated 1994 Long-Term
Incentive Plan (the "Plan") is to further the earnings of Saks Incorporated, a
Tennessee corporation, and its subsidiaries (collectively, the "Company") by
assisting the Company in attracting, retaining, and motivating management
employees and directors of high caliber and potential. The Plan provides for
the award of long-term incentives to those officers, other key executives, and
directors who make substantial contributions to the Company by their loyalty,
industry, and invention.
2. Administration
The Plan shall be administered by a committee (the "Committee") selected by
the Board of Directors of the Company (the "Board of Directors") consisting
solely of two or more members who are "outside directors" as described in
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
Except to the extent permitted under Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the "1934 Act") (or any successor rule of similar
import), each Committee member shall be ineligible to receive, and shall not
have been, during the one-year period prior to appointment thereto, granted or
awarded stock options, stock appreciation rights, performance units, or
restricted stock pursuant to this Plan or any other similar plan of the
Company or any affiliate of the Company. Without limiting the foregoing, the
Committee shall have full and final authority in its discretion to interpret
the provisions of the Plan and to decide all questions of fact arising in its
application. Subject to the provisions hereof, the Committee shall have full
and final authority in its discretion to determine the employees and directors
to whom awards shall be made under the Plan; to determine the type of awards
to be made and the amount, size and terms, and conditions of each such award;
to determine the time when awards shall be granted; to determine the
provisions of each agreement evidencing an award; and to make all other
determinations necessary or advisable for the administration of the Plan.
3. Stock Subject to the Plan
The Company may grant awards under the Plan with respect to not more than a
total of 10,822,000 shares of $.10 par value common stock of the Company (the
"Shares") (subject, however, to adjustment as provided in paragraph 20,
below). Such shares may be authorized and unissued Shares or treasury Shares.
Except as otherwise provided herein, any Shares subject to an option or right
which for any reason is surrendered before exercise or expires or is
terminated unexercised as to such Shares shall again be available for the
granting of awards under the Plan. Similarly, if any Shares granted pursuant
to restricted stock awards are forfeited, such forfeited Shares shall again be
available for the granting of awards under the Plan.
4. Eligibility to Receive Awards
Persons eligible to receive awards under the Plan shall be limited to those
officers, other key employees, and directors of the Company who are in
positions in which their decisions, actions, and counsel have a significant
impact upon the profitability and success of the Company (but excluding
members of the Committee, except as provided in paragraphs 6(h) and 8(e)).
5. Form of Awards
Awards may be made from time to time by the Committee in the form of stock
options to purchase Shares, stock appreciation rights, performance units,
restricted stock, or any combination of the above. Stock options may be
options which are intended to qualify as incentive stock options ("Incentive
Stock Options") within the meaning of Section 422(b) of the Code, or options
which are not intended to so qualify ("Nonqualified Stock Options").
6. Stock Options
Stock options for the purchase of Shares shall be evidenced by written
agreements in such form not inconsistent with the Plan as the Committee shall
approve from time to time, provided that the maximum number of options which
may be granted to any one grantee during any twelve-month period is 1,000,000
(as adjusted pursuant to paragraph 20, below). Such agreement shall contain
the terms and conditions applicable to the options, including in substance the
following terms and conditions:
(a) Type of Option. Each option agreement shall identify the options
represented thereby as Incentive Stock Options or Nonqualified Stock
Options, as the case may be, and shall set forth the number of Shares
subject to the options.
(b) Option Price. The option exercise price to be paid by the
optionee to the Company for each Share purchased upon the exercise of
an option shall be determined by the Committee, but shall in no event
be less than the fair market value of the stock on the date the option
is granted, nor shall the Committee reduce the exercise price after the
option is granted.
(c) Exercise Term. Each option agreement shall state the period or
periods of time within which the option may be exercised, in whole or
in part, as determined by the Committee and subject to such terms and
conditions as are prescribed for such purpose by the Committee,
provided that no option shall be exercisable after ten years from the
date of grant thereof. The Committee, in its discretion, may provide in
the option agreement circumstances under which the option shall become
immediately exercisable, in whole or in part, and, notwithstanding the
foregoing, may accelerate the exerciseability of any option, in whole
or in part, at any time.
