Saks Fifth Avenue 2008 Annual Report Download - page 211

Code) (such product, the “Threshold”). If the Payment does not exceed the Threshold, the Executive will not receive a Gross-Up
Payment and the amount of the Payment will be reduced to an amount that is one dollar less than the largest amount that would
not become subject to the excise tax imposed by Section 4999 of the Code and that the Company could pay to the Executive
without loss of deduction under Section 280G(a) 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.
(b) Calculations; When Paid. Subject to the provisions of Section 11(c) hereof, all determinations required to be made
under this Section 11, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized public accounting
firm retained by the Company (the “Accounting Firm”) that will provide detailed supporting calculations both to the Company
and the Executive as soon as practicable following the receipt of notice from the Executive that there has been a Payment. All
fees and expenses of the Accounting Firm will be borne solely by the Company. Such Gross-Up Payment, as determined
pursuant to this Section 11, shall be paid by the Company to the Executive promptly following the receipt of the Accounting
Firm’s determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, the Accounting Firm
will furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive’s applicable federal
income tax return should not result in the imposition of a negligence or similar penalty or comparable opinion supporting such
determination in accordance with the practices and procedures of the Accounting Firm. Any determination by the
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