Exhibit 10.31

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“Agreement”) is entered into as of the 20th day of
June 2003, by and between Saks Incorporated (the “Company”), and Charles Hansen
(“Executive”).

 

Company and Executive agree as follows:

 

1. Employment. Company hereby employs Executive as Senior Vice President and
Deputy General Counsel of Company and, as of September 2, 2003, as Executive
Vice President and General Counsel of Company or in such other capacity of equal
or greater stature with Company and its subsidiaries as Company’s Board of
Directors shall designate.

 

2. Duties. During his employment, Executive shall devote substantially all of
his working time, energies, and skills to the benefit of Company’s business
except for service on boards or committees not significantly interfering with
his duties hereunder, periods of vacation or sick leave, and the normal
management of personal affairs. Executive agrees to serve Company diligently and
to the best of his ability and to use his best efforts to follow the policies
and directions of Company’s Chief Executive and Board of Directors.

 

3. Compensation. Executive’s compensation and benefits under this Agreement
shall be as follows:

 

(a) Base Salary. Company shall pay Executive a base salary (“Base Salary”) at a
rate of no less than $272,645 per year and, commencing September 2, 2003, no
less than $320,000 per year. Executive’s Base Salary shall be paid in
installments in accordance with Company’s normal payment schedule for its senior
management. All payments shall be subject to the deduction of payroll taxes and
similar assessments as required by law.

 

(b) Bonus. In addition to the Base Salary, Executive shall be eligible, as long
as he holds the position of General Counsel, for a yearly cash bonus with a
target of 40% (“Target Bonus”) of Base Salary for achieving plan with the
opportunity to receive more than the Target Bonus.

 

(c) New Restricted Stock Award. Executive shall receive 3,333 shares of common
stock on September 2, 2004, 3,333 shares of common stock on September 2, 2005,
and 3,334 shares of

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common stock on September 2, 2006, provided that he remains employed by Company
on those dates.

 

(d) Incentive Compensation. Executive is hereby granted, as of the end of the
third fiscal quarter, a nonqualified option (“Option”) to purchase 25,000 shares
of Company common stock at an option price equal to the closing price of the
stock at the end of the Company’s third fiscal quarter, as reported in the Wall
Street Journal. This Option is granted pursuant to Company’s 1997 Stock-Based
Incentive Plan (“1997 Plan”), and shall be subject to the terms and conditions
thereof. The Option shall be exercisable on or after six months after the grant
date to the extent of 20% of the shares covered thereby; exercisable to the
extent of an additional 20% of the shares covered thereby on and after the first
anniversary of the grant date; exercisable to the extent of an additional 20% of
the shares covered thereby on and after the second anniversary of the grant
date; exercisable to the extent of an additional 20% of the shares covered
thereby on an after the third anniversary of the grant date; and exercisable to
the extent of any remaining shares on and after the fourth anniversary of the
grant date. The Option may be exercised (as provided in the 1997 Plan) up to
seven (7) years from the grant date. Any portion of the Option not exercised
within said seven (7) year period shall expire.

 

(e) Change in Control. In accordance with the policy set by the Human Resources
Committee of the Board, all options and restricted stock shall vest upon a
Change in Control, as defined below.

 

4. Insurance and Benefits. Company shall allow Executive to participate in each
employee benefit plan and to receive each executive benefit that Company
provides for senior executives at the level of Executive’s position. In
addition, Executive shall be entitled to receive, in accordance with Schedule
5.7(g) of the merger agreement between Saks Incorporated and Carson Pirie Scott
Co., the benefits listed in that Schedule but excluding any listed benefit in
which Executive was not participation at the time of the execution of the merger
agreement.

 

5. Term. The term of this Agreement shall be for three years, provided, however,
that Company may terminate this Agreement at any time upon thirty (30) days’
prior written notice (at which time this Agreement shall terminate except for
Section 9, which shall continue in effect as set forth in

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Section 9). In the event of such termination by Company, Executive shall be
entitled to receive his Base Salary (at the rate in effect at the time of
termination) through the end of the term of this Agreement plus a pro rata
number of shares under Section 3(c). Such Base Salary shall be paid in one lump
sum. In the event that Executive’s employment is terminated without Cause, as
defined below, during the final 18 months of the Term, or thereafter if
Executive is working without an employment contract, he shall be entitled to 18
months’ Base Salary as severance pay.

 

In addition, this Agreement shall terminate upon the death of Executive, except
as to: (a) Executive’s estate’s right to exercise any unexercised stock options
pursuant to Company’s stock option plan then in effect, (b) other entitlements
under this contract that expressly survive death, (c) any rights which
Executive’s estate or dependents may have under COBRA or any other federal or
state law or which are derived independent of this Agreement by reason of his
participation in any employee benefit arrangement or plan maintained by Company,
and (d) Executive’s estate shall be entitled to receive the next segment of
shares to be awarded under Section 3(c).