(d) Payment for shares. The purchase price of the Shares with respect
to which an option is exercised shall be payable in full at the time of
exercise in cash, shares at fair market value, or a combination
thereof, as the Committee may determine and subject to such terms and
conditions as may be prescribed by the Committee for such purpose. If
the purchase price is paid by tendering Shares, the Committee in its
discretion may grant the optionee a new stock option for the number of
Shares used to pay the purchase price.
(e) Rights Upon Termination. In the event of Termination (as defined
below) of an optionee's status as an employee or director of the
Company for any cause other than Retirement (as defined below), death,
or Disability (as defined below), the optionee shall have the right to
exercise the option during its term within a period of three months
after such Termination to the extent that the option was exercisable at
the time of Termination, or within such other period, and subject to
such terms and conditions, as may be specified by the Committee. As
used herein, "Termination" means (i) in the case of an employee, the
cessation of the grantee's employment by the Company for any reason and
(ii) in the case of a director, the cessation of the grantee's service
as a director of the Company, and "Terminates" has the corresponding
meaning. As used herein, "Retirement" means retirement from active
employment (in the case of an employee) or active service (in the case
of a director) with the Company on or after age 65, or such earlier age
with the express written consent for purposes of the Plan of the
Company at or before the time of such retirement, and "Retires" has the
corresponding meaning. As used herein, "Disability" means a condition
that, in the judgment of the Committee, has rendered a grantee
completely and presumably permanently unable to perform any and every
duty of his regular occupation, and "Disabled" has the corresponding
meaning. In the event that an optionee Retires, dies, or becomes
Disabled prior to the expiration of his option and without having fully
exercised his option, the optionee or his Beneficiary (as defined
below) shall have the right to exercise the option during its term
within a period of (i) one year after Termination due to Retirement,
death, or Disability, or (ii) one year after death if death occurs
either within one year after Termination due to Retirement or
Disability or within three months after Termination for other reasons,
to the extent that the option was exercisable at the time of death or
Termination, or within such other period, and subject to such terms and
conditions, as may be specified by the Committee. (As used herein,
"Beneficiary" means the person or persons designated in writing by the
grantee as his beneficiary with respect to an award under the Plan; or,
in the absence of an effective designation or if the designated person
or persons predecease the grantee, the grantee's Beneficiary shall be
the person or persons who acquire by bequest or inheritance the
grantee's rights in respect of an award.) In order to be effective, a
grantee's designation of a Beneficiary must be on file with the
Committee before the grantee's death, but any such designation may be
revoked and a new designation substituted therefore at any time before
the grantee's death.
(f) Nontransferability. Options granted under the Plan shall not be
sold, assigned, transferred, exchanged, pledged, hypothecated, or
otherwise encumbered, other than by will or by the laws of descent and
distribution. During the lifetime of the optionee the option is
exercisable only by the optionee.
(g) Incentive Stock Options. In the case of an Incentive Stock
Option, each option shall be subject to such other terms, conditions,
and provisions as the Committee determines necessary or desirable in
order to qualify such option as an incentive stock option within the
meaning of Section 422(b) of the Code (or any amendment or substitute
or successor thereto or regulation thereunder), including in substance,
without limitation, the following:
(i) The purchase price of stock subject to an Incentive Stock
Option shall not be less than 100 percent of the fair market value
of such stock on the date the option is granted, as determined by
the Committee.
(ii) The aggregate fair market value (determined as of the time
the option is granted) of the stock with respect to which incentive
stock options are exercisable for the first time by an optionee
in any calendar year under all plans of the Company and its
subsidiary corporations (which term, as used hereinafter, shall
have the meaning ascribed thereto in Section 424(f) of the Code
or successor provision of similar import) shall not exceed
$100,000.
(iii) No Incentive Stock Option shall be granted to any employee
if at the time the option is granted the individual owns stock
possessing more than 10 percent of the total combined voting
power of all classes of stock of the Company or of a subsidiary
corporation of the Company, unless at the time such option is
granted the option price is at least 110 percent of the fair
market value (as determined by the Committee) of the stock
subject to the option and such option by its terms is not
exercisable after the expiration of five years from the date of
grant.
(iv) Directors who are not employees of the Company shall not be
eligible to receive Incentive Stock Options.
