Saks Incorporated
1998 Senior Executive Bonus Plan
1. Purpose.
The purpose of the 1998 Senior Executive Bonus Plan (the "Plan") is to provide
a select group of executive officers with an annual incentive opportunity, based on the achievement of
pre-established, objective performance goals described in Section 4 ("Performance Goals"), to earn
additional compensation so as to attract and retain such executive officers and to motivate them to enhance
the value of the business of Saks Incorporated (the "Company"). The Plan
2. Eligibility to Participate.
(a)The participants in the Plan ("Participants") for any annual performance
period (an "Annual Performance Period") shall be those executive officers of the Company who are
selected by the Committee (as defined in Section 8) to participate in the Plan for such Annual Performance
Period. Such selection shall be made by the Committee within 90 days following the commencement of each
Annual Performance Period (or within such earlier period as shall be required under Sect
(b) An executive officer shall automatically cease to be a Participant, without notice
to or consent of such executive officer, upon the earliest to occur of the following events: (i) the
Participant's death; (ii) the Participant's permanent and total disability; and (iii) the Participant's
termination of employment with the Company.
3. Annual Performance Period.
Each Annual Performance Period shall be a fiscal year of the Company, commencing with
the fiscal year beginning February 1, 1998.
4. Bonus Amounts and Performance Goals.
Prior to the 90th day following the start of each Annual Performance Period (or
within such earlier period as shall be required under Section 162(m)) and while the outcome of the
Performance Goals is substantially uncertain, the Committee will establish, in writing, for each Participant
(i) bonus potential amounts, expressed as a percentage of annual rate of base salary or a number of shares
of Company common stock, payable in accordance with the Plan and (ii) one or more Performance
5. Bonus Awards.
(a) Each Participant shall be eligible to receive the bonus amount (a "Bonus
Award") determined by the Committee in accordance with Section 4, payable in cash or stock pursuant to
Section 6, if and to the extent, with respect to such bonus amount, the Performance Goal or the Performance
Goals established for the Participant for the Annual Performance Period are achieved in accordance with the
objective criteria set forth in the specific Performance Goal. If the Performance G
(i) below the established minimum level of performance, no Bonus Award will be
paid;
(ii) equal to or greater than the maximum level of performance, the maximum Bonus
Award will be paid;
(iii) between the minimum and maximum levels of performance, the Bonus Award will be
prorated.
(b) The Committee, in its sole discretion, may reduce the amount of, or eliminate, a
Bonus Award of any Participant. In determining whether a Bonus Award will be reduced or eliminated, the
Committee may consider any extraordinary changes that may also have occurred during the Annual Performance
Period, including without limitation changes in accounting practices or the law, and may consider such
business performance criteria that it deems appropriate, including without limitation the
(b) The maximum Bonus Award payable to a Participant in cash is the amount equal to
100% of the Participant's annual base salary or shares of common stock in the following amounts (subject to
adjustment in the case of stock splits): 50,000 shares of common stock if the Participant is the Companys
Chief Executive Officer, and (ii) 25,000 shares of common stock if the Participant is any other executive
officer.
6. Payment of Bonus Awards.
Subject to any shareholder approval required by law, payment of any Bonus Award for an
Annual Performance Period in accordance with the Plan shall be made in cash or stock to a Participant who is
employed by the Company after the Committee shall have certified that the Performance Goal or Performance
Goals for the Annual Performance Period were achieved and any other material terms of the Bonus Award were
satisfied. The Company may defer, for such period of time as the Participant may re
uch deferral, in accordance with the plans and policies of the Company, the payment of all or any portion of
any Bonus Award which may become payable to the Participant, with respect to the Annual Performance Period.
If a Participant has the right to defer payment of all or any portion of the Participant's compensation from
the Company in accordance with an employment or similar agreement, then the right to defer any Bonus Award
and the terms of such deferral will be governed by that agreement.
7. Deferral of Bonus Awards.
(a) The Committee may, subject to such limits as the Committee may specify, permit a
Participant to defer all or part of the Bonus Award payable to him or her with respect to any Annual
Performance Period by executing and delivering to the Company a deferral election form provided by the
Committee no later than the date specified in the notification to the Participant of his or her
participation for the Annual Performance Period.