 

6. Termination by Company for Cause. (a) Company shall have the right to
terminate Executive’s employment under this Agreement for cause, in which event
no salary or bonus shall be paid after termination for cause. Termination for
cause shall be effective immediately upon notice sent or given to Executive. For
purposes of this Agreement, the term “cause” shall mean and be strictly limited
to: (i) conviction of Executive, after all applicable rights of appeal have been
exhausted or waived, for any crime that materially discredits Company or is
materially detrimental to the reputation or goodwill of Company; (ii) commission
of any material act of fraud or dishonesty by Executive against Company or
commission of an immoral or unethical act that materially reflects negatively on
Company, provided that Executive shall first be provided with written notice of
the claim and with an opportunity to contest said claim before the Board of
Directors; or (iii) Executive’s willful and continual material breach of his
obligations under paragraph 2 of the Agreement, after written notice of the
breach and failure to cure, as so determined by the Board of Directors.

 

(b) In the event that Executive’s employment is terminated, Executive agrees to
resign as an officer and/or director of Company (or any of its subsidiaries or
affiliates), effective as of the date of such termination, and Executive

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agrees to return to Company upon such termination any of the following which
contain confidential information: all documents, instruments, papers,
facsimiles, and computerized information which are the property of Company or
such subsidiary or affiliate.

 

7. Change in Control. If Executive’s employment is terminated by Executive for
“Good Reason” after a Change in Control, or by Company in any way connected with
a Change in Control of Company or a Potential Change in Control of Company, as
defined below, Executive shall receive a sum equal to three times his Base
Salary then in effect and continuation in the Company’s health plans for three
years at no cost. The phrase “Good Reason” shall mean: (1) a mandatory
relocation from the Birmingham, Alabama area, or (2) a reduction in duties or
status within the combined company as a result of or after the Change in Control
or (3) any time during the 13th month after a Change in Control the Executive
terminates employment and deems it to be for Good Reason.

 

If any payment, right or benefit provided for in this Agreement or otherwise
paid to Executive by Company is treated as an “excess parachute payment” under
Section 280(G) (b) of the Internal Revenue Code of 1986, as amended, (the
“Code”), Company shall indemnify and hold harmless and make whole, on an
after-tax basis, Executive for any adverse tax consequences, including but not
limited to providing to Executive on an after-tax basis the amount necessary to
pay any tax imposed by Code Section 4999.

 

As used herein, the term “Change in Control” means the happening of any of the
following:

 

(a) Any person or entity, including a “group” as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended, other than Company, a
subsidiary of Company, or any employee benefit plan of Company or its
subsidiaries, becomes the beneficial owner of Company’s securities having 25
percent or more of the combined voting power of the then outstanding securities
of Company that may be cast for the election for directors of Company (other
than as a result of an issuance of securities initiated by Company in the
ordinary course of business); or

 

(b) 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

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foregoing transactions, less than a majority of the combined voting power of the
then outstanding securities of Company or any successor corporation or entity
entitled to vote generally in the election of directors of Company or such other
corporation or entity after such transaction are held in the aggregate by
holders of Company’s securities entitled to vote generally in the election of
directors of Company immediately prior to such transactions; or

 

(c) During any period of two consecutive years, individuals who at the beginning
of any such period constitute the Board of Directors of Company cease for any
reason to constitute at lease a majority thereof, unless the election, or the
nomination for election by Company’s stockholders, of each director of Company
first elected during such period was approved by a vote of at least two-thirds
of the directors of Company then still in office who were directors of Company
at the beginning of any such period.

 

As used herein, the term “Potential Change in Control” means the happening of
any of the following:

 

(a) The approval by stockholders of an agreement by Company, the consummation of
which would result in a Change of Control of Company or

 

(b) The acquisition of beneficial ownership, directly or indirectly, by any
entity, person or group (other than Company, a wholly-owned subsidiary thereof
or any employee benefit plan of company or its subsidiaries (including any
trustee of such plan acting as trustee)) of securities of Company representing 5
percent or more of the combined voting power of Company’s outstanding securities
and the adoption by the Board of Directors of Company of a resolution to the
effect that a Potential Change in Control of Company has occurred for purposes
of this Agreement.

 

8. Disability. If Executive becomes disabled at any time during the term of this
Agreement, he shall after he becomes disabled continue to receive all payments
and benefits provided under the terms of this Agreement for a period of twelve
consecutive months. This means that Executive shall continue to be employed for
twelve consecutive months after he becomes disabled, so that he continues to
enjoy all protections of this Agreement and his options and restricted stock
shall continue to vest during such period. For purposes of this Agreement, the
term “disabled” shall mean the inability of Executive (as the

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result of a physical or mental condition) to perform the duties of his position
under this Agreement with reasonable accommodation and which inability is
reasonably expected to last at least one (1) full year.