(v) In the event of Termination of employment by reason of
Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of
Section 422 of the Code, the option will thereafter be treated as
a Nonqualified Stock Option.
(h) Automatic Grant of Options to Nonemployee Directors.
Notwithstanding any other provision of the Plan, the grant of options
hereunder to directors who are not also employees of the Company
("Nonemployee Directors") shall be subject to the following terms and
conditions:
(i) Immediately following each annual meeting of the
stockholders of the Company ("Annual Meeting"), each Nonemployee
Director of the Company who is then incumbent shall be granted a
Nonqualified Stock Option to purchase 3,000 Shares (as adjusted
pursuant to paragraph 20, below).
(ii) If a person is elected or appointed as a Nonemployee
Director of the Company other than at an Annual Meeting, such
person shall thereupon be granted a Nonqualified Stock Option to
purchase 3,000 shares (as adjusted pursuant to paragraph 20, below).
(iii) The purchase price of stock subject to an option granted to
Nonemployee Directors under this paragraph 6(h) shall be equal to
100 percent of the fair market value of such stock on the date
the option is granted, as determined by the Committee.
(iv) Except as provided in paragraph 18, each option granted to
Nonemployee Directors under this paragraph 6(h) shall be
exercisable to the extent of (a) 20% of the Shares covered
thereby on or after the date which is six months after the date
of grant; (b) an additional 20% of the Shares covered thereby on
or after the first anniversary of the date of grant; (c) an
additional 20% of the Shares covered thereby on or after the
second anniversary of the date of grant; (d) an additional 20% of
the Shares covered thereby on or after the third anniversary of
the date of grant; and (e) exercisable to the extent of the
remaining 20% of the Shares covered thereby on or after the
fourth anniversary of the date of grant; provided, however, that
no portion of the option shall be exercisable any earlier than
the date the Plan is approved by the stockholders of the Company.
(v) Unless otherwise provided in the Plan, all provisions with
respect to the terms of Nonqualified Stock Options hereunder
shall be applicable to options granted to Nonemployee Directors
under this paragraph 6(h).
(vi) The automatic grants described in this paragraph 6(h) and
the restricted stock awards under paragraph 8(e) shall constitute
the only awards under the Plan permitted to be made to Nonemployee
Directors.
7. Stock Appreciation Rights
Stock appreciation rights (SARs) shall be evidenced by written SAR agreements
in such form not inconsistent with the Plan as the Committee shall approve
from time to time, provided that the maximum number of SARs which may be
granted to any one grantee during any twelve- month period is 125,000 (as
adjusted pursuant to paragraph 20, below). Such SAR agreements shall contain
the terms and conditions applicable to the SARs, including in substance the
following terms and conditions:
(a) Award. SARs may be granted in connection with a previously or
contemporaneously granted stock option, or independently of a stock
option. SARs shall entitle the grantee, subject to such terms and
conditions as may be determined by the Committee, to receive upon
exercise thereof all or a portion of the excess of (i) the fair market
value at the time of exercise, as determined by the Committee, of a
specified number of Shares with respect to which the SAR is exercised,
over (ii) a specified price which shall not be less than 100 percent of
the fair market value of the Shares at the time the SAR is granted, or,
if the SAR is granted in connection with a previously issued stock
option, not less than 100 percent of the fair market value of the
Shares at the time such option was granted. Upon exercise of a SAR, the
number of Shares reserved for issuance hereunder shall be reduced by
the number of Shares covered by the SAR. Shares covered by a SAR shall
not be used more than once to calculate the amount to be received
pursuant to the exercise of the SAR.
(b) SARs Related to Stock Options. If a SAR is granted in relation to
a stock option, (i) the SAR shall be exercisable only at such times,
and by such persons, as the related option is exercisable; (ii) the
grantee's right to exercise the related option shall be canceled if and
to the extent that the Shares subject to the option are used to
calculate the amount to be received upon the exercise of the related
SAR; (iii) the grantee's right to exercise the related SAR shall be
canceled if and to the extent that the Shares subject to the SAR are
purchased upon the exercise of the related option; and (iv) the SAR
shall not be transferable other than by will or by the laws of descent
and distribution, and shall be exercisable during the lifetime of the
grantee only by him.