(b) The deferred Bonus Award will be credited to a special book account maintained
for each Participant and will be accounted for as a number of shares or cash that will accrue earnings based
on a reasonable rate of interest or on the rate of return of one or more predetermined actual investments
(whether or not assets associated with the amount originally owed are actually invested therein) such that
the amount payable by the Company at the end of the deferral period will be based on
eturn of the specific investment (including any decrease as well as any increase in the value of the
investment). Distribution of the deferred Bonus Award plus accrued earnings will be made at such time or
times and in such manner as the Participant shall specify at the time he or she files the deferral election
forms, subject, however, to such restrictions and limitations as the Committee may from time to time
impose.
(c) The obligation to pay a deferred Bonus Award plus earnings shall at all times be
an unfunded and unsecured obligation of the Company. The Participant and his or her beneficiary(ies) shall
look exclusively to the general assets of the Company, as general creditors of the Company. The Plan is
intended to be unfunded for purposes of the Employee Retirement Income Security Act of 1974 and the Internal
Revenue Code of 1986. The Participant shall have no right to assign, pledge or enc
8. Administration
(a) The Human Resources/Stock Option Committee of the Board of Directors of the
Company (the "Committee"), or a subcommittee thereof, consisting solely of two or more members of
the Board, each of whom shall be an "outside director" within the meaning of Section 162(m) of the
Code shall administer the Plan and be authorized to take all actions necessary or desirable to effect the
purposes of the Plan, in its sole discretion, including but not limited to:
(i) providing rules for the management, operation, and administration of the Plan and
all pre-existing bonus arrangements incorporated into the Plan;
(ii) interpreting the Plan in its sole discretion to the fullest extent permitted by
law; and
(iii) correcting any defect or omission or reconciling any inconsistency in the Plan
in such manner and to such extent as it shall deem appropriate in its sole discretion.
(b) The decisions of the Committee shall be final and conclusive for all purposes of
the Plan and upon all persons and will not be subject to any appeal or review.
9. Amendment and Termination.
(a) The Company hereby reserves the right, exercisable by the Committee, to amend
the Plan at any time and in any respect or to discontinue and terminate the Plan in whole or in part at any
time, subject to Section 9(b). Amendment or termination may be effective with respect to any amount which
has not yet been paid out, except that amounts which have been credited to a deferred bonus account shall be
paid out in accordance with the applicable deferral election or, if the Committe
(b) In no event shall any Bonus Award be made under the Plan for any Annual
Performance Period after the Annual Performance Period beginning in 2002. The Plan, awards under the Plan,
and any amendment to the Plan which would change the class of executives who are eligible to receive awards
under the Plan or the permissible amount of such awards shall be subject to approval of the Company's
shareholders in such manner and with such frequency as shall be required under Section 162(m).
10. Miscellaneous.
(a) Neither the establishment of the Plan nor participation herein shall be
construed as conferring any legal rights upon any Participant or other person for continuation of
employment, and the Company reserves its right to discharge any executive officer without regard to the
effect such discharge might have upon such executive officer as a Participant in the Plan. However, nothing
contained herein shall affect any contractual right of a Participant pursuant to a written employme
(b) The Company shall withhold from any amounts payable under the Plan all federal,
state, local and other taxes as may be required to be withheld by applicable law.
(c) Subject to any applicable law, no benefit under the Plan shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any
attempt to do so shall be void, nor shall any such benefit in any manner liable for or subject to the debts,
contracts, liabilities, engagements or torts of the Participant. In the event that the Committee shall find
that any Participant has attempted to violate such provision or has become bankrupt,
(d) The Plan shall be interpreted and construed in accordance with the laws of the
State of Tennessee, without regard to principles of conflicts of laws.
(e) If a provision of the Plan shall be held illegal or invalid, the illegality or
invalidity shall not affect the remaining provisions of the Plan and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included in the Plan.
(f) The Plan is designed and intended to comply with Section 162(m) of the Code and
all provisions hereof shall be construed in a manner so to comply.
11. Effective Date
The Plan shall be submitted to the shareholders of the Company for approval and, if
approved by the shareholders, shall be effective as of February 1, 1998.