 

9. Non-competition; Unauthorized Disclosure.

 

(a) Non-competition. During the period Executive is employed under this
Agreement, and for a period of one year thereafter, Executive:

 

(i) shall not engage in any activities, whether as employer, proprietor,
partner, stockholder (other than the holder of less than 5% of the stock of a
corporation the securities of which are traded on a national securities exchange
or in the over-the-counter market), director, officer, employee or otherwise in
competition with (i) the businesses conducted at the date hereof by Company or
any subsidiary or affiliate or (ii) any business in which Company or any
subsidiary or affiliate is substantially engaged at any time during the
employment period;

 

(ii) shall not induce or attempt to persuade any employee of Company or any of
its divisions, subsidiaries or then present affiliates to terminate his or his
employment relationship; and

 

(iii) for purposes of this Section, the Company’s competitors shall be deemed to
include only Federated Department Stores, Kohl’s, The May Company, Dillard’s,
Marshall Fields, Belk Department Stores, Neiman Marcus or its affiliates,
Barney’s and Nordstrom’s, or any of their successors.

 

(b) Unauthorized Disclosure. During the period Executive is employed under this
Agreement, and for a further period of one year thereafter, Executive shall not,
except as required by any court or administrative agency, without the written
consent of the Board of Directors, or a person authorized thereby, disclose to
any person, other than an employee of Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance y
Executive of his duties as an executive for Company, any confidential
information obtained by him while in the employ of Company; provided, however,
that confidential information shall not include any information now known or
which becomes known generally to the public (other than as a result of
unauthorized disclosure by Executive).

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(c) Scope of Covenants; Remedies. The following provisions shall apply to the
covenants of Executive contained in this Section 9:

 

(i) the covenants contained in paragraph (i) of Section 9(a) shall apply within
all the territories in which Company or its affiliates or subsidiaries are
actively engaged in the conduct of business while Executive is employed under
this Agreement;

 

(ii) without limiting the right of Company to pursue all other legal and
equitable remedies available for violation by Executive of the covenants
contained in this Section 9, it is expressly agreed by Executive and Company
that such other remedies cannot fully compensate Company for any such violation
and that Company shall be entitled to injunctive relief to prevent any such
violation or any continuing violation thereof; provided, however, Company shall
be entitled to injunctive relief only to protect itself from unfair competition
of the type protected under Tennessee law.

 

(iii) each party intends and agrees that if, in any action before any court or
agency legally empowered to enforce the covenants contained in this Section 9,
any term, restriction, covenant or promise contained therein is found to be
unreasonable and accordingly unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent necessary to make it
enforceable by such court or agency; and

 

(iv) the covenants contained in this Section 8 shall survive the conclusion of
Executive’s employment by Company.

 

10. General Provisions.

 

(a) Notices. Any notice to be given hereunder by either party to the other may
be effected in writing by personal delivery, mail, electronic mail, overnight
courier, or facsimile. Notices shall be addressed to the parties at the
addresses set forth below, but each party may change his or its address by
written notice in accordance with this Section 10(a). Notices shall be deemed
communicated as of the actual receipt or refusal of receipt.

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If to Executive:

  

Charles Hansen

    

750 Lakeshore Parkway

    

Birmingham, AL 35211

 

If to Company:

  

Saks Incorporated

    

Law Department

    

12 E. 49th Street

    

New York, NY 10017

 

(b) Partial Invalidity. If any provision in this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions shall, nevertheless, continue in full force and without being
impaired or invalidated in any way.

 

(c) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Tennessee.

 

(d) Entire Agreement. Except for any prior grants of options, restricted stock,
or other forms of incentive compensation evidenced by a written instrument or by
an action of the Board or Directors, this Agreement supersedes any and all other
agreements, either oral or in writing, between the parties hereto with respect
to employment of Executive by Company and contains all of the covenants and
agreements between the parties with respect to such employment. Each party to
this Agreement acknowledges that no representations, inducements or agreements,
oral or otherwise, that have not been embodied herein, and no other agreement,
statement or promise not contained in this Agreement, shall be valid or binding.
Any modification of this Agreement will be effective only if it is in writing
signed by the party to be charged.

 

(e) No Conflicting Agreement. By signing this Agreement, Executive warrants that
he is not a party to any restrictive covenant, agreement or contract which
limits the performance of his duties and responsibilities under this Agreement
or under which such performance would constitute a breach.

 

(f) Headings. The Section, paragraph, and subparagraph headings are for
convenience or reference only and shall not define or limit the provisions
hereof.

 

(g) Attorney’s Fees. If Executive brings any action to enforce his purported
rights under this Agreement after a Change

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in Control, Company shall reimburse Executive for his reasonable costs,
including attorney’s fees, incurred. Company shall reimburse Executive as the
costs are incurred and without regard to the outcome of the action.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

 

Saks Incorporated By:  

/s/    BRIAN J. MARTIN        

   

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    Brian J. Martin     Executive Vice President

/s/    CHARLES HANSEN        

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Charles Hansen Executive