<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
PROFFITT'S, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
TENNESSEE 5311 82-0331040
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. employer
incorporation or organization) Classification Code Number) identification number)
</TABLE>
3455 HIGHWAY 80 WEST
JACKSON, MISSISSIPPI 39209
(601) 968-4400
(Address, including zip code, and telephone number, including area code, of the
Company's principal executive offices)
G.R. HERBERGER'S, INC.
(AS GUARANTOR)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5311 41-0635374
(State or other jurisdiction (Primary Standard Industrial (I.R.S. employer
of Classification Code Number) identification number)
incorporation or organization)
</TABLE>
600 MALL GERMAIN
ST. CLOUD, MINNESOTA 56301
(320) 251-5351
(Address, including zip code, and telephone number, including area code, of the
Company's principal executive offices)
MCRAE'S, INC.
(AS GUARANTOR)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MISSISSIPPI 5311 64-0202140
(State or other jurisdiction (Primary Standard Industrial (I.R.S. employer
of Classification Code Number) identification number)
incorporation or organization)
</TABLE>
3455 HIGHWAY 80 WEST
JACKSON, MISSISSIPPI 39209
(601) 968-4400
(Address, including zip code, and telephone number, including area code, of the
Company's principal executive offices)
MCRAE'S STORES PARTNERSHIP
(AS GUARANTOR)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MISSISSIPPI 5311 72-1360263
(State or other jurisdiction (Primary Standard Industrial (I.R.S. employer
of Classification Code Number) identification number)
incorporation or organization)
</TABLE>
3455 HIGHWAY 80 WEST
JACKSON, MISSISSIPPI 39209
(601) 968-4400
(Address, including zip code, and telephone number, including area code, of the
Company's principal executive offices)
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(Cover continued on next page)
<PAGE> 2
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MCRAE'S OF ALABAMA, INC.
(AS GUARANTOR)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
ALABAMA 5311 63-0165960
(State or other jurisdiction (Primary Standard Industrial (I.R.S. employer
of Classification Code Number) identification number)
incorporation or organization)
</TABLE>
3455 HIGHWAY 80 WEST
JACKSON, MISSISSIPPI 39209
(601) 968-4400
(Address, including zip code, and telephone number, including area code, of the
Company's principal executive offices)
PARISIAN, INC.
(AS GUARANTOR)
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
ALABAMA 5311 63-0680839
(State or other jurisdiction (Primary Standard Industrial (I.R.S. employer
of Classification Code Number) identification number)
incorporation or organization)
</TABLE>
750 LAKESHORE PARKWAY
BIRMINGHAM, ALABAMA 35211
(205) 940-4400
(Address, including zip code, and telephone number, including area code, of the
Company's principal executive offices)
---------------------
BRIAN J. MARTIN, ESQ.
EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
PROFFITT'S, INC.
750 LAKESHORE PARKWAY
BIRMINGHAM, ALABAMA 35211
(205) 940-4890
FAX: (205) 940-4468
(Name, address, including zip code and telephone number, including area code, of
agent for service)
COPIES TO:
<TABLE>
<C> <C>
RALPH F. MACDONALD, III, ESQ. JAMES A. STRAIN, ESQ.
ALSTON & BIRD LLP SOMMER & BARNARD, PC
ONE ATLANTIC CENTER 4000 BANK ONE TOWER
1201 WEST PEACHTREE STREET 111 MONUMENT CIRCLE
ATLANTA, GEORGIA 30309-3424 INDIANAPOLIS, INDIANA 46204
(404) 881-7000 (317) 630-4000
FAX: (404) 881-7777 FAX: (317) 236-9802
</TABLE>
---------------------
Approximate date of commencement of proposed sale to public: UPON
CONSUMMATION OF THE EXCHANGE OFFER REFERRED TO HEREIN.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this form is filed to register additional Securities for an offering pursuant
to Rule 462(b) under the Securities Act of 1993. Please check the following
box. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(a) under
the Securities Act, please check the following box and list the securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
Please check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE OFFERING PRICE REGISTRATION FEE(1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8 1/8% Senior Notes due 2004,
Series B...................... $125,000,000 100% $125,000,000 $37,878.79
==================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the filing fee pursuant to Rule
457(a) under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 3
SUBJECT TO COMPLETION, DATED JUNE 20, 1997
PROSPECTUS
$125,000,000
PROFFITT'S, INC.
OFFER TO EXCHANGE ITS
8 1/8% SENIOR NOTES DUE 2004, SERIES B
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OUTSTANDING
8 1/8% SENIOR NOTES DUE 2004, SERIES A
------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN TIME, ON ,
, 1997, UNLESS EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION (THE
"EXPIRATION DATE").
Proffitt's, Inc., a Tennessee corporation (the "Company"), hereby offers
(the "Exchange Offer"), upon the terms and subject to the conditions set forth
in this Prospectus (the "Prospectus") and the accompanying Letter of Transmittal
(the "Letter of Transmittal"), to exchange up to $125,000,000 aggregate
principal amount of its 8 1/8% Senior Notes due 2004, Series B (the "Exchange
Notes") for an equal principal amount of its outstanding 8 1/8% Senior Notes due
2004, Series A (the "Series A Notes", and collectively with the Exchange Notes,
the "Notes"). The Exchange Notes are substantially identical (including
principal amount, interest rate, maturity, redemption rights and guarantees) to
the Series A Notes for which they may be exchanged pursuant to this offer,
except that (i) the Exchange Notes have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), and (ii) holders of Exchange Notes
will no longer be entitled to certain rights of registration provided to
eligible holders of the Series A Notes under a Registration Rights Agreement by
and among the Company, the Subsidiary Guarantors (as defined herein), and the
Initial Purchasers (as defined herein), dated as of May 21, 1997 (the
"Registration Rights Agreement"). The Series A Notes have been, and the Exchange
Notes will be, issued under an Indenture dated as of May 21, 1997 (the
"Indenture"), by and among the Company, the Subsidiary Guarantors, and The First
National Bank of Chicago, as trustee (the "Trustee"). The Company will not
receive any proceeds from this Exchange Offer; however, pursuant to the
Registration Rights Agreement, the Company will bear certain offering expenses.
See "Description of the Notes."
The Exchange Notes will bear interest at the same rate and on the same terms
as the Series A Notes. Consequently, interest on the Exchange Notes will be
payable semi-annually in arrears on May 15 and November 15 of each year,
commencing November 15, 1997, including interest accrued but unpaid since the
Series A Notes were originally issued. The Exchange Notes will mature on May 15,
2004 and will not be subject to redemption, at the option of the Company, at any
time. Following the occurrence of a Change of Control Triggering Event (as
defined herein), each holder of Notes will have the right to require the Company
to purchase all or a portion of such holder's Notes at a purchase price equal to
101% of the principal amount thereof, plus accrued and unpaid interest thereon,
if any, to the date of purchase. See "Description of the Notes."
The Notes rank pari passu in right of payment with all existing and future
unsecured and unsubordinated indebtedness of the Company and senior in right of
payment to all existing and future subordinated indebtedness of the Company. The
Notes are fully and unconditionally guaranteed on a senior basis (the
"Guarantees") by substantially all of the Company's existing and future
subsidiaries (other than Accounts Receivable Subsidiaries and any Foreign
Subsidiaries) (the "Subsidiary Guarantors"). The Guarantees are subject to
release under certain circumstances specified in the Indenture, and rank pari
passu in right of payment with all existing and future unsecured and
unsubordinated indebtedness of the Subsidiary Guarantors and senior in right of
payment to all existing and future subordinated indebtedness of the Company and
the Subsidiary Guarantors. The Notes and the Guarantees will be effectively
subordinated to all secured indebtedness of the Company and the Subsidiary
Guarantors to the extent of the value of the assets securing such indebtedness.
As of May 3, 1997, on a pro forma basis after giving effect to the issuance of
the Series A Notes and the application of the net proceeds therefrom, the
Company and the Subsidiary Guarantors would have had approximately $521.2
million of indebtedness outstanding, of which approximately $295.3 million would
have been senior indebtedness and approximately $60.3 million would have been
secured indebtedness. See "Description of the Notes -- Guarantees."
The Series A Notes have not been listed on any securities exchange and are
not traded on the National Association of Securities Dealers Automated Quotation
System, Inc. ("Nasdaq"). The Series A Notes have been designated eligible for
trading through the National Association of Securities Dealers, Inc.'s ("NASD")
PORTAL trading system. The Company does not intend to apply for listing of the
Exchange Notes on any securities exchange or for quotation through Nasdaq.
Although the Initial Purchasers (as defined herein) have informed the Company
that they currently intend to make a market in the Notes, they are not obligated
to do so, and any such market making may be discontinued at any time without
notice. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Notes. The Company's Common Stock is traded on
the Nasdaq National Market under the symbol "PRFT." The Company has filed an
application to list its Common Stock for trading on The New York Stock Exchange.
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER SERIES A NOTES IN THE EXCHANGE
OFFER.
The Company will accept for exchange any and all Series A Notes validly
tendered by eligible holders and not withdrawn prior to 5:00 p.m. New York City
time on , 1997, unless extended by the Company in its sole discretion
(the "Expiration Date"). Tenders of Notes may be withdrawn at any time prior to
the Expiration Date. The Exchange Offer is subject to certain customary
conditions. The Notes may be tendered only in integral multiples of $1,000. See
"The Exchange Offer."
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1997.
<PAGE> 4
EXPLANATORY NOTE
This Registration Statement covers $125,000,000 aggregate principal amount
of the Exchange Notes and the related guarantees thereof to be offered in
exchanged for equal principal amounts of the Series A Notes and the related
Guarantees thereof in the Exchange Offer. This Registration Statement is being
filed to satisfy certain requirements of the Registration Rights Agreement.
Based on interpretations by the staff of the Securities and Exchange
Commission (the "SEC" or the "Commission") set forth in no-action letters issued
to unrelated third parties, the Company believes that Exchange Notes issued
pursuant to the Exchange Offer in exchange for Series A Notes may be offered for
resale, resold and otherwise transferred by any holder thereof (other than any
such holder which is a broker-dealer that holds Notes acquired for its own
account as a result of market-making or other trading activities or any holder
which is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act")) without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
holder's business and such holder is not engaged in, and does not intend to
participate, and has no arrangement or understanding with any person to
participate in, a distribution of such Exchange Notes. In the event that any
holder of Series A Notes is prohibited by law or any policy of the Commission
from participating in the Exchange Offer, or any holder of Exchange Notes may
not resell such Exchange Notes without delivering a prospectus and this
Prospectus is inappropriate or unavailable for such resales, or if a holder is a
broker-dealer and holds Notes acquired directly from the Company or one of its
affiliates, and in each case such holder satisfies certain other requirements,
including timely notice to the Company, the Company has agreed, pursuant to the
Registration Rights Agreement, to file a shelf registration statement (the
"Shelf Registration Statement") in respect of any such Notes pursuant to Rule
415 under the Securities Act.
Any Series A Notes not tendered and accepted in the Exchange Offer will
remain outstanding. To the extent Series A Notes are tendered and accepted in
the Exchange Offer, a holder's ability to sell untendered and unregistered
Series A Notes could be adversely affected. Following consummation of the
Exchange Offer, the holders of Series A Notes will continue to be subject to the
existing restrictions upon transfer thereof and the Company will have fulfilled
one of its obligations under the Registration Rights Agreement. Holders of Notes
who do not tender their Notes generally will not have any further registration
rights under the Registration Rights Agreement or otherwise. See "The Exchange
Offer -- Termination of Certain Rights" and " -- Consequences of Failure To
Exchange."
The Company expects that the Exchange Notes will be issued only in the form
of a Global Note (as defined herein), which will be deposited with, or on behalf
of, The Depository Trust Company ("DTC") and registered in its name or in the
name of DTC's nominee, Cede & Co. ("Cede"). Beneficial interests in the Global
Note representing the Exchange Notes will be shown on, and transfers thereof
will be effected through, records maintained by DTC and its participants. After
the initial issuance of the Global Note, Exchange Notes in certificated form may
be issued in exchange for the Global Note on the terms and conditions set forth
in the Indenture. See "Description of Exchange Notes -- Book-Entry; Delivery and
Form."
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). So long as any Notes are
outstanding, or the Company is subject to the periodic reporting requirements of
the Exchange Act, it is required to furnish the information required to be filed
with the Commission to the Trustee and the holders of the Notes. The Company has
agreed that, even if it is not required under the Exchange Act to furnish such
information to the Commission, it will nonetheless continue to furnish
information that would be required to be furnished by the Company pursuant to
Sections 13 and 15(d) of the Exchange Act, to the Trustee and the holders of the
Notes as if it were subject to such periodic reporting requirements. See
"Available Information."
In addition, the Company has agreed that in the event the Company is no
longer subject to Sections 13 or 15(d) under the Exchange Act, and for so long
as any of the Series A Notes remain outstanding, it will make available to any
prospective purchaser of the Series A Notes or beneficial owner of the Series A
Notes in connection with any sale thereof the information required by Rule
144A(d)(4) under the Securities Act, until
2
<PAGE> 5
such time as either (i) the Company has exchanged the Series A Notes for the
Exchange Notes or (ii) the holders thereof have disposed of such Series A Notes
pursuant to an effective registration statement filed by the Company.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission a
registration statement on Form S-1 (together with all amendments and exhibits
thereto, the "Registration Statement") under the Securities Act with respect to
the securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto, as permitted by the rules and regulations of the Commission.
For further information with respect to the Company and the Exchange Notes,
reference is hereby made to the Registration Statement, including the exhibits
and schedules filed or incorporated as a part thereof. Statements contained
herein concerning the provisions of any document are not necessarily complete
and in each instance reference is made to the copy of the document filed as an
exhibit or schedule to the Registration Statement. Each such statement is
qualified in its entirety by reference to the copy of the applicable document
filed with the Commission. In addition, the Company files periodic reports and
other information with the Commission under the Exchange Act, relating to the
Company's business, financial statements and other matters. The Registration
Statement, including the exhibits and schedules thereto, and the periodic
reports and other information filed in connection therewith, may be inspected at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: 7 World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies may be obtained at the prescribed
rates from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 or on the Internet at
http://www.sec.gov.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed in this Prospectus may constitute
forward-looking statements for purposes of the Securities Act and the Exchange
Act. Such forward-looking statements may involve uncertainties and other factors
that may cause the actual results and performance of the Company to be
materially different from future results or performance expressed or implied by
such statements. Cautionary statements regarding the risks associated with such
forward-looking statements, include, without limitation, those statements
included under "Risk Factors" "Summary -- Business Strategy" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere herein. Among others, factors that could adversely affect actual
results and performance include local and regional economic conditions in the
areas served by the Company, the level of consumer spending for apparel and
other consumer goods, the effects of weather conditions on seasonal sales in the
Company's market areas, competition among department and specialty stores,
changes in merchandise mixes, site selection and related traffic and demographic
patterns, best practices and merchandising, inventory management and turnover
levels, realization of planned synergies and cost savings, and the Company's
success in integrating recent and potential future acquisitions. See "Risk
Factors -- Forward-Looking Statements."
All written or oral forward-looking statements attributable to the Company
are expressly qualified in their entirety by the foregoing cautionary statement.
3
<PAGE> 6
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus. Reference is made to, and this summary is qualified in its
entirety by, the more detailed information contained in this Prospectus. As used
herein, unless the context otherwise requires, "Company" means Proffitt's, Inc.
and its subsidiaries, and the terms "Proffitt's," "McRae's," "Younkers,"
"Parisian" and "Herberger's" refer to the Company's five department store
chains, and the existing and predecessor entities that conduct or conducted
business under such names. Reference in this Prospectus to the Company's fiscal
year means the fiscal year ended on the Saturday nearest January 31 of the
following calendar year (e.g., "fiscal 1995" means the fiscal year ended
February 3, 1996). Unless the context otherwise requires, references in this
Prospectus to "pro forma" financial information reflect the acquisition by the
Company of Parisian as if the acquisition had occurred on February 4, 1996.
Historical financial information presented in this Prospectus includes the
results of Parisian from and after October 11, 1996, the date of its acquisition
by the Company.
THE EXCHANGE OFFER
The Exchange Offer......... The Exchange Offer consists of this Prospectus and
the related Letter of Transmittal, and is being
made solely to eligible holders of Series A Notes.
Upon the terms and subject to the conditions of the
Exchange Offer, the Company is offering eligible
holders of Series A Notes the opportunity to
exchange its Series A Notes that have not been
registered under the Securities Act for the
Exchange Notes that have been registered under the
Securities Act.
Exchange Offer Expiration
Date..................... The Exchange Offer expires at 5:00 P.M., Eastern
Time on , , 1997 unless
extended by the Company in its sole discretion.
Exchange Notes Offered..... The Exchange Notes consist of $125,000,000
aggregate principal amount of 8 1/8% Senior Notes
due 2004, Series B.
Procedures for Tendering
Series A Notes........... Brokers, dealers, commercial banks, trust companies
and other nominees who hold Series A Notes through
DTC (as defined herein) may effect tenders by
book-entry transfer in accordance with DTC's
Automated Tender Offer Program ("ATOP"). Holders of
such Series A Notes registered in the name of a
broker, dealer, commercial bank, trust company or
other nominee are urged to contact such person
promptly if they wish to tender Series A Notes. In
order for Series A Notes to be tendered by a means
other than by book-entry transfer, a Letter of
Transmittal must be completed and signed in
accordance with the instructions contained herein.
The Letter of Transmittal and any other documents
required by the Letter of Transmittal must be
delivered to the Exchange Agent by mail, facsimile,
hand delivery or overnight carrier, and either such
Series A Notes must be delivered to the Exchange
Agent or specified procedures for guaranteed
delivery must be complied with. See "The Exchange
Offer -- Procedures for Tendering."
Letters of Transmittal and certificates
representing Series A Notes should not be sent to
the Company. Such documents should only be sent to
the Exchange Agent. See "The Exchange
Offer -- Exchange Agent."
THE NOTES
Maturity Date of the
Notes...................... May 15, 2004.
4
<PAGE> 7
Interest Payment Dates..... Limited Nature of May 15 and November 15 of each
year, commencing November 15, 1997.
Guarantees................. The Notes are fully and unconditionally guaranteed
on a senior basis by the Subsidiary Guarantors.
Under certain circumstances, future subsidiaries
(other than Accounts Receivables Subsidiaries and
Foreign Subsidiaries) of the Company may be
requested to guarantee the Notes. In addition, the
Guarantees are subject to release under certain
circumstances. See "Description of the
Notes -- Exchange Note Guarantees" and "Description
of the Exchange Notes -- Limitations on Guarantees
by Restricted Subsidiaries."
Ranking.................... The Notes rank pari passu in right of payment with
all existing and future unsecured and
unsubordinated indebtedness of the Company and
senior in right of payment to all existing and
future subordinated indebtedness of the Company.
The Guarantees rank pari passu in right of payment
with all existing and future unsecured and
unsubordinated indebtedness of the Subsidiary
Guarantors and senior in right of payment to all
existing and future subordinated indebtedness of
the Subsidiary Guarantors. The Notes and the
Guarantees will be effectively subordinated to all
secured indebtedness of the Company and the
Subsidiary Guarantors to the extent of the value of
the assets securing such indebtedness. As of May 3,
1997, on a pro forma basis after giving effect to
the issuance of the Notes and the application of
the net proceeds therefrom, the Company and the
Subsidiary Guarantors would have had an aggregate
of approximately $521.2 million of indebtedness
outstanding, of which approximately $295.3 million
would have been senior indebtedness and
approximately $60.3 million would have been secured
indebtedness. See "Description of the Exchange
Notes."
Change of Control.......... Following the occurrence of a Change of Control
Triggering Event (as defined in the Indenture), the
Company will be required to make an offer to
purchase all outstanding Notes at a price equal to
101% of the principal amount thereof plus accrued
and unpaid interest, if any, to the date of
purchase. See "Description of the Notes -- Change
of Control."
Certain Covenants.......... The Indenture under which the Notes are issued
contains certain covenants that, among other
things, limit (i) the incurrence of additional
indebtedness, (ii) certain restricted payments,
(iii) certain asset sales, (iv) transactions with
affiliates, (v) consolidations, mergers and
dispositions of assets on a consolidated basis, and
(vi) the Company's restricted subsidiaries from
guaranteeing certain other indebtedness of the
Company unless such restricted subsidiaries also
guarantee the Notes. The Indenture also prohibits
certain restrictions on distributions from
restricted subsidiaries of the Company. These
covenants are subject to important exceptions and
qualifications.
The Indenture provides that after the Notes achieve
an investment grade rating from both Standard &
Poor's Ratings Group and Moody's Investors Service,
Inc., the Company's obligation to comply with
certain of the restrictive covenants described
herein will be terminated. See "Description of the
Notes -- Certain Covenants."
Use of Proceeds............ The Company will not receive any proceeds from the
issuance of the Exchange Notes pursuant to the
Exchange Offer. The net proceeds to the Company
from the sale of the Series A Notes are being used
to repay
5
<PAGE> 8
certain outstanding mortgage and other indebtedness
of the Company, to reduce certain borrowings under
the Credit Facility and for general corporate
purposes. See "Use of Proceeds."
Shelf Registration
Statement............... If (i) the Exchange Offer is not permitted by
applicable law or (ii) any holder of Transfer
Restricted Notes (as defined herein) notifies the
Company within 20 business days of the commencement
of the Exchange Offer that (A) it is prohibited by
law or Commission policy from participating in the
Exchange Offer, (B) that it may not resell the
Exchange Notes acquired by it in the Exchange Offer
to the public without delivering a prospectus and
this Prospectus is not appropriate or available for
such resales or (C) that it is a broker-dealer and
holds Series A Notes acquired directly from the
Company or an affiliate of the Company, the Company
will be required to provide the Shelf Registration
Statement to cover resales of the Notes by such
holders thereof. If the Company fails to satisfy
these registration obligations, it will be required
to pay Additional Interest (as defined herein) to
the holders of Notes under certain circumstances.
See "The Exchange Offer."
Absence of an Established
Trading Market for the
Notes.................... The Series A Notes are new securities that were
issued on May 21, 1997 (the "Issue Date" or
"Closing Date"). There is currently no established
trading market for the Notes or the Exchange Notes.
Although Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Goldman, Sachs & Co. and Smith Barney
Inc. (the "Initial Purchasers") have informed the
Company that they currently intend to make a market
in the Series A Notes and, upon issuance, the
Exchange Notes, they are not obligated to do so and
any such market making may be discontinued at any
time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any
market for the Notes. To the extent Series A Notes
are exchanged in this Exchange Offer, the liquidity
of the market for the remaining Series A Notes may
be reduced. The Series A Notes have been designated
eligible for trading in the Private Offerings,
Resale and Trading through Automatic Linkages
(PORTAL) market. The Company does not intend to
apply for listing of the Exchange Notes on any
securities exchange or for quotation through
Nasdaq. See "Risk Factors -- Absence of a Public
Market."
THE COMPANY
The Company is a leading regional department store chain operating 175
stores in 24 states, primarily in the Southeast and Midwest. The Company
operates its stores under five chain names: Proffitt's (19 stores), McRae's (29
stores), Younkers (48 stores), Parisian (40 stores) and Herberger's (39 stores).
Each chain operates primarily as a leading branded traditional department store
in its communities, with Parisian serving as a better branded specialty
department store. Most of the stores are located in premier regional malls in
the respective trade areas served. The Company's stores offer a wide selection
of fashion apparel, accessories, cosmetics and decorative home furnishings,
featuring assortments of premier brands, private brands and specialty
merchandise. Each of the Company's chains operates with its own merchandising,
marketing and store operations team in order to tailor regional assortments to
the local customer. At the same time, the Company coordinates merchandising
among the chains and consolidates administrative and support functions to
realize scale economies, to promote a competitive cost structure and to increase
margins.
Under the leadership of R. Brad Martin and an experienced senior management
team, the Company has executed a disciplined acquisition strategy and strategic
approach to new store openings, growing from 11 stores and net sales of $94.8
million in fiscal 1989 to 175 stores and pro forma net sales of $2.3 billion in
fiscal
6
<PAGE> 9
1996. In addition, the Company has increased EBITDA from $8.9 million in fiscal
1989 to $167.2 million in fiscal 1996, on a pro forma basis.
Members of the Company's senior management have substantial investments in
the Company. As of April 25, 1997, Mr. Martin beneficially owned approximately
4.7% of the Company's Common Stock and all directors and executive officers of
the Company as a group beneficially owned approximately 13.2% of the Company's
Common Stock.
The Company was incorporated under the laws of the State of Tennessee in
1919. The principal executive offices of the Company are located at 3455 Highway
80 West, Jackson, Mississippi 39209, and its telephone number is (601) 968-4400.
BUSINESS STRENGTHS
The Company believes that it is well-positioned to build upon its
historical success by capitalizing on its competitive strengths, including the
following:
Strong Regional Focus. The Company places a high priority on being a
market leader in each of the markets in which it operates. In smaller
communities, the Company's stores are frequently the only branded name
department store catering to middle and upper income customers and offering an
array of brands that frequently are not otherwise available to shoppers in such
markets. In most larger metropolitan markets, the Company seeks to maximize its
market share by operating multiple stores in prime locations. While the Company
has grown through the acquisition of regional chains, its philosophy has been to
(i) maintain existing trade names and retain merchandising and store personnel
and (ii) utilize previously developed regional expertise and knowledge of the
local customer base by allowing each chain to tailor merchandise assortments to
the local customer. The Company believes that the increased sales and gross
margins resulting from a coordinated but decentralized merchandising effort
outweigh any incremental operating cost savings associated with a completely
centralized strategy.
Scale Economies. With pro forma sales of approximately $2.3 billion in
fiscal 1996, the Company realizes scale economies in purchasing and
distribution, administrative areas such as accounting, proprietary credit card
administration, management information systems, and other infrastructure-related
areas. Although the Company's chains control regional merchandising, the
Proffitt's Merchandising Group coordinates merchandising, planning and
execution, visual presentation, marketing and advertising activities among the
chains. The Proffitt's Merchandising Group manages strategic relationships with
the Company's top vendors to ensure that each chain is afforded the purchasing
leverage of the Company as a whole. In addition to seeking economies of scale in
purchasing, the Proffitt's Merchandising Group will continue to capitalize on
corporate level marketing synergies, such as the coordination of media buying
and direct mail programs, the establishment of preferred advertising rates, and
the production of store catalogs.
Proven Track Record of Integrating Acquisitions. In recent years, the
Company has grown primarily through the acquisition of strong, regional
department store chains at valuations believed to be attractive by management.
The following table sets forth certain information concerning the Company's
significant acquisitions:
<TABLE>
<CAPTION>
TRANSACTION VALUE(A)
EQUITY AS A % AS A MULTIPLE OF:
DATE OF NUMBER TRANSACTION OF TRANSACTION ----------------------------
COMPANY ACQUIRED ACQUISITION OF STORES VALUE(A) VALUE(A) LTM SALES(B) LTM EBITDA(B)
- ---------------- ----------- --------- ----------- -------------- ------------ -------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
McRae's, Inc................... March 31, 1994 28 $264.8 5% 0.6x 5.3x
Younkers, Inc.................. February 3, 1996 51 321.6 79 0.5 6.5
Parisian, Inc.................. October 11, 1996 38 375.0 28 0.5 8.7
G.R. Herberger's, Inc.......... February 1, 1997 39 176.9 88 0.5 7.4
</TABLE>
- ---------------
(a) Transaction value is the total consideration paid in the form of: (i) cash;
(ii) notes; (iii) equity (valued as of the announcement date for
pooling-of-interest transactions and in accordance with generally
7
<PAGE> 10
accepted accounting principles for purchase accounting transactions); and
(iv) assumed long-term debt, net of cash, as of the end of the last full
fiscal quarter prior to the acquisition date.
(b) LTM Sales and LTM EBITDA of the acquired company represent data for the
twelve months ending on the last day of the last full fiscal quarter prior
to the acquisition date. Additionally, EBITDA for Herberger's is adjusted
for ESOP expense of $4.3 million. See "-- Summary Historical and Pro Forma
Financial and Operating Data" for the definition of EBITDA.
The Company employs a "best practices" approach to integrating acquired
companies. Best practices is a process whereby each acquired chain's operating
procedures and policies are reviewed to determine those practices which the
Company believes will increase synergies while minimizing business
interruptions. The Company believes the implementation of best practices
throughout the Company's chains has resulted in improved comparable store sales
and increased operating margins through better and more consistent inventory
control and pricing, and other operating efficiencies.
Strong Financial Position. The Company has been able to realize
significant growth while maintaining moderate leverage. Since February 1996, the
acquisitions of Younkers, Herberger's and Parisian have resulted in an increase
in net sales of approximately $1.6 billion, while senior debt as a percentage of
total capitalization decreased slightly. In addition to conservative balance
sheet management, the Company's strong cash flow generation has allowed it to
fund all capital expenditures, incremental working capital requirements and
fixed charges with internally generated cash flow. On a pro forma basis, the
Company's ratio of EBITDA to interest expense in fiscal 1996 would have been
3.7x. The Company's strong financial performance has provided it with
significant financial flexibility, including the ability to use its
publicly-traded common stock as consideration for selected acquisitions.
Geographic and Demographic Diversity. The Company operates 175 stores in
24 states. Stores are operated in metropolitan markets such as Atlanta, Georgia
and Indianapolis, Indiana, as well as in smaller markets such as Ames, Iowa and
Kalispell, Montana. The Company believes that its geographic diversity and the
demographic breadth of its target customer groups may to some extent serve to
insulate the Company from sales and earnings volatility typically associated
with poor weather conditions, or changes in local or regional economic
conditions.
Attractive Real Estate. The Company believes that its stores are primarily
located in premier malls in the markets in which the Company operates. As is
consistent with national trends, the Company further believes that construction
of new malls in many of its markets is likely to be limited. The Company
anticipates that the attractiveness of its existing locations, combined with
limited new mall development, may contribute to improved comparable store sales.
BUSINESS STRATEGY
The Company's business objective is to maximize profitability and
shareholder value by (i) expanding its core business through comparable store
sales growth, new store openings and margin expansion, and (ii) monitoring
acquisition opportunities while maintaining a strong capital structure.
Comparable Store Sales Growth. The Company expects that comparable store
sales will benefit from a number of merchandising initiatives including (i)
implementing best practices, (ii) expanding sales of key brands, and (iii)
increasing sales of the Company's private brands. As part of best practices, the
Company benchmarks sales of product categories and brand assortments for each
store and identifies and targets opportunities to strengthen such sales by
altering the merchandise mix. The Company has successfully used this strategy by
applying the long history of strength in the cosmetics business of McRae's and
Proffitt's stores to increase the penetration and profitability of Younkers
stores' cosmetics business. The Company believes that it will be able to further
utilize this strategy to increase sales in the Younkers shoe business, increase
McRae's women's apparel sales and introduce home goods into select Parisian
stores.
The Company believes that comparable store sales will also benefit from
expanded sales of key brands, such as Tommy Hilfiger, Liz Claiborne, Jones New
York, Polo/Ralph Lauren, Calvin Klein, Guess, and Nine West, among others. The
Company's large scale and proven track record with these vendors has enabled the
Company to introduce certain of these brands into acquired stores which, prior
to combining with the
8
<PAGE> 11
Company, did not have access to these vendors. For instance, Tommy Hilfiger,
Nautica and Lancome will now be carried in select Herberger's stores.
Additionally, the Company plans to increase sales of its private brand offerings
within the apparel and housewares categories from 6% of total net sales to 12%
to 15% over the next two to three years. For example, the Company has recently
developed its own line of men's dress shirts and accessories, under the brand
name RBM. The RBM collection is designed to fill a niche for quality men's
furnishings at moderate prices.