(c) Term. Each SAR agreement shall state the period or periods of
time within which the SAR may be exercised, in whole or in part, as
determined by the Committee and subject to such terms and conditions as
are prescribed for such purpose by the Committee, provided that no SAR
shall be exercisable earlier than six months after the date of grant or
later than ten years after the date of grant. The Committee may, in its
discretion, provide in the SAR agreement circumstances under which the
SARs shall become immediately exercisable, in whole or in part, and
may, notwithstanding the foregoing, accelerate the exercisability of
any SAR, in whole or in part, at any time.
(d) Termination. SARs shall be exercisable only during the grantee's
tenure as an employee or director of the Company, except that, in the
discretion of the Committee, a SAR may be made exercisable for up to
three months after the grantee is Terminated for any reason other than
Retirement, death, or Disability, and for up to one year after the
grantee is Terminated because of Retirement, death, or Disability.
(e) Payment. Upon exercise of a SAR, payment shall be made in cash,
in shares at fair market value on the date of exercise, or in a
combination thereof, as the Committee may determine at the time of
exercise.
(f) Other Terms. SARs shall be granted in such manner and such form,
and subject to such additional terms and conditions, as the Committee
in its sole discretion deems necessary or desirable, including without
limitation: (i) if granted in connection with an Incentive Stock
Option, in order to satisfy any requirements set forth under Section
422 of the Code; or, (ii) in order to avoid any insider-trading
liability in connection with a SAR under Section 16(b) of the 1934 Act.
8. Restricted Stock Awards
Restricted stock awards under the Plan shall consist of Shares free of any
purchase price or for such purchase price as may be established by the
Committee restricted against transfer, subject to forfeiture, and subject to
such other terms and conditions (including attainment of performance
objectives) as may be determined by the Committee. Restricted stock shall be
evidenced by written restricted stock agreements in such form not inconsistent
with the Plan as the Committee shall approve from time to time, which
agreement shall contain the terms and conditions applicable to such awards,
including in substance the following terms and conditions:
(a) Restriction Period. Restrictions shall be imposed for such period
or periods as may be determined by the Committee, provided, however,
the restriction period shall be at least three years unless
restrictions lapse on the basis of achieving performance targets. The
Committee, in its discretion, may provide in the agreement
circumstances under which the restricted stock shall become immediately
transferable and nonforfeitable, or under which the restricted stock
shall be forfeited.
(b) Restrictions Upon Transfer. Restricted stock and the right to
vote such shares and to receive dividends thereon, may not be sold,
assigned, transferred, exchanged, pledged, hypothecated, or otherwise
encumbered, except as herein provided, during the restriction period
applicable to such Shares. Notwithstanding the foregoing, and except as
otherwise provided in the Plan, the grantee shall have all of the other
rights of a stockholder, including, but not limited to, the right to
receive dividends and the right to vote such Shares.
(c) Certificates. A certificate or certificates representing the
number of restricted Shares granted shall be registered in the name of
the grantee. The Committee, in its sole discretion, shall determine
when the certificate or certificates shall be delivered to the grantee
(or, in the event of the grantee's death, to his Beneficiary), may
provide for the holding of such certificate or certificates in escrow
or in custody by the Company or its designee pending their delivery to
the grantee or Beneficiary, and may provide for any appropriate legend
to be borne by the certificate or certificates.
(d) Lapse of Restrictions. The restricted stock agreement shall
specify the terms and conditions upon which any restriction upon
restricted stock awarded under the Plan shall expire, lapse, or be
removed, as determined by the Committee. Upon the expiration, lapse, or
removal of such restrictions, Shares free of the restrictive legend
shall be issued to the grantee or his legal representative.
(e) Automatic Award of Restricted Stock to Nonemployee Directors.
Notwithstanding any other provision of the Plan, awards of restricted
stock hereunder to Nonemployee Directors shall be subject to the
following terms and conditions:
(i) Until the 2003 Annual Meeting, if a person is elected or
appointed as a Nonemployee Director of the Company other than at
an Annual Meeting, such person shall thereupon be awarded 2,000
Shares of restricted stock (as adjusted pursuant to paragraph 20,
below).
