What is the main reason for amending the employment agreements of Mr. Herrman and Mr. Naylor?

The primary reason for the amendments is to ensure that TJX can continue to deduct compensation paid under its Management Incentive Plan (MIP) and Long Range Performance Incentive Plan (LRPIP) as performance-based compensation, exempt from certain deduction limitations under Section 162(m) of the Internal Revenue Code. This involves adjusting how incentive payouts are calculated upon termination.

How do these amendments affect potential executive payouts?

The amendments mean that incentive payouts tied to MIP and LRPIP upon certain types of termination (without cause or voluntary termination without good reason) will now be based on actual company performance rather than target performance. Additionally, the company is no longer obligated to pay tax gross-up amounts for change of control events, and specific severance benefits post-change of control are removed.

What are the benefits for the executives in exchange for these changes?

In exchange for agreeing to these amendments, both Mr. Herrman and Mr. Naylor will receive an extended severance benefit period of 24 months (up from 18 months) following an involuntary termination without cause or a voluntary termination for good reason. Mr. Naylor's non-competition period was also extended to 24 months.

Are there any other significant changes to the employment agreements?

The amendments also include revisions to the definition of 'change of control' within the agreements. Other than these changes and the specific modifications related to compensation and termination, the remaining terms of the employment agreements are substantially unchanged.

TJX 8-K: Leadership Changes

Summary

This 8-K filing from The TJX Companies, Inc. (TJX) on April 24, 2009, details amendments to the employment agreements of two key senior executives: Ernie Herrman, Senior Executive Vice President, Group President, and Jeffrey Naylor, Senior Executive Vice President, Chief Financial and Administrative Officer. These amendments, effective February 1, 2009, were primarily aimed at ensuring TJX's ability to deduct compensation paid under its incentive plans, specifically aligning with performance-based compensation exemptions under Section 162(m) of the Internal Revenue Code. The changes modify how incentive payouts are calculated upon certain termination scenarios and adjust severance provisions. Notably, the amendments remove the company's obligation for tax gross-up payments related to change of control events and eliminate severance benefits for specific voluntary terminations post-change of control. In exchange for these concessions, both executives will receive an extended severance period following involuntary termination or termination for good reason, and Mr. Naylor's non-competition period has been extended. Investors should note these adjustments as they impact executive compensation structure and potential future payouts, while also demonstrating a strategic move by TJX to maintain tax deductibility of executive compensation.

Key Highlights

1Amendments to employment agreements for Ernie Herrman and Jeffrey Naylor, effective February 1, 2009.
2Primary goal of amendments is to preserve tax deductibility of executive compensation under Section 162(m) of the Internal Revenue Code.
3Incentive plan payouts upon termination will now be measured by actual, not target, performance to comply with tax regulations.
4Company removed obligation for tax gross-up payments related to change of control for both executives.
5Severance benefits upon certain voluntary terminations following a change of control have been eliminated.
6Severance period for involuntary termination without cause or voluntary termination for good reason extended from 18 to 24 months for both executives.
7Jeffrey Naylor's non-competition provision extended to 24 months, matching Mr. Herrman's existing term.

TJX COMPANIES INC /DE/ 8-K Report, Executive Changes (Apr 24, 2009)

Summary

Key Highlights

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