New Store Openings. The Company plans to open 15 to 20 new stores across
all chains over the next three years and to make selective real estate
acquisitions in existing or new markets. The Company targets premier mall
locations principally based on favorable demographic profiles and trends, as
well as the compatibility and traffic draws of other tenants. High quality real
estate is a primary criterion for all new stores. In addition, the Company plans
to selectively remodel or expand certain existing stores.
Margin Expansion. The Company has implemented the following strategies to
increase margins: (i) leveraging key vendor relationships; (ii) capitalizing on
purchasing economies of scale; (iii) extending key brands into certain acquired
stores; (iv) shifting the merchandise mix toward higher margin products; (v)
increasing private brand penetration; (vi) consolidating administrative and
support areas and eliminating redundant expenses; and (vii) realizing
efficiencies related to the re-engineering of certain operating activities.
The Company intends to further increase gross margins by increasing sales
of its private brand products, which typically generate higher margins and
enhance customer loyalty. Operating margins are also expected to benefit from
sales productivity enhancements across the Company's chains and from the
integration cost savings programs developed by management in conjunction with
the Younkers, Parisian, and Herberger's acquisitions. These programs reduced
operating expenses by a total of $6 million in fiscal 1996 (consistent with the
Company's announced target) and are expected to produce annualized expense
savings of $20 million in fiscal 1997 and $29 million in fiscal 1998 (compared
to the 1995 cost structure of the chains on an independent basis).
Monitor Acquisition Opportunities. The Company has an established record
of successfully acquiring and integrating regional department store chains. The
Company believes that its philosophy of retaining the local identity and
merchandising organization of acquired companies makes the Company an attractive
acquirer for regional department store companies. The Company's criteria in
evaluating strategic opportunities include (i) strong market presence; (ii)
prime real estate locations; (iii) similar merchandising strategies targeted
toward middle to upper income consumers; (iv) geographic proximity to the
Company's core markets; (v) compatible corporate culture; and (vi) favorable
demographics in the regions served. Although the Company currently has no
agreements, arrangements or understandings with respect to future acquisitions,
the Company expects the department store industry will continue to consolidate
and the Company will regularly evaluate possible acquisition opportunities as
they arise.
Maintain Strong Capital Structure. The Company intends to maintain a
strong balance sheet to support its growth objectives. The fulfillment of this
objective has been facilitated by strong cash flows and the Company's issuance
of its Common Stock as all or part of the consideration used in its recent
acquisitions. The Company believes that, absent any additional acquisitions,
future cash flows from operations (with seasonal needs supplemented by
borrowings under its Credit Facility) will be sufficient to service debt and
lease payments, and to fund capital expenditures and working capital
requirements.
RECENT DEVELOPMENTS
Strengthening and Retaining Management. In recent months, the Company has
acted to strengthen and retain its senior management in light of its recent
growth and strategic objectives. In April 1997, the Board of Directors of the
Company authorized a new five-year employment agreement with R. Brad Martin, its
Chairman and Chief Executive Officer since 1989. Among other recent
appointments, the Company also named Douglas E. Coltharp as Executive Vice
President and Chief Financial Officer, William D. Cappiello as President and
Chief Executive Officer of Parisian, Frank E. Kulp as President and Chief
Executive Officer of Herberger's, Mark Shulman as President and Chief Executive
Officer of Younkers, Toni E. Browning as President and Chief Executive Officer
of the Proffitt's Division, Dawn H. Robertson as President and Chief Executive
Officer of McRae's, and Donald E. Wright as Senior Vice President of Finance and
Accounting.
9
<PAGE> 12
Implementation of Capital Structure Improvements. The Company is in the
process of implementing a number of capital structure improvements to position
it for future growth. The issuance of the Notes is part of a plan to improve the
Company's capital structure by (i) reducing the amount of the Company's secured
indebtedness; (ii) reducing the amount of the Company's indebtedness that bears
interest at a floating rate; and (iii) extending the average life of the
Company's indebtedness. The Company is also seeking to amend its existing credit
facility (the "Credit Facility") to, among other things, increase such facility
from $275 million to $325-$400 million, and extend the maturity to five years
from the closing of the amended credit facility. Furthermore, the Company is
pursuing a restructuring of its existing accounts receivable financing
arrangements in an effort to extend the term of a portion of such arrangements
from one year to three to five years through the sale of investment grade term
asset-backed securities. The Company anticipates that such transactions may be
completed during or shortly after the Exchange Offer. There is no assurance,
however, that these transactions will be completed as presently contemplated.
Sale of Seven Virginia Stores. The Company continuously evaluates store
performance and closes or sells stores that do not meet management's objectives.
As part of its ongoing efforts to efficiently deploy its capital, the Company
recently closed seven Proffitt's stores in Virginia and sold the fixed assets to
an unrelated company. While these stores were profitable, they did not meet
management's targeted return on investment. Proceeds from the sale of these
stores will be reinvested in new stores and existing store renovations.
RISK FACTORS
See "Risk Factors," beginning on page 13, for a discussion of certain
factors that should be considered by holders of both Series A Notes and Exchange
Notes.
10
<PAGE> 13
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
The following table presents summary historical and pro forma financial and
operating data derived from the audited Consolidated Financial Statements of the
Company for the last five fiscal years and the unaudited Condensed Consolidated
Financial Statements for the latest interim period. The historical financial
data should be read in conjunction with the Company's Consolidated Financial
Statements and Condensed Consolidated Financial Statements and the notes thereto
appearing elsewhere herein. The summary historical pro forma financial and
operating data give effect to the purchase of Parisian as if it had occurred on
February 4, 1996, are based on certain assumptions and are derived from, and
should be read in conjunction with the Pro Forma Combined Statement of Income
(Unaudited) appearing elsewhere herein. The summary pro forma financial data do
not purport to present the actual financial position or results of operations of
the Company had the Parisian acquisition and the events assumed therein in fact
occurred on the dates specified, nor are they necessarily indicative of the
results of operations that may be achieved in the future. See "Pro Forma
Combined Statement of Income (Unaudited)" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
THREE MONTHS ENDED PRO FORMA FISCAL YEAR ENDED(A)
------------------------- YEAR ENDED ---------------------------------------
MAY 3, MAY 4, FEBRUARY 1, FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996(A) 1997 1997 1996 1995
----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME
STATEMENT DATA:
Net sales................ $ 526,370 $365,179 $2,320,955 $1,889,779 $1,661,056 $1,513,444
Cost and expenses:
Cost of sales.......... 335,882 237,201 1,511,802 1,230,454 1,087,619 980,028
Selling, general and
administrative
expenses............. 128,629 88,952 551,804 440,502 398,999 352,448
Depreciation and
amortization......... 10,898 9,811 48,471 41,037 43,013 40,305
Property and equipment
rentals.............. 19,048 11,270 81,747 60,684 50,609 47,857
Taxes other than income
taxes................ 12,622 9,638 49,720 40,403 36,938 34,421
Merger, restructuring
and integration
costs(b)............. 1,468 2,763 15,929 15,929 20,822 --
Operating income......... 17,796 7,804 62,576 61,864 753 52,385
Other income (expense):
Finance charge income,
net(c)............... 10,878 7,160 37,883 32,305 31,273 27,934
Interest expense....... (10,692) (4,706) (44,702) (26,756) (29,389) (23,286)
Other income, net...... 136 498 3,409 1,572 4,051 4,826
Income before provision
for income taxes,
extraordinary loss and
cumulative effect of
changes in accounting
methods................ 18,118 10,756 59,166 68,985 6,688 61,859
Net income (loss)........ 10,544 6,308 29,768 37,399 (1,419) 37,448
OTHER FINANCIAL DATA(D):
EBITDAR.................. $ 60,251 $ 37,046 $ 248,921 $ 212,297 $ 172,824 $ 173,307
Rental expense........... 19,048 11,270 81,747 60,684 50,609 47,857
---------- -------- ---------- ---------- ---------- ----------
EBITDA................... 41,203 25,776 167,174 151,613 122,215 125,450
Unusual items(e)......... (1,495) (503) (14,835) (14,835) (43,125) --
---------- -------- ---------- ---------- ---------- ----------
EBITDA after unusual
items.................. $ 39,708 $ 25,273 $ 152,339 $ 136,778 $ 79,090 $ 125,450
---------- -------- ---------- ---------- ---------- ----------
Capital expenditures..... $ 24,090 $ 9,944 $ 66,242 $ 61,03 $ 51,469 $ 53,293
Ratio of EBITDA to
interest expense....... 3.9 5.5 3.7x 5.7x 4.2x 5.4x
Ratio of total debt to
EBITDA(h).............. 3.1x 2.7x 3.1 2.4 2.7 2.7
<CAPTION>
FISCAL YEAR ENDED(A)
-------------------------
JANUARY 29, JANUARY 30,
1994 1993
----------- -----------
<S> <C> <C>
CONSOLIDATED INCOME
STATEMENT DATA:
Net sales................ $1,063,488 $ 858,754
Cost and expenses:
Cost of sales.......... 690,083 523,444
Selling, general and
administrative
expenses............. 255,856 220,889
Depreciation and
amortization......... 26,693 19,586
Property and equipment
rentals.............. 37,049 26,344
Taxes other than income
taxes................ 25,050 18,227
Merger, restructuring
and integration
costs(b)............. -- --
Operating income......... 28,757 50,264
Other income (expense):
Finance charge income,
net(c)............... 19,312 16,151
Interest expense....... (11,286) (11,701)
Other income, net...... 4,063 233
Income before provision
for income taxes,
extraordinary loss and
cumulative effect of
changes in accounting
methods................ 40,846 54,947
Net income (loss)........ 25,540 32,522
OTHER FINANCIAL DATA(D):
EBITDAR.................. $ 115,874 $ 112,578
Rental expense........... 37,049 26,344
---------- ----------
EBITDA................... 78,825 86,234
Unusual items(e)......... -- --
---------- ----------
EBITDA after unusual
items.................. $ 78,825 $ 86,234
---------- ----------
Capital expenditures..... $ 86,192 $ 48,078
Ratio of EBITDA to
interest expense....... 7.0x 4.2x
Ratio of total debt to
EBITDA(h).............. 2.8 3.4
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
THREE MONTHS ENDED PRO FORMA FISCAL YEAR ENDED(A)
------------------------- YEAR ENDED ---------------------------------------
MAY 3, MAY 4, FEBRUARY 1, FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996(A) 1997 1997 1996 1995
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Working capital.......... $ 375,348 $226,361 $ 344,410 $ 344,410 $ 235,194 $ 301,270
Total assets............. 1,456,794 921,606 1,403,796 1,403,796 919,013 967,667
Long-term debt, less
current portion........ 505,108 247,537 502,577 502,577 269,442 325,501
Shareholders' equity..... 555,159 334,394 539,898 539,898 327,371 337,007
SELECTED STORE DATA(F):
Stores at beginning of
period................. 173 144 181 144 146 115
Stores opened or
acquired............... 2 1 3 4 1 31
Stores closed or sold.... (2) (11) (11) (3) --
---------- -------- ---------- ---------- ---------- ----------
Stores at end of
period(g).............. 175 143 173 173 144 146
========== ======== ========== ========== ========== ==========
<CAPTION>
FISCAL YEAR ENDED(A)
-------------------------
JANUARY 29, JANUARY 30,
1994 1993
----------- -----------
<S> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Working capital.......... $ 306,853 $ 203,977
Total assets............. 653,680 536,603
Long-term debt, less
current portion........ 203,838 216,985
Shareholders' equity..... 275,104 122,582
SELECTED STORE DATA(F):
Stores at beginning of
period................. 106 77
Stores opened or
acquired............... 12 29
Stores closed or sold.... (3) --
---------- ----------
Stores at end of
period(g).............. 115 106
========== ==========
</TABLE>
- ---------------
(a) Effective February 1, 1997 and February 3, 1996, Herberger's and Younkers,
respectively, were acquired by the Company. Such acquisitions were accounted
for under the pooling-of-interests method. Accordingly, the Company's
financial statements were restated for all periods to include the results of
operations and financial position of Herberger's and Younkers. The pro forma
financial and operating data do not reflect the cost savings realized by the
Company from consolidation of administrative and operating functions and
other synergies following such acquisitions.
(b) In connection with the acquisitions of Younkers and Herberger's, the Company
incurred certain merger, restructuring and integration costs, including
transaction costs, costs associated with severance and related benefits,
abandonment and elimination of duplicate administrative office space,
property, data processing equipment and software, and other costs.
(c) Finance charge income includes finance charges and late payment fees earned
on the Company's proprietary credit cards, less the portion of such income
allocated to third party purchasers of such credit card receivables. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Finance Charge Income, Net," "Receivables Securitization
Facilities" and Note 4 to the Company's Consolidated Financial Statements.
(d) EBITDA represents earnings before interest, taxes, depreciation,
amortization and unusual items. EBITDAR represents EBITDA plus rental
expense. While EBITDA and EBITDAR should not be construed as substitutes for
operating income or as better measures of liquidity than cash flows from
operating activities, which are determined in accordance with generally
accepted accounting principles, they are included herein to provide
additional information with respect to the ability of the Company to meet
future debt service, capital expenditure and working capital requirements.
In fiscal 1996, the Company incurred additional charges aggregating $16.3
million associated with the closing of seven stores in Virginia ($4.9
million), Herberger's employee stock ownership plan ($3.9 million), excess
markdowns associated with adjustments to Herberger's inventory ($3.8
million), and write-offs and accruals related to various Herberger's balance
sheet items ($3.7 million). Pro forma EBITDA before these additional charges
for the fiscal year ended February 1, 1997 would have been approximately
$183.5 million, and the ratios of EBITDA to interest expense and total debt
to EBITDA would have been 4.1x and 2.8x, respectively.
(e) Unusual items for the 52 weeks ended February 1, 1997 include net gains from
long-lived assets of $1.1 million and merger, restructuring and integration
costs of $15.9 million. Unusual items for the 53 weeks ended February 3,
1996 include expenses of $3.2 million related to Younkers' hostile takeover
defense, losses from long-lived assets of $19.1 million, and merger,
restructuring and integration costs of $20.8 million.
(f) Where operations within a particular shopping mall are divided among two or
more locations but operate under the same chain, the combined operation is
counted as one store.
(g) Excludes two stores opened subsequent to February 1, 1997, and reflects the
closing of seven stores in Virginia. See "-- Recent Developments -- Sale of
Seven Virginia Stores."
(h) EBITDA is annualized for the three months ended May 3, 1997 and May 4, 1996,
respectively, for purposes of calculating the ratio.
12
<PAGE> 15
RISK FACTORS
Eligible holders of Series A Notes should consider carefully, in addition
to the other information contained in this Prospectus, the following risk
factors before tendering Series A Notes in the Exchange Offer.
RANKING; INDEBTEDNESS OF THE COMPANY
All of the Notes and the related Guarantees will be senior unsecured
obligations of the Company and the Subsidiary Guarantors ranking pari passu in
right of payment with all existing and future unsubordinated obligations of the
Company, including indebtedness incurred under the Credit Facility. Such Notes
and Guarantees will be effectively subordinated to all secured indebtedness of
the Company and the Subsidiary Guarantors to the extent of the value of the
assets securing such indebtedness. After any realization upon the collateral or
a dissolution, liquidation, reorganization or similar proceeding involving the
Company or any Subsidiary Guarantor, there can be no assurance that there will
be sufficient available proceeds or other assets for holders of the Notes to
recover all or any portion of their claims under the Notes and the Indenture. As
of May 3, 1997, on a pro forma basis, after giving effect to the issuance of the
Series A Notes and the application of the net proceeds therefrom, the Company
and the Subsidiary Guarantors would have had approximately $521.2 million of
indebtedness outstanding, of which approximately $295.3 million would have been
senior indebtedness and approximately $60.3 million would have been secured
indebtedness. At such date, the Company would have had outstanding approximately
$225.9 million of indebtedness subordinated in right of payment to the Exchange
Notes. The prepayment of the 9 7/8% Senior Subordinated Notes due 2003 of
Parisian (the "Senior Subordinated Notes") is not restricted under the
Indenture. See "Description of the Notes -- Certain Covenants -- Limitation on
Restricted Payments."
Each Subsidiary Guarantor's Guarantee of the Notes may be subject to review
under relevant federal and state fraudulent conveyance and similar law. In the
event the Guarantees of any Subsidiary Guarantors are deemed to be unenforceable
as a fraudulent conveyance or otherwise, all the Notes will be effectively
subordinated in right of payment to all outstanding indebtedness of such
Subsidiary Guarantor or Subsidiary Guarantors.
A portion of the Company's cash flow from operations will be dedicated to
debt service, thereby reducing funds available for operations and capital
expenditures. The indebtedness and the restrictive covenants to which the
Company is subject under the terms of its indebtedness (including the Notes and
the Exchange Notes) may make the Company more vulnerable to economic downturns
and competitive pressures, may hinder its ability to execute its growth
strategy, and may reduce its flexibility to respond to changing business
conditions. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Description of Other Indebtedness."
COMPETITION
The department store business is highly competitive. The Company's stores
compete with national and regional department store chains, specialty apparel
stores and discount store chains, some of which are larger than the Company and
may be able to devote greater financial and other resources to marketing and
other competitive activities. The Company also competes with local stores that
carry similar categories of merchandise. The Company generally competes on the
basis of pricing, quality, merchandise selection, customer service and amenities
and store design. The Company's success also depends in part on its ability to
anticipate and respond to changing merchandise trends and customer preferences
in a timely manner. Accordingly, any failure by the Company to anticipate and
respond to changing merchandise trends and customer preferences could materially
adversely affect sales of the Company's private brands and product lines, which
in turn could materially adversely affect the Company's business, financial
condition or results of operations. There can be no assurance that the Company's
stores will continue to compete successfully with such other stores or that any
such competition will not have a material impact on the Company's financial
condition or results of operations. See "Business -- Competition."
13
<PAGE> 16
GENERAL ECONOMIC CONDITIONS; SEASONALITY
The Company's future performance is subject to prevailing economic
conditions and to all operating risks normally incident to the retail industry.
The Company experiences seasonal fluctuations in sales and net income, with
disproportionate amounts typically realized during the fourth quarter of each
year. Sales and net income are generally weakest during the first quarter. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Seasonality," "Business -- Seasonality" and Note 17 to the
Company's Consolidated Financial Statements.
INTEGRATION OF ACQUIRED COMPANIES
As part of its business strategy, the Company has consummated several
acquisitions and will regularly evaluate future acquisition opportunities
including acquisitions of other regional department store chains and individual
stores or locations. The Company's future operations and earnings will be
affected by its ability to continue to successfully integrate the operations of
any acquired businesses or store locations. While the Company has in the past
been successful at effectively integrating the operations of acquired
businesses, there can be no assurance that the Company will be able to continue
to do so. In addition, the successful integration of operations will be subject
to numerous contingencies, some of which are beyond the Company's control. The
failure to successfully integrate any such operations with those of the Company
could have a material adverse effect on the Company's financial position,
results of operations and cash flows.
RESTRICTIONS ON RESALE
The Series A Notes have not been registered under the Securities Act or any
state securities laws and, unless so registered or qualified, may not be offered
or sold except pursuant to an exemption from, or in transactions not subject to,
the registration requirements of the Securities Act or any applicable state
securities laws. The Exchange Notes have been registered under the Securities
Act and, generally, will be freely tradable. See "Exchange Offer" and "Plan of
Distribution."
ABSENCE OF AN ESTABLISHED TRADING MARKET FOR THE NOTES
The Series A Notes are new securities that were first issued on May 21,
1997. There is currently no established trading market for the Notes. Although
the Initial Purchasers have informed the Company that they currently intend to
make a market in the Series A Notes and, upon issuance, the Exchange Notes, they
are not obligated to do so and any such market making may be discontinued at any
time without notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Notes. To the extent Series A
Notes are exchanged in this Exchange Offer, the liquidity of the market for the
remaining Series A Notes may be reduced. The Series A Notes have been designated
eligible for trading in the Private Offerings, Resale and Trading through
Automatic Linkages (PORTAL) market. The Company does not intend to apply for
listing of the Exchange Notes on any securities exchange or for quotation
through Nasdaq. There is no assurance that an active public or other market will
develop for the Exchange Notes, and it is expected that the market, if any, that
develops for the Exchange Notes will be similar to the limited market that
currently exists for the Series A Notes.
LIMITED REGISTRATION RIGHTS
EXCEPT AS OTHERWISE PROVIDED HEREIN, FOLLOWING THE CONSUMMATION OF THE
EXCHANGE OFFER, ANY HOLDERS OF SERIES A NOTES NOT TENDERED THEREIN WHO ARE NOT
ENTITLED TO RESELL THE SAME PURSUANT TO A RESALE PROSPECTUS, IF ANY, REQUIRED TO
BE FILED AS A POST-EFFECTIVE AMENDMENT TO THIS REGISTRATION STATEMENT OR
PURSUANT TO A SHELF REGISTRATION STATEMENT, WILL HAVE NO FURTHER EXCHANGE OR
REGISTRATION RIGHTS, AND SUCH NOTES WILL CONTINUE TO BE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER.
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FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements concerning the
Company's existing and contemplated operations, economic performance and
financial condition. These statements are based upon a number of assumptions and
estimates which are inherently subject to uncertainties and contingencies, many
of which are beyond the control of the Company, including the level of consumer
spending for apparel and other merchandise carried by the Company, competition
among department and specialty stores, management's ability to predict consumer
tastes, merchandise brands and mix, the effectiveness of planned advertising,
marketing and promotional campaigns, appropriate inventory management,
realization of planned synergies, private brand sales and effective cost
containment. See "Cautionary Notice Regarding Forward-Looking Statements."
THE EXCHANGE OFFER
PERSONS NOT ELIGIBLE TO PARTICIPATE IN THE EXCHANGE OFFER
ANY HOLDER OF SERIES A NOTES WHO IS PROHIBITED BY APPLICABLE LAW OR SEC
POLICY FROM PARTICIPATING IN THE EXCHANGE OFFER, INCLUDING ANY HOLDER WHO IS AN
AFFILIATE OF THE COMPANY OR A BROKER-DEALER WHO HOLDS SERIES A NOTES ACQUIRED
DIRECTLY FROM THE COMPANY OR ONE OF ITS AFFILIATES, AND ANY PERSON WHO INTENDS
TO, OR HAS ANY ARRANGEMENT OR UNDERSTANDING TO PARTICIPATE IN, A DISTRIBUTION OF
THE EXCHANGE NOTES, SHOULD CONTACT THE COMPANY WITHIN 20 BUSINESS DAYS OF THE
COMMENCEMENT OF THE EXCHANGE OFFER IN ORDER TO PRESERVE ITS REGISTRATION RIGHTS
THAT ARE DISCUSSED HEREIN.
REGISTRATION RIGHTS AND EFFECT OF EXCHANGE OFFER
The Series A Notes were sold by the Company on the Issue Date to the
Initial Purchasers pursuant to a Purchase Agreement dated as of May 15, 1997, by
and among the Company, the Subsidiary Guarantors and the Initial Purchasers (the
"Purchase Agreement"). Subsequently, the Initial Purchasers sold the Series A
Notes to various "qualified institutional buyers" ("QIBs") and to a limited
number of institutional "accredited investors" (as defined in Rule
501(a)(1),(2), (3) or (7) under the Securities Act ("Accredited Investors")) in
reliance upon Rule 144A and other available exemptions under the Securities Act.
As a condition to the Initial Purchasers' obligations under the Purchase
Agreement, the Company and the Subsidiary Guarantors entered into the
Registration Rights Agreement with the Initial Purchasers, pursuant to which the
Company and the Subsidiary Guarantors agreed to file with the Commission a
registration statement (the "Registration Statement") on an appropriate form
under the Securities Act with respect to an offer to the holders of Series A
Notes who are able to make certain representations ("Eligible Holders"), the
opportunity to exchange their Series A Notes for Exchange Notes.
The Registration Statement covers the offer to the Exchange Notes pursuant
to the Exchange Offer made hereby and resales by broker-dealers that acquired
Notes for their own accounts as a result of market-making and other trading
activities. Such resales of Transfer Restricted Securities made in reliance upon
the registration thereof under the Securities Act may be made only pursuant to
the "Plan of Distribution" set forth in this Prospectus or the other prospectus,
if any, filed as an amendment to the Registration Statement. To be eligible to
effect resales of Transfer Restricted Securities pursuant to a Registration of
the Notes for resale by holders ineligible to participate in the Exchange Offer,
holder of Transfer Restricted Securities must (i) notify the Company within 20
business days after the commencement of the Exchange Offer that it has
determined that it is not permitted by law or any policy of the Commission to
participate in the Exchange Offer made hereby or that such holder may not resell
the Exchange Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and that the prospectus included in this Registration
Statement is inappropriate or unavailable for such resales by such holder or
that such holder is a broker-dealer and holds Notes acquired directly from the
Company or one of its affiliates and (ii) provide to the Company, within 15 days
following the Company's request therefor, such information as the Company may
reasonably request for use in connection with the Registration Statement. In the
event that any holders of Transfer Restricted Securities comply with the
foregoing requirements, and supply any additional information
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<PAGE> 18
reasonably requested by the Company within 20 business days following such
request, the Company will file, as promptly as is practicable, an amendment to
the Registration Statement containing an appropriate resale prospectus and will
use its reasonable efforts to cause such amendment to become effective under the
Securities Act and to remain continuously effective thereunder for a period of
three years following the Closing Date.
Each holder of Series A Notes that wishes to exchange such Series A Notes
for Exchange Notes in the Exchange Offer is required to establish that it is an
Eligible Holder that may participate in such Exchange Offer by making certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business and that
it did not acquire such Series A Notes directly from the Company, (ii) it has no
arrangement or understanding with any person to participate in and has no
intention of participating in, a distribution (within the meaning of the
Securities Act) of the Exchange Notes and (iii) it is not an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company.
If the holder is a broker-dealer that will receive Exchange Notes for its
own account in exchange for Series A Notes that were acquired as a result of
market-making activities or other trading activities, it also will be required
to acknowledge that it will deliver a prospectus in connection with any resale
of such Exchange Notes, but that by delivering such a prospectus it is not
thereby deemed to admit that it is an "underwriter" within in the meaning of the
Securities Act.
Holders of Notes acquired directly from the Company, affiliates of the
Company and persons participating in, or having any arrangement or understanding
with any person to participate in, a distribution of the Exchange Notes will be
ineligible, under Commission policy, to participate in the Exchange Offer, and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale transaction of the Notes.
If (i) the Company is not permitted to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy, (ii) the Exchange Offer is not for any other reason consummated within
150 days after the Issue Date, (iii) any holder of Series A Notes notifies the
Company within 20 business days after commencement of the Exchange Offer that
(a) due to a change in law or policy it is not entitled to participate in the
Exchange Offer, (b) due to a change in law or policy it may not resell the
Exchange Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and the prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
holder or (c) it is a broker-dealer and owns Series A Notes acquired directly
from the Company or an affiliate of the Company or (iv) the holders of a
majority of the principal amount of the Series A Notes may not resell the
Exchange Notes acquired by them in the Exchange Offer to the public without
restriction under the Securities Act (other than delivery of the prospectus
contained in the Exchange Offer Registration Statement), the Company will file
with the Commission a Shelf Registration Statement to cover resales of the
Transfer Restricted Notes (as defined herein) by the holders thereof. The
Company has agreed to use its best efforts to cause the applicable registration
statement to be declared effective as promptly as possible by the Commission.
For purposes of the foregoing and as used elsewhere herein, "Transfer
Restricted Notes" means each Series A Note until (i) the date on which such
Series A Note has been exchanged by a person other than a broker-dealer referred
to in clause (ii) below for an Exchange Note in the Exchange Offer, (ii)
following the exchange by a broker-dealer in the Exchange Offer of a Series A
Note for an Exchange Note, the date on which such Exchange Note is sold to a
purchaser who receives from such broker-dealer on or prior to the date of such
sale, a copy of the prospectus contained in the Registration Statement, as
amended or supplemented, (iii) the date on which such Series A Note has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement, (iv) the date on which such Series A Note
is distributed to the public pursuant to Rule 144 under the Securities Act (or
any similar provision then in force, but not Rule 144A under the Securities
Act), (v) the date on which such Series A Note shall have been otherwise
transferred by the holder thereof and a new Note not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of such Note shall not require registration under the
Securities Act or (vi) such Series A Note ceases to be outstanding.
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<PAGE> 19
Under existing Commission interpretations, the Exchange Notes will, in
general, be freely transferable by holders after the Exchange Offer without
further registration under the Securities Act; provided that in the case of
eligible broker-dealers participating in the Exchange Offer, a prospectus
meeting the requirements of the Securities Act must be delivered upon resale by
such broker-dealers in connection with resales of the Exchange Notes. The
Company has agreed, for period of 90 days after consummation of the Exchange
Offer (subject to extension in certain cases), to make available a prospectus
meeting the requirements of the Securities Act to any such broker-dealer for use
in connection with any resale of any Exchange Notes acquired in the Exchange
Offer. A broker-dealer which delivers such a prospectus to purchasers in
connection with such resales may be deemed a statutory underwriter that may, as
such, may be subject to certain of the civil liability provisions under the
Securities Act and will be bound by the provisions of the Registration Rights
Agreement (including certain indemnification rights and obligations).
The Company has agreed to pay all expenses incident to the Exchange Offer
and to indemnify the Initial Purchasers against certain liabilities, including
liabilities under the Securities Act.
The Registration Rights Agreement provides that unless the Exchange Offer
is not permitted by applicable law or Commission policy, the Company will: (i)
file the Registration Statement with the Commission on or prior to 45 days after
the Issue Date, (ii) use its best efforts to have the Registration Statement
declared effective by the Commission on or prior to 120 days after the Issue
Date and (iii) commence the Exchange Offer following the effectiveness of the
Registration Statement and use its best efforts to issue, on or prior to 30
business days after the date on which the Registration Statement was declared
effective by the Commission, Exchange Notes in Exchange for all Series A Notes
tendered prior thereto in the Exchange Offer.
In addition, the Registration Rights Agreement provides that, if obligated
to file the Shelf Registration Statement, the Company will use its best efforts
to file prior to the later of (a) 150 days after the Issue Date or (b) 30 days
after such filing obligation arises and use its best efforts to cause the Shelf
Registration Statement to be declared effective by the Commission on or prior to
90 days after such obligation arises; provided, however that if the Company has
not consummated the Exchange Offer within 150 days of the Issue Date, then the
Company will file the Shelf Registration Statement with the Commission on or
prior to the 165th day after the Issue Date. The Company shall use its best
efforts to keep such Shelf Registration Statement, if required, continuously
effective, supplemented and amended until the earlier of two years from the
Issue Date or such shorter period ending when all Notes covered by the Shelf
Registration Statement have been sold in the manner set forth and as
contemplated in the Shelf Registration Statement, such Notes are no longer
outstanding or when the Notes become eligible for resale pursuant to Rule 144
under the Securities Act without volume restrictions.
A holder of Notes that sells its Notes pursuant to the Shelf Registration
Statement generally will be required to be named as a selling securityholder in
the related prospectus and to deliver a prospectus to purchasers, will be
subject to certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement that are applicable to such a holder (including
certain indemnification and contribution obligations). In addition, each holder
of the Notes will be required to timely deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on the
Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Notes included in the Shelf
Registration Statement and to benefit from the provisions regarding additional
interest set forth in the following paragraph.
If the Company issues a notice that the Shelf Registration Statement is
unusable due to the pendency of an announcement of a material corporate
transaction, or such a notice is required under applicable securities laws to be
issued by the Company, and the aggregate number of days in any consecutive
twelve-month period for which all such notices are issued or required to be
issued exceeds 30 days in the aggregate, then the interest rate borne by the
Notes will be increased by 0.25% per annum following the date that such Shelf
Registration Statement ceases to be usable for a period of time in excess of the
period permitted above, which rate shall be increased by an additional 0.25% per
annum at the beginning of each subsequent 90-day period; provided that the
aggregate increase in such annual interest rate may in no event exceed 1.00% per
annum. Upon the
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<PAGE> 20
Company declaring that the Shelf Registration Statement is usable after the
period of time described in the preceding sentence, the interest rate borne by
the Notes will be reduced to the original interest rate if the Company is
otherwise in compliance with this paragraph. Such additional interest, if any,
shall accrue and be paid only on the actual number of days for which the Shelf
Registration Statement is unusable.