(ii) The shares of restricted stock awarded pursuant to this
paragraph 8(e) shall have a restriction period of ten years. The
restrictions shall lapse with respect to 10 percent of the Shares
awarded hereunder on the anniversary date of the award during
each of the ten consecutive calendar years following the date on
which the award is made, but only if the grantee has been a
director of the Company continuously from the grant date of the
restricted stock award to such anniversary date; provided,
however, that all restrictions shall lapse, and the grantee of
such restricted Shares shall be entitled to the delivery of a
stock certificate or certificates evidencing the restricted
Shares, upon (a) the date of the grantee's death or Disability
while serving as a director, or (b) the date on which the Board
of Directors determines that the holder will not be nominated for
election as a director by reason of Retirement. Upon any other
Termination, all shares still subject to the restrictions hereof
shall be returned to or canceled by the Company and shall be
deemed to have been forfeited by the grantee.
(iii) No Shares awarded under this paragraph 8(e) may be sold,
assigned, transferred, exchanged, pledged, hypothecated, or
otherwise encumbered unless, until and then only to the extent
that the restrictions shall have lapsed in accordance with
paragraph 8(e) (iii) hereof.
(iv) Stock certificates evidencing restricted Shares awarded
under this paragraph 8(e) shall be issued in the sole name of the
grantee (but shall be held by the Company until the restrictions
shall have lapsed in accordance herewith) and shall bear a legend
which, in part, shall provide that such Shares (a) are subject to
the terms and restrictions of the Plan, (b) are subject to
forfeiture or cancellation under the terms of the Plan, and (c)
shall not be sold, assigned, transferred, exchanged, pledged,
hypothecated, or otherwise encumbered except pursuant to the
provisions of the Plan.
(v) Unless otherwise provided in the Plan, all provisions with
respect to the terms of restricted stock awards hereunder shall
be applicable to restricted stock awarded to Nonemployee
Directors under this paragraph 8(e).
(vi) The restricted stock awards under this paragraph 8(e) and
the automatic grants described in paragraph 6(h) shall constitute
the only awards under the Plan permitted to be made to Nonemployee
Directors.
9. Performance Units
Performance unit awards under the Plan shall entitle grantees to future
payments based upon the achievements of preestablished long-term performance
objectives and shall be evidenced by written performance unit agreements in
such form not inconsistent with this Plan as the Committee shall approve from
time to time. Such agreements shall contain the terms and conditions
applicable to the performance unit awards, including in substance the
following terms and conditions:
(a) Performance Period. The Committee shall establish with respect to
each unit award a performance period of not fewer than two years.
(b) Unit Value. The Committee shall establish with respect to each
unit award value for each unit which shall not thereafter change, or
which may vary thereafter pursuant to criteria specified by the
Committee.
(c) Performance Targets. The Committee shall establish with respect
to each unit award maximum and minimum performance targets to be
achieved during the applicable performance period. Achievement of
maximum targets shall entitle grantees to payment with respect to the
full value of a unit award. Grantees shall be entitled to payment with
respect to a portion of a unit award according to the level of
achievement of targets as specified by the Committee for performance
which achieves or exceeds the minimum target but fails to achieve the
maximum target.
(d) Performance Measures. Performance targets established by the
Committee shall relate to corporate, subsidiary, division, or unit
performance and may be established in terms of growth in gross revenue,
earnings per share, ratios of earnings to equity or assets, or such
other measures or standards as may be determined by the Committee in
its discretion. Multiple targets may be used and may have the same or
different weighing, and they may relate to absolute performance or
relative performance measured against other companies or businesses.
(e) Adjustments. At any time prior to the payment of a unit award,
the Committee may adjust previously established performance targets or
other terms and conditions, including the Company's or other
corporations' financial performance for Plan purposes, to reflect major
unforeseen events such as changes in laws, regulations or accounting
practices, mergers, acquisitions or divestitures, or other
extraordinary unusual or non-recurring items or events.
(f) Payment of Unit Awards. Following the conclusion of each
performance period, the Committee shall determine the extent to which
performance targets have been attained and any other terms and
conditions satisfied for such period. The Committee shall determine
what, if any, payment is due on the unit award and whether such payment
shall be made in cash, Shares, or a combination thereof. Payment shall
be made in a lump sum or installments, as determined by the Committee,
commencing as promptly as practicable following the end of the
performance period, unless deferred subject to such terms and
conditions and in such form as may be prescribed by the Committee.
