Saks Fifth Avenue 2008 Annual Report Download - page 191

Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. The Executive
will be entitled to a Gross-Up Payment in accordance with this section 7(a) only if the Executive’s “parachute
payments” (as such term is defined in Section 280G of the Code) exceed three hundred thirty percent of the Executive’s
“base amount” (as determined under Section 280G(b) of the Code) such produce, the “Threshold”). If the Payment does
not exceed the Threshold, the Executive will not receive a Gross-Up Payment and the amount of the Payment will be
reduced, in the order set forth below, to an amount that is one dollar less than the largest amount that would not become
subject to the excise tax imposed by Section 4999 of the Code and that SKS could pay to the Executive without loss of
deduction under Section 280G(s) of the Code.
The reduction of the amounts payable to the Executive, if applicable, shall be made in the following order: (1) by first
eliminating the acceleration of vesting of any stock options for which the exercise price exceeds the then fair market value
(and if there is more than one option award so outstanding, then the acceleration of the vesting of the most “under water”
option shall be reduced first and so on); (2) second, by eliminating the acceleration of vesting of any stock appreciation
rights that are subject to time based vesting for which the exercise price exceeds the then fair market value (and if there is
more than one such stock appreciation right so outstanding, then the acceleration of the vesting of the most “under water”
stock appreciation right shall be reduced first and so on); (3) third, by reducing the payments of any stock appreciation
rights, restricted stock, restricted stock units, phantom shares, performance share units, performance shares or other similar
equity based awards that have been awarded to the Executive by the Company that are subject to performance based
vesting (and if there be more than one such award held by Executive, by reducing the awards in the reverse order of the
date of their award, with the most recently awarded reduced first and the oldest award reduced last); (4) fourth, by reducing
any cash payments not subject to Code section 409A; (5) fifth, by reducing any benefit continuation payments (and if there
be more than one such payment, by reducing the payments in reverse order, with the payments made the earliest being
reduced first); (6) sixth, by reducing cash payments that are subject to Code section 409A; (7) seventh, by reducing the
payments of any restricted stock, restricted stock units, phantom shares or other similar equity based awards that have been
awarded to the Executive by the Company that are subject to time based vesting (and if there be more than one such award
held by Executive, by reducing the awards in the reverse order of the date of their award, with the most recently awarded
reduced first and the oldest award reduced last); (8) eighth, by reducing the acceleration of vesting of any stock options that
are not described in (1) above; and (9) ninth, by reducing the acceleration of vesting of any stock appreciation rights that
are not described in (2) or (3) above.”
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