The Company has filed the Registration Statement required by the
Registration Rights Agreement on or before the date specified for such filing.
However, if (i) such registration statement (or any other registration statement
required by the Registration Rights Agreement) is not declared effective by the
Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), subject to certain limited exceptions, (ii) the
Company fails to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Registration Statement, or (iii)
the Shelf Registration Statement or the Registration Statement is declared
effective but thereafter, subject to certain limited exceptions, ceases to be
effective or usable in connection with resales of Transfer Restricted Notes or
with the Exchange Offer, as the case may be, during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (i)
through (iii) above, a "Registration Default"), then the interest rate on the
Transfer Restricted Notes will increase ("Additional Interest") with respect to
the first 90-day period (or portion thereof) while a Registration Default is
continuing immediately following the occurrence of such Registration Default in
an amount equal to 0.25% per annum of the principal amount of the Notes. The
rate of Additional Interest will increase by an additional 0.25% per annum of
the principal amount of the Notes for each subsequent 90-day period (or portion
thereof) while a Registration Default is continuing until all Registration
Defaults have been cured, up to a maximum amount of 1.00% of the principal
amount of the Notes. Additional Interest, if any, shall be computed based on the
actual number of days elapsed during which any such Registration Default exists.
Following the cure of a particular Registration Default, the accrual of
Additional Interest with respect to such Registration Default will cease.
EXCEPT AS OTHERWISE PROVIDED HEREIN WITH RESPECT TO THE SHELF REGISTRATION
STATEMENT, FOLLOWING THE CONSUMMATION OF THE EXCHANGE OFFER, ANY HOLDER OF
SERIES A NOTES THAT HAS NOT TENDERED AND EFFECTIVELY DELIVERED TO THE EXCHANGE
AGENT IN ACCORDANCE WITH THE EXCHANGE OFFER, AND ANY HOLDER OF EXCHANGE NOTES
WHO IS NOT ENTITLED TO RESELL SUCH EXCHANGE NOTES PURSUANT TO A RESALE
PROSPECTUS, IF ANY, REQUIRED TO BE FILED AS AN AMENDMENT TO THE REGISTRATION
STATEMENT, WILL HAVE NO FURTHER EXCHANGE OR REGISTRATION RIGHTS AND SUCH SERIES
A NOTES WILL CONTINUE TO BE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER. See
"-- Termination of Certain Rights," "-- Consequences of Failure to Exchange,"
and "-- Resale of Notes." Accordingly, the ability of any such holder of Notes
to resell its Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Series A
Notes validly tendered and not withdrawn prior to 5:00 P.M. Eastern Time, on the
Expiration Date. The Company will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of outstanding Series A Notes
accepted in the Exchange Offer. Holders may tender some or all of their Series A
Notes pursuant to the Exchange Offer. However, Series A Notes may be tendered
only in integral multiples of $1,000.
The form and terms of the Exchange Notes are substantially identical to the
form and terms of the Series A Notes except that (i) the Exchange Notes have
been registered under the Securities Act and hence will not bear the transfer
restrictions set forth on the Series A Notes and (ii) the holders of the
Exchange Notes generally will not be entitled to certain rights under the
Registration Rights Agreement, which rights generally will terminate upon
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Series A Notes and will be entitled to the benefits of the
Indenture, including the Guarantees.
Holders of the Notes do not have any appraisal or dissenters' rights under
Indenture or otherwise in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with
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<PAGE> 21
the Indenture, the Registration Rights Agreement, and the applicable
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder, including Rule 14e-1 thereunder.
The Company shall be deemed to have accepted validly tendered Series A
Notes when, as and if the Company has given telephonic, facsimile or written
notice thereof to the Exchange Agent (as defined herein). The Exchange Agent
will act as agent for the tendering holders for the purpose of receiving the
Exchange Notes from the Company.
If any tendered Series A Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Series A Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Series A Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Series
A Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection with
the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 P.M., Eastern Time, on
, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
To extend the Exchange Offer, the Company will notify the Exchange Agent of
any extension by oral or written notice, followed by a public announcement
thereof no later than 9:00 A.M., Eastern Time, on the next business day after
the previously scheduled Expiration Date.
The Company reserves the right, in its reasonable judgment, (i) to delay
accepting any Series A Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "-- Conditions"
shall not have been satisfied, by giving telephonic, facsimile or written notice
of such delay, extension or termination to the Exchange Agent or (ii) to amend
the terms of the Exchange Offer in any manner. Any such delay in acceptance,
extension or termination, and any amendment will be followed as promptly as
practicable by a public announcement thereof. If the Exchange Offer is amended
in a manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders.
If the Company does not consummate the Exchange Offer, or, in lieu thereof,
the Company does not file and cause to become effective a Shelf Registration
Statement for the Series A Notes within the time periods set forth herein,
Additional Interest will accrue and be payable on the Notes. See
" -- Registration Rights and Effect of Exchange Offer."
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from May 15, 1997, the date of
issuance of the Series A Notes that are exchanged for the Exchange Notes (or, if
later the most recent Interest Payment Date to which interest on such Series A
Notes has been paid or duly provided for). Accordingly, holders of Series A
Notes that are accepted for exchange will not receive interest that is accrued
but unpaid on those Notes at the time of tender, but such interest will be
payable on the first Interest Payment Date following the Expiration Date.
Interest on the Exchange Notes will be payable semiannually on each May 15 and
November 15, commencing on November 15, 1997.
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<PAGE> 22
PROCEDURES FOR TENDERING
Only Eligible Holders of Series A Notes may tender such Series A Notes in
the Exchange Offer. To tender in the Exchange Offer, a holder of Series A Notes
must complete, sign and date the Letter of Transmittal, or a facsimile thereof,
have the signatures thereon guaranteed if required by the Letter of Transmittal
and mail or otherwise deliver the Letter of Transmittal or such facsimile,
together with the Series A Notes and any other required documents, to the
Exchange Agent so as to be received by the Exchange Agent at the address set
forth below prior to 5:00 P.M., Eastern Time, on the Expiration Date. Delivery
of the Series A Notes may be made by book-entry transfer in accordance with the
procedures described below. Confirmation of such book-entry transfer must be
received by the Exchange Agent prior to the Expiration Date. In addition, either
(i) certificates for such Series A Notes must be received by the Exchange Agent
along with the Letter of Transmittal, or (ii) a timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Series A Notes, if
such procedure is available, into the Exchange Agent's account at DTC (the
"Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the Letter of
Transmittal or, in the case of a book-entry transfer, an Agent's Message in lieu
of a letter of transmittal, and all other required documents must be received by
the Exchange Agent at the address set forth below under "-- Exchange Agent"
prior to the Expiration Date. The term "Agent's Message" means a message
transmitted by DTC to, and received by, the Exchange Agent and forming a part of
a Book-Entry Confirmation, which states that DTC has received express
acknowledgment from the tendering DTC participant indicating that such
participant has received, and agrees to be bound by, the Letter of Transmittal
and that the Company may enforce such Letter of Transmittal against such
participant.
The tender by a holder and the acceptance thereof by the Company will
constitute an agreement between such holder of Series A Notes and the Company
upon the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF THE SERIES A NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE SOLE ELECTION
AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT
HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR SERIES A NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Series A Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee, including
Series A Notes held in book-entry form and who wishes to tender should contact
the registered holder of Notes promptly, or in the case of book-entry Series A
Notes, DTC participant who holds such Series A Notes at DTC on behalf of the
beneficial owner, and instruct such registered holder to tender on such
beneficial owner's behalf. See "Exchange Offer."
Signatures on the Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Series A Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
the Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Series A Notes listed therein, such Series A Notes must
be endorsed or accompanied by a properly completed bond power,
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<PAGE> 23
signed by such registered holder as such registered holder's name appears on
such Series A Notes with the signature thereon guaranteed by an Eligible
Institution.
If the Letter of Transmittal or any Series A Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Series A Notes and withdrawal of tendered
Series A Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute right
to reject any and all Series A Notes not properly tendered or any Series A Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right to waive, to the
extent permitted by applicable law, any defects, irregularities or conditions of
tender as to particular Series A Notes. The Company's interpretation of the
terms and conditions of the Exchange Offer (including the instructions in the
Letter of Transmittal) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Series A Notes must
be cured within such time as the Company shall determine. Although the Company
intends to notify holders of Series A Notes of defects or irregularities with
respect to tenders of Series A Notes, none of the Company, the Exchange Agent
nor any other person shall incur any liability for failure to give such
notification. Tenders of Series A Notes will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any Series A
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders as soon as practicable
following the Expiration Date.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Series A Notes at DTC for
the purpose of facilitating the Exchange Offer, and subject to the establishment
thereof, any financial institution that is a DTC Participant may make book-entry
delivery of the Series A Notes by causing DTC to transfer such Series A Notes
into the relevant Exchange Agent's account with respect to the Series A Notes in
accordance with DTC's ATOP procedures for such transfer. Although delivery of
the Series A Notes may be effected through book-entry transfer into the Exchange
Agent's account at DTC, an Agent's Message or an appropriate Letter of
Transmittal properly completed and duly executed with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures. Delivery of documents to DTC does not constitute delivery to the
Exchange Agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Series A Notes and (i) whose Series A
Notes are not immediately available, (ii) who cannot deliver their Series A
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent or (iii) who cannot complete the procedures for book-entry transfer, in
each case prior to the Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of Series A Notes, the
certificate number(s) of such holder's Series A Notes and the principal
amount of Series A Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three New York Stock Exchange trading
days after the Expiration Date, the Letter of Transmittal (or facsimile
thereof), together with the
21
<PAGE> 24
certificates(s) representing the tendered Series A Notes (or a confirmation
of book-entry transfer of such Series A Notes into the Exchange Agent's
account at DTC) and any other documents required by the Letter of
Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Series A Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Series A Notes into the Exchange Agent's account at DTC)
and all other documents required by the Letter of Transmittal, are received
by the relevant Exchange Agent within three New York Stock Exchange trading
days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Series A Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWALS OF TENDERS
Except as otherwise provided herein, tenders of Series A Notes may be
withdrawn at any time prior to 5:00 P.M., Eastern Time, on the Expiration Date.
To withdraw a tender of Series A Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the relevant
Exchange Agent at its address set forth herein prior to 5:00 P.M., Eastern Time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the name
of the person having deposited the Series A Notes to be withdrawn (the
"Depositor"), (ii) identify the Series A Notes to be withdrawn (including the
certificate number(s) and principal amount of such Series A Notes, or, in the
case of Series A Notes transferred by book-entry transfer, the name and number
of the account at DTC to be credited and the DTC participant through which such
Series A Notes are held), (iii) be signed by the holder of such Series A Notes
in the same manner as the original signature on the Letter of Transmittal by
which such Series A Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer sufficient to have the
transfer agent and registrar with respect to the Series A Notes register the
transfer of such Series A Notes into the name of the person withdrawing the
tender; and (iv) specify the name in which any such Series A Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Company, whose determination shall be final and binding on
all parties. Any Series A Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer and no Exchange Notes will
be issued with respect thereto unless the Series A Notes so withdrawn are
validly and timely re-tendered. Any Series A Notes which have been tendered but
which are not accepted for exchange will be returned to the holder thereof
without cost to such holder, as soon as practicable after withdrawal, rejection
of tender or termination of the Exchange Offer. Properly withdrawn Series A
Notes may be re-tendered by following one of the procedures described above
under "-- Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer including, without
limitation, the terms and conditions contained herein and in the Letter of
Transmittal, the Company shall not be required to accept for exchange, or to
exchange Exchange Notes for, any Series A Notes, and may terminate or amend the
Exchange Offer as provided herein before the acceptance of such Series A Notes,
if:
(a) any law, statute, rule, regulation or interpretation by the staff
of the SEC is proposed, adopted or enacted, which, in the reasonable
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(b) any governmental approval has not been obtained, which approval
the Company shall, in its reasonable judgment, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
22
<PAGE> 25
If the Company determines in its reasonable judgment that any of the
conditions are not satisfied, the Company may, in its sole discretion (i) refuse
to accept any Series A Notes and return all tendered Notes to the tendering
holders, (ii) extend the Exchange Offer and retain all Series A Notes tendered
prior to the expiration of the Exchange Offer, subject, however, to the rights
of holders to withdraw such Series A Notes (see "-- Withdrawals of Tenders") or
(iii) waive such unsatisfied conditions with respect to the Exchange Offer and
accept all properly tendered Series A Notes which have not been withdrawn. If
such waiver constitutes a material change to the Exchange Offer, the Company
will promptly disclose such waiver by means of a prospectus supplement that will
be distributed to the registered holders of Series A Notes.
TERMINATION OF CERTAIN RIGHTS
Holders of the Notes to whom this Exchange Offer is made have special
rights under the Registration Rights Agreement, certain of which will terminate
upon the consummation of the Exchange Offer. Such special rights which will
terminate include (a) the right to require the Company to comply with the
following: (x) to file with the Commission a registration statement under the
Securities Act with respect to the Exchange Notes no later than 45 days
following the Issue Date, (y) to use its best efforts to cause such registration
statement to become effective under the Securities Act within 120 days after the
Issue Date, and (z) to commence the Exchange Offer following the effectiveness
of such registration statement and use its best efforts to issue, on or prior to
30 business days after the date on which such registration statement was
declared effective by the Commission, Exchange Notes in exchange for all Notes
tendered prior thereto in the Exchange Offer; (b) the right to receive
Additional Interest in the event of a breach by the Company of any of its
obligations set forth in the foregoing clauses (x), (y) or (z), in an amount,
during the first 90-day period (or portion thereof) immediately following the
occurrence, and during the continuance, of such a breach, equal to 0.25% per
annum of the principal amount of the Notes, such amount to increase by an
additional 0.25% of the principal amount of the Notes for each subsequent 90-day
period (or portion thereof) until the breach and all other breaches thereunder
in respect of such obligations have been cured, up to a maximum amount of 1.00%
of the principal amount of the Notes. See "-- Registration Rights and Effect of
Exchange Offer."
The Registration Statement also requires the registering for resale,
pursuant to Rule 415 under the Securities Act, the Transfer Restricted Notes
under certain circumstances. Such resale of Transfer Restricted Notes made in
reliance upon the registration thereof under the Securities Act may be made only
pursuant to the "Plan of Distribution" set forth in this Prospectus or a
separate resale prospectus, if any, filed as an amendment to the Registration
Statement. To be eligible to effect resales of Transfer Restricted Notes
pursuant to the Shelf Registration Statement, a holder of Transfer Restricted
Notes must (i) notify the Company in writing within 20 days after the
commencement of the Exchange Offer that (a) due to a change in law or policy it
is not entitled to participate in the Exchange Offer, (b) due to a change in law
or policy it may not resell the Exchange Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and this Prospectus is not
appropriate or available for such resales by such holder or (c) it is a
broker-dealer and owns Notes acquired directly from the Company or an affiliate
of the Company and (ii) provide to the Company, within 15 days following receipt
by such holder of the Company's request therefor, such information as the
Company may reasonably request for use in connection with the Shelf Registration
Statement. In the event that any holders of Transfer Restricted Notes comply
with the foregoing requirements, and supply any additional information
reasonably requested by the Company within 15 days following such request, the
Company will file, as promptly as practicable, an amendment to this Registration
Statement containing an appropriate resale prospectus and will use its best
efforts to cause such amendment to become effective under the Securities Act and
to remain continuously effective thereunder for a period of two years following
the Issue Date. In the event that the Company fails to comply with its
obligations in connection with resales of Transfer Restricted Notes under the
resulting Shelf Registration Statement it may be required to pay Additional
Interest. See "-- Registration Rights and Effect of Exchange Offer."
23
<PAGE> 26
EXCHANGE AGENT
The Trustee will act as Exchange Agent for the Exchange Offer with respect
to the Notes (the "Exchange Agent").
Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal for the Notes and requests for
copies of Notice of Guaranteed Delivery should be directed to the Exchange
Agent, addressed as follows:
By Registered or Certified Mail, Overnight Mail or Courier Service or in
Person by Hand:
The First National Bank of Chicago
c/o First Chicago Trust Company of New York
8th Floor, Window 2
New York, New York 10005
By Facsimile: (212) 240-8938
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone, facsimile or in person by officers and
regular employees of the Company and its affiliates, who may be reimbursed their
reasonable expenses incurred in connection with such solicitation, but who will
not otherwise receive special compensation for such efforts.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or other
persons soliciting acceptance of the Exchange Offer. The Company, however, will
pay the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith
and pay other registration expenses, including reasonable fees and expenses of
the Trustee, filing fees, blue sky fees and printing and distribution expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Notes pursuant to the Exchange Offer. If, however, certificates
representing the Exchange Notes or the Series A Notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be issued in
the name of, any person other than the registered holder of the Series A Notes
tendered, or if tendered Series A Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of the Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder of Series A Notes.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded by the Company at the same carrying
value as the Series A Notes, which is the aggregate principal amount in the case
of the Series A Notes. Accordingly, no gain or loss for accounting purposes will
be recognized in connection with the Exchange Offer. The expenses of the
Exchange Offer will be amortized over the term of the Exchange Notes.
RESALE OF EXCHANGE NOTES
Based on an interpretation by the staff of the SEC set forth in no-action
letters issued to unrelated third parties, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer in exchange for Notes may be offered
for resale, resold and otherwise transferred by any holder thereof (other than
any such holder which is a broker-dealer that holds Series A Notes acquired for
its own accounts as a result of market-making or other trading activities or any
such holder which is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder does not intend to participate, and has no arrangement or
24
<PAGE> 27
understanding with any person to participate, in the distribution of such
Exchange Notes. Any holder who tenders in the Exchange Offer with the intention
to participate, or for the purpose of participating, in a distribution of the
Exchange Notes may not rely on the position of the staff of the SEC enunciated
in Exxon Capital Holdings Corporation (available April 13, 1989); Morgan Stanley
& Co., Incorporated (available June 5, 1991) and Shearman & Sterling (available
July 2, 1993), or similar no-action letters, but rather must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. In addition, any such resale transaction
should be covered by an effective registration statement containing the selling
security holders information required by Item 507 of Regulation S-K of the
Securities Act. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Series A Notes, where such Series A Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities, may be a statutory underwriter and must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes.
By tendering Series A Notes in the Exchange Offer, each holder tendering
such Series A Notes will represent to the Company that, among other things, (i)
the Exchange Notes to be acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is a holder, (ii) neither the holder
nor any such other person has an arrangement or understanding with any person to
participate in a distribution of such Exchange Notes and (iii) the holder and
such other person acknowledge that if they participate in the Exchange Offer for
the purpose of distributing the Exchange Notes (a) they must, in the absence of
an exemption therefrom, comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of the Exchange
Notes and cannot rely on the no-action letters referenced above and (b) failure
to comply with such requirements in such instance could result in such holder
incurring liability under the Securities Act for which such holder is not
indemnified or otherwise protected by the Company. Further, by tendering in the
Exchange Offer, each holder that may be deemed an "affiliate" (as defined under
Rule 405 under the Securities Act) of the Company will represent to the Company
that such holder understands and acknowledges that the Exchange Notes may not be
offered for resale, resold or otherwise transferred by that holder without
registration under the Securities Act or an exemption therefrom.
As set forth above, affiliates of the Company are not entitled to rely on
the foregoing interpretations of the staff of the SEC with respect to resales of
the Exchange Notes without compliance with the registration and prospectus
delivery requirements of the Securities Act. The Company has agreed to bear all
registration expenses incurred under the Registration Rights Agreement,
including printing and distribution expenses, reasonable fees of counsel, blue
sky fees and expenses, reasonable fees of independent accountants in connection
with the preparation of comfort letters (to the extent required), and SEC and
the NASD filing fees and expenses.
CONSEQUENCES OF FAILURE TO EXCHANGE
As a result of the making of this Exchange Offer, the Company will have
fulfilled one of its obligations under the Registration Rights Agreement, and
holders of Series A Notes who do not tender their Series A Notes generally will
not have any further registration rights under the Registration Rights Agreement
or otherwise. Accordingly, any holder of Series A Notes that does not exchange
that holder's Series A Notes for Exchange Notes will continue to hold
unregistered Series A Notes and will be entitled to all the rights and
limitations applicable thereto under the Indenture, except to the extent that
such rights or limitations, by their terms, terminate or cease to have further
effectiveness as a result of the Exchange Offer.
The Series A Notes that are not exchanged for Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Series A
Notes may be resold only (i) to the Company (upon redemption thereof or
otherwise), (ii) pursuant to an effective registration statement under the
Securities Act, (iii) so long as the Series A Notes are eligible for resale
pursuant to Rule 144A, to a qualified institutional buyer within the meaning of
Rule 144A under the Securities Act in a transaction meeting the requirements of
Rule 144A, (iv) outside the United States to a foreign person pursuant to the
exemption from the registration requirements of the Securities Act provided by
Regulation S thereunder, (v) pursuant to an exemption from registration under
the Securities Act provided by Rule 144 thereunder (if available) or (vi) to an
institutional
25
<PAGE> 28
accredited investor in a transaction exempt from the registration requirements
of the Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States. See "Risk Factors -- Restrictions on
Transfer."
NO RECOMMENDATION
Participation in the Exchange Offer is voluntary and holders of Series A
Notes should carefully consider whether to accept. Holders of Series A Notes are
urged to consult their own financial and tax advisors in making their own
decision on what action to take. The Boards of Directors of the Company and the
Guarantors make no recommendation as to whether or not holders should tender
Series A Notes pursuant to the Exchange Offer.
OTHER
The Company may in the future seek to acquire unregistered Series A Notes
that are not tendered in the Exchange Offer in open market, privately negotiated
or other transactions, through subsequent exchange offers or otherwise. The
Company has no present plans to acquire any Series A Notes that are not tendered
in the Exchange Offer or, except as required by the Registration Rights
Agreement, to file a registration statement to permit resales of any untendered
Series A Notes.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge (i) that by receiving Exchange
Notes for its own account in exchange for Series A Notes, where such Series A
Notes were acquired as a result of market-making activities or other trading
activities, such broker-dealer may be a statutory underwriter, and (ii) that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with the resales of Exchange Notes
received in exchange for the Series A Notes where such Series A Notes were
acquired as a result of market-making activities or other trading activities.
The Company has agreed that for a period of 90 days (subject to extensions in
certain cases) after the date on which the Registration Statement is declared
effective, it will make this Prospectus, as amended or supplemented, available
to any broker-dealer that requests such documents in the Letter of Transmittal
for use in connection with any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers or any other persons. Exchange Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders (including any broker-dealers) and certain parties related
to the holders against certain liabilities, including liabilities under the
Securities Act.
26
<PAGE> 29
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of the Exchange
Notes pursuant to the Exchange Offer. The net proceeds to the Company from the
sale of the Series A Notes were approximately $120.8 million (after deducting
estimated expenses and commissions), of which (i) approximately $64.0 million is
being used to repay real estate and mortgage notes, (ii) approximately $3.8
million is being used to repay unsecured notes payable, and (iii) approximately
$53.0 million is being used to reduce outstanding borrowings under the Credit
Facility. Amounts used to reduce balances under the Credit Facility may be
reborrowed, subject to having the requisite borrowing base and satisfying other
conditions to borrowing, and utilized for general corporate purposes. At
February 1, 1997, the indebtedness to be repaid accrued interest at a weighted
average interest rate of approximately 7.7% per annum and had maturities ranging
from January 1, 1998 to February 1, 2010. See "Description of Other
Indebtedness."
CAPITALIZATION
The following table sets forth the capitalization of the Company as of May
3, 1997, (i) on an actual basis and (ii) as adjusted to reflect the sale of the
Notes (after deducting the offering expenses and the application of the net
proceeds therefrom). This table should be read in conjunction with the
Consolidated Financial Statements of the Company and the notes thereto included
elsewhere herein.
<TABLE>
<CAPTION>
AS OF MAY 3, 1997
---------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt(a):
Credit Facility........................................... $ 163,100 $ 110,101
Real estate and mortgage notes............................ 113,578 49,547
Sale of Notes............................................. -- 125,000
Other notes payable....................................... 3,754 --
Capital lease obligations................................. 10,706 10,706
Senior Subordinated Notes(b).............................. 125,000 125,000
Convertible subordinated debentures....................... 86,250 86,250
Junior subordinated debt.................................. 14,590 14,590
---------- -----------
Total long-term debt.............................. 516,978 521,194
Shareholders' equity........................................ 555,159 555,159
---------- -----------
Total capitalization.............................. $1,072,137 $ 1,076,353
========== ===========
</TABLE>
- ---------------
(a) Includes current maturities of long-term debt.
(b) Since May 3, 1997, the Company has purchased approximately $32 million of
Senior Subordinated Notes.
27
<PAGE> 30
SELECTED FINANCIAL DATA
The selected financial and operating data below are derived from, and
should be read in conjunction with, the Company's Consolidated Financial
Statements and Condensed Consolidated Financial Statements and the notes thereto
appearing elsewhere herein. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------- FISCAL YEAR ENDED(A)
MAY 4, -------------------------------------------------------------------
MAY 3, 1997 1996(A) FEBRUARY 1, FEBRUARY 3, JANUARY 28, JANUARY 29, JANUARY 30,
(UNAUDITED) (UNAUDITED) 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT
DATA:
Net sales..................... $ 526,370 $365,179 $1,889,779 $1,661,056 $1,513,444 $1,063,488 $ 858,754
Costs and expenses:
Cost of sales................. 335,882 237,201 1,230,454 1,087,619 986,028 690,083 523,444
Selling, general and
administrative expenses... 128,629 88,952 440,502 398,999 352,448 255,856 220,889
Other operating expenses.... 42,568 30,719 142,124 130,560 122,583 88,792 64,157
Expenses related to hostile
takeover defense(b)....... -- 3,182 -- -- --
(Gains) losses from
long-lived assets(c)...... 27 (2,260) (1,094) 19,121 -- -- --
Merger, restructuring and
integration costs(d)...... 1,468 2,763 15,929 20,822 -- -- --
---------- -------- ---------- ---------- ---------- ---------- ----------
Operating income.............. 17,796 7,804 61,864 753 52,385 28,757 50,264
Other income (expense):
Finance charge income,
net(e).................... 10,878 7,160 32,305 31,273 27,934 19,312 16,151
Interest expense............ (10,692) (4,706) (26,756) (29,389) (23,286) (11,286) (11,701)
Other income, net........... 136 498 1,572 4,051 4,826 4,063 233
---------- -------- ---------- ---------- ---------- ---------- ----------
Income before provision for
income taxes,
extraordinary loss and
cumulative effect of
changes in accounting
methods................... 18,118 10,756 68,985 6,688 61,859 40,846 54,947
Provision for income
taxes..................... 7,574 4,448 31,586 6,047 24,411 16,122 20,631
---------- -------- ---------- ---------- ---------- ---------- ----------
Income before extraordinary
loss and cumulative effect
of changes in accounting
methods................... 10,544 6,308 37,399 641 37,448 24,724 34,316
Extraordinary loss (net of
tax) from early
extinguishment of debt.... -- -- -- (2,060) -- (1,088) --
Cumulative effect of changes
in accounting methods (net
of tax)(f)................ -- -- -- -- -- 1,904 (1,794)
---------- -------- ---------- ---------- ---------- ---------- ----------
Net income (loss)........... $ 10,544 $ 6,308 $ 37,399 $ (1,419) $ 37,448 $ 25,540 $ 32,522
========== ======== ========== ========== ========== ========== ==========
CONSOLIDATED BALANCE SHEET DATA:
Working capital............... $ 375,348 $226,361 $ 344,410 $ 235,194 $ 301,270 $ 306,853 $ 203,977
Total assets.................. 1,456,794 921,606 1,403,796 919,013 967,667 653,680 536,603
Long-term debt, less current
portion..................... 505,108 247,537 502,577 269,442 325,501 203,838 216,985
Shareholder's equity.......... 555,159 334,394 539,898 327,371 337,007 275,104 122,582
OTHER FINANCIAL AND OPERATING
DATA:
Stores open at end of
period...................... 175 143 173 144 146 115 106
Capital expenditures.......... $ 24,090 $ 9,944 $ 61,031 $ 51,469 $ 53,293 $ 86,192 $ 48,078
Ratio of earnings to fixed
charges..................... 2.1x 2.3x 2.4x 1.1x 2.5x 2.6x 3.7x
</TABLE>
- ---------------
(a) Effective February 1, 1997 and February 3, 1996, Herberger's and Younkers,
respectively, were acquired by the Company. These acquisitions were
accounted for under the pooling-of-interests method. Accordingly, the
Company's financial statements were restated for all periods to include the
results of operations and financial position of Herberger's and Younkers.
(b) Expenses incurred were related to the defense of the attempted hostile
takeover of Younkers by Carson Pirie Scott & Co.
28
<PAGE> 31
(c) The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" in the fourth quarter of
fiscal 1995. As a result of adopting this new accounting standard and as a
result of closing certain stores and warehouses, the Company incurred
impairment charges related to the write-down in carrying value of six stores
due to poor operating results, abandonment of duplicate warehouse and
leasehold improvements related to the Younkers acquisition, and a loss on
abandonment of leasehold improvements related to closed stores. For the
period ended February 1, 1997, the Company incurred additional charges of
$1.4 million for closed or underperforming stores of the newly-acquired
Herberger's chain. These losses were offset by gains from sales of assets
totaling $2.5 million consisting principally of land, building and fixtures
related to two Younkers stores sold to Carson Pirie Scott & Co.
(d) In connection with the Younkers and Herberger's acquisitions, the Company
incurred certain costs to effect such acquisitions and other costs to
restructure and integrate the combined operating companies. The costs
incurred included, among other costs, merger transaction costs, severance
and related benefits, abandonment and elimination of duplicate
administrative office space, property, data processing equipment and
software.
(e) Finance charge income includes finance charges and late payment fees earned
on the Company's proprietary credit cards, less the portion of such income
allocated to third party purchasers of such credit card receivables. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Finance Charge Income, Net;" "Receivables Securitization
Facilities" and Note 4 to the Company's Consolidated Financial Statements.
(f) Effective as of the beginning of the fiscal year ended January 30, 1993,
Younkers recognized a cumulative effect adjustment of $1.8 million (net of
income taxes of $1.2 million) due to the adoption of SFAS No. 106, under
which employers recognize the cost of retiree health and life insurance
benefits over the employees' period of service.
Effective January 31, 1993, the Company changed its method of accounting for
inventory to include certain purchasing and distribution costs. Previously,
these costs were charged to expense in the period incurred rather than in
the period in which the merchandise was sold. The cumulative effect of this
change was to increase net income $2.3 million (net of income taxes of $1.5
million). Also effective January 31, 1993, the Company also changed its
method of accounting for store preopening costs to expensing such costs when
incurred. The cumulative effect of this change was to decrease net income
$0.4 million (net of income taxes of $0.2 million). Previously, these costs
were amortized over the twelve months immediately following the individual
store openings.
In 1992, the Financial Accounting Standards Board issued SFAS No. 109,
Accounting for Income Taxes, which requires a change from the deferred
method to the asset and liability method of accounting for income taxes. The
Company adopted the new accounting standard effective January 31, 1993.
Adoption of the new standard had no effect on the Company's financial
position or results of operations. There would have been no impact on the
year ended January 30, 1993 had the standard been applied retroactively.