(g) Termination. In the event that a grantee is Terminated as an
employee or director by the Company prior to the end of the performance
period by reason of death, Disability, or Retirement with the consent
of the Company, any unit award, to the extent earned under the
applicable performance targets, shall be payable at the end of the
performance period according to the portion of the performance period
during which the grantee was employed by or served as a director of the
Company, provided that the Committee shall have the power to provide
for an appropriate settlement of a unit award before the end of the
performance period. Upon any other Termination, participation shall
terminate forthwith, and all outstanding unit awards shall be canceled.
10. Loans and Supplemental Cash
The Committee, in its sole discretion to further the purpose of the Plan, may
provide for supplemental cash payments or loans to individuals in connection
with all or any part of an award under the Plan. Supplemental cash payments
shall be subject to such terms and conditions as shall be prescribed by the
Committee at the time of grant, provided that in no event shall the amount of
payment exceed:
(a) In the case of an option, the excess fair market value of a Share
on the date of exercise over the option price multiplied by the number
of Shares for which such option is exercised, or
(b) In the case of a SAR, performance unit, or restricted stock
award, the value of the Shares and other consideration issued in
payment of such award.
Any loan shall be evidenced by a written loan agreement or other instrument in
such form and containing such terms and conditions (including, without
limitation, provisions for interest, payment schedules, collateral,
forgiveness or acceleration) as the Committee may prescribe from time to time.
11. General Restrictions
Each award under the Plan shall be subject to the requirement that if at any
time the Company shall determine that (i) the listing, registration or
qualification of the Shares subject or related thereto upon any securities
exchange or under any state or federal law, or (ii) the consent or approval of
any regulatory body, or (iii) an agreement by the recipient of an award with
respect to the disposition of Shares, or (iv) the satisfaction of withholding
tax or other withholding liabilities is necessary or desirable as a condition
of or in connection with the granting of such award or the issuance or
purchase of Shares thereunder, such award shall not be consummated in whole or
in part unless such listing, registration, qualification, consent, approval,
agreement, or withholding shall have been effected or obtained free of any
conditions not acceptable to the Company. Any such restriction affecting an
award shall not extend the time within which the award may be exercised; and
neither the Company nor its directors or officers nor the Committee shall have
any obligation or liability to the grantee or to a Beneficiary with respect to
any Shares with respect to which an award shall lapse or with respect to which
the grant, issuance, or purchase of Shares shall not be effected, because of
any such restriction.
12. Single or Multiple Agreements
Multiple awards, multiple forms of awards, or combinations thereof may be
evidenced by a single agreement or multiple agreements, as determined by the
Committee.
13. Rights of the Shareholder
The recipient of any award under the Plan shall have no rights as a
shareholder with respect thereto unless and until certificates for Shares are
issued to him, and the issuance of Shares shall confer no retroactive right to
dividends.
14. Rights to Terminate
Nothing in the Plan or in any agreement entered into pursuant to the Plan
shall confer upon any person the right to continue in the employment of the
Company or to serve as a director, or affect any right which the Company may
have to terminate the employment or directorship of such person.
15. Withholding
(a) Prior to the issuance or transfer of Shares under the Plan, the
recipient shall remit to the Company an amount sufficient to satisfy
any federal, state, or local withholding tax requirements. The
recipient may satisfy the withholding requirement in whole or in part
by electing to have the Company withhold Shares having a value equal to
the minimum amount required to be withheld. No additional amount may be
withheld. The value of the Shares to be withheld shall be the fair
market value, as determined by the Committee, of the stock on the date
that the amount of tax to be withheld is determined (the "Tax Date").
Such election must be made prior to the Tax Date, must comply with all
applicable securities law and other legal requirements, as interpreted
by the Committee, and may not be made unless approved by the Committee,
in its discretion.
(b) Whenever payments to a grantee in respect of an award under the
Plan are to be made in cash, such payments shall be net of the amount
necessary to satisfy any federal, state, or local withholding tax
requirements.
16. Non-Assignability
No award under the Plan shall be sold, assigned, transferred, exchanged,
pledged, hypothecated, or otherwise encumbered, other than by will or by the
laws of descent and distribution, or by such other means as the Committee may
approve. Except as otherwise provided herein, during the life of the
recipient, such award shall be exercisable only by such person or by such
person's guardian or legal representative.
