Saks Fifth Avenue 2008 Annual Report Download - page 212

Accounting Firm shall be binding upon the Company and the Executive absent manifest error. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company should have been made (“Underpayment”),
consistent with the calculations required to be made in accordance with this Section 11. If the Company exhausts its remedies
pursuant to Section 11(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm
will determine the amount of the Underpayment that has occurred and any such Underpayment will be promptly paid by the
Company to or for the benefit of the Executive.
(c) IRS Claims. The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the Gross-Up Payment. The Executive will give the notice as soon as
practicable but no later than 10 business days after the Executive is informed in writing of the claim and will apprise the
Company of the nature of the claim and the date on which such claim is requested to be paid. The Executive will not pay the
claim prior to the expiration of the 30-day period following the date on which the Executive gives the notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to the claim is due). If the Company notifies the
Executive in writing prior to the expiration of the 30-day period that the Company desires to contest the claim, the Executive
shall (i) give the Company any information reasonably requested by the Company relating to the claim, (ii) take such action in
connection with contesting the claim as the Company reasonably requests in writing from time to time, including, without
limitation, accepting legal representation with respect to the claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to contest the claim, and (iv) permit the Company to
participate in any proceedings relating to such claim. The Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless,
on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result
of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 11(c)
and subject to the next two sentences, the Company shall control all proceedings taken in connection with the contest and, at its
sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of the claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees to prosecute the contest to a determination
before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company
determines. If the Company directs the Executive to pay the claim and sue for a refund, the Company shall advance the amount
of the payment to the Executive on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax and income tax (including interest and penalties with respect thereto) imposed with respect to the
advance or with respect to any imputed income with respect to the advance. With respect to any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive as to which the contested amount is claimed to be
due, the Executive may seek to limit the extension to the contested amount. The Company’s control of the contest will be
limited to issues with respect to which a Gross-Up Payment would be payable in accordance with this Section 11 and the
Executive will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any
other taxing authority.
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