Effective January 30, 1994, the Company changed its method of accounting for
inventory to the last-in, first-out (LIFO) method for a substantial portion
of its inventories. Previously, all inventories were valued using the
first-in, first-out (FIFO) method. The cumulative effect of this change is
not presented because it is not determinable.
29
<PAGE> 32
PRO FORMA COMBINED STATEMENT OF INCOME (UNAUDITED)
The following Pro Forma Combined Statement of Income (Unaudited) has been
derived by the application of pro forma adjustments to the Company's
Consolidated Financial Statements included elsewhere herein to reflect the
Company's acquisition of Parisian on October 11, 1996, which was accounted for
as a purchase. Historical financial information presented in this Prospectus
includes results of Parisian from the acquisition date. The accompanying Pro
Forma Combined Statement of Income (Unaudited) for the year ended February 1,
1997 gives effect to the Parisian acquisition as if it had been consummated on
February 4, 1996. The Pro Forma Combined Statement of Income (Unaudited) is
intended for informational purposes only and is not necessarily indicative of
future results of operations or financial position of the Company had the
Parisian acquisition occurred on the indicated date and does not purport to
indicate the results of operations that may be achieved in the future. The Pro
Forma Combined Statement of Income (Unaudited) does not reflect the cost savings
realized by the Company from consolidation of administrative and operating
functions and other synergies. The Pro Forma Combined Statement of Income
(Unaudited) and the accompanying notes should be read in conjunction with the
Consolidated Financial Statements of the Company including the notes thereto,
appearing elsewhere herein. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------ ACQUISITION PRO FORMA
COMPANY(A) PARISIAN(B) ADJUSTMENTS(C) TOTAL
---------- ----------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales................................. $1,889,779 $431,176 $2,320,955
Costs and expenses:
Cost of sales........................... 1,230,454 279,699 $ 1,649(d) 1,511,802
Selling, general, and administrative
expenses............................. 440,502 112,390 (1,649)(d) 551,804
561(e)
Other operating expenses................ 142,124 38,328 (1,845)(e) 179,938
1,331(f)
Gains from long lived assets, net....... (1,094) (1,094)
Merger, restructuring and integration
costs................................ 15,929 15,929
---------- -------- ------- ----------
Operating income.......................... 61,864 759 (47) 62,576
Other income (expense):
Finance charge income, net.............. 32,305 5,578 37,883
Interest expense........................ (26,756) (11,932) (6,014)(g) (44,702)
Other income, net....................... 1,572 1,837 3,409
---------- -------- ------- ----------
Income (loss) before provision for income
taxes................................... 68,985 (3,758) (6,061) 59,166
Provision for income taxes................ 31,586 (799) (1,389)(h) 29,398
---------- -------- ------- ----------
Net income (loss)......................... $ 37,399 $ (2,959) $(4,672) $ 29,768
========== ======== ======= ==========
</TABLE>
- ---------------
(a) The historical income statement of the Company does not reflect the
operating results of Parisian prior to the Company's acquisition of
Parisian on October 11, 1996.
(b) Includes information derived from Parisian's unaudited historical income
statement for the period from February 4, 1996 through October 10, 1996.
(c) Pro forma adjustments do not include any charges or benefits related to the
integration of the operations of the businesses of the Company and
Parisian. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations Merger, Restructuring and Integration Costs" and
Notes 2 and 3 to the Company's Consolidated Financial Statements.
(d) Adjustments have been made to conform Parisian's direct cost method of
accounting for inventory to the full cost method used by the Company and to
conform Parisian's presentation of certain expenses with that of the
Company.
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<PAGE> 33
(e) Adjustments have been made to conform Parisian's accounting method for store
preopening costs of deferral and amortization over twelve months to the
Company's accounting method of expensing such costs as incurred.
(f) Adjustments have been made to reflect the increase in depreciation and
amortization resulting from the purchase price allocation for the Parisian
acquisition.
(g) Adjustments have been made to reflect interest expense on acquisition debt
of approximately $119.0 million at 7.4% per annum for the period ended
October 10, 1996, assuming the debt was outstanding throughout the period.
(h) Adjustments have been made to reflect the income tax impact of the pro forma
merger and acquisition adjustments using a combined federal and state
income tax rate of 40%. See Note 6 to the Company's Consolidated Financial
Statements.
31
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the Consolidated Financial
Statements of the Company and the notes thereto and other data and information
appearing in this Prospectus.
OVERVIEW
General. The Company is a leading regional department store company
offering a wide selection of fashion apparel, accessories, cosmetics and
decorative home furnishings, featuring assortments of premier brands and
specialty merchandise. The Company's five chains are Proffitt's (19 stores),
McRae's (29 stores), Younkers (48 stores), Parisian (40 stores) and Herberger's
(39 stores). The following table sets forth the merchandising mix for each chain
for the year ended February 1, 1997:
<TABLE>
<CAPTION>
TOTAL
PROFFITT'S MCRAE'S YOUNKERS PARISIAN(A) HERBERGER'S COMPANY
---------- ------- -------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Womens Apparel................. 32.6% 25.9% 31.7% 31.7% 39.0% 31.8%
Mens Apparel................... 13.7 16.6 16.1 21.7 15.3 17.4
Home/Gifts..................... 11.1 15.3 15.6 1.1 9.4 9.9
Cosmetics...................... 15.0 11.4 10.9 9.5 8.6 10.8
Children's Apparel............. 7.8 7.3 6.8 11.3 12.9 9.1
Accessories.................... 6.7 7.1 6.2 6.9 5.6 6.5
Shoes.......................... 7.3 8.0 2.9 12.3 5.4 7.5
Intimate Apparel............... 4.2 3.9 4.6 3.2 3.8 3.9
----- ----- ----- ----- ----- -----
Total owned.......... 98.4 95.5 94.8 97.7 100.0 96.9
Leased(b)...................... 1.6 4.5 5.2 2.3 E 3.1
Total................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== =====
</TABLE>
- ---------------
(a) Represents entire period even though Parisian was acquired October 11, 1996.
(b) Leased departments include fine jewelry, beauty salon, and maternity
departments. See "Business -- Merchandising."
Recent Acquisitions and Growth in Store Base. The Company's financial
results for the periods discussed below have been affected by the Company's
significant acquisition-related growth. In March 1994, the Company acquired
McRae's, a privately owned company with 28 stores. In April 1995, the Company
completed the acquisition of Parks-Belk Company, the owner-operator of four
stores in Northeast Tennessee. Effective February 3, 1996, the Company acquired
Younkers, a publicly traded company with 51 stores. On October 11, 1996, the
Company acquired Parisian, a 38 store closely-held company. Effective February
1, 1997, the Company acquired Herberger's, an employee owned company with 39
stores. The McRae's, Parks-Belk and Parisian transactions were accounted for
using the purchase method and are included in the Company's income statements
from the date of acquisition; the Younkers and Herberger's transactions were
accounted for as poolings of interests. The Company's Consolidated Financial
Statements have been restated to reflect the Younkers and Herberger's
acquisitions.
Actions Impacting Future Results. The Company believes that its future
results of operations may be impacted by a number of factors, including (i) the
results of cost savings and operating efficiency programs undertaken in
connection with recent acquisitions, (ii) the results of the Company's efforts
to centralize certain administrative and support functions, (iii) the
implementation of the Company's plans to improve its capital structure, (iv) the
results of a shift to a more optimal merchandise mix and the realization of
improved purchasing power resulting from increased scale, and (v) future
acquisitions, if any, undertaken by the Company.
Management has identified synergies and developed cost savings programs in
conjunction with the Younkers, Parisian and Herberger's acquisitions. The
implementation of these programs reduced operating
32
<PAGE> 35
expenses by $6 million (from the Younkers acquisition only) in fiscal 1996 and
is expected to produce annualized cost savings of $20 million in fiscal 1997 and
$29 million in fiscal 1998 (compared to the 1995 cost structure of the chains on
an independent basis). Cost reductions are expected to be achieved through the
elimination of duplicate corporate expenses, economies of scale, implementation
of best practices and consolidation of certain administrative support functions.
The Company expects that these programs may result in additional cost savings
which cannot presently be quantified. The realization of these cost savings is
subject to uncertainties described under "Risk Factors."
During 1995 and 1996, the Company consolidated certain administrative and
support functions, such as accounting, information systems, proprietary credit
card administration and store planning for the Proffitt's, McRae's and Younkers
chains. The Company is in the process of further consolidating these functions
to include the Parisian chain, with the majority of this work to be completed by
the fall of 1997. Consolidation of these functions for the Herberger's chain
will begin in 1997 and is expected to be completed in 1998. Merchandising, store
operations, sales promotion and advertising and visual presentation for the
Proffitt's, McRae's, Younkers, Parisian and Herberger's chains will remain
separate, but will be coordinated centrally by the Proffitt's Merchandising
Group.
The issuance of the Notes was part of a plan to improve the Company's
capital structure by (i) reducing the amount of the Company's secured
indebtedness, (ii) reducing the amount of the Company's indebtedness that bears
interest at floating rates of interest, and (iii) extending the average life of
the Company's indebtedness. To achieve these objectives, the Company will
undertake the following:
- Use of Proceeds from the Issuance of the Notes. The Company is
applying the net proceeds from the issuance of the Notes to (i) repay
approximately $64.0 million of real estate and mortgage notes, (ii)
repay approximately $3.8 million of unsecured notes payable and (iii)
reduce outstanding borrowings under the Credit Facility. This will
extend the maturity of the Company's indebtedness. See "Use of
Proceeds."
- Renegotiation of Revolving Credit Facility. The Company has engaged
NationsBank of Texas, National Association ("NationsBank") and
NationsBanc Capital Markets, Inc. ("NCMI") in connection with the
Company's efforts to amend its existing $275 million syndicated Credit
Facility. The proposed amendment seeks, among other things, to increase
such facility to $325-$400 million, extend the termination date to five
years from the closing of the amended credit facility and otherwise
provide greater flexibility for the Company. Although there is no
assurance that the Credit Facility will be amended, that the amended
credit facility will be successfully syndicated or as to the final
terms of the amended credit facility, it is currently anticipated that
such amendments will be completed during or shortly after the Exchange
Offer. See "Description of Other Indebtedness -- Bank Credit
Facilities -- Amended Credit Facility" and " -- Liquidity and Capital
Resource."
- New Receivables Arrangements. The Company has engaged NCMI to
restructure and combine its existing accounts receivable securitization
facilities into a new master trust, with a view to issuing
approximately $200 million of investment grade asset-backed securities
having terms of up to five years secured by the Company's credit card
receivables, while continuing to provide the Company with the ability
to sell a variable interest in proprietary credit card receivables to
asset-backed commercial paper conduits. Although there is no assurance
that a new accounts receivable securitization facility will be
successfully established, or as to the final terms of such a facility,
it is currently anticipated that such a facility will be established
during Summer 1997. See " -- Liquidity and Capital Resources" and
"Receivables Securitization Facilities."
During the first and second fiscal quarters of 1997, the Company has
purchased approximately $32 million of Senior Subordinated Notes. The Company or
its subsidiaries may from time to time purchase additional Senior Subordinated
Notes with available cash and borrowings under the Credit Facility. See
"Description of Other Indebtedness -- Subordinated Indebtedness -- Senior
Subordinated Notes."
33
<PAGE> 36
RESULTS OF OPERATIONS
The following table sets forth the selected financial data (excluding
unusual items) for the Company expressed as a percentage of net sales for the
periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED(1)
-------------------- -----------------------------------------
MAY 3, MAY 4, FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996(1) 1997 1996 1995
-------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales......................... 63.8 65.0 65.1 65.5 65.2
----- ----- ----- ----- -----
Gross profit.......................... 36.2 35.0 34.9 34.5 34.8
Selling, general and administrative
expenses............................ 24.4 24.4 23.3 24.0 23.3
Property and equipment rentals........ 3.6 3.1 3.2 3.0 3.1
Taxes other than income taxes......... 2.4 2.6 2.1 2.2 2.2
Finance charge income, net............ 2.1 2.0 1.7 1.9 1.8
Other income, net..................... 0.0 0.1 0.0 0.2 0.3
----- ----- ----- ----- -----
EBITDA................................ 7.8 7.1 8.0 7.4 8.3
Depreciation & amortization........... 2.1 2.7 2.2 2.6 2.7
----- ----- ----- ----- -----
EBIT.................................. 5.7% 4.4% 5.8% 4.8% 5.6%
</TABLE>
- ---------------
(1) Effective February 1, 1997 and February 3, 1996, Herberger's and Younkers,
respectively, were acquired by the Company. Such acquisitions were accounted
for under the pooling-of-interests method. Accordingly, the Company's
financial statements were restated for all periods to include the results of
operations and financial position of Herberger's and Younkers.
RESULTS OF OPERATIONS FOR QUARTERS ENDED MAY 4, 1996 AND MAY 3, 1997
For the quarter ended May 3, 1997, total Company sales were $526.4 million,
a 44% increase over $365.2 million in the prior year. Sales for the quarter
included $166.4 million of sales from the newly-acquired Parisian division. On a
comparable stores basis (excluding Parisian), total Company sales increased 3%
for the quarter.
For the quarter ended May 3, 1997, gross margin percentages increased over
the prior year. This improvement resulted from improved inventory management,
reduced markdowns, and the effects of inventory repositioning at both the
Parisian and Herberger's businesses, which was initiated in late 1996.
Selling, general, and administrative expenses declined as a percentage of
net sales for the quarter. This expense leverage primarily resulted from the
early stages of targeted cost reductions related to each of the Company's recent
business combinations.
Other operating expenses, which consist of rents, depreciation and
amortization, and taxes other than income taxes, declined as a percentage of net
sales for the quarter. This reduction was primarily due to the effect of closed
underperforming stores.
Total financing costs, which include interest expense and finance charge
income allocated to the third party purchasers of accounts receivable, increased
as a percentage of net sales for the quarter due to additional borrowings
related to the October 1996 purchase of Parisian.
Prior to the non-recurring items and ESOP charges outlined below, net
income totaled $11.9 million, or $.41 per share, a 77% increase over $6.7
million, or $.26 per share last year.
In conjunction with the Company's mergers with Younkers (completed February
3, 1996), Parisian, and Herberger's, the Company incurred certain non-recurring
integration charges in the first quarter of each year presented. For the quarter
ended May 3, 1997, these charges totaled $1.5 million before tax, or 0.3% of net
sales ($.9 million after tax, or $.03 per share). For the quarter ended May 4,
1996, these charges totaled $2.8 million before tax, or 0.8% of net sales ($1.7
million after tax, or $.07 per share).
34
<PAGE> 37
For the quarter ended May 4, 1996, the Company realized pre-tax gains of
$2.3 million ($1.4 million after tax, or $0.6 per share) related to the
Company's March 1996 sale of two Younkers stores to Carson Pirie Scott & Co.
For the quarters ended May 3, 1997 and May 4, 1996, the Company incurred
pre-tax expenses of $0.7 million, or 0.1% of net sales, and $0.2 million, or
0.1% of net sales, respectively, related to the Company's Employee Stock
Ownership Plan (ESOP) maintained at the newly acquired Herberger's Division. On
an after-tax basis, these charges totaled $.5 million, or $.01 per share, and
$.1 million, or less than $.01 per share, for the quarters ended May 3, 1997 and
May 4, 1996, respectively.
After these non-recurring items and ESOP charges, net income for the
quarter ended May 3, 1997 totaled $10.5 million, or $.37 per share, compared to
$6.3 million, or $.25 per share, for the quarter ended May 4, 1996. The increase
in earnings over the prior year primarily was due to solid gross margin
performance and leverage on operating expenses netted against increased
financing costs.
NET SALES FOR FISCAL 1994, FISCAL 1995 AND FISCAL 1996
Total Company net sales increased by 13.8% and 9.8% in fiscal 1996 and
fiscal 1995, respectively. The fiscal 1996 increase primarily was due to a
comparable store sales increase of 3% and revenues generated from the Parisian
chain acquired in October 1996. The fiscal 1995 sales increase primarily was due
to a comparable store sales increase of 3% and a full year of sales generated
from the McRae's stores acquired in March 1994.
GROSS MARGINS FOR FISCAL 1994, FISCAL 1995 AND FISCAL 1996
Gross margins were 34.9%, 34.5%, and 34.8% in fiscal 1996, fiscal 1995, and
fiscal 1994, respectively. The Company uses a full-cost method to account for
inventories, which includes certain purchasing and distribution costs. Such
costs which relate to obtaining merchandise and preparing it for sale are
included in cost of sales.
The improvement in gross margin percent in fiscal 1996 to 34.9% from 34.5%
in fiscal 1995 was a result of improved inventory management, resulting in
increased inventory turnover and lower markdowns. The decrease in gross margin
percent from 34.8% in 1994 to 34.5% in 1995 was primarily a result of increased
markdowns over the prior year.
Management expects that sales and gross margins can be enhanced over time
through further development of key businesses in each of the Company's chains;
expansion of key brands (primarily at the newly acquired Herberger's chain);
further private brand development; enhanced relationships and buying power with
vendors due to the Company's increased scale; and continued appropriate
inventory management.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES FOR FISCAL 1994, FISCAL 1995 AND
FISCAL 1996
Selling, general and administrative expenses ("SG&A") were 23.3% of net
sales in fiscal 1996, 24.0% of net sales in fiscal 1995, and 23.3% of net sales
in fiscal 1994. In fiscal 1996, primarily in conjunction with its acquisition of
Herberger's, the Company revised certain estimates and recorded other charges to
SG&A in the fourth quarter totaling $3.7 million, or 0.2% of net sales. The most
significant components of these charges were: (i) a $0.7 million charge for
store closing and conversion costs and (ii) a $1.7 million charge to strengthen
various accruals. In addition, the Company recorded fourth quarter charges to
SG&A of $1.0 million, or 0.1% of net sales, related to the sale of seven of the
Company's stores located in Virginia. In fiscal 1995, primarily in conjunction
with the Company's acquisition of Younkers, the Company revised certain
estimates and recorded other charges to SG&A in the fourth quarter totaling
$13.7 million, or 0.8% of net sales. The most significant components of these
charges were: (i) a $2.4 million charge for the conversion of the Younkers
leased shoe operation to an owned operation; (ii) a $2.0 million charge to
strengthen the Company's bad debt reserve; and (iii) a $5.0 million reserve for
various Younkers legal claims. See "Summary -- Recent Developments -- Sale of
Seven Virginia Stores."
35
<PAGE> 38
Excluding these fourth quarter charges, SG&A as a percentage of net sales
was 23.0% in fiscal 1996 and 23.2% in fiscal 1995. The reduction of the SG&A
percentage in fiscal 1996 over fiscal 1995 was due to increased economies of
scale and the implementation of the synergies outlined under "-- Overview."
OTHER OPERATING EXPENSES FOR FISCAL 1994, FISCAL 1995 AND FISCAL 1996
Other operating expenses were 7.5% of net sales in fiscal 1996, compared to
7.9% in fiscal 1995 and 8.1% in fiscal 1994. Other operating expenses for fiscal
1996 include a $1.0 million charge, or 0.1% of net sales, related to the sale of
seven of the Company's stores located in Virginia. Excluding this charge, other
operating expenses as a percentage of net sales were 7.4% in fiscal 1996. The
percent decline in fiscal 1996 over fiscal 1995 and fiscal 1994 levels resulted
from leverage of these expenses over a larger sales base, the effect of closed
underperforming stores, and lower expenses due to the write-down of certain
property. See "Summary -- Recent Developments -- Sale of Seven Virginia Stores"
and "-- Gains (Losses) from Long-Lived Assets".
EXPENSES RELATED TO HOSTILE TAKEOVER DEFENSE BY YOUNKERS FOR FISCAL 1994, FISCAL
1995 AND FISCAL 1996
During fiscal 1995, the Company incurred expenses of approximately $3.2
million, or 0.2% of net sales, related to the defense of the attempted hostile
takeover of Younkers by Carson Pirie Scott & Co.
GAINS (LOSSES) FROM LONG-LIVED ASSETS FOR FISCAL 1994, FISCAL 1995 AND FISCAL
1996
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." The Company adopted the provision of this new
accounting standard in the fourth quarter of fiscal 1995. As a result of
adopting this new accounting standard and as a result of closing certain stores
and warehouses, the Company incurred impairment charges totaling $1.0 million,
or 0.1% of net sales, and $19.1 million, or 1.1% of net sales, in fiscal 1996
and fiscal 1995, respectively. The fiscal 1996 write-down of $1.0 million was
netted against gains on the sales of certain properties totaling $2.1 million,
or 0.1% of net sales, primarily related to the sale of two Younkers units in
March 1996. The $19.1 million charge in fiscal 1995 is comprised of $15.9
million related to the write-down in carrying value of six store properties and
$3.2 million related to the write-down of abandoned property.
MERGER, RESTRUCTURING, AND INTEGRATION COSTS FOR FISCAL 1994, FISCAL 1995 AND
FISCAL 1996
In connection with the acquisition of Herberger's by the Company, the two
companies incurred certain costs in the fourth quarter of fiscal 1996 to effect
the transaction and other costs to restructure, integrate and combine
operations. These costs totaled $10.0 million, or 0.5% of net sales, and were
comprised of $2.6 million of merger transaction costs (principally investment
banking, legal, and other direct merger costs); $6.5 million of severance and
related benefits, the consolidation of administrative operations, and systems
conversions; and $0.9 million for the write-off of duplicate administrative
facilities. Management also expects to incur certain additional integration
costs in fiscal 1997, such as transition payroll, training, and relocation
expenses. These expenses are expected to total approximately $3.0 to $4.0
million in 1997.
In connection with the acquisition of Younkers by the Company, the two
companies incurred certain costs in the fourth quarter of fiscal 1995 to effect
the transaction and other costs to restructure, integrate, and combine
operations. These costs totaled $20.8 million, or 1.3% of net sales, and were
comprised of $8.8 million of merger transaction costs (principally investment
banking, legal, and other direct merger costs); $3.2 million of severance and
related benefits, $7.4 million for the write-off of duplicate administrative
facilities, and $1.4 million of miscellaneous costs. The Company also incurred
certain additional integration costs in fiscal 1996, such as transition payroll,
training, and relocation expenses. These expenses totaled $5.9 million during
1996, or 0.3% of net sales.
FINANCE CHARGE INCOME, NET FOR FISCAL 1994, FISCAL 1995 AND FISCAL 1996
Net finance charge income was 1.7% of net sales in 1996 and 1.9% of net
sales in both 1995 and 1994.
36
<PAGE> 39
For fiscal 1996, gross finance charge income (before allocation of finance
charges to the third party purchasers of accounts receivable) increased to 2.6%
of net sales from 2.4% in fiscal 1995. This increase was primarily due to
increased finance charge rates assessed in certain states and a full year's
benefit of the October 1995 implementation of late fee charges on past due
charge accounts for the Proffitt's and McRae's chains. See "-- Liquidity and
Capital Resources."
For fiscal 1995, gross finance charge income increased to 2.4% of net sales
over 2.2% of net sales in fiscal 1994. This increase was due to increased
customer usage of the Company's proprietary charge cards, increased finance
charge rates assessed in certain states, the October 1995 implementation of late
fee charges on past due charge account balances for the McRae's and Proffitt's
chains, and a full year's benefit of the May 1994 implementation of late fee
charges on past due charge account balances at the Younkers chain.
The allocation of finance charges to the third party purchasers of accounts
receivable totaled approximately $16.0 million, or 0.8% of net sales, in fiscal
1996; $8.8 million, or 0.5% of net sales, in fiscal 1995; and $5.6 million, or
0.4% of net sales, in fiscal 1994. Utilization of the Company's accounts
receivable securitization programs increased each year presented, commensurate
with the Company's growth in proprietary charge card sales. See "-- Liquidity
and Capital Resources."
Each of the Company's chains operates a proprietary credit card program. A
proprietary credit card program was introduced to the Herberger's customer base
on May 15, 1997.
INTEREST EXPENSE FOR FISCAL 1994, FISCAL 1995 AND FISCAL 1996
Interest expense as a percentage of net sales was 1.4% for fiscal 1996,
1.8% for fiscal 1995, and 1.5% for fiscal 1994. Total interest expense was $26.8
million, $29.4 million, and $23.3 million in fiscal 1996, fiscal 1995, and
fiscal 1994, respectively. The decrease in interest expense in fiscal 1996 over
fiscal 1995 was attributable to lower average borrowings under the Company's
Credit Facility due to an increase in cash flow from operations, and a reduction
in short-term interest rates. The increase in interest expense in fiscal 1995
over fiscal 1994 was attributable to higher borrowings associated with the
purchase and operation of the stores acquired from the Parks-Belk Company in
April 1995 and the acquisition of McRae's in March 1994, along with higher
interest rates.
INCOME TAXES FOR FISCAL 1994, FISCAL 1995 AND FISCAL 1996
The effective tax rates differ from the expected tax rates principally due
to nondeductible merger costs and other nondeductible expenses related to
acquisitions.
NET INCOME FOR FISCAL 1994, FISCAL 1995 AND FISCAL 1996
Net income (prior to extraordinary items) was $37.4 million in fiscal 1996,
or 2.0% of net sales, $0.6 million in fiscal 1995, or 0.0% of net sales, and
$37.4 million in fiscal 1994, or 2.5% of net sales. Earnings in fiscal 1996 were
negatively affected by such items as fourth quarter charges to SG&A in
conjunction with the acquisition of Herberger's by the Company and the sale of
seven of the Company's stores located in Virginia and merger, restructuring, and
integration costs previously discussed. Without these items, fiscal 1996 net
income would have totaled $52.2 million, or 2.8% of net sales. In fiscal 1995,
earnings were negatively affected by such items as fourth quarter charges to
SG&A in conjunction with the acquisition of Younkers, expenses related to the
Younkers hostile takeover attempt, charges for the impairment of long-lived
assets, and merger, restructuring, and integration costs previously discussed.
Without these items, fiscal 1995 net income would have totaled $38.4 million, or
2.3% of net sales. See "-- Expenses Related to Hostile Takeover Defense."
EXTRAORDINARY ITEM FOR FISCAL 1994, FISCAL 1995 AND FISCAL 1996
On February 3, 1996, Younkers replaced its debt financing of accounts
receivable with sales of ownership interests in its accounts receivable. In
addition, Younkers canceled its $150.0 million revolving credit agreement. As a
result of the early extinguishment of debt, certain deferred costs associated
with the debt facilities, such as loan origination costs and a loss from an
interest rate swap, were written off. This write-off of $3.4 million ($2.1
million net of income taxes) was recorded as an extraordinary item in fiscal
1995.
37
<PAGE> 40
INFLATION
Inflation affects the costs incurred by the Company in its purchase of
merchandise and in certain components of its selling, general, and
administrative expenses. The Company attempts to offset the effects of inflation
through price increases and control of expenses, although the Company's ability
to increase prices is limited by competitive factors in its markets. Inflation
may also adversely affect the Company's net finance charge income. See
"Business -- Proprietary Credit Cards."
SEASONALITY
The Company's business, like that of most retailers, is subject to seasonal
influences, with a significant portion of net sales and net income realized
during the fourth quarter of each year, which includes the Christmas selling
season. In light of these patterns, selling, general, and administrative
expenses are typically higher as a percentage of net sales during the first
three quarters of each year, and working capital needs are greater in the last
quarter of each year. The fourth quarter increases in working capital needs have
typically been financed with internally generated funds, the sale of interests
in the Company's accounts receivable, and borrowings under the Company's
revolving credit facility. Generally, more than 30% of the Company's net sales
and over 50% of net income are generated during the fourth quarter. See "Risk
Factors -- Effect of General Economic Conditions; Seasonality",
"Business -- Seasonality" and Note 17 to the Company's Consolidated Financial
Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary needs for liquidity are to: acquire, renovate, or
construct stores; service debt; meet operating lease and other rental payment
obligations; and provide working capital for new and existing stores.
The Company estimates capital expenditures for fiscal 1997 will approximate
$110 million, primarily for the construction of seven new stores opening in
fiscal 1997, initial expenditures related to new stores scheduled to be opened
in fiscal 1998, several store expansions and renovations, and enhancements to
management information systems.
At February 1, 1997, total debt was 48.8% of total book capitalization, up
from 42.8% at February 3, 1996. Excluding subordinated debt of approximately
$225.8 million at February 1, 1997 and approximately $100.5 million at February
3, 1996, senior debt was 27.4% of total capitalization, down from 28.0% one year
ago.
As of February 1, 1997, the Company owed $120.3 million of mortgage debt
related to 26 of its owned store locations and other owned properties.
Management believes the market value of these properties significantly exceeds
the related indebtedness.
The increase in the May 3, 1997 and February 1, 1997 asset, liability, and
shareholders' equity classifications over the May 4, 1996 balances presented was
largely attributable to the acquisition and financing of the Parisian
transaction completed on October 11, 1996. For example, May 3, 1997 merchandise
inventories and property and equipment balances increased over May 4, 1996
balances primarily due to the value of the acquired Parisian inventories and
property and equipment.
May 3, 1997 goodwill and tradenames increased over the balance at May 4,
1996 due to goodwill of approximately $225 million recorded in conjunction with
the October 1996 Parisian acquisition.
May 3, 1997 subordinated debt increased over the balance at May 4, 1996 due
to the addition of Parisian's $125 million of 9 7/8% notes due 2003.
In fiscal 1996, on a pro forma basis, the Company would have incurred
approximately $81.7 million in operating lease and rent expense. It is expected
that minimum operating lease and rent expense for fiscal 1997 will remain
relatively constant as a percentage of sales.
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Net cash provided by operating activities was $82.5 million in fiscal 1996
and $66.6 million in fiscal 1995. In fiscal 1996 net income and depreciation and
amortization charges were offset by additional working capital needs of $14.3
million. In fiscal 1995, working capital needs were reduced by $14.0 million.
Net cash used in investing activities was $174.7 million in fiscal 1996 of
which $119.1 million was for the acquisition of Parisian and $61.0 million was
related to other capital expenditures. Net cash used in investing activities for
fiscal 1995 totaled $62.0 million, of which $51.5 million related to other
capital expenditures and $10.5 million was the cash portion of the purchase
price for the Company's acquisition of stores from the Parks-Belk Company.
Net cash provided by financing activities for fiscal 1996 totaled $66.4
million, which was primarily due to proceeds of $113.0 million from borrowings
on long-term debt netted against payments on such debt of $49.3 million. Net
cash provided by financing activities for fiscal 1995 totaled $7.0 million,
which was primarily due to proceeds of $32.3 million from borrowings on
long-term debt netted against payments on such debt of $20.3 million.
The Company currently has a $275 million unsecured Credit Facility with
several banks, which is available for general corporate purposes. The Credit
Facility, which matures in 1999, provides various borrowing options, including
prime rate and Eurodollar rates. As of May 30, 1997, the LIBOR-based, variable
interest rate on the Credit Facility was approximately 6.8% per annum.
Borrowings under the Credit Facility are, subject to certain qualifications,
limited to 55% of eligible inventories. As of May 30, 1997, the Company had
borrowings totaling $120.8 million outstanding under the Credit Facility and
unused availability of $154.2 million. The maximum amount outstanding under the
Credit Facility during fiscal 1996 was $176.7 million, at which time, the
Company had unused availability on the Credit Facility of $98.3 million. The
Company's previous $125 million revolving credit facility was replaced by the
Credit Facility in October 1996 in conjunction with the acquisition of Parisian
by the Company. The Company has engaged NationsBank and NCMI in connection with
the Company's efforts to amend its existing $275 million Credit Facility. The
proposed amendment seeks, among other things, to increase the facility to
$325-$400 million, extend the termination date to five years from the closing of
the amended credit facility and otherwise provide greater flexibility for the
Company. See "Description of Other Indebtedness -- Bank Credit Facilities."