17. Non-Uniform Determinations
The Committee's determinations under the Plan (including without limitation
determinations of the persons to receive awards, the form, amount and timing
of such awards, the terms and provisions of such awards and the agreements
evidencing same, and the establishment of values and performance targets) need
not be uniform and may be made selectively among persons who receive, or are
eligible to receive, awards under the Plan, whether or not such persons are
similarly situated.
18. Change in Control Provisions
(a) In the event of (1) a Change in Control (as defined) or (2) a
Potential Change in Control (as defined), but only if and to the extent
so determined by the Board of Directors at or after grant (subject to
any right of approval expressly reserved by the Board of Directors at
the time of such determination), the following acceleration and
valuation provisions shall apply:
(i) Any SARs outstanding for at least six months and any stock
options awarded under the Plan not previously exercisable and
vested shall become fully exercisable and vested.
(ii) Any restrictions and deferral limitations applicable to any
restricted stock, performance units, or other stock-based awards,
in each case to the extent not already vested under the Plan,
shall lapse and such shares, performance units, or other stock-based
awards shall be deemed fully vested.
(iii) The value of all outstanding stock options, SARs, restricted
stock, performance units, and other stock-based awards, in each
case to the extent vested, shall, unless otherwise determined by
the Committee in its sole discretion at or after grant but prior
to any Change in Control, be cashed out on the basis of the
Change in Control Price (as defined) as of the date such Change
in Control or such Potential Change in Control is determined to
have occurred or such other date as the Committee may determine
prior to the Change in Control.
(b) As used herein, the term "Change in Control" means the happening
of any of the following:
(i) Any person or entity, including a "group" as defined in
Section 13(d)(3) of the 1934 Act, other than the Company, a
subsidiary of the Company, or any employee benefit plan of the
Company or its subsidiaries, becomes the beneficial owner of the
Company's securities having 25 percent or more of the combined
voting power of the then outstanding securities of the Company
that may be cast for the election for directors of the Company
(other than as a result of an issuance of securities initiated by
the Company in the ordinary course of business), or
(ii) As the result of, or in connection with, any cash tender or
exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the foregoing
transactions, less than a majority of the combined voting power
of the then outstanding securities of the Company or any
successor corporation or entity entitled to vote generally in the
election of directors of the Company or such other corporation or
entity after such transaction, are held in the aggregate by
holders of the Company's securities entitled to vote generally in
the election of directors of the Company immediately prior to
such transactions; or
(iii)During any period of two consecutive years, individuals who at
the beginning of any such period constitute the Board of
Directors cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by
the Company's stockholders, of each director of the Company first
elected during such period was approved by a vote of at least
two-thirds of the directors of the Company then still in office
who were directors of the Company at the beginning of any such
period.
(c) As used herein, the term "Potential Change in Control" means the
happening of any of the following:
(i) The approval by stockholders of an agreement by the Company, the
consummation of which would result in a Change in Control of the
Company; or
(ii) The acquisition of beneficial ownership, directly or indirectly,
by any entity, person, or group (other than the Company, a
wholly-owned subsidiary thereof, or any employee benefit plan of
the Company or its subsidiaries, including any trustee of such
plan acting as such trustee) of securities of the Company
representing 5 percent or more of the combined voting power of
the Company's outstanding securities and the adoption by the
Board of Directors of a resolution to the effect that a Potential
Change in Control of the Company has occurred for purposes of
this Plan.
(d) As used herein, the term "Change in Control Price" means the
highest price per share paid in any transaction reported by the New
York Stock Exchange, or paid or offered in any bona fide transaction
related to a Potential or actual Change in Control of the Company at
any time during the 60 day period immediately preceding the occurrence
of the Change in Control (or, where applicable, the occurrence of the
Potential Change in Control event), in each case determined by the
Committee except that, in the case of Incentive Stock Options and SARs
relating to Incentive Stock Options, such price shall be based only on
transactions reported for the date on which the optionee exercises such
SARs or, where applicable, the date on which a cash out occurs under
Section 18(a)(iii).
19. Non-Competition Provision
Unless the award agreement relating to a stock option, SAR, restricted stock,
or performance unit specifies otherwise, a grantee shall forfeit all
unexercised, unearned and/or unpaid awards, including, but not by way of
limitation, awards earned but not yet paid, all unpaid dividends and dividend
equivalents, and all interest, if any, accrued on the foregoing if, (i) in the
opinion of the Committee, the grantee without the written consent of the
Company, engages directly or indirectly in any manner or capacity as
principal, agent, partner, officer, director, employee or otherwise, in any
business or activity competitive with the business conducted by the Company or
any of its subsidiaries; or (ii) the grantee performs any act or engages in
any activity which in the opinion of the Chief Executive Officer of the
Company is inimical to the best interests of the Company.
20. Adjustments
In the event of any change in the outstanding common stock of the Company, by
reason of a stock dividend or distribution, recapitalization, merger,
consolidation, reorganization, split-up, combination, exchange of Shares or
the like, the Board of Directors, in its discretion, may adjust
proportionately the number of Shares which may be issued under the Plan, the
number of Shares subject to outstanding awards, and the option exercise price
of each outstanding option, and may make such other changes in outstanding
options, SARs, performance units, and restricted stock awards, as it deems
equitable in its absolute discretion to prevent dilution or enlargement of the
rights of grantees, provided that any fractional Shares resulting from such
adjustments shall be eliminated.
21. Amendment
The Board of Directors may terminate, amend, modify, or suspend the Plan at
any time, except that the Board shall not, without the authorization of the
holders of a majority of Company's voting securities, increase the maximum
number of Shares which may be issued under the Plan (other than increases
pursuant to paragraph 20 hereof), extend the last date on which awards may be
granted under the Plan, extend the date on which the Plan expires, change the
class of persons eligible to receive awards, or change the minimum option
price. In no event, however, shall the provisions of paragraphs 6(h) and 8(e)
be amended more often than once every six months, other than to comport with
changes in the Code, the Employment Retirement Income Security Act of 1974, as
amended, or the rules thereunder. No termination, modification, amendment, or
suspension of the Plan shall adversely affect the rights of any grantee or
Beneficiary under an award previously granted, unless the grantee or
Beneficiary shall consent; but it shall be conclusively presumed that any
adjustment pursuant to paragraph 20 hereof does not adversely affect any such
right.
22. Effect on Other Plans
Participation in this Plan shall not affect a grantee's eligibility to
participate in any other benefit or incentive plan of the Company. Any awards
made pursuant to this Plan shall not be used in determining the benefits
provided under any other plan of the Company unless specifically provided
therein.
23. Effective Date and Duration of the Plan
The Plan shall become effective when adopted by the Board of Directors,
provided that the Plan is approved by the holders of a majority of the
Company's voting securities on the date of its adoption by the Board or before
the first anniversary of that date. Unless it is sooner terminated in
accordance with paragraph 21 hereof, the Plan shall remain in effect until all
awards under the Plan have been satisfied by the issuance of Shares or payment
of cash or have expired or otherwise terminated, but no award shall be granted
more than ten years after the earlier of the date the Plan is adopted by the
Board of Directors or is approved by the holders of the Company's voting
securities.
24. Unfunded Plan
The Plan shall be unfunded, except to the extent otherwise provided in
accordance with Section 8 hereof. Neither the Company nor any affiliate shall
be required to segregate any assets that may be represented by stock options,
SARs, or performance units, and neither the Company nor any affiliate shall be
deemed to be a trustee of any amounts to be paid under any stock option, SAR,
or performance unit. Any liability of the Company or any affiliate to pay any
grantee or Beneficiary with respect to an option, SAR, or performance unit
shall be based solely upon any contractual obligations created pursuant to the
provisions of the Plan; no such obligations will be deemed to be secured by a
pledge or encumbrance on any property of the Company or an affiliate.
25. Governing Law
The Plan shall be construed and its provisions enforced and administered in
accordance with the laws of the State of Tennessee except to the extent that
such laws may be superseded by any federal law.
Adopted by the Board of Directors of Saks Incorporated on the seventh day of
April 1999.
By /s/ R. Brad Martin
R. Brad Martin
Chairman of the Board of Directors and
Chief Executive Officer