In January 1997, an Accounts Receivable Subsidiary (as defined under
"Description of the Exchange Notes") of the Company entered into a $300 million
facility agreement (the "Proffitt's Accounts Receivable Facility") with a third
party financial institution for the sale of ownership interests in accounts
receivable, which expires in 1998. The Proffitt's Accounts Receivable Facility
requires a portion of finance charges earned to be allocated to the purchaser of
the ownership interests in the accounts receivable in an amount sufficient to
cover the yield on commercial paper utilized by the purchaser to finance the
transaction, plus fees and expenses. As of May 30, 1997, the interest rate on
the Proffitt's Accounts Receivable Facility, including program fees, was
approximately 6.0% per annum, and $219.5 million of receivables were sold
through the Proffitt's Accounts Receivable Facility at that date. As of February
1, 1997, $234.0 million of receivables were sold through the Proffitt's Accounts
Receivable Facility. Amounts sold are limited to 82% of eligible accounts
receivable.
The Proffitt's Accounts Receivable Facility replaced the following
facilities: (i) the Proffitt's and McRae's accounts receivable program ($175
million facility) and (ii) the Parisian accounts receivable program ($160
million facility). Maximum amounts sold under these facilities in fiscal 1996
were $172.4 million and $129.0 million, respectively.
Prior to February 3, 1996, Younkers utilized an accounts receivable
securitization program under which its receivables were used as collateral for
commercial paper issued by a wholly-owned special purpose subsidiary. Effective
with the February 3, 1996 acquisition by the Company, Younkers replaced amounts
borrowed under its prior securitization program with the Younkers Credit Card
Master Trust (the "Younkers Master Trust") including the sale of: (i) fixed rate
asset-backed securities of $75 million and (ii) variable ownership interests of
up to $50 million financed through variable rate asset-backed commercial paper.
The $75 million of receivables sold under the term asset-backed securities are
from a pool of $91.5 million of accounts receivable and remain fixed until 2000
at which time a portion of collections of outstanding
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<PAGE> 42
receivables will be retained by the purchaser until the $75 million is
amortized. The purchaser retains an allocation of finance charges earned on the
$75 million of receivables in an amount sufficient to provide a return of
approximately 6.5% per annum.
Additional sales of receivables up to $50 million are restricted on the
basis of the level of eligible receivables in excess of the $91.5 million
supporting the fixed pool and a minimum ownership interest to be retained by
Younkers. Younkers may obtain additional proceeds by increasing the ownership
interest transferred to the purchaser or reduce the purchaser's interest by
allowing a portion of the collections to be retained by the purchaser. The
purchaser retains an allocation of finance charge income equal to a variable
rate based on commercial paper or Eurodollar rates. The $50 million facility
expires in 1998. As of March 21, 1997, the interest rate was approximately 5.8%
per annum, and $5.0 million of Younkers' receivables were sold under this
facility at that date. The aggregate fixed and variable interests in receivables
sold in fiscal 1996 totaled $90.0 million.
The Company has engaged NCMI to restructure and combine its existing
accounts receivable securitization facilities into a new master trust, with a
view to issuing approximately $200 million of investment grade asset-backed
securities having terms of up to five years secured by the Company's credit card
receivables, while continuing to provide the Company with the ability to sell a
variable interest in proprietary credit card receivables to asset-backed
commercial paper conduits. It is currently anticipated that such a facility will
be established during or shortly after the Exchange Offer.
The Company anticipates its capital expenditures, working capital
requirements relating to planned new and existing stores and debt and lease
payment obligations will be funded through cash provided by operations and
borrowings under its Credit Facility. The Company expects to generate adequate
cash flows from operating activities to sustain current levels of operations,
debt service and lease payments. The Company maintains favorable banking
relations and anticipates the Credit Facility will be amended or new agreements
will be entered into in order to provide future borrowing requirements as
needed, although no assurance can be given in this regard. The Company also
believes it has access to a variety of other capital markets. The Company's goal
is to continue to maintain a strong balance sheet and prudent leverage,
providing the Company flexibility to capitalize on attractive opportunities for
growth. See "Description of Other Indebtedness."
The Company is using the net proceeds from the issuance of the Series A
Notes to repay certain outstanding mortgage and other indebtedness, to reduce
certain borrowings under the Credit Facility and for general corporate purposes.
As a result of the issuance of the Series A Notes and the application of the net
proceeds therefrom, the Company reduced the amount of its secured indebtedness,
reduced the amount of its indebtedness that bears interest at floating rates and
extended the average life of its indebtedness. The Company will not receive any
proceeds from the issuance of the Exchange Notes pursuant to the Exchange Offer.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." The new standard, which was effective for all sales of accounts
receivable beginning January 1, 1997, requires that a gain be recognized at the
time of sale to the extent the fair value of the undivided interest in the
receivables sold and the servicing rights retained exceed the carrying value of
the receivables. Historically, the Company has recognized the excess interest
earned on sold receivables over the life of the receivables. The effect of this
accounting change was immaterial to fiscal 1996.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share." The new standard changes the presentation and method
in which earnings per share are computed and is effective for the Company's year
ending January 31, 1998. The new standard will be applied on a "retroactive
restatement of all prior periods" basis. The Company is currently ascertaining
the impact the new standard will have on its earnings per share amounts for
fiscal 1996 and prior periods.
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<PAGE> 43
BUSINESS
THE COMPANY
The Company is a leading regional department store chain operating 175
stores in 24 states, primarily in the Southeast and Midwest. The Company
operates its stores under five chain names: Proffitt's (19 stores), McRae's (29
stores), Younkers (48 stores), Parisian (40 stores) and Herberger's (39 stores).
Each chain operates primarily as a leading branded traditional department store
in its communities, with Parisian serving as a better branded specialty
department store. Most of the stores are located in premier regional malls in
the respective trade areas served. The Company's stores offer a wide selection
of fashion apparel, accessories, cosmetics and decorative home furnishings,
featuring assortments of premier brands, private brands and specialty
merchandise. Each of the Company's chains operates with its own merchandising,
marketing and store operations team in order to tailor regional assortments to
the local customer. At the same time, the Company coordinates merchandising
among the chains and consolidates administrative and support functions to
realize scale economies, to promote a competitive cost structure and to increase
margins.
Under the leadership of R. Brad Martin and an experienced senior management
team, the Company has executed a disciplined acquisition strategy and strategic
approach to new store openings, growing from 11 stores and net sales of $94.8
million in fiscal 1989 to 175 stores and pro forma net sales of $2.3 billion in
fiscal 1996. In addition, the Company has increased EBITDA from $8.9 million in
fiscal 1989 to $167.2 million in fiscal 1996, on a pro forma basis.
Members of the Company's senior management have substantial investments in
the Company. As of April 25, 1997, Mr. Martin beneficially owned approximately
4.7% of the Company's Common Stock and all directors and executive officers of
the Company as a group beneficially owned approximately 13.2% of the Company's
Common Stock.
BUSINESS STRENGTHS
The Company believes that it is well-positioned to build upon its
historical success by capitalizing on its competitive strengths, including the
following:
Strong Regional Focus. The Company places a high priority on being a
market leader in each of the markets in which it operates. In smaller
communities, the Company's stores are frequently the only branded name
department store catering to middle and upper income customers and offering
an array of brands that frequently are not otherwise available to shoppers
in such markets. In most larger metropolitan markets, the Company seeks to
maximize its market share by operating multiple stores in prime locations.
While the Company has grown through the acquisition of regional chains, its
philosophy has been to (i) maintain existing trade names and retain
merchandising and store personnel and (ii) utilize previously developed
regional expertise and knowledge of the local customer base by allowing
each chain to tailor merchandise assortments to the local customer. The
Company believes that the increased sales and gross margins resulting from
a coordinated but decentralized merchandising effort outweigh any
incremental operating cost savings associated with a completely centralized
strategy.
Scale Economies. With pro forma sales of approximately $2.3 billion
in fiscal 1996, the Company realizes scale economies in purchasing and
distribution, administrative areas such as accounting, proprietary credit
card administration, management information systems, and other
infrastructure-related areas. Although the Company's chains control
regional merchandising, the Proffitt's Merchandising Group coordinates
merchandising, planning and execution, visual presentation, marketing and
advertising activities among the chains. The Proffitt's Merchandising Group
manages strategic relationships with the Company's top vendors to ensure
that each chain is afforded the purchasing leverage of the Company as a
whole. In addition to seeking economies of scale in purchasing, the
Proffitt's Merchandising Group will continue to capitalize on corporate
level marketing synergies, such as the coordination of media buying and
direct mail programs, the establishment of preferred advertising rates, and
the production of store catalogs.
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Proven Track Record of Integrating Acquisitions. In recent years, the
Company has grown primarily through the acquisition of strong, regional
department store chains at valuations believed to be attractive by
management. The following table sets forth certain information concerning
the Company's significant acquisitions:
<TABLE>
<CAPTION>
TRANSACTION VALUE(A)
AS A MULTIPLE OF:
EQUITY AS A % --------------------
DATE OF NUMBER TRANSACTION OF TRANSACTION LTM LTM
COMPANY ACQUIRED ACQUISITION OF STORES VALUE (A) VALUE(A) SALES(B) EBITDA(B)
- ---------------- ----------- --------- ----------- -------------- -------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
McRae's, Inc. .............. March 31, 1994 28 $264.8 5% 0.6x 5.3x
Younkers, Inc. ............. February 3, 1996 51 321.6 79 0.5 6.5
Parisian, Inc. ............. October 11, 1996 38 375.0 28 0.5 8.7
G.R. Herberger's, Inc. ..... February 1, 1997 39 176.9 88 0.5 7.4
</TABLE>
- ---------------
(a) Transaction value is the total consideration paid in the form of: (i) cash;
(ii) notes; (iii) equity (valued as of the announcement date for
pooling-of-interest transactions and in accordance with generally accepted
accounting principles for purchase accounting transactions); and (iv)
assumed long-term debt, net of cash, as of the end of the last full fiscal
quarter prior to the acquisition date.
(b) LTM Sales and LTM EBITDA of the acquired company represent data for the
twelve months ending on the last day of the last full fiscal quarter prior
to the acquisition date. Additionally, EBITDA for Herberger's is adjusted
for ESOP expense of $4.3 million. See "-- Summary Historical and Pro Forma
Financial and Operating Data" for the definition of EBITDA.
The Company employs a "best practices" approach to integrating acquired
companies. Best practices is a process whereby each acquired chain's operating
procedures and policies are reviewed to determine those practices which the
Company believes will increase synergies while minimizing business
interruptions. The Company believes the implementation of best practices
throughout the Company's chains has resulted in improved comparable store sales
and increased operating margins through better and more consistent inventory
control and pricing, and other operating efficiencies.
Strong Financial Position. The Company has been able to realize
significant growth while maintaining moderate leverage. Since February 1996, the
acquisitions of Younkers, Herberger's and Parisian have resulted in an increase
in net sales of approximately $1.6 billion, while senior debt as a percentage of
total capitalization decreased slightly. In addition to conservative balance
sheet management, the Company's strong cash flow generation has allowed it to
fund all capital expenditures, incremental working capital requirements and
fixed charges with internally generated cash flow. On a pro forma basis, the
Company's ratio of EBITDA to interest expense in fiscal 1996 would have been
3.7x. The Company's strong financial performance has provided it with
significant financial flexibility, including the ability to use its
publicly-traded common stock as consideration for selected acquisitions.
Geographic and Demographic Diversity. The Company operates 175 stores in
24 states. Stores are operated in metropolitan markets such as Atlanta, Georgia
and Indianapolis, Indiana, as well as in smaller markets such as Ames, Iowa and
Kalispell, Montana. The Company believes that its geographic diversity and the
demographic breadth of its target customer groups may to some extent serve to
insulate the Company from sales and earnings volatility typically associated
with poor weather conditions, or changes in local or regional economic
conditions.
Attractive Real Estate. The Company believes that its stores are primarily
located in premier malls in the markets in which the Company operates. As is
consistent with national trends, the Company further believes that construction
of new malls in many of its markets is likely to be limited. The Company
anticipates that the attractiveness of its existing locations, combined with
limited new mall development, may contribute to improved comparable store sales.
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BUSINESS STRATEGY
The Company's business objective is to maximize profitability and
shareholder value by (i) expanding its core business through comparable store
sales growth, new store openings and margin expansion, and (ii) monitoring
acquisition opportunities while maintaining a strong capital structure.
Comparable Store Sales Growth. The Company expects that comparable store
sales will benefit from a number of merchandising initiatives including (i)
implementing best practices, (ii) expanding sales of key brands, and (iii)
increasing sales of the Company's private brands. As part of best practices, the
Company benchmarks sales of product categories and brand assortments for each
store and identifies and targets opportunities to strengthen such sales by
altering the merchandise mix. The Company has successfully used this strategy by
applying the long history of strength in the cosmetics business of McRae's and
Proffitt's stores to increase the penetration and profitability of Younkers
stores' cosmetics business. The Company believes that it will be able to further
utilize this strategy to increase sales in the Younkers shoe business, increase
McRae's women's apparel sales and introduce home goods into select Parisian
stores.
The Company believes that comparable store sales will also benefit from
expanded sales of key brands, such as Tommy Hilfiger, Liz Claiborne, Jones New
York, Polo/Ralph Lauren, Calvin Klein, Guess, and Nine West, among others. The
Company's large scale and proven track record with these vendors has enabled the
Company to introduce certain of these brands into acquired stores which, prior
to combining with the Company, did not have access to these vendors. For
instance, Tommy Hilfiger, Nautica and Lancome will now be carried in select
Herberger's stores. Additionally, the Company plans to increase sales of its
private brand offerings within the apparel and housewares categories from 6% of
total net sales to 12% to 15% over the next two to three years. For example, the
Company has recently developed its own line of men's dress shirts and
accessories, under the brand name RBM. The RBM collection is designed to fill a
niche for quality men's furnishings at moderate prices.
New Store Openings. The Company plans to open 15 to 20 new stores across
all chains over the next three years and to make selective real estate
acquisitions in existing or new markets. The Company targets premier mall
locations principally based on favorable demographic profiles and trends, as
well as the compatibility and traffic draws of other tenants. High quality real
estate is a primary criterion for all new stores. In addition, the Company plans
to selectively remodel or expand certain existing stores.
Margin Expansion. The Company has implemented the following strategies to
increase margins: (i) leveraging key vendor relationships; (ii) capitalizing on
purchasing economies of scale; (iii) extending key brands into certain acquired
stores; (iv) shifting the merchandise mix toward higher margin products; (v)
increasing private brand penetration; (vi) consolidating administrative and
support areas and eliminating redundant expenses; and (vii) realizing
efficiencies related to the re-engineering of certain operating activities.
The Company intends to further increase gross margins by increasing sales
of its private brand products, which typically generate higher margins and
enhance customer loyalty. Operating margins are also expected to benefit from
sales productivity enhancements across the Company's chains and from the
integration cost savings programs developed by management in conjunction with
the Younkers, Parisian, and Herberger's acquisitions. These programs reduced
operating expenses by a total of $6 million in fiscal 1996 (consistent with the
Company's announced target) and are expected to produce annualized expense
savings of $20 million in fiscal 1997 and $29 million in fiscal 1998 (compared
to the 1995 cost structure of the chains on an independent basis).
Monitor Acquisition Opportunities. The Company has an established record
of successfully acquiring and integrating regional department store chains. The
Company believes that its philosophy of retaining the local identity and
merchandising organization of acquired companies makes the Company an attractive
acquirer for regional department store companies. The Company's criteria in
evaluating strategic opportunities include (i) strong market presence; (ii)
prime real estate locations; (iii) similar merchandising strategies targeted
toward middle to upper income consumers; (iv) geographic proximity to the
Company's core markets; (v) compatible corporate culture; and (vi) favorable
demographics in the regions served. Although the Company currently has no
agreements, arrangements or understandings with respect to future acquisitions,
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<PAGE> 46
the Company expects the department store industry will continue to consolidate
and the Company will regularly evaluate possible acquisition opportunities as
they arise.
Maintain Strong Capital Structure. The Company intends to maintain a
strong balance sheet to support its growth objectives. The fulfillment of this
objective has been facilitated by strong cash flows and the Company's issuance
of its Common Stock as all or part of the consideration used in its recent
acquisitions. The Company believes that, absent any additional acquisitions,
future cash flows from operations (with seasonal needs supplemented by
borrowings under its Credit Facility) will be sufficient to service debt and
lease payments and to fund capital expenditures and working capital
requirements.
DEPARTMENT STORES
Proffitt's. The Proffitt's chain operates 19 department stores located in
the Southeast and mid-Atlantic regions of the United States, with twelve of its
stores located in Tennessee. Proffitt's stores average approximately 95,000
gross square feet and approximately $149 in net sales per square foot of selling
space. The Proffitt's stores offer moderate to better brand name fashion
apparel, shoes, accessories, cosmetics and decorative home furnishings. Major
brands found in a typical Proffitt's store include Liz Claiborne, Calvin Klein,
Jones New York, Polo/Ralph Lauren, Tommy Hilfiger, Nautica, Marisa Christina,
Enzo, Nine West, Timberland, Levi's, Clinique, Lancome, and Estee Lauder.
Proffitt's stores are principally anchor stores in leading regional or community
malls. The Proffitt's chain is headquartered in Alcoa, Tennessee.
McRae's. The McRae's chain operates 29 stores located in four Southeastern
states, with 26 of its stores located in Mississippi and Alabama. McRae's stores
average approximately 101,000 gross square feet and approximately $183 in net
sales per square foot of selling space. The merchandise selection of the McRae's
chain is very similar to that of the Proffitt's chain with modifications for
regional tastes. The McRae's chain is headquartered in Jackson, Mississippi.
Younkers. Younkers is a leading fashion department store chain operating
48 stores located in Iowa, Nebraska, Wisconsin, Michigan, Illinois, Minnesota
and South Dakota. The Younkers stores average approximately 97,000 gross square
feet and approximately $149 in net sales per square foot of selling space.
Younkers' stores are generally located in mid-sized to smaller cities where
Younkers is one of the primary department stores and competition is more limited
than in major metropolitan areas.
Younkers stores are full-line department stores which offer a merchandise
selection similar to Proffitt's with modifications for regional taste. Younkers
also sells furniture and operates restaurants in certain of its stores. The
Younkers chain is headquartered in Des Moines, Iowa.
Parisian. The Parisian chain operates 40 specialty department stores
located in nine states, with 33 of its stores located in the Southeast and the
remainder located in the Midwest. The Parisian stores average approximately
107,000 gross square feet and approximately $228 in net sales per square foot of
selling space. Parisian's stores are generally anchor stores in enclosed
regional and premium malls.
Parisian carries moderate to better apparel, cosmetics, shoes, accessories
and gifts customarily found in other quality department stores, but does not
carry home furnishings, housewares, or furniture. In addition to popular brands
found in the Company's other department stores, Parisian carries premium lines
such as Brighton, Robert Talbott, Armani, Coach, and MAC cosmetics. Parisian
seeks to create a special shopping experience in its stores through carefully
selected fashion merchandise assortments, attractive store design, exciting
visual presentations and promotional events, and personal amenities that enhance
customer convenience and comfort.
The Parisian chain is headquartered in Birmingham, Alabama. Parisian stores
overlap with McRae's and Proffitt's stores in certain markets. In several
instances, these stores serve as anchor stores in the same mall. The Company
believes that the product offerings and image of the Parisian chain are distinct
and allow for the successful coexistence of these stores.
Herberger's. The Herberger's chain operates 39 stores located in ten
states throughout the Midwest and Great Plains states. Herberger's stores
average approximately 64,000 gross square feet and approximately $143
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in net sales per square foot of selling space. Most Herberger's stores are
located in rural population centers where Herberger's is generally the leading
brand name department store. Such markets typically encompass a retail trade
area ranging in size from approximately 50,000 to 300,000 people, although
certain stores are in larger markets where Herberger's believes it successfully
fulfills the customer's desire for a "neighborhood" department store.
Brands typically found in a Herberger's store include Liz Claiborne, Susan
Bristol, Chaps by Ralph Lauren, Calvin Klein, Woolrich, Timberland, Nike and
Estee Lauder. Prior to its acquisition by the Company, the size and location of
the Herberger's chain made it difficult to establish relationships with certain
popular and premium vendors as an independent company. As one of the Company's
chains, Herberger's has recently received commitments to introduce key brands
such as Tommy Hilfiger, Nautica, and Lancome in certain of its locations during
1997. The Herberger's chain is headquartered in St. Cloud, Minnesota.
Prior to its merger with the Company, Herberger's did not have an existing
proprietary credit card program. Instead, Herberger's had participated in a
co-branded VISA(R) program with a third-party financial institution which has
been terminated. On May 15, 1997, the Company introduced a proprietary credit
card at the Herberger's stores. Based on experience in its other chains, the
Company believes that the introduction of the proprietary credit card will
increase sales, improve customer loyalty and generate additional finance charge
income. The Herberger's proprietary credit card program will be administered
from the Company's central credit card processing center located in Jackson,
Mississippi.
Herberger's stores overlap with Younkers stores in Appleton, Wisconsin and
Waterloo, Iowa. The Company has announced that the Herberger's stores in
Appleton and Waterloo will be converted to Younkers stores to better leverage
advertising and promotion expenses.
MERCHANDISING
The Company's merchandising strategy is to provide middle to upper income
customers a wide assortment of quality fashion apparel, shoes, accessories,
cosmetics, and decorative home furnishings at competitive prices. The Company's
commitment to a branded merchandising strategy, enhanced by its merchandise
presentation and high level of customer service, makes it a preferred
distribution channel for premier brand-name merchandise. Key brands featured
include Liz Claiborne, Marisa Christina, Susan Bristol, Karen Kane, Jones New
York, Polo/Ralph Lauren, Tommy Hilfiger, Nautica, Calvin Klein, Guess, Haggar,
Estee Lauder, Clinique, Lancome, Vanity Fair, Nine West, Enzo, Coach, Brighton,
and Timberland. The Company's large scale and proven track record with these
vendors has enabled the Company to introduce certain of these brands into
acquired stores which prior to combining with the Company did not have access to
these vendors. The Company believes that the introduction of these key brands
will increase revenues and improve gross margins. The Company supplements its
name brand assortments with high quality private brands in selected merchandise
categories.
Private brand offerings are intended to provide national brand quality at
lower prices. During fiscal 1996 private brand offerings comprised approximately
6.0% of the Company's net sales. The Company believes that the extension of
certain existing private brands such as RBM and River Trader across the
Proffitt's, McRae's, Younkers and Herberger's chains, the introduction of
Parisian Signature as a premium brand in the stores of these chains, and the
introduction of other new private brands will enhance customer loyalty and
contribute to improved revenues and gross margin.
The Company has developed a detailed knowledge of each of its regional
markets and customer bases. This market knowledge and expertise has been gained
through the Company's regional merchandising structure in conjunction with
frequent store visits by senior management and merchandising personnel, as well
as, use of on-line merchandise information. The Company believes it is
successful in tailoring each store's merchandise assortments to the
characteristics of its markets and responding to demographic and customer
profiles.
The Proffitt's Merchandising Group coordinates merchandising planning,
execution, visual presentation, marketing, and advertising activities among the
chains. By so doing, the Proffitt's Merchandising Group
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enables the Company to leverage its purchasing power, monitor the performance of
brands and categories of merchandise on a per store and per buyer level, and
ensure consistency in standards across all of the chains. The Company believes
that the Proffitt's Merchandising Group will improve merchandise flow throughout
the Company, resulting in higher sales and margins and improvements in inventory
turnover.
Certain departments in the Company's stores are leased to independent
companies in order to provide high quality service and merchandise where
specialization and expertise are critical and economics do not justify the
Company's direct participation in the business. Leased departments include fine
jewelry, beauty salon, and maternity departments. The terms of the lease
agreements typically are between one and three years and require the lessee to
pay for fixtures and provide its own employees. Leased department sales are
included in the Company's net sales. Management regularly evaluates the
performance of the leased departments and requires compliance with established
customer service guidelines. See Note 1 to the Company's Consolidated Financial
Statements.
PRICING
The Company's primary merchandise focus is on moderate to better nationally
branded merchandise and private brands. Management believes that customers
respond to promotional events more favorably than they do to "everyday low
pricing." Accordingly, while the Company continues to maintain a competitive
pricing structure that provides value to its customers, the Company's business
includes various promotional events throughout the year.
The Company recognizes that competitors sometimes price merchandise below
the Company's prices. In such situations, it is the Company's policy to match
competitor's prices. Accordingly, sales associates have the authority to reduce
the price of any merchandise if the customer has seen the same item advertised
or sold at a lower price in the same geographic market.
PURCHASING AND DISTRIBUTION
The Company purchases merchandise from numerous suppliers. Management
monitors the Company's profitability and sales history with each supplier and
believes it has alternative sources available for each category of merchandise
it purchases. Management believes it has good relationships with its suppliers.
The 85,000 square foot distribution facility serving the Proffitt's chain
is located in metropolitan Knoxville, Tennessee, and the 164,000 square foot
distribution center for the McRae's chain is located in Jackson, Mississippi.
The Younkers chain is served by two distribution facilities. A 182,000 square
foot center in Green Bay, Wisconsin serves Younkers' northern stores, and a
120,000 square foot facility in Ankeny, Iowa serves Younkers' southern stores.
Parisian's 125,000 square foot distribution facility is located in Birmingham,
Alabama. Herberger's operates a 98,000 square foot distribution center near St.
Cloud, Minnesota.
The Company believes its distribution centers effectively utilize current
technology. The Company utilizes UPC bar code technology which is designed to
move merchandise onto the selling floor more quickly and cost-effectively by
allowing vendors to deliver floor-ready merchandise to the distribution
facilities. For example, high speed automated conveyor systems are capable of
scanning bar coded labels and diverting cartons to the proper merchandise
processing areas. Some types of merchandise are being processed in the receiving
area and immediately "cross-docked" to the shipping dock for delivery to the
stores. Certain processing areas are staffed with personnel equipped with
hand-held radio frequency terminals that can scan a vendor's bar code and
transmit the necessary information to a computer to check-in merchandise. As
utilization of this technology increases, it is expected to create a nearly
paperless environment for the distribution function.
The Company believes that opportunities may arise in the future to reduce
the number of its distribution centers, further improving the Company's
competitive cost structure. The Company is also undertaking several initiatives
to increase the percentage of floor-ready merchandise handled by its
distribution centers. Management believes that increases in the percentage of
floor-ready merchandise will reduce costs and improve the flow of goods to the
stores thereby improving inventory turnover.
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<PAGE> 49
MANAGEMENT INFORMATION SYSTEMS
The Company's information systems provide information necessary for:
management operating decisions; sales and margin management; inventory control,
profitability monitoring by many measures (brand, family of business, buyer,
store, division), cost reduction programs; and gauging the success of customer
service enhancements. Data processing systems include point-of-sale reporting,
purchase order management, receiving, merchandise planning and control, payroll,
general ledger, credit card administration, and accounts payable. Bar code
ticketing is used, and scanning is utilized at all point-of-sale terminals to
ensure timely sales and margin data compilation and to provide for inventory
control monitoring. Information is made available on-line to merchandising staff
and store management on a timely basis, thereby reducing the need for paper
reports. The Company uses electronic data interchange ("EDI") with certain of
its vendors to facilitate timely merchandise replenishment. The Company believes
that the further use of EDI with its vendors will improve inventory turnover and
lower the administrative costs associated with invoice processing and
settlement.
The Company has historically upgraded, and expects to continue to upgrade,
its information systems to improve operations and support future growth. The
Company estimates it will make capital expenditures of approximately $20 million
to $25 million over the next three years for enhancements to its management
information systems. The Company has engaged IBM to lead the structure, design
and implementation of state-of-the-art systems.
MARKETING
The Company's advertising and promotions are coordinated to reinforce its
market position as a fashion department store selling quality merchandise at
competitive prices. Advertising is divided among fashion advertising, price
promotions, and special events.
The Company uses a multi-media approach, including newspaper, television,
radio, and direct mail. The Company's advertising and special events are
produced by each chain's in-house sales promotion staff in conjunction with
outside advertising agencies. The Company utilizes data captured through the use
of its proprietary credit cards to develop segmented advertising and promotional
events targeted at specific customers who have established purchasing patterns
for certain brands, departments, and store locations. To promote its image as
the fashion leader in its markets, the Company also sponsors fashion shows and
in-store special events highlighting the Company's key brands. The Proffitt's
Merchandising Group coordinates and assists the stores' marketing and
advertising to maintain quality and obtain better advertising rates. See
"-- Merchandising."
PROPRIETARY CREDIT CARDS
The Company issues proprietary credit cards for each of the Proffitt's,
McRae's, Younkers, and Parisian chains and introduced a Herberger's credit card
on May 15, 1997. Approximately 46.1% of net sales (excluding Herberger's sales
because Herberger's did not have a proprietary credit card) in fiscal 1996 were
charged to the Company's proprietary credit cards. Frequent use of the Company's
proprietary credit cards by customers is an important element in the Company's
marketing and growth strategies and generates significant finance charge income
which augments the income received from the sale of merchandise. The Company
believes that proprietary credit card holders shop more frequently with the
Company, purchase more merchandise, and are generally more loyal to the Company
than are customers who pay with cash or third-party credit cards. As previously
mentioned, the Company also makes frequent use of the names and addresses of its
proprietary credit card holders in direct marketing efforts. The introduction of
a proprietary credit card will allow Herberger's to participate in the Company's
credit card based promotional activities.
The Company seeks to expand the number and use of its proprietary credit
cards by, among other things, providing incentives to sales associates to open
"instant credit" accounts, which can generally be opened within approximately
three minutes through use of an automated voice response unit which provides
rapid credit checks. Also, customers who open accounts are entitled to certain
discounts on initial and subsequent purchases. At Younkers stores, the Company
has introduced a "Younkers Gold Card" to preferred customers which enables
cardholders to receive "points" for each credit card purchase. Points can be
redeemed for
47
<PAGE> 50
discounts on subsequent purchases. Historically, cardholders redeeming points
have tended to make purchases in addition to the merchandise purchased on
redemption of points. Based on its experience with the Younkers Gold Card, the
Company is evaluating whether to introduce the gold card concept in its other
chains.
The Company has approximately 4.0 million credit cards outstanding, of
which approximately 2.0 million accounts have been active within the last six
months. The Company employs state-of-the-art systems to monitor and administer
its credit cards through the Vision 21 system. All credit card service is
currently conducted centrally from the Company's facility in Jackson,
Mississippi, except the Parisian credit card service which will move to Jackson
on or about June 15, 1997. The Company believes that it takes appropriate steps
to control losses in its credit card portfolio. For instance, the Company
conducts behavior scoring on all active card holders semi-annually and utilizes
the results to adjust credit limits and/or terminate certain accounts.
PROPOSED CREDIT CARD BANK
The origination of receivables at the operating division level subjects the
Company to regulatory compliance in each of the 24 states in which it currently
operates at least one store. State laws, among other things, impose interest
ceilings and may restrict the application of certain other finance charges
(e.g., late fees). The Company believes that the formation of a nationally
chartered bank (to be created as a wholly-owned subsidiary) as the issuer of its
proprietary credit cards would enhance its profitability by: (i) allowing for
the standardization of terms across all divisions, (ii) providing for the
exportation of interest rates and late fee income across the franchise states,
and (iii) allowing for future flexibility and potential income generation
through various other programs (e.g., co-branded MasterCard(R) and VISA credit
cards). The Company is considering forming a special purpose credit card bank to
issue proprietary credit cards on behalf of the Company's various chains. The
Company expects that a credit card bank would create efficiencies and cost
savings, and enhance finance charge revenue.
CUSTOMER SERVICE
The Company believes that personal customer attention builds loyalty and
that the Company's sales associates provide a level of customer service superior
to its competitors. Each store is staffed with knowledgeable, friendly sales
associates skilled in salesmanship and customer service. Sales associates
maintain customer records, send personalized thank-you notes, and communicate
personally with customers to advise them of special promotions and new
merchandise offerings. Superior customer service is encouraged through the
development and monitoring of sales and productivity goals and through specific
award and recognition programs. The Company also builds customer loyalty through
various amenities including special parking spaces for expectant mothers, infant
changing tables in customer restrooms on each floor of a store, in-store cooking
and decorating classes and fashion shows.
ASSOCIATES
On March 31, 1997, the Company employed approximately 27,000 associates, of
which approximately 13,000 were employed on a part-time basis. The Company hires
additional temporary employees and increases the hours of part-time employees
during seasonal peak selling periods. Approximately 20 associates in a Younkers
distribution center are covered by collective bargaining agreements. The Company
considers its relations with its employees to be generally good.
PROPERTIES
Proffitt's leases a 44,000 square foot administrative office and owns an
85,000 square foot distribution center, both of which are located in
metropolitan Knoxville, Tennessee.
McRae's owns a 272,000 square foot administrative office building and a
164,000 square foot distribution center in Jackson, Mississippi. The Jackson
facility also serves as the Company's operations center and houses central
support functions for all of the divisions including certain accounting
functions, inventory control, management information systems, credit
administration and distribution management.
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<PAGE> 51
Younkers leases a 127,000 square foot administrative office located in Des
Moines, Iowa. Younkers owns a 120,000 square foot distribution center and a
182,000 square foot distribution center in Ankeny, Iowa and Green Bay,
Wisconsin, respectively.
Parisian owns a 125,000 square foot administrative office building and a
125,000 square foot distribution facility, both of which are located in
Birmingham, Alabama. The Birmingham office building also serves as the Company's
administrative headquarters for various support areas for all of the divisions
including the Proffitt's Merchandising Group, Finance and Treasury, Budgeting
and Planning, Legal, and Human Resources.
Herberger's owns a 58,000 square foot administrative office located in its
St. Cloud, Minnesota store, and a 98,000 square foot distribution center located
in Sartell, Minnesota.
The Company operates 175 stores in 24 states with 16.2 million gross square
feet and 13.3 million selling square feet. The Company owns 26 of its store
locations and leases 149. Store leases generally require the Company to pay a
base rent plus an amount based on a percentage of sales. Generally, the Company
is responsible under its store leases for a portion of mall promotion and common
area maintenance expenses and for certain utility, property tax and insurance
expenses.
COMPETITION
The department store business is highly competitive. The Company's stores
compete with national and regional department store chains. The Company also
competes with local stores that carry similar categories of merchandise. The
Company believes it has a competitive price structure and generally competes on
the basis of pricing, quality, merchandise selection, availability of credit
under its various proprietary credit card programs, customer service and
amenities, and store design and locations. The Company's success also depends in
part on its ability to anticipate and respond to changing merchandise trends and
customer preferences and demands in a timely manner. See "Risk
Factors -- Competition."
LEGAL PROCEEDINGS
The Company is involved in various legal proceedings arising from its
normal business activities. Management believes that none of these legal
proceedings will have a material adverse effect on the financial condition or
results of operations of the Company.
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<PAGE> 52
MANAGEMENT
The Company's directors and executive officers are as follows:
<TABLE>
<CAPTION>
AGE AS OF
MAY 15,
NAME 1997 POSITION
- ---- --------- --------
<S> <C> <C>
R. Brad Martin............................ 45 Chairman of the Board of Directors and
Chief Executive Officer
James A. Coggin........................... 54 President and Chief Operating Officer
Julia A. Bentley.......................... 38 Senior Vice President of Investor
Relations and Planning and Secretary
Douglas E. Coltharp....................... 36 Executive Vice President and Chief
Financial Officer
Brian J. Martin........................... 40 Executive Vice President of Law and
General Counsel
Robert M. Mosco........................... 47 President and Chief Executive Officer
of Proffitt's Merchandising Group
Donald E. Wright.......................... 39 Senior Vice President of Finance and
Accounting
Dawn H. Robertson......................... 54 President and Chief Executive Officer
of McRae's
Toni E. Browning.......................... President and Chief Executive Officer
of Proffitt's Division
William D. Cappiello...................... 53 President and Chief Executive Officer
of Parisian
Frank E. Kulp, III........................ 53 President and Chief Executive Officer
of Herberger's
Mark Shulman.............................. President and Chief Executive Officer
of Younkers
Bernard E. Bernstein...................... 65 Director
Edmond D. Cicala.......................... 71 Director
Ronald de Waal............................ 44 Vice Chairman of the Board of
Directors and Director
Gerard K. Donnelly........................ 63 Director
Donald F. Dunn............................ 71 Director
W. Thomas Gould........................... 50 Director
Michael S. Gross.......................... 35 Director
Donald E. Hess............................ 48 Director
G. David Hurd............................. 67 Director
Richard D. McRae.......................... 75 Director
C. Warren Neel............................ 58 Director
Harwell W. Proffitt....................... 78 Director
Marguerite W. Sallee...................... 50 Director
Gerald Tsai, Jr........................... 67 Director
</TABLE>
R. Brad Martin has served as a Director since 1984 and became Chairman of
the Board in February 1987 and Chief Executive Officer in July 1989. Mr. Martin
previously served as President from July 1989 until March 1994 and from
September 1994 to March 1995. Mr. Martin serves on the Board of Directors of
Delta Life Corporation, First Tennessee National Corporation, Harrah's
Entertainment, Inc., and Pilot Corporation. Mr. Martin and Brian J. Martin are
brothers.
James A. Coggin was named President and Chief Operating Officer of the
Company in March 1995 and served as Executive Vice President and Chief
Administrative Officer of the Company from March 1994 to
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<PAGE> 53
March 1995. From June 1978 to March 1994, Mr. Coggin served as Executive Vice
President and Chief Administrative Officer of McRae's. Mr. Coggin joined McRae's
in 1971.
Julia A. Bentley was named Senior Vice President of Investor Relations and
Planning and Secretary of the Company in March 1994. From January 1993 to March
1994, Ms. Bentley served as Senior Vice President of Finance, Chief Financial
Officer, Secretary and Treasurer, and from March 1989 to January 1993, she
served as Vice President, Chief Financial Officer, Secretary, and Treasurer. Ms.
Bentley is a Certified Public Accountant and joined the Company in 1987 after
several years with an international public accounting firm.
Douglas E. Coltharp joined the Company in November 1996 as Executive Vice
President and Chief Financial Officer. Mr. Coltharp was with NationsBank from
1987 to November 1996, where he held a variety of senior positions including his
most recent post of Senior Vice President of Corporate Finance.
Brian J. Martin was named Executive Vice President of Law and General
Counsel in April 1997. He served as Senior Vice President of Human Resources and
Law and General Counsel from August 1995 to April 1997 and served as Senior Vice
President and General Counsel of the Company from March 1995 to August 1995. He
joined the Company in 1994 as Vice President and General Counsel. From June 1990
to May 1994, Mr. Martin was affiliated with the Indianapolis, Indiana law firm
of Barnes & Thornburg. Mr. Martin served as Assistant Solicitor General of the
United States between January 1988 and June 1990. Mr. Martin and R. Brad Martin
are brothers.
Robert M. Mosco was promoted to President and Chief Executive Officer of
Proffitt's Merchandising Group in October 1996. Between February 1996 and
October 1996, Mr. Mosco served as President and Chief Executive Officer of
Younkers. Mr. Mosco served as President and Chief Operating Officer of Younkers
between 1992 and January 1996. From 1989 to 1992, he held the position of
Executive Vice President of Merchandising and Marketing for Younkers. Mr. Mosco
joined Younkers in 1987. Mr. Mosco began his retail career with Gimbel's and
later worked for Rich's Department Stores.
Donald E. Wright joined the Company in April 1997 as Senior Vice President
of Finance and Accounting. Mr. Wright is a Certified Public Accountant and was a
Partner with the international accounting firm of Coopers & Lybrand. He joined
Coopers & Lybrand in 1979.
Dawn H. Robertson joined the Company in May 1997 as President and Chief
Executive Officer of McRae's. Ms. Robertson previously worked for the Kaufmann's
division of May Department Stores, where she most recently held the post of
Senior Vice President and General Merchandise Manager. Ms. Robertson joined
Kaufmann's in 1985, and prior to that, she held various merchandising positions
with the G. Fox division of May and with R.H. Macy.
Toni E. Browning was appointed President and Chief Executive Officer of the
Proffitt's department stores in May 1997. Ms. Browning was most recently Senior
Vice President of Stores for Younkers. She has held previous department store
and merchandising positions with Dayton Hudson Corporation and with both the
Lazarus and Blocks Divisions of Federated/Allied Stores.
William D. Cappiello joined the Company in April 1997 as President and
Chief Executive Officer of Parisian. Mr. Cappiello held a variety of management
and executive positions in both merchandising and store areas with R.H. Macy &
Co. between 1971 and April 1997. From June 1993 to April 1997, he served as
President of Macy's West, Inc. and from August 1985 to May 1993, he was Director
of Stores for Macy's West.
Frank E. Kulp, III was named President and Chief Executive Officer of
Herberger's in March 1997. Between November 1995 and March 1997, he was a Senior
Vice President and General Merchandise Manager for Younkers. From 1987 to 1995,
Mr. Kulp held the post of President and Chief Operating Officer of Lamonts, a
department store chain headquartered in Bellevue, Washington. He held previous
merchandising management positions with Donaldson's and Lazarus department
stores. Lamonts filed a petition for reorganization under the Bankruptcy Code in
January 1995.
Mark Shulman joined the Company in May 1997 as President and Chief
Executive Officer of the Younkers department stores. Prior to joining the
Company, Mr. Shulman was Executive Vice President and
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<PAGE> 54
Chief Merchandising Officer of Stage Stores, Inc. since 1994. He was previously
the President of the Dress Division for Leslie Fay, Inc., held the posts of
President and Chief Operating Officer of Bonjour, Inc., and served as President
and Chief Executive Officer of both Henri Bendel and Ann Taylor Stores
Corporation.
Bernard E. Bernstein has served as a director since 1987. Mr. Bernstein is
a partner in the Knoxville, Tennessee law firm of Bernstein, Stair & McAdams.
Edmond D. Cicala has served as a director since 1987. Mr. Cicala is
President of Edmond Enterprises, Inc., and is the retired Chairman and Chief
Executive Officer of the Goldsmith's Division of Federated Department Stores.
Mr. Cicala is a Director of National Commerce Bancorporation, Memphis, Tennessee
and Evans, Inc.
Ronald de Waal has served as a director since 1985. He was elected Vice
Chairman of the Board of Directors in April 1997. Mr. de Waal is Chairman of We
International, B.V., a Netherlands corporation, which operates more than 250
fashion specialty stores in Belgium, the Netherlands, Switzerland, and Germany.
Gerard K. Donnelly has served as a director since 1996. Mr. Donnelly has
been Chairman of Princeton Middletown Partners, Inc., a consulting company,
since February 1994. From 1990 to January 1994, Mr. Donnelly was President,
Chief Executive Officer, and director of H. C. Prange Company, a specialty
retailer. H. C. Prange filed a petition for reorganization under the Bankruptcy
Code in September 1994.
Donald F. Dunn has served as a director since 1996. Mr. Dunn is a retired
Senior Vice President and director of Allied Stores Corporation. Mr. Dunn serves
on the Board of Directors of Tech Data Corporation.
W. Thomas Gould served as Vice Chairman of the Company and Chairman of
Younkers from February 1996 to April 1997. Mr. Gould served with Younkers as
Chief Executive Officer from 1987 to January 1996. Mr. Gould will retire as a
director as of the Company's annual meeting of shareholders scheduled for June
1997.
Michael S. Gross has served as a director since 1994. Mr. Gross is Vice
President of Apollo Capital Management, Inc., the general partner of Apollo
Advisors, L.P. Mr. Gross serves on the Board of Directors of Converse, Inc.,
Florsheim Group, Inc., Furniture Brands International, Inc., Allied Waste, Inc.
and Urohealth, Inc.
Donald E. Hess in October 1996 became a Director and was named Chairman of
Parisian in April 1997. He served as President and Chief Executive Officer of
Parisian from October 1996 to April 1997. Mr. Hess served as President and Chief
Executive Officer between 1986 and October 1996. He serves on the Board of
Directors of AmSouth Bancorporation.
G. David Hurd has served as a director since 1996. Mr. Hurd served as
Chairman and Chief Executive Officer of The Principal Financial Group, an
insurance and financial services company, from 1989 until his retirement in
December 1994. Mr. Hurd is the Emeritus Chairman of The Principal Financial
Group.
Richard D. McRae has served as a director since 1994. Mr. McRae is the
former Chairman, President, and Chief Executive Officer of McRae's. Mr. McRae
will retire as a director as of the Company's annual meeting of shareholders
scheduled for June 1997.
C. Warren Neel has served as a director since 1987. Dr. Neel is Dean of the
College of Business Administration at the University of Tennessee, Knoxville.
Dr. Neel serves on the Board of Directors of American Healthcorp, Inc., Clayton
Homes, Inc., O'Charley's, Inc., and The Promus Companies, Inc.
Harwell W. Proffitt has served as a director since 1971. Mr. Proffitt is
the former Chairman, President, and Chief Executive Officer of Proffitt's. Mr.
Proffitt will retire as a director as of the Company's annual meeting of
shareholders scheduled for June 1997.
Marguerite W. Sallee has served as a director since 1996. Ms. Sallee is
President and Chief Executive Officer of Corporate Family Solutions. Ms. Sallee
serves on the Board of Directors of MagneTek, Inc., and NationsBank of Tennessee
and Kentucky.
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<PAGE> 55
Gerald Tsai, Jr. has served as a director since 1993. Mr. Tsai is Chairman,
President, and Chief Executive Officer of Delta Life Corporation. Mr. Tsai
serves on the Board of Directors of Meditrust, Rite Aid Corporation, Sequa
Corporation, Triarc Companies, Inc., Delta Life and Annuity Company and Zenith
National Insurance Corporation.
The business association of the persons as shown has been continued for
more than five years unless otherwise noted.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the years ended February 1, 1997,
February 3, 1996, and January 28, 1995, the cash compensation paid by the
Company, as well as other compensation paid or accrued for these years to the
Company's Chief Executive Officer and to each of the other four highest
compensated executive officers ("Named Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
---------------------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
------------------------------------------- RESTRICTED OPTIONS
NAME & PRINCIPAL OTHER ANNUAL STOCK AWARD(S) GRANTED ALL OTHER
POSITION YEAR SALARY ($) BONUS ($)(A) COMPENSATION ($)(B) (#) COMPENSATION($)
---------------- ---- ---------- ------------ --------------- -------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. Brad Martin............ 1996 $536,031 $609,382(c) $27,700(d) $683,321(e)(f) $ 7,800(g)
Chairman of the Board 1995 445,833 233,250(h) 27,700(d) 312,000(i) 20,000 7,140(g)
and Chief Executive 1994 383,334 293,438(i) 27,700(d) 95,000 7,140(g)
Officer
James A Coggin(k)......... 1996 450,000 376,450(c) 373,750(e)(f)
President and Chief 1995 358,333 108,600(h) 20,000
Operating Officer 1994 270,833 208,125(j) 60,000
Robert M. Mosco(k)........ 1996 450,000 229,167 160,430(e) 60,000 37,500(l)
President and Chief 1995
Executive Officer 1994
of Proffitt's
Merchandising
Group
W. Thomas Gould(k)........ 1996 750,000 372,799(m) 100,000
Former Vice Chairman 1995
of Board and 1994
Chairman the
Younkers Division
Tom R. Amerman(k)......... 1996 300,000 87,750 25,000
Former Executive 1995
Vice President 1994
of Special
Projects
</TABLE>
- ---------------
(a) Amounts awarded under the Incentive Compensation Plan for the respective
fiscal years, even if deferred.
(b) As of February 1, 1997, the number and value (based on the $36.25 closing
price of Common Stock as of January 31, 1997) of shares of restricted stock
held by each of the Named Officers were as follows: Mr. Martin, 35,000
shares ($1,268,750); Mr. Coggin, 20,000 shares ($725,000); and Mr. Mosco,
12,500 shares ($453,125). Messrs. Gould and Amerman had no restricted stock
holdings at that date.
(c) Includes stock grants to Messrs. Martin and Coggin of 5,000 and 2,500 shares
of the Company's Common Stock, respectively.
(d) In February 1989, the Company entered into a compensation agreement with R.
Brad Martin which provides for a $500,000 interest-free loan due January
31, 1999 or upon Mr. Martin's termination of
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<PAGE> 56
employment with the Company. Other Annual Compensation represents imputed
interest on that interest-free loan.
(e) In 1996, Messrs. Martin, Coggin, and Mosco were granted 25,000, 15,000, and
12,500 shares of Company Common Stock under a Restricted Stock Grant
Agreement under the Company's 1994 Long-Term Incentive Plan. Restrictions
shall lapse as a function of the Company achieving certain performance
goals. Under the Plan, shares will be earned ("Earned Shares") on the basis
of achieving these goals for 1996, 1997, and 1998. Restrictions will be
removed from 25% of such Earned Shares at the time they are earned, and
restrictions shall be removed from an additional 25% of such Earned Shares
at the end of each of the following three years. As of February 1, 1997,
8,333, 5,000, and 4,167 shares were Earned Shares for Messrs. Martin,
Coggin, and Mosco, respectively, and 2,083, 1,250, and 1,042 shares were
vested for Messrs. Martin, Coggin, and Mosco, respectively.
(f) Includes restricted stock awards of 10,000 and 5,000 shares of the Company's
Common Stock for Messrs. Martin and Coggin, respectively, which were
granted at the market price of $36.25 on the January 31, 1997 date of grant
(valued at $362,500 and $181,250 for Messrs. Martin and Coggin,
respectively). The awards will fully vest one year from the date of grant.
(g) Economic benefit of split dollar life insurance policy.
(h) Includes stock grants to Messrs. Martin and Coggin of 5,000 and 1,500 shares
of the Company's Common Stock, respectively, which were granted at the
market price of $32.25 on the March 21, 1996 date of grant (valued at
$161,250 and $48,375 for Messrs. Martin and Coggin, respectively).
(i) Represents a restricted stock award of 13,000 shares of the Company's Common
Stock which was granted at the market price of $24.00 on the February 12,
1996 date of grant. The award fully vested one year from the date of grant.
(j) Includes stock grants to Messrs. Martin and Coggin of 5,000 and 2,500 shares
of the Company's Common Stock, respectively, which were granted at the
market price of $21.50 on the February 6, 1995 date of grant (valued at
$107,500 and $53,750 for Messrs. Martin and Coggin, respectively).
(k) The hire date for Mr. Coggin was April 1, 1994 and for Messrs. Amerman,
Gould, and Mosco was February 3, 1996. Mr. Amerman resigned effective
February 7, 1997. Mr. Gould terminated his employment effective April 1,
1997. See "-- Mr. Gould's Employment Agreement."
(l) One-time relocation bonus.
(m) Reimbursement payment of excise, federal, and Medicare taxes.
EMPLOYMENT CONTRACTS
All of the Named Officers and certain other officers have employment
agreements with the Company. All agreements fix the Named Officers minimum base
compensation for the fiscal year and provide for participation by such officers
in employment benefit plans as the Company may adopt. The agreements for Messrs.
Martin, Coggin, and Mosco expire on May 9, 2002, October 11, 1999, and February
5, 2000, respectively. Mr. Amerman resigned on February 7, 1997, and his
agreement expired on that date. For terms of Mr. Gould's employment, see "-- Mr.
Gould's Employment Agreement." Under the terms of each agreement, each Named
Officer (excluding Mr. Gould) is entitled to receive his base salary for the
remainder of his employment period in the event he is terminated without cause.
If the termination is involuntary and due to a change in control or a potential
change in control, he is entitled to receive his base salary then in effect for
the greater of the remaining term of his agreement or twenty-four months. Annual
base salaries currently in effect are as follows: Messrs. Martin, $625,000;
Coggin, $510,000; and Mosco, $500,000. A "Change in Control" is defined as: (i)
the acquisition of 25% or more of the combined voting power of the Company's
outstanding securities, (ii) a tender offer, merger, sale of assets, or other
business combination which results in the transfer of a majority of the combined
voting power of the Company or any successor entity, or (iii) during any two
consecutive year period, the failure to elect a majority of the individuals
constituting the Board of Directors of the Company prior to the commencement of
such period, unless the election or nomination of any replacement Directors was
approved by vote of at least two-thirds of the Directors of the Company then
still in office who were Directors of the Company at the beginning of such
period. A "Potential Change in Control" is defined as: (i) the approval by the
shareholders of the Company of an agreement which, if consummated, will result
in a change of control or (ii) the acquisition of 5% or more of
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<PAGE> 57
the outstanding voting securities of the Company and the adoption by the
Company's Directors of a resolution to the effect that a potential change in
control of the Company has occurred.
The Company also entered into an employment agreement with Robert M. Mosco
in conjunction with the Company's February 3, 1996 business combination with
Younkers. Under the terms of that Employment Agreement, Mr. Mosco had the right
to terminate his employment with the Company in the 13th month after the
business combination. In such event, he would have received a lump sum severance
payment in an amount equal to (i) salary through the date of termination and
bonus for the then-current year, (ii) three times Mr. Mosco's highest annual
salary in effect during the 12-month period prior to termination and three times
Mr. Mosco's average bonus in respect of the three immediately preceding fiscal
years, (iii) any unvested benefit under Younkers' defined benefit pension plan,
and (iv) any unvested employer contributions under Younkers' defined
contribution plan. In connection with Mr. Mosco's entering into a new Employment
Contract that expires on February 5, 2000, Mr. Mosco waived his right to
terminate employment and receive such compensation. In connection with that
waiver, the Company paid Mr. Mosco $1.1 million on February 3, 1997.
MR. GOULD'S EMPLOYMENT AGREEMENT
The Company entered into the employment agreement with Mr. Gould in
conjunction with the Company's February 3, 1996 acquisition of Younkers.
February 3, 1996 was the effective date of the agreement ("Effective Date"). Mr.
Gould's employment agreement, as amended ("Employment Agreement") has a five
year term and provides that Mr. Gould will be paid a minimum annual base salary
of $750,000. Mr. Gould's Employment Agreement provides that each of the Company
and Mr. Gould may terminate Mr. Gould's Employment Agreement prior to its
expiration upon thirty days prior written notice; provided, however, that such
notice may not be provided for at least one year from the Effective Date, and
provided further that Mr. Gould's payments thereunder are not terminated by
virtue of his notice. Mr. Gould terminated his employment with the Company
effective April 1, 1997. Under the terms of the Employment Agreement, the
Company will continue to pay Mr. Gould his annual salary and continue to provide
Mr. Gould with medical and life insurance coverage during the remaining term of
the Employment Agreement. In the event Mr. Gould's payments are subject to an
excise tax under Section 4999 of the Internal Revenue Code, he will receive a
reimbursement payment to offset such tax.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Proffitt's, Inc. 1994 Long-Term Incentive Plan ("Plan") to the
Named Officers as of fiscal year end.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL REALIZABLE VALUE
% OF AT ASSUMED ANNUAL RATES
TOTAL OPTIONS OF STOCK PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE OR FOR OPTION TERM(C)
GRANTED EMPLOYEES BASE PRICE EXPIRATION ---------------------------
NAME (#)(A) IN FISCAL YEAR ($/SHARE)(B) DATE 5% ($) 10% ($)
- ---- ------- -------------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
R. Brad Martin.......... -- -- -- -- -- --
James A. Coggin......... -- -- -- -- -- --
Robert M. Mosco......... 50,000(d) 10.2 $24.50 2/5/06 $ 770,396 $1,952,335
10,000(d) 2.0 39.75 10/28/06 249,986 633,513
W. Thomas Gould......... 100,000(d) 20.4 24.50 4/1/99(e) 1,540,792 3,904,669
Tom R. Amerman.......... 25,000(f) 5.1 24.50 5/8/97(g) 385,198 976,167
</TABLE>
- ---------------
(a) Under the terms of the Plan, the Stock Option Committee retains discretion,
subject to Plan limits, to modify the terms of outstanding options and to
reprice the options.
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<PAGE> 58
(b) All options were granted at the market closing price on the date of grant.
No incentive stock options were granted. The exercise price and tax
withholding obligations related to exercise may be paid by delivery of
already owned shares, subject to certain conditions.
(c) Potential gains are reported net of the option exercise price but before
taxes associated with exercise. These amounts represent certain assumed
rates of appreciation only. Actual gains, if any, on stock option exercises
are dependent on the future performance of the Common Stock of the Company
and overall stock conditions, as well as the optionholder's continued
employment through the vesting period. The amounts reflected in this table
may not necessarily be achieved.
(d) Options are exercisable in cumulative one-fifth installments commencing six
months from the date of grant (with each subsequent installment vesting on
the anniversary date of grant) with full vesting occurring on the fourth
anniversary of the date of grant.
(e) Mr. Gould resigned April 1, 1997. Under the terms of his Employment
Agreement, all options fully vest upon termination of employment, and he has
two years from the termination date to exercise the vested portion of these
options.
(f) Options are exercisable in cumulative one-third installments commencing six
months from the date of grant (with each subsequent installment vesting on
the anniversary date of grant) with full vesting occurring on the second
anniversary of the date of grant.
(g) Mr. Amerman resigned on February 7, 1997, and under terms of the Plan, he
had 90 days from that date to exercise the vested portion of these options.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Officers concerning the exercise of options during 1996 and unexercised options
held at fiscal year end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR END AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END (#) FISCAL YEAR END ($)(A)
SHARES ------------------- -----------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- ------------ ------------ ------------------- -----------------------
<S> <C> <C> <C> <C>
R. Brad Martin........ 0 $ 0 150,000/70,000 $1,870,000/$820,000
James A. Coggin....... 0 0 44,000/36,000 510,000/412,500
Robert M. Mosco....... 0 0 89,106/50,000 2,046,108/470,000
W. Thomas Gould....... 127,500 3,744,215 185,824/80,000 4,349,520/940,000
Tom R. Amerman........ 65,324 993,847 0/16,667 0/195,837
------- ---------- ---------------- -------------------
</TABLE>
- ---------------
(a) Represents the difference between the closing price of the Company's Common
Stock on January 31, 1997 and the exercise price of the options.
CERTAIN TRANSACTIONS
Director Michael S. Gross is one of the founding principals of Apollo
Advisors, L.P., the managing general partner of Apollo Investment Fund, L.P.,
the general partner of Apollo Specialty Retail Partners, L.P. ("Apollo
Specialty"), the holder of the Company's Series A Preferred Stock, which was
converted into Common Stock in June 1996. The Company paid Apollo Specialty $0.8
million in regular dividends and a one-time $3.0 million payment for the early
conversion of the Preferred Stock for the fiscal year ended February 1, 1997.
Bernard E. Bernstein, Chairman of the Human Resources/Compensation
Committee, is a partner in Bernstein, Stair & McAdams, which serves, on
occasion, as legal counsel for the Company.
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<PAGE> 59
In February 1989, the Company made a $500,000 unsecured, interest-free loan
to R. Brad Martin as a supplement to his base pay. Under Mr. Martin's new
employment contract, this loan will be forgiven over a five-year period provided
that he remains employed by the Company.
In February 1997 the Company paid $1.1 million to Robert M. Mosco in
connection with his waiver of his right to terminate an employment agreement and
receive compensation provided for under such agreement. Mr. Mosco entered into a
new Employment Contract at the same time. See "Executive
Compensation -- Employment Contracts."
57
<PAGE> 60
PRINCIPAL SHAREHOLDERS
Listed in the following table are the number of shares owned by each
Director, the executive officers named in the Summary Compensation Table above,
and all Directors and officers of the Company as a group as of April 25, 1997.
The table also includes the beneficial owners as of April 25, 1997 of more than
5% of the Company's outstanding Common Stock who are known to the Company.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER TOTAL SHARES PERCENTAGE OF
(AND ADDRESS IF BENEFICIAL BENEFICIALLY COMMON STOCK
OWNERSHIP EXCEEDS 5%) TITLE OWNED(A) OWNERSHIP
- --------------------------------- ----- ------------ -------------
<S> <C> <C> <C>
R. Brad Martin................... Chairman of the Board and Chief 1,327,423(b) 4.67%
Executive Officer
James A. Coggin.................. President and Chief Operating 85,129 *
Officer
Robert M. Mosco.................. President and Chief Executive 131,527(c) *
Officer of Proffitt's
Merchandising Group
W. Thomas Gould.................. Vice Chairman and Chairman of 315,456(d) 1.11
Younkers
Tom R. Amerman................... Executive Vice President of 16,886(e) *
Special Projects
Bernard E. Bernstein............. Director 16,401(f) *
Edmond D. Cicala................. Director 9,589 *
Ronald de Waal................... Vice Chairman of the Board and 1,250,713 4.43
Director
Gerard K. Donnelly............... Director 5,049 *
Donald F. Dunn................... Director 8,950 *
Michael S. Gross................. Director 2,200(g) *
Donald E. Hess................... Director 407,664(h) 1.44
G. David Hurd.................... Director 6,843 *
Richard D. McRae................. Director
C. Warren Neel................... Director 7,450 *
Harwell W. Proffitt.............. Director
Marguerite W. Sallee............. Director 2,200 *
Gerald Tsai, Jr.................. Director 5,200 *
Fidelity Management and Research
Corporation.................... 1,698,206(i) 6.02
82 Devonshire Street
Boston, Massachusetts
Norwest Bank Minnesota, as 2,913,716(j) 10.32
trustee........................
Investors Building
733 Marquette
Minneapolis, MN
All Directors and Officers as a
group (24 persons).............
3,803,906 13.15
</TABLE>
- ---------------
* Owns less than 1% of the total outstanding Common Stock of the Company.
(a) Includes shares that the following persons have a right to acquire within
sixty days after April 25, 1997 through the exercise of stock options:
Bernstein (3,200), Cicala (2,200), de Waal (2,200), Donnelly (2,070), Dunn
(2,070), Gross (1,200), Hurd (2,070), Martin (173,000), Neel (3,200),
Sallee (200), Tsai (2,200), Amerman (8,333), Coggin (58,000), Gould
(215,824), and Mosco (101,106).
(b) Includes: (i) 2,000 shares held by Mr. Martin for his children, (ii) 1,900
shares owned by RBM Venture Company, a company of which Mr. Martin is sole
shareholder, (iii) 100,000 shares held by Mr. Martin as trustee or
co-trustee for his children, (iv) 4,774 shares owned by the R. Brad and
Jean L. Martin Family Foundation, (v) 10,000 shares of restricted stock
which will vest on January 31, 1998, and (vi) 25,000
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<PAGE> 61
shares of restricted stock, the restrictions on which will lapse based on
performance measurements and length of service.
(c) Includes 3,158 shares held in a Company profit sharing and savings plan for
the account of Mr. Mosco. Excludes 16,282 shares reserved by the Company
for issuance to Mr. Mosco with respect to a deferred compensation
arrangement.
(d) Includes 3,577 shares owned by Mr. Gould's wife as to which he disclaims
beneficial ownership. Also includes 18,033 shares held in a Company profit
sharing and savings plan for the account of Mr. Gould. Excludes 84,735
shares reserved by the Company for issuance to Mr. Gould with respect to a
deferred compensation arrangement. Mr. Gould terminated his employment with
the Company effective April 1, 1997.
(e) Mr. Amerman resigned on February 7, 1997. He has 90 days from that date to
exercise the vested portion of his stock options, which total 8,333 shares.
(f) Includes 3,000 shares owned by the Bernard E. Bernstein Defined Benefit
Pension Plan.
(g) Does not include 1,211,801 shares held by Apollo Specialty. Mr. Gross is one
of the founding principals of Apollo Advisors, L.P., the managing general
partner of Apollo Investment Fund, L.P., the general partner of Apollo
Specialty. Mr. Gross disclaims beneficial ownership of all securities held
by Apollo Specialty.
(h) Includes: (i) 180,908 shares owned directly by Mr. Hess, (ii) 174,222 shares
held by Mr. Hess as trustee or co-trustee for his children, and (iii)
52,534 shares held by him as trustee for the children of his sister, Jo Ann
H. Morrison. Does not include: (i) 2,290 shares owned directly by his wife,
(ii) 7,330 shares held by his wife as co-trustee for one of their children,
and (iii) 88,058 shares held by another individual as trustee for Mr. Hess'
children, with respect to which shares Mr. Hess disclaims beneficial
ownership.
(i) Based solely on information provided by the beneficial owner.
(j) Represents shares held in trust for the G.R. Herberger's, Inc. 401(k)
Employee Stock Purchase Plan and Employee Stock Ownership Plan.
59
<PAGE> 62
DESCRIPTION OF OTHER INDEBTEDNESS
The following summary of certain agreements and instruments of the Company
does not purport to be complete and is qualified in its entirety by reference to
the various agreements and instruments described, copies of certain of which
have been included as exhibits to various filings by the Company with the
Commission. See "Available Information."
BANK CREDIT FACILITIES
Credit Facility. The Company has entered into the Credit Facility with the
lenders named therein (the "Lenders") and NationsBank, as agent for the Lenders
(the "Agent"). Capitalized terms that are used but not defined in this section
have the meanings given such terms in the Credit Facility.
The Credit Facility provides for a revolving credit facility (the
"Revolving Credit Facility") of up to $275.0 million (the "Total Revolving
Credit Commitment"), which includes subfacilities of up to $15.0 million for
Letters of Credit and up to $20.0 million for short-term borrowings ("Swing Line
Loans"). The total amount of (i) Revolving Credit Loans, (ii) Swing Line Loans,
(iii) undrawn amounts of Letters of Credit and (iv) reimbursement obligations in
respect of Letters of Credit, may not exceed the lesser of the Total Revolving
Credit Commitment and the Borrowing Base. The "Borrowing Base" is defined as
55.0% of the difference between (x) Eligible Inventory and (y) subject to
certain qualifications, the face amount of all letters of credit issued in
connection with the purchase of inventory by the Company. As of February 1, 1997
and May 30, 1997, the Borrowing Base was equal to approximately $246.0 million
and approximately $278.5 million, respectively.
The Total Revolving Credit Commitment expires on October 11, 1999. In
addition, the Credit Facility requires that the Total Revolving Credit
Commitment be reduced upon the receipt of the net proceeds from one or more of
certain non-ordinary course asset sales.
Revolving Credit Loans bear interest at a variable rate equal, at the
option of the Company, to (i) the Eurodollar Rate plus the Applicable Interest
Addition or (ii) the Base Rate. Swing Line Loans bear interest at a rate agreed
to by the Company and NationsBank from time to time. Under the terms of the
Credit Facility, the Applicable Interest Addition is adjusted based on the
financial performance of the Company.
The Credit Facility contains a number of covenants, including, among
others, covenants restricting the Company and its subsidiaries with respect to
the incurrence of indebtedness (including contingent obligations); the creation
of liens; the sale, lease, transfer or other disposition of assets; the making
of certain investments and loans; the making of acquisitions; the consummation
of certain transactions such as sales of substantial assets, mergers or
consolidations; transactions with affiliates; the making of capital
expenditures; the taking or failing to take certain actions with respect to
employee pension benefit plans; changing the Company's fiscal year; winding up,
liquidating or dissolving; and entering into agreements which limit the ability
to create liens. In addition, the Credit Facility contains affirmative covenants
including, among others, requirements regarding compliance with laws;
preservation of corporate existence; maintenance of insurance; payment of taxes
and other obligations; maintenance of properties; environmental compliance; the
keeping of books and records; the maintenance of intellectual property; the
continuance in the same or complementary lines of business; and the delivery of
financial and other information to the Agent and the Lenders.
The Company and its subsidiaries are also required to comply with certain
financial tests and maintain certain financial ratios. Certain of these
financial tests and ratios include: (i) maintaining a minimum Consolidated Net
Worth; (ii) preventing the ratio of Consolidated Senior Indebtedness to
Consolidated Capitalization from exceeding agreed upon ratios set forth in the
Credit Facility; (iii) maintaining a minimum Consolidated Fixed Charge Ratio;
and (iv) preventing the ratio of Consolidated Funded Indebtedness to
Consolidated EBITDA from exceeding agreed upon ratios set forth in the Credit
Facility.
The Credit Facility contains customary events of default. An event of
default under the Credit Facility would allow the lenders thereunder to
accelerate or, in certain cases, would automatically cause the acceleration of,
the maturity of the indebtedness under the Credit Facility and would restrict
the ability of the Company to meet its obligations with respect to the Exchange
Notes.
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<PAGE> 63
The payment of principal and interest on indebtedness under the Credit
Facility is guaranteed on a senior basis by each of the Company's existing and
future, direct and indirect subsidiaries (except for Securitization
Subsidiaries).
Amended Credit Facility. The Company has engaged NationsBank and NCMI in
connection with the Company's efforts to amend its existing $275 million Credit
Facility. The proposed amendment seeks, among other things, to increase the
facility to up to $400 million, extend the termination to five years from the
closing of the amended credit facility and otherwise provide greater flexibility
for the Company. In addition, the amended credit facility, when compared with
the Credit Facility, is expected to have (i) more favorable interest rates for
the Company and (ii) fewer covenants and more favorable covenant terms for the
Company. In all other material respects, the amended credit facility is expected
to be substantially similar to the Credit Facility. The Company also expects
that the payment of principal and interest on indebtedness under the amended
credit facility will continue to be guaranteed on a senior basis by each of the
Company's existing and future, direct and indirect subsidiaries (except for
securitization subsidiaries, banking subsidiaries and foreign subsidiaries).
Although there is no assurance that the Credit Facility will be amended,
that the amended credit facility will be successfully syndicated or as to the
final terms of the amended credit facility, it is currently anticipated that
such amendment will be completed during or shortly after the Exchange Offer.
OTHER SENIOR INDEBTEDNESS
In addition to the senior indebtedness of the Company under the Indenture
and as described above under "-- Bank Credit Facilities," after giving effect to
the issuance of the Series A Notes and the application of the net proceeds
therefrom, the Company and its subsidiaries have an aggregate of approximately
$60.3 million of outstanding senior indebtedness (which includes approximately
$10.7 million of capitalized lease obligations and approximately $49.6 million
of secured indebtedness) under various agreements and instruments having
interest rates ranging from 3.6% to 9.0% per annum (or from 8.63% to 12.05% per
annum for the implicit interest rates of such capitalized lease obligations) and
maturities ranging from September 1, 1998 to April 1, 2007. The issuance of the
Exchange Notes in the Exchange Offer will not change the Company's total
indebtedness or its total senior indebtedness. See "Use of Proceeds."
SUBORDINATED INDEBTEDNESS
Senior Subordinated Notes. Pursuant to the Amended and Restated Indenture
dated as of September 12, 1996 (the "Senior Subordinated Indenture") among the
Company, Parisian and AmSouth Bank of Alabama, Birmingham, Alabama, as trustee,
the Company guaranteed on a senior subordinated basis the Senior Subordinated
Notes previously issued by the Company's wholly-owned subsidiary, Parisian.
Capitalized terms that are used but not defined in this section have the
meanings given such terms in the Senior Subordinated Indenture.
An aggregate of approximately $93 million principal amount of the Senior
Subordinated Notes were outstanding as of June 9, 1997 and accrue interest at a
fixed rate of 9 7/8% per annum. The Senior Subordinated Notes mature and become
payable on July 15, 2003.
On or after July 15, 1998, Parisian may, at its option, redeem all or any
part of the Senior Subordinated Notes at a premium equal to 104.938% in 1998 and
102.469% in 1999, in each case of the principal amount thereof, together with
accrued and unpaid interest. Beginning in the year 2000 and thereafter, the
Senior Subordinated Notes are redeemable at 100% of the principal amount
thereof, together with accrued and unpaid interest. In addition, if a Change of
Control Triggering Event occurs at any time, each holder of the Senior
Subordinated Notes has the right to require Parisian to repurchase such holder's
Senior Subordinated Notes in whole or in part at 101% of the principal amount
thereof, together with accrued and unpaid interest.
The Senior Subordinated Indenture contains customary covenants which are
applicable to the Company and its subsidiaries (including Parisian) and are
similar to the covenants contained in the Indenture. However, certain of these
covenants are more restrictive than those contained in the Indenture. In
addition, the Senior
61
<PAGE> 64
Subordinated Indenture contains customary events of default. An event of default
under the Senior Subordinated Indenture would allow the holders of the Senior
Subordinated Notes to accelerate or, in certain cases, would automatically cause
the acceleration of, the maturity of the Senior Subordinated Notes and would
cause an event of default under the Indenture. The guaranty by the Company under
the Senior Subordinated Indenture is a senior subordinated obligation of the
Company and is subordinate in right of payment to all Parent Senior Indebtedness
of the Company, including the Exchange Notes. The Senior Subordinated Notes are
also senior subordinated obligations of Parisian and are subordinate in right of
payment to all Senior Indebtedness of Parisian, including the guaranty by
Parisian of the Exchange Notes.
Convertible Subordinated Debentures. The Company has issued $86.3 million
of 4 3/4% Convertible Subordinated Debentures due 2003 (the "Convertible
Debentures") under the Indenture dated as of October 6, 1993 (the "Convertible
Debenture Indenture") between the Company and Union Planters National Bank,
Memphis, Tennessee, as trustee. Capitalized terms that are used but not defined
in this section have the meanings given such terms in the Convertible Debenture
Indenture.
The Convertible Debentures accrue interest at a fixed rate of 4 3/4% per
annum and mature and become payable on November 1, 2003. The Company may, at its
option, redeem all or any part of the Convertible Debentures at a premium equal
to (i) 102.6369% in 1997, (ii) 102.1111% in 1998, (iii) 101.5833% in 1999, (iv)
101.0556% in 2000 and (v) 100.5278% in 2001, in each case of the principal
amount thereof, together with accrued and unpaid interest. Beginning in the year
2002 and thereafter, the Convertible Debentures are redeemable at 100% of the
principal amount thereof, together with accrued and unpaid interest. In
addition, if a Change of Control occurs at any time, each holder of the
Convertible Debentures has the right to require the Company to repurchase such
holder's Convertible Debentures in whole or in part at 100% of the principal
amount thereof, together with accrued and unpaid interest.
The Convertible Debenture Indenture contains covenants which are, in most
cases, less restrictive than the covenants contained in the Indenture. The
Convertible Debenture Indenture also contains customary events of default. An
event of default under the Convertible Debenture Indenture would allow the
holders of the Convertible Debentures to accelerate or, in certain cases, would
automatically cause the acceleration of, the maturity of the Convertible
Debentures and would cause an event of default under the Indenture. The
Convertible Debentures are subordinated obligations of the Company and are
subordinate in right of payment to all Senior Indebtedness of the Company,
including the Exchange Notes. In addition, on or before November 1, 2003, each
holder of Convertible Debentures may, at its option and upon the terms set forth
in the Convertible Debenture Indenture, convert its Convertible Debentures into
shares of Common Stock.
Junior Subordinated Debentures. As of May 3, 1997, the Company had
outstanding approximately $14.6 million principal amounts of 7.5% Junior
Subordinated Debentures due 2004 (the "Junior Debentures"). Capitalized terms
that are used but not defined in this section have the meanings given such terms
in the Junior Debentures.
The Junior Debentures, which were issued at a discount, have a principal
amount at maturity of $17.5 million and accrue interest at an effective rate of
11.0% per annum. The Junior Debentures mature and become payable on March 31,
2004.
The Company may, at its option, prepay, without premium, all or any part of
the Junior Debentures at any time, together with accrued and unpaid interest,
although repayment of the Junior Debentures is restricted by the terms of other
indebtedness of the Company. The Junior Debentures contain covenants which are,
in most cases, less restrictive than the covenants contained in the Indenture.
The Junior Debentures also contain customary events of default. An event of
default under the Junior Debentures would allow the holders of the Junior
Debentures to accelerate or, in certain cases, would automatically cause the
acceleration of, the maturity of the Junior Debentures and would cause an event
of default under the Indenture. The Junior Debentures are junior subordinated
obligations of the Company and are subordinate in right of payment to all Senior
Indebtedness of the Company, including the Exchange Notes.
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<PAGE> 65
RECEIVABLES SECURITIZATION FACILITIES
Proffitt's Accounts Receivable Facility. NationsBank, N.A.
("NationsBank"), through Enterprise Funding Corporation ("Enterprise"), has
provided the Company with the $300 million Proffitt's Accounts Receivable
Facility for the securitization of certain trade accounts receivable (the
"Receivables") originated by Proffitt's, McRae's, Herberger's and Parisian and
sold to Proffitt's Credit Corporation ("PCC"), a wholly-owned,
bankruptcy-remote, special purpose Accounts Receivable Subsidiary of the
Company. McRae's acts as the servicer for the Receivables. The Proffitt's
Accounts Receivable Facility expires in January 1998 and contains covenants,
representations and warranties customary for such facilities.
The Proffitt's Accounts Receivable Facility requires a portion of the
Receivables' finance charges earned to be allocated to Enterprise, as purchaser
of the receivables interests, sufficient to cover the yield on commercial paper
utilized by Enterprise to finance the purchase of such interests, plus fees and
expenses. As of May 30, 1997 and February 1, 1997, the weighted average interest
rate of the commercial paper issued under the Proffitt's Accounts Receivables
Facility plus the program fee was 6.0% and 5.8%, respectively. As of May 30,
1997 and February 1, 1997, the outstanding amount invested by Enterprise in the
Receivables under the Proffitt's Accounts Receivable Facility was $219.5 million
and $234.0 million, respectively.
Younkers Master Trust Facility. In June 1995, the Younkers Master Trust
originated by the Younkers Credit Corporation ("YCC"), a wholly-owned,
bankruptcy-remote special purpose Accounts Receivable Subsidiary of the Company,
issued to third parties a total of $75 million of asset-backed securities in two
separate classes: (i) $67.0 million in aggregate principal amount of 6.43%
Series 1995-1 Class A Certificates and (ii) $8.0 million in aggregate principal
amount of 6.61% Series 1995-1 Class B Certificates. Concurrently therewith, the
Younkers Master Trust issued to YCC $16.5 million in aggregate principal amount
of Series 1995-1 Class C Certificates. YCC is required to maintain the principal
amount of the Younkers receivables in the Trust in an amount not less than $91.5
million, subject to reduction in the event of principal repayments on the Series
1995-1 Class A and Class B Certificates. YCC may from time to time create other
series of certificates that evidence undivided interests in the assets of the
Younkers Master Trust.
A percentage of finance charges and certain other amounts earned on the
assets in the Younkers Master Trust are allocated to pay interest charges on the
Series 1995-1 Class A and Class B Certificates. During the accumulation period
(which is anticipated to begin in December 1999), a percentage of the principal
repayments made on the assets in the Younkers Master Trust will be allocated to
repay the $75.0 million principal amount of the Series 1995-1 Class A and Class
B Certificates. Principal payments will be made on the Series 1995-1 Class A and
Class B Certificates in June 2000, to the extent then available, subject to an
earlier payment obligation resulting from certain defaults and breaches by YCC
or the servicer or the failure to satisfy certain portfolio yield requirements
or to generate sufficient eligible receivables.
In July 1995, a second series was established under the Younkers Master
Trust ("Series 1995-2 Certificates"). Under this Series 1995-2 program,
Receivables Capital Corporation or certain other unaffiliated purchasers may
from time to time purchase Series 1995-2 Certificates (Class A Certificates and
Class B Certificates) in an aggregate amount of up to $50.0 million, which
represent fractional undivided interests in the assets of the Younkers Master
Trust. The sales of the Series 1995-2 Certificates are limited by the level of
eligible receivables in the Younkers Master Trust in excess of the $91.5 million
supporting the Series 1995-1 Certificates and a minimum ownership interest to be
retained by the Company. The interest rate on the Series 1995-2 Certificates
will be a variable rate based upon either commercial paper rates or Eurodollar
rates over a fixed period. A percentage of finance charges and certain other
amounts earned on the assets in the Younkers Master Trust will be allocated to
pay interest charges on the Series 1995-2 Certificates. During the amortization
period (which is anticipated to begin in June 1999), a percentage of the
principal repayments made on the assets in the Younkers Master Trust will be
allocated to repay the then outstanding principal amount of the Series 1995-2
Certificates. Principal payments will be made on the Class A and Class B
Certificates beginning in June 2000, to the extent then available, subject to an
earlier payment obligation resulting from certain defaults and breaches by YCC
or the servicer, including certain cross defaults, or the failure to satisfy
certain portfolio yield requirements or to generate sufficient receivables. As
of April 28, 1997 and February 1, 1997, the weighted average interest rate of
the Series 1995-2 Certificates was 6.0% and 5.9%,
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respectively. As of April 28, 1997 and February 1, 1997, the outstanding amount
invested in the Series 1995-2 Certificates was $5.0 million and $15.0,
respectively.
New Asset Securitization Facility. The Company has engaged NCMI to
restructure and combine its existing accounts receivable securitization
facilities into a new master trust, with a view to issuing approximately $200
million of investment grade securities having terms of up to five years secured
by the Company's credit card receivables and related property, while continuing
to provide the Company with the ability to sell a variable interest in
proprietary credit card receivables to asset-backed commercial paper conduits.
Although there is no assurance that a new accounts receivable securitization
facility will be successfully established, or as to the final terms of such a
facility, it is currently anticipated that such a facility will be established
during Summer 1997.
DESCRIPTION OF THE NOTES
The Exchange Notes are substantially identical (including principal amount,
interest rate, maturity and redemption rights) to the Series A Notes for which
they may be exchanged pursuant to this offer, except that (i) the offering and
sale of the Exchange Notes will have been registered under the Securities Act,
and (ii) holders of Exchange Notes will not be entitled to certain rights of
holders of the Series A Notes under the Registration Rights Agreement. The
Exchange Notes will be issued under the Indenture among the Company, the
Guarantors and the Trustee. For purposes of this section, references to the
"Company" mean only Proffitt's, Inc. and not any of its subsidiaries. The
following summary of the material provisions of the Indenture does not purport
to be complete and is subject to, and qualified by, reference to the provisions
of the Indenture, including the definitions of certain terms contained therein
and those terms made part of the Indenture by reference to the Trust Indenture
Act of 1939, as amended, as in effect on the date of the Indenture. The
definition of certain terms used in the following summary are set forth below
under "-- Certain Definitions."
GENERAL
The Notes will be general unsecured senior obligations of the Company
limited to $125,000,000 aggregate principal amount. The Notes will rank pari
passu in right of payment with all unsubordinated indebtedness of the Company
and will be senior in right of payment to all subordinated indebtedness of the
Company. The Notes will be issued only in fully registered form without coupons,
in denominations of $1,000 and integral multiples thereof. Principal of,
premium, if any, and interest on the Notes are payable, and the Notes are
transferable, at the office or agency of the Company in the City of New York
maintained for such purposes (which initially will be the corporate trust office
of the Trustee); provided, however, that payment of interest may be made at the
option of the Company by check mailed to the Person entitled thereto as shown on
the security register. No service charge will be made for any registration of
transfer, exchange or redemption of the Notes, except in certain circumstances
for any tax or other governmental charge that may be imposed in connection
therewith.
The Company will not be required to make any sinking fund payments with
respect to the Notes.
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on May 15, 2004. Interest on the Notes will accrue at
the rate of 8 1/8% per annum and will be payable semi-annually on each May 15
and November 15, commencing on November 15, 1997, to the holders of record of
Notes at the close of business on the May 1 and November 1, respectively,
immediately preceding such interest payment dates. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the Issue Date. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
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CHANGE OF CONTROL TRIGGERING EVENT
The Indenture provides that, following the occurrence of a Change of
Control Triggering Event (the date of such occurrence being the "Change of
Control Date"), the Company will be obligated, within 20 days after the Change
of Control Date, to make an offer to purchase (a "Change of Control Offer") all
of the then outstanding Notes at a purchase price in cash equal to 101% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the Purchase Date.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the Notes that might be tendered by holders of Notes seeking to accept the
Change of Control Offer. If the Company fails to repurchase all of the Notes
tendered for purchase, such failure will constitute an Event of Default under
the Indenture. See "-- Events of Default" below.
The Company shall comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act, and any other applicable securities laws
or regulations and any applicable requirements of any securities exchange on
which the Notes are listed, in connection with the repurchase of Notes pursuant
to a Change of Control Offer, and any violation of the provisions of the
Indenture relating to such Change of Control Offer occurring as a result of such
compliance, shall not be deemed a Default under the Indenture.
NOTE GUARANTEES
All of the Company's subsidiaries (other than the Accounts Receivable
Subsidiaries and any Foreign Subsidiaries) on the Issue Date have, jointly and
severally, fully and unconditionally guaranteed the Company's obligations under
the Notes. In addition, if any Restricted Subsidiary of the Company becomes a
guarantor or obligor in respect of any other Indebtedness of the Company or any
of the Restricted Subsidiaries, the Company shall cause such Restricted
Subsidiary to enter into a supplemental indenture pursuant to which such
Restricted Subsidiary shall agree to guarantee the Company's obligations under
the Notes. If the Company defaults in payment of the principal of, premium, if
any, or interest on the Notes, each of the Guarantors will be unconditionally,
jointly and severally obligated to duly and punctually pay the same.
The obligations of each Guarantor under its Guarantee are limited to the
maximum amount which, after giving effect to all other contingent and fixed
liabilities of such Guarantor, and after giving effect to any collections from
or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under the Indenture, will result in the obligations of
such Guarantor under its Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under Federal or state law. Each Guarantor that makes a
payment or distribution under its Guarantee shall be entitled to a contribution
from each other Guarantor in a pro rata amount based on the net assets of each
Guarantor determined in accordance with GAAP. See "-- Certain
Covenants -- Limitation on Guarantees by Restricted Subsidiaries."
Notwithstanding the foregoing, but subject to the requirements described
under "-- Consolidation, Merger, Sale of Assets, Etc.," any Guarantee by a
Guarantor shall be automatically and unconditionally released and discharged (i)
upon any sale, exchange or transfer, to any Person (other than an Affiliate of
the Company), of all of the Capital Stock of such Restricted Subsidiary, or all
or substantially all of the assets of such Restricted Subsidiary, pursuant to a
transaction which is in compliance with the Indenture (including, but not
limited to, the covenant described in "-- Disposition of Proceeds of Asset
Sales" above) or (ii) at the request of the Company, in the event that the
lenders under the Credit Facility (or any other revolving credit or term loan
facility entitled to a guarantee from such Guarantor) unconditionally release
such Guarantor from its guarantee obligations under such facility, if such
Guarantor is not a Leveraged Subsidiary; provided, however, that a release of a
Guarantor that is a Leveraged Subsidiary may only be obtained under the
circumstances described in this clause (ii) if, after giving effect to the
release, either (x) such Guarantor would have been permitted to incur all of its
then outstanding Indebtedness under the covenant "Limitation on Indebtedness" or
(y) the "Limitation on Indebtedness" covenant has been terminated pursuant to
the terms of the Indenture. The Company may, at any time, cause a Restricted
Subsidiary to become a Guarantor
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by executing and delivering a supplemental indenture providing for the guarantee
of payment of the Notes by such Restricted Subsidiary on the basis provided in
the Indenture.
The Indebtedness evidenced by each Guarantee (including the payment of
principal of, premium, if any, and interest on the Notes) will rank pari passu
in right of payment with all other unsubordinated indebtedness of such Guarantor
and will rank senior in right of payment to all subordinated indebtedness of
such Guarantor. As of May 3, 1997, on a pro forma basis after giving effect to
the Exchange Offer and the issuance of the Notes and the application of the net
proceeds therefrom, the Company and the Guarantors would have had approximately
$521.2 million of indebtedness outstanding, of which approximately $295.3
million was senior indebtedness and approximately $60.3 million was secured
indebtedness. At such date, the Company would have had outstanding approximately
$225.9 million of indebtedness subordinated in right of payment to the Notes.
The prepayment of the Parisian Notes is not restricted under the covenant
"-- Limitation on Restricted Payments."
CERTAIN COVENANTS
The Indenture provides that the covenants set forth herein are applicable
to the Company; provided, however, that if no Default has occurred and is
continuing, after the ratings assigned to the Notes by both Rating Agencies are
equal to or higher than BBB- and Baa3, or the equivalents thereof, respectively
(the "Investment Grade Ratings"), and notwithstanding that the Notes may later
cease to have an Investment Grade Rating, the Company and the Restricted
Subsidiaries will not be subject to the provisions of the Indenture described
under "Limitation on Indebtedness," "Disposition of Proceeds of Assets Sales,"
"Limitation on Restricted Payments," clause (c) of the first and fourth
paragraphs of "Limitation on Designations of Unrestricted Subsidiaries,"
"Limitation on Preferred Stock of Restricted Subsidiaries," "Limitation on
Transactions with Affiliates," "Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries" and clause (iii) of
"Consolidation, Merger, Sale of Assets, Etc."
Limitation on Indebtedness. The Indenture provides that the Company will
not, and will not cause or permit any of the Restricted Subsidiaries to,
directly or indirectly, create, incur, assume, issue, guarantee or in any manner
become liable for or with respect to, contingently or otherwise (in each case,
to "incur"), the payment of any Indebtedness (including any Acquired
Indebtedness); provided, however, that (i) the Company and any Guarantor may
incur Indebtedness (including Acquired Indebtedness) and (ii) any Restricted
Subsidiary may incur Acquired Indebtedness, if, in either case, immediately
after giving pro forma effect thereto, the Consolidated Fixed Charge Coverage
Ratio of the Company is at least equal to 2.00:1.
Notwithstanding the foregoing, the Company and, to the extent specifically
set forth below, the Restricted Subsidiaries may incur each and all of the
following (collectively, "Permitted Indebtedness"):
(i) Indebtedness of the Company and the Guarantors under the Credit
Facility in an aggregate principal amount at any one time outstanding not
to exceed the greater of (i) $400 million and (ii) 65% of Eligible
Inventory (as defined under the Credit Facility) of the Company and the
Restricted Subsidiaries (determined on a consolidated basis);
(ii) Indebtedness of the Company or any Guarantor under the Indenture,
the Notes and the Guarantees;
(iii) Indebtedness of the Company or any Restricted Subsidiary not
otherwise referred to in this paragraph that is outstanding on the Issue
Date, except Indebtedness to be repaid as described under "Use of Proceeds"
(other than Indebtedness repaid that is permitted to be reborrowed under
clause (i) above);
(iv) Indebtedness of the Company or any Restricted Subsidiary in
respect of performance bonds, bankers' acceptances, trade letters of credit
of the Company or any Restricted Subsidiary and surety bonds provided by
the Company or any Restricted Subsidiary in the ordinary course of
business;
(v) Indebtedness of any Restricted Subsidiary owed to and held by the
Company or any Subsidiary that is a Guarantor, and Indebtedness of the
Company owed to and held by any Subsidiary that is a
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Guarantor which is unsecured and subordinated in right of payment to the
payment and performance of the Company's obligations under the Indenture
and the Notes; provided, however, that an incurrence of Indebtedness that
is not permitted by this clause (v) shall be deemed to have occurred upon
(a) any sale or other disposition of any Indebtedness of the Company or any
Restricted Subsidiary referred to in this clause (v) to a Person (other
than the Company or any Subsidiary that is a Guarantor), (b) any sale or
other disposition of Capital Stock of any Restricted Subsidiary which holds
Indebtedness of the Company or another Restricted Subsidiary such that such
Restricted Subsidiary ceases to be a Restricted Subsidiary and (c) the
designation of a Restricted Subsidiary which holds Indebtedness of the
Company or any other Restricted Subsidiary as an Unrestricted Subsidiary;
(vi) Any guarantees of Indebtedness by a Restricted Subsidiary
incurred in compliance with the covenant described under "-- Limitations on
Guarantees by Restricted Subsidiaries";
(vii) Interest Rate Protection Obligations of the Company or any
Restricted Subsidiary covering Indebtedness of the Company or any
Restricted Subsidiary (which Indebtedness is otherwise permitted to be
incurred under this covenant) to the extent the notional principal amount
of such Interest Rate Protection Obligations does not exceed the principal
amount of the Indebtedness to which such Interest Rate Protection
Obligations relate;
(viii) Indebtedness of the Company or any Restricted Subsidiary under
Currency Agreements relating to (a) Indebtedness of the Company or any
Restricted Subsidiary and/or (b) obligations to purchase or sell assets or
properties, in each case, incurred in the ordinary course of business of
the Company or any Restricted Subsidiary; provided, however, that such
Currency Agreements do not increase the Indebtedness or other obligations
of the Company or any Restricted Subsidiary outstanding other than as a
result of fluctuations in foreign currency exchange rates or by reason of
fees, indemnities and compensation payable thereunder;
(ix) Purchase Money Indebtedness (other than Indebtedness incurred in
connection with an Asset Acquisition) and Capitalized Lease Obligations of
the Company or any Restricted Subsidiary in an aggregate amount not
exceeding (i) $25.0 million incurred in any one year and (ii) $50.0 million
outstanding at any time;
(x) (a) Indebtedness of the Company or any Guarantor to the extent the
proceeds thereof are used to Refinance Indebtedness of the Company or any
Guarantor or any Restricted Subsidiary incurred under the first paragraph
of this covenant or Indebtedness referred to under clause (ii) or (iii)
above and (b) Indebtedness of any Restricted Subsidiary that is not a
Guarantor to the extent the proceeds thereof are used to Refinance
Indebtedness of any Restricted Subsidiary that is not a Guarantor incurred
under the first paragraph of this covenant or Indebtedness referred to
under clause (iii) above; provided, however, that, in the case of either
clause (a) or (b), the principal amount of Indebtedness incurred pursuant
to this clause (x) (or, if such Indebtedness provides for an amount less
than the principal amount thereof to be due and payable upon a declaration
of acceleration of the maturity thereof, the original issue price of such
Indebtedness) shall not exceed the sum of the principal amount of
Indebtedness so refinanced (or, if such Indebtedness provides for an amount
less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof, the original issue
price of such Indebtedness, plus any accreted value attributable thereto
since the original issuance of such Indebtedness), plus the amount of any
premium required to be paid in connection with such Refinancing pursuant to
the terms of such Indebtedness or the amount of any premium reasonably
determined by the Company or a Restricted Subsidiary, as applicable, as
necessary to accomplish such Refinancing by means of a tender offer or
privately negotiated purchase, plus the amount of expenses in connection
therewith; and
(xi) in addition to the items referred to in clauses (i) through (x)
above, additional Indebtedness of the Company and the Restricted
Subsidiaries not to exceed an aggregate principal amount at any time
outstanding of $50.0 million.
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For purposes of determining compliance with this "Limitation on
Indebtedness" covenant, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness permitted by this
covenant, the Company in its sole discretion shall classify such item of
Indebtedness and only be required to include the amount of such Indebtedness as
one of such types.
Limitation on Restricted Payments. The Indenture provides that the Company
will not, and will not cause or permit any of the Restricted Subsidiaries to,
directly or indirectly:
(i) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of the Company or any Restricted
Subsidiary or any payment made to the direct or indirect holders (in their
capacities as such) of Capital Stock of the Company or any Restricted
Subsidiary (other than dividends or distributions made to the Company or a
Restricted Subsidiary and dividends and distributions payable solely in
Capital Stock of the Company (other than Redeemable Capital Stock) or in
rights to purchase Capital Stock of the Company (other than Redeemable
Capital Stock) or dividends and distributions made by a Restricted
Subsidiary on a pro rata basis to all shareholders of such Restricted
Subsidiary); or
(ii) purchase, redeem, defease or otherwise acquire or retire for
value any Capital Stock of the Company (other than any such Capital Stock
owned by the Company or a Restricted Subsidiary that is a Guarantor); or
(iii) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Subordinated Indebtedness (other than any Subordinated
Indebtedness owed to and held by the Company or a Restricted Subsidiary
that is a Guarantor); or
(iv) make any Investment (other than a Permitted Investment) (such
payments or Investments (other than an exception thereto) described in the
preceding clauses (i), (ii), (iii) and (iv) are collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect to
the proposed Restricted Payment (the amount of any such Restricted Payment,
if other than in cash, shall be the Fair Market Value of the asset(s)
proposed to be transferred by the Company or such Restricted Subsidiary, as
the case may be, pursuant to such Restricted Payment):
(A) no Default shall have occurred and be continuing;
(B) the aggregate amount of all Restricted Payments declared or
made from and after the Issue Date and all Designation Amounts would not
exceed the sum of (1) 50% of cumulative Consolidated Net Income of the
Company during the period (treated as one accounting period) beginning
on the Issue Date and ending on the last day of the fiscal quarter of
the Company immediately preceding the date of such proposed Restricted
Payment for which consolidated financial information of the Company is
available (or, if such cumulative Consolidated Net Income of the Company
for such period shall be a deficit, minus 100% of such deficit), plus
(2) the aggregate net cash proceeds received by the Company either (x)
as capital contributions to the Company increasing its common equity
after the Issue Date or (y) from the issuance or sale of Capital Stock
(excluding Redeemable Capital Stock but including Capital Stock issued
upon the conversion of convertible Indebtedness, in exchange for
outstanding Indebtedness or from the exercise of options, warrants or
rights to purchase Capital Stock (other than Redeemable Capital Stock))
of the Company to any Person (other than to a Restricted Subsidiary of
the Company) after the Issue Date (excluding the net cash proceeds from
any issuance and sale of Capital Stock financed, directly or indirectly,
using funds borrowed from the Company or any Restricted Subsidiary until
and to the extent such borrowing is repaid), plus (3) without
duplication of any amounts included in clause (1) above, in the case of
the disposition or repayment of any Investment constituting a Restricted
Payment made after the Issue Date, an amount (to the extent not included
in Consolidated Net Income) equal to the lesser of the return of capital
with respect to such Investment and the initial amount of such
Investment which was treated as a Restricted Payment, in either case,
less the cost of the disposition of such Investment and net of taxes,
plus (4) without
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duplication of any amounts included in clause (1) above so long as the
Designation thereof was treated as a Restricted Payment made after the
Issue Date, with respect to any Unrestricted Subsidiary that has been
redesignated as a Restricted Subsidiary after the Issue Date in
accordance with "Limitation on Designations of Unrestricted
Subsidiaries" below, the Fair Market Value of the Company's interest in
such Subsidiary; provided, however, that such amount shall not in any
case exceed the Designation Amount with respect to such Restricted
Subsidiary at the time of its Designation, plus (5) $25.0 million, minus
(6) the Designation Amount (measured as of the date of Designation) with
respect to any Subsidiary of the Company which has been designated as an
Unrestricted Subsidiary after the Issue Date in accordance with
"Limitation on Designations of Unrestricted Subsidiaries" below; and
(C) the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under the "Limitation on Indebtedness"
covenant described above.
For purposes of the preceding clause (B)(2), upon the issuance of Capital
Stock either from the conversion of convertible Indebtedness or exchange for
outstanding Indebtedness or upon the exercise of options, warrants or rights,
the amount counted as net cash proceeds received will be the cash amount
received by the Company at the original issuance of the Indebtedness that is so
converted or exchanged or from the issuance of options, warrants or rights, as
the case may be, plus the incremental amount of cash received by the Company, if
any, upon the conversion, exchange or exercise thereof.
None of the foregoing provisions of this covenant will prohibit or restrict
(i) the payment of any dividend within 60 days after the date of its
declaration, if at the date of declaration such payment would be permitted by
the provisions of the Indenture; (ii) so long as no Default shall have occurred
and be continuing or would arise therefrom, the redemption, repurchase or other
acquisition or retirement of any shares of any class of Capital Stock of the
Company in exchange for, or out of the net cash proceeds of, a substantially
concurrent issue and sale of other shares of Capital Stock (other than
Redeemable Capital Stock) of the Company to any Person (other than to a
Restricted Subsidiary); provided, however, that any such net proceeds and the
value of any Capital Stock issued in exchange for such retired Capital Stock are
excluded from clause (B)(2) of the preceding paragraph; (iii) so long as no
Default shall have occurred and be continuing or would arise therefrom, any
redemption, repurchase or other acquisition or retirement of Subordinated
Indebtedness made by exchange for, or out of the net cash proceeds of, a
substantially concurrent issue and sale of (A) Capital Stock (other than
Redeemable Capital Stock) of the Company to any Person (other than to a
Restricted Subsidiary); provided, however, that any such net cash proceeds and
the value of any Capital Stock issued in exchange for Subordinated Indebtedness
are excluded from clause (B)(2) of the preceding paragraph or (B) Indebtedness
of the Company or any Guarantor so long as such Indebtedness (1) is subordinated
to the Notes or the Guarantees of such Guarantor, as the case may be, at least
to the same extent as the Subordinated Indebtedness so purchased, exchanged,
redeemed, repurchased, acquired or retired and (2) does not have a Stated
Maturity earlier than the Stated Maturity for the Subordinated Indebtedness
being redeemed, repurchased or otherwise acquired or retired; (iv) Investments
constituting Restricted Payments made as a result of the receipt of noncash
consideration from any Asset Sale made pursuant to and in compliance with the
covenant "-- Disposition of Proceeds of Asset Sales"; (v) so long as no Default
shall have occurred and be continuing, the Refinancing of the Parisian Notes;
(vi) so long as no Default shall have occurred and be continuing, any purchase,
redemption or other acquisition or retirement for value of any Capital Stock
(including any option, warrant or right to purchase Capital Stock) (other than
Redeemable Capital Stock) of the Company for purposes of making contributions of
such Capital Stock of the Company to employees of the Company or its
Subsidiaries pursuant to any qualified employee benefit or similar plan; (vii) a
Restricted Payment to pay for the repurchase, retirement or other acquisition or
retirement for value of Capital Stock (or warrants or options convertible into
or exchangeable for such Capital Stock) of the Company held by any future,
present or former employee, director or consultant of the Company or any
Subsidiary pursuant to any management equity plan or stock option plan or any
other management or employee benefit plan or agreement; provided, however, that
the aggregate amount of Restricted Payments made pursuant to this clause (vii)
does not exceed in any calendar year $2.5 million (with the unused amount in any
calendar year being carried over to succeeding calendar years subject to a
maximum of $5.0 million in
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any calendar year); (viii) payments or distributions to dissenting stockholders
pursuant to applicable law, pursuant to or in connection with an Asset Sale or
Asset Acquisition that complies with the provisions of the Indenture; (ix)
repurchases of Capital Stock (or warrants or options convertible into or
exchangeable for such Capital Stock) deemed to occur upon exercise of stock
options to the extent that shares of such Capital Stock (or warrants or options
convertible into or exchangeable for such Capital Stock) represents a portion of
the exercise price of such options; and (x) the repurchase or retirement of
Capital Stock of the Company in exchange for the cancellation of Indebtedness
owed to the Company or any Restricted Subsidiary; provided, however, that the
Fair Market Value of such Capital Stock is not less than the outstanding
principal balance of and accrued and unpaid interest on, the Indebtedness so
cancelled. In computing the amount of Restricted Payments previously made for
purposes of clause (B) of the preceding paragraph, Restricted Payments under the
immediately preceding clauses (i), (iv), (vi), (vii) and (viii) shall be
included.
Limitation on Transactions with Affiliates. The Indenture provides that
the Company will not, and will not cause or permit any of the Restricted
Subsidiaries to, directly or indirectly, conduct any business or enter into or
suffer to exist any transaction or series of related transactions with, or for
the benefit of, any of their respective Affiliates or any beneficial holder of
10% or more of any class of Voting Stock of the Company or any officer or
director of the Company or any Restricted Subsidiary (each, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the Restricted Subsidiary, as the case may be,
than those which could have been obtained in a comparable transaction at such
time from Persons who do not have such a relationship and (ii) with respect to
any Affiliate Transaction or series of Affiliate Transactions involving
aggregate payments or value equal to or greater than $5.0 million, the Company
shall have delivered an officer's certificate to the Trustee certifying that
such Affiliate Transaction or series of related Affiliate Transactions complies
with the preceding clause (i) and, with respect to any Affiliate Transaction or
series of Affiliate Transactions involving aggregate payments or value equal to
or greater than $10.0 million, further certifying that such Affiliate
Transaction or series of Affiliate Transactions has been approved by a majority
of the Board of Directors of the Company, including a majority of the
disinterested directors of the Board of Directors of the Company.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to (i) transactions with or among the Company and the Restricted
Subsidiaries who are Guarantors; (ii) customary directors' fees, indemnification
and similar arrangements, consulting fees, employee salaries, bonuses or
employment agreements, compensation or employee benefit arrangements and
incentive arrangements with any officer, director or employee of the Company or
any Restricted Subsidiary entered into in the ordinary course of business
(including customary benefits thereunder) and payments under any indemnification
arrangements permitted by applicable law; (iii) the issue and sale by the
Company to its stockholders of Capital Stock (other than Redeemable Capital
Stock); (iv) any dividends made in compliance with "Limitation on Restricted
Payments" above; (v) loans and advances to officers, directors, employees and
consultants of the Company or any Restricted Subsidiary for travel,
entertainment, moving and other relocation expenses, in each case made in the
ordinary course of business; (vi) transactions with or by any Accounts
Receivable Subsidiary made in the ordinary course of business and transactions
related to any proprietary credit card issued by or for the benefit of the
Company or an Affiliate of the Company in the ordinary course of business; (vii)
any agreement or Affiliate Transactions as in effect on the Issue Date and any
transaction contemplated thereby; and (viii) tax sharing agreements between the
Company and any of its Subsidiaries providing for the payment by such Subsidiary
of an amount equal to the hypothetical United States tax liability of the
Subsidiary as if such Subsidiary had filed its own U.S. federal tax return for
any given taxable year.
Disposition of Proceeds of Asset Sales. The Indenture provides that the
Company will not, and will not cause or permit any Restricted Subsidiary to,
directly or indirectly, make any Asset Sale, unless (i) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the Fair Market Value of the assets sold or
otherwise disposed of and (ii) at least 75% of such consideration consists of
(A) cash or Cash Equivalents, (B) properties and capital assets to be used in
the same line of business being conducted by the Company or any Restricted
Subsidiary at such time or (C) Capital Stock in any Person which thereby becomes
a Wholly Owned Restricted Subsidiary whose assets
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consist primarily of properties and capital assets used in the same line of
business being conducted by the Company or any Restricted Subsidiary at such
time. In lieu of the consideration described in clause (ii) above, the Company
or any Restricted Subsidiary may receive consideration from an Asset Sale or
Asset Sales consisting of obligations payable to the sellers of such asset or
assets in an aggregate amount not to exceed $25.0 million at any time
outstanding; provided, however, that all consideration received from an Asset
Sale or Asset Sales in excess of such $25.0 million shall be subject to the next
preceding sentence. The amount of any (i) Indebtedness of a Restricted
Subsidiary that is not a Guarantor that is actually assumed by the transferee in
such Asset Sale and from which the Company and the Restricted Subsidiaries are
fully released shall be deemed to be cash for purposes of determining the
percentage of cash consideration received by the Company or the Restricted
Subsidiaries (and excluding any liabilities that are incurred in connection with
or in anticipation of such Asset Sale) and (ii) notes or other similar
obligations received by the Company or any Restricted Subsidiary from such
transferee that are immediately converted, sold or exchanged (or are converted,
sold or exchanged within thirty days of the related Asset Sale) by the Company
or the Restricted Subsidiaries into cash shall be deemed to be cash, in an
amount equal to the net cash proceeds realized upon such conversion, sale or
exchange for purposes of determining the percentage of cash consideration
received by the Company or the Restricted Subsidiaries.
The Company or such Restricted Subsidiary, as the case may be, may apply
the Net Cash Proceeds of any Asset Sale within 365 days of receipt thereof to
(i) repay Indebtedness of the Company or any Guarantor which is secured by a
Lien on the assets or property of the Company or any Guarantor which was the
subject of such Asset Sale and permanently reduce any related commitment, (ii)
repay Indebtedness (other than Subordinated Indebtedness) of any Restricted
Subsidiary that is not a Guarantor in respect of which neither the Company nor
any Guarantor is liable and permanently reduce any related commitment, (iii)
repay any Indebtedness (other than Subordinated Indebtedness) of the Company or
any Guarantor not repaid pursuant to the preceding clause (i) or (ii), or (iv)
make Asset Acquisitions or acquire, construct or improve properties or capital
assets, in each case, to be used in the same line of business being conducted by
the Company or any Restricted Subsidiary at such time.
To the extent all or part of the Net Cash Proceeds of any Asset Sale are
not applied within 365 days of such Asset Sale as described in clause (i), (ii),
(iii) or (iv) of the immediately preceding paragraph (such Net Cash Proceeds,
the "Unutilized Net Cash Proceeds"), the Company shall, within 20 days after
such 365th day, make an offer to purchase (the "Asset Sale Offer") all
outstanding Notes up to a maximum principal amount (expressed as a multiple of
$1,000) of Notes equal to such Unutilized Net Cash Proceeds, at a purchase price
in cash equal to 100% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the Purchase Date; provided, however, that the
Asset Sale Offer may be deferred until there are aggregate Unutilized Net Cash
Proceeds equal to or in excess of $10.0 million, at which time the entire amount
of such Unutilized Net Cash Proceeds, and not just the amount in excess of $10.0
million, shall be applied as required pursuant to this paragraph.
Notwithstanding the foregoing, the Company may retain up to $20.0 million of Net
Cash Proceeds of Asset Sales without applying it as required by the foregoing.
With respect to any Asset Sale Offer effected pursuant to this covenant,
among the Notes, to the extent the aggregate principal amount of Notes tendered
pursuant to such Asset Sale Offer exceeds the Unutilized Net Cash Proceeds to be
applied to the repurchase thereof, such Notes shall be purchased pro rata based
on the aggregate principal amount of such Notes tendered by each holder. To the
extent the Unutilized Net Cash Proceeds exceed the aggregate amount of Notes
tendered by the holders of the Notes pursuant to such Asset Sale Offer, the
Company may retain and utilize any portion of the Unutilized Net Cash Proceeds
not applied to repurchase the Notes for any purpose consistent with the other
terms of the Indenture.
In the event that the Company makes an Asset Sale Offer, the Company shall
comply, to the extent applicable, with the requirements of Section 14(e) of the
Exchange Act, and any other applicable securities laws or regulations and any
applicable requirements of any securities exchange on which the Notes are
listed, and any violation of the provisions of the Indenture relating to such
Asset Sale Offer occurring as a result of such compliance shall not be deemed a
Default or an Event of Default.
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Limitation on Liens. The Indenture provides that the Company will not, and
will not cause or permit any Restricted Subsidiary to, directly or indirectly,
create, incur, assume or suffer to exist any Lien of any kind (other than
Permitted Liens), upon any of its property or assets, whether now owned or
acquired after the Issue Date, or any proceeds therefrom, or assign or convey
any right to receive income therefrom to secure either (i) Subordinated
Indebtedness, unless the Notes, in the case of the Company, and the Guarantees,
in the case of a Restricted Subsidiary that is a Guarantor, are secured by a
Lien on such property, assets or proceeds that is senior in priority to the
Liens securing such Subordinated Indebtedness or (ii) any other Indebtedness,
unless the Notes and the Guarantees, in the case of a Restricted Subsidiary that
is a Guarantor, are equally and ratably secured thereby.
Limitation on Guarantees by Restricted Subsidiaries. The Indenture
provides that the Company will not cause or permit any of the Restricted
Subsidiaries, directly or indirectly, to guarantee the payment of any
Indebtedness of the Company or any Restricted Subsidiary ("Other Indebtedness"),
except for guarantees to suppliers, lessors, licensees, contractors, franchises
or customers incurred in the ordinary course of business, unless such Subsidiary
(A) is a Guarantor or (B) simultaneously executes and delivers a supplemental
indenture to the Indenture pursuant to which it will become a Guarantor under
the Indenture; provided, however, that if such Other Indebtedness is (i)
Indebtedness that is ranked pari passu in right of payment with the Notes or the
Guarantee of such Restricted Subsidiary, as the case may be, the Guarantee of
such Subsidiary shall be pari passu in right of payment with the guarantee of
the Other Indebtedness; or (ii) Subordinated Indebtedness, the Guarantee of such
Subsidiary shall be senior in right of payment to the guarantee of the Other
Indebtedness (which guarantee of such Subordinated Indebtedness shall provide
that such guarantee is subordinated to the Guarantees of such Subsidiary to the
same extent and in the same manner as the other Indebtedness is subordinated to
the Notes or the Guarantee of such Restricted Subsidiary, as the case may be).
Restrictions on Preferred Stock of Restricted Subsidiaries. The Indenture
provides that the Company will not sell, and will not cause or permit any of the
Restricted Subsidiaries to issue, any Preferred Stock of any Restricted
Subsidiary (other than to the Company or to a Wholly-Owned Restricted
Subsidiary) or permit any Person (other than the Company or a Wholly-Owned
Restricted Subsidiary) to own any Preferred Stock of any Restricted Subsidiary.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture provides that the Company will not, and will not
cause or permit any Restricted Subsidiary to, directly or indirectly, create or
otherwise cause or suffer to exist, or enter into any agreement with any Person
that would cause to become effective, any consensual encumbrance or restriction
of any kind, on the ability of any Restricted Subsidiary to (a) pay dividends,
in cash or otherwise, or make any other distribution on or in respect of its
Capital Stock or any other interest or participation in, or measured by, its
profits, to the Company or any other Restricted Subsidiary, (b) pay any
Indebtedness owed to the Company or any other Restricted Subsidiary, (c) make
loans or advances to, or guarantee any Indebtedness or other obligations of, the
Company or any other Restricted Subsidiary or (d) transfer any of its property
or assets to the Company or any other Restricted Subsidiary, except any
encumbrance or restriction (i) with respect to a Restricted Subsidiary that is
not a Restricted Subsidiary on the Issue Date, in existence at the time such
Person becomes a Restricted Subsidiary (but not created in contemplation
thereof); provided, however, that such encumbrances and restrictions are not
applicable to the Company or any Restricted Subsidiary, or the properties or
assets of the Company or any Restricted Subsidiary, other than such Person; (ii)
arising as a result of customary non-assignment provisions in leases entered
into in the ordinary course of business; (iii) existing under any agreement
governing the terms of or otherwise arising as a result of Purchase Money
Indebtedness (other than Indebtedness incurred to finance an Asset Acquisition)
for property acquired in the ordinary course of business that only imposes
encumbrances and restrictions on the property so acquired; (iv) contained in any
agreement for the sale or disposition of the Capital Stock or assets of any
Restricted Subsidiary; provided, however, that such encumbrances and
restrictions described in this clause (iv) are only applicable to such
Restricted Subsidiary or assets, as applicable, and any such sale or disposition
is made in compliance with "Disposition of Proceeds of Asset Sales" above to the
extent applicable thereto; or (v) existing under any agreement that refinances
or replaces the agreements containing the encumbrance or
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restrictions in the foregoing clause (i); provided, however, that the terms and
conditions of any such restrictions permitted under this clause (v) are not
materially less favorable to the holders of the Notes than those under or
pursuant to the agreement evidencing the Indebtedness refinanced.
Limitation on Designations of Unrestricted Subsidiaries. The Indenture
provides that the Company may designate after the Issue Date any Subsidiary
(other than a Guarantor) as an "Unrestricted Subsidiary" under the Indenture (a
"Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(b) the Company would be permitted to make an Investment (other than a
Permitted Investment) at the time of Designation (assuming the
effectiveness of such Designation) pursuant to the first paragraph of
"Limitation on Restricted Payments" above in an amount (the "Designation
Amount") equal to the Fair Market Value of the Company's interest in such
Subsidiary on such date calculated in accordance with GAAP;
(c) the Company would be permitted under the Indenture to incur $1.00
of additional Indebtedness (other than Permitted Indebtedness) pursuant to
the covenant described under "-- Limitation on Indebtedness" at the time of
such Designation (assuming the effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment pursuant to the covenant
"-- Limitation on Restricted Payments" for all purposes of the Indenture in the
Designation Amount.
The Indenture further provides that (i) the Company shall not and shall not
cause or permit any Restricted Subsidiary to at any time (x) provide credit
support for, or subject any of its property or assets (other than the Capital
Stock of any Unrestricted Subsidiary) to the satisfaction of, any Indebtedness
of any Unrestricted Subsidiary (including any undertaking, agreement or
instrument evidencing such Indebtedness) (other than Permitted Investments in
Unrestricted Subsidiaries) or (y) be directly or indirectly liable for any
Indebtedness of any Unrestricted Subsidiary and (ii) no Unrestricted Subsidiary
shall at any time guarantee or otherwise provide credit support for any
obligation of the Company or any Restricted Subsidiary. For purposes of the
foregoing, the Designation of a Subsidiary of the Company as an Unrestricted
Subsidiary shall be deemed to be the Designation of all of the Subsidiaries of
such Subsidiary.
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if:
(a) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation;
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the
Indenture;
(c) unless such redesignated Subsidiary shall not have any
Indebtedness outstanding (other than Indebtedness that would be Permitted
Indebtedness), immediately after giving effect to such proposed Revocation,
and the incurrence of any such additional Indebtedness, the Company could
incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the covenant described under "-- Limitation on Indebtedness";
and
(d) any transaction (or series of related transactions) between such
Subsidiary and any of its Affiliates that occurred while such Subsidiary
was an Unrestricted Subsidiary would be permitted by "-- Limitation on
Transactions with Affiliates" above as if such transaction (or series of
related transactions) had occurred at the time of such Revocation.
All Designations and Revocations must be evidenced by Board Resolutions of
the Company delivered to the Trustee certifying compliance with the foregoing
provisions.
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Reporting Requirements. The Indenture provides that the Company will file
with the Commission, the Trustee and the Initial Purchasers, the annual reports,
quarterly reports and other documents required to be filed with the Commission
pursuant to Sections 13 and 15 of the Exchange Act, whether or not the Company
has a class of securities registered under the Exchange Act.
CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
The Indenture provides that the Company will not, in any transaction or
series of related transactions, merge or consolidate with or into, or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of its properties and assets as an entirety to, any Person or Persons, and that
the Company will not permit any of the Restricted Subsidiaries to enter into any
such transaction or series of related transactions if such transaction or series
of related transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company and the Restricted Subsidiaries
(determined on a consolidated basis for the Company and the Restricted
Subsidiary), to any other Person or Persons, unless at the time and after giving
effect thereto (i) either (A)(1) if the transaction or transactions is a merger
or consolidation involving the Company, the Company shall be the surviving
Person of such merger or consolidation or (2) if the transaction or transactions
is a merger or consolidation involving a Restricted Subsidiary, such Restricted
Subsidiary shall be the surviving Person of such merger or consolidation, or
(B)(1) the Person formed by such consolidation or into which the Company or such
Restricted Subsidiary is merged or to which the properties and assets of the
Company or such Restricted Subsidiary, as the case may be, substantially as an
entirety, are transferred (any such surviving Person or transferee Person being
the "Surviving Entity") shall be a corporation organized and existing under the
laws of the United States of America, any State thereof or the District of
Columbia and (2)(x) in the case of a transaction involving the Company, the
Surviving Entity shall expressly assume by a supplemental indenture executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Notes, the Notes and the Indenture and the
Registration Rights Agreement and, in each case, the Notes, the Notes, the
Indenture and the Registration Rights Agreement shall remain in full force and
effect, or (y) in the case of a transaction involving a Restricted Subsidiary
that is a Guarantor, the Surviving Entity shall expressly assume by a
supplemental indenture executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of such Restricted Subsidiary
under its Guarantee, the Indenture and the Registration Rights Agreement, and,
in each case, such Guarantee, the Indenture and the Registration Rights
Agreement shall remain in full force and effect; (ii) immediately after giving
effect to such transaction or series of related transactions on a pro forma
basis, no Default shall have occurred and be continuing; and (iii) the Company,
or the Surviving Entity, as the case may be, immediately after giving effect to
such transaction or series of transactions on a pro forma basis (including,
without limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions),
could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
under the "Limitation on Indebtedness" covenant described above.
No Guarantor (other than a Guarantor whose Guarantee is to be released in
accordance with the terms of its Guarantee and the Indenture as provided in the
second sentence under "Limitation on Guarantees by Restricted Subsidiaries"
above) shall, in any transaction or series of related transactions, consolidate
with or merge with or into another Person, whether or not such Person is
affiliated with such Guarantor and whether or not such Guarantor is the
Surviving Entity, unless (i) the Surviving Entity (if other than such Guarantor)
is a corporation organized and validly existing under the laws of the United
States, any State thereof or the District of Columbia; (ii) the Surviving Entity
(if other than such Guarantor) expressly assumes by a supplemental indenture all
the obligations of such Guarantor under its Guarantee and the performance and
observance of every covenant of the Indenture and the Registration Rights
Agreement to be performed or observed by such Guarantor and (iii) immediately
after giving effect to such transaction or series of related transactions on a
pro forma basis, no Default shall have occurred and be continuing.
In connection with any consolidation, merger, transfer, lease or other
disposition contemplated hereby, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an officers' certificate and an opinion of counsel, each stating that
such
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consolidation, merger, transfer, lease or other disposition and the supplemental
indenture in respect thereof comply with the requirements under the Indenture.
In addition, each Guarantor, unless it is the other party to the transaction or
unless its Guarantee will be released and discharged in accordance with its
terms as a result of the transaction, will be required to confirm, by
supplemental indenture, that its Guarantee will continue to apply to the
obligations of the Company or the Surviving Entity under the Indenture.
Upon any consolidation or merger of the Company or any Guarantor or any
transfer of all or substantially all of the assets of the Company in accordance
with the foregoing, in which the Company or a Guarantor is not the continuing
corporation, the successor corporation formed by such a consolidation or into
which the Company or such Guarantor is merged or to which such transfer is made,
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under the Indenture, the Notes and the Registration Rights
Agreement, as the case may be, or such Guarantor, as the case may be, under the
Indenture, and the Guarantee of such Guarantor and the Registration Rights
Agreement, as the case may be, with the same effect as if such successor
corporation had been named as the Company or Guarantor, as the case may be,
therein; and thereafter, except in the case of (a) a lease or (b) any sale,
assignment, conveyance, transfer, lease or other disposition to a Restricted
Subsidiary of the Company or such Guarantor, the Company or such Guarantor, as
the case may be, shall be discharged from all obligations and covenants under
the Indenture and the Notes and/or the Guarantee of such Guarantor, as the case
may be.
The Indenture provides that for all purposes of the Indenture and the Notes
(including the provision of this covenant and the covenants described in
"-- Limitation on Indebtedness", "-- Limitation on Restricted Payments" and
"-- Limitation on Liens"), Subsidiaries of any Surviving Entity shall, upon such
transaction or series of related transactions, become Restricted Subsidiaries
unless and until designated as Unrestricted Subsidiaries pursuant to and in
accordance with "-- Limitation on Designations of Unrestricted Subsidiaries" and
all Indebtedness, and all Liens on property or assets, of the Company and the
Restricted Subsidiaries in existence immediately prior to such transaction or
series of related transactions will be deemed to have been incurred upon such
transaction or series of related transactions.
EVENTS OF DEFAULT
The following will be "Events of Default" under the Indenture:
(i) default in the payment of the principal of or premium, if any,
when due and payable, on any of the Notes (at its Stated Maturity, upon
optional redemption, required purchase, sinking fund, scheduled principal
payment or otherwise); or
(ii) default in the payment of an installment of interest on any of
the Notes, when due and payable, continued for 30 days or more; or
(iii) the Company or any Guarantor fails to comply with any of its
obligations described under "-- Consolidation, Merger, Sale of Assets,
Etc.," "Certain Covenants -- Change of Control" or "-- Certain
Covenants -- Disposition of Proceeds of Asset Sales"; or
(iv) the Company or any Guarantor fails to perform or observe any
other term, covenant or agreement contained in the Notes, the Guarantees or
the Indenture (other than a default specified in (i), (ii) or (iii) above)
for a period of 45 days after written notice of such failure requiring the
Company to remedy the same shall have been given (x) to the Company by the
Trustee or (y) to the Company and the Trustee by the holders of 25% in
aggregate principal amount of the Notes then outstanding; or
(v) default or defaults under one or more agreements, indentures or
instruments under which the Company or any Restricted Subsidiary then has
outstanding Indebtedness in excess of $25.0 million individually or in the
aggregate and either (a) such Indebtedness is already due and payable in
full or (b) such default or defaults results in the acceleration of the
maturity of such Indebtedness; or
(vi) any Guarantee ceases to be in full force and effect or is
declared null and void or any Guarantor denies that it has any further
liability under any Guarantee, or gives notice to such effect (other than
by
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reason of the termination of the Indenture or the release of any such
Guarantee in accordance with the terms of the Indenture); or
(vii) one or more judgments, orders or decrees of any court or
regulatory or administrative agency for the payment of money in excess of
$25.0 million either individually or in the aggregate shall have been
rendered against the Company or any Restricted Subsidiary or any of their
respective properties and shall not have been discharged and either (a) any
creditor shall have commenced an enforcement proceeding upon such judgment,
order or decree or (b) there shall have been a period of 60 consecutive
days during which a stay of enforcement of such judgment, order or decree,
by reason of a pending appeal or otherwise, shall not be in effect; or
(viii) certain events of bankruptcy, insolvency or reorganization with
respect to the Company or any Material Subsidiary shall have occurred.
If an Event of Default (other than as specified in clause (viii) with
respect to the Company), shall occur and be continuing, the Trustee, by notice
to the Company, or the holders of at least 25% in aggregate principal amount of
the Notes then outstanding, by notice to the Trustee and the Company, may
declare the principal of, premium, if any, and accrued interest on all of the
outstanding Notes due and payable immediately, upon which declaration, all such
amounts payable in respect of the Notes will become and be immediately due and
payable. If an Event of Default specified in clause (viii) above with respect to
the Company occurs and is continuing, then the principal of, premium, if any,
and accrued interest on all of the outstanding Notes will ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any holder of Notes.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of a
majority in aggregate principal amount of the outstanding Notes, by written
notice to the Company and the Trustee, may rescind such declaration if (a) the
Company has paid or deposited with the Trustee a sum sufficient to pay (i) all
sums paid or advanced by the Trustee under the Indenture and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, (ii) all overdue interest on all Notes, (iii) the principal of and
premium, if any, on any Notes which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate borne by the Notes,
and (iv) to the extent that payment of such interest is lawful, interest upon
overdue interest at the rate borne by the Notes; and (b) all Events of Default,
other than the non-payment of principal of, premium, if any, and interest on the
Notes that has become due solely by such declaration of acceleration, have been
cured or waived.
The holders of not less than a majority in aggregate principal amount of
the outstanding Notes may on behalf of the holders of all the Notes waive any
past defaults under the Indenture, except a default in the payment of the
principal of, premium, if any, or interest on any Note, or in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding.
No holder of any of the Notes has any right to institute any proceeding
with respect to the Indenture or any remedy thereunder, unless the holders of at
least 25% in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding as Trustee under the Notes and the Indenture, the Trustee has
failed to institute such proceeding within 15 days after receipt of such notice
and the Trustee, within such 15-day period, has not received directions
inconsistent with such written request by holders of a majority in aggregate
principal amount of the outstanding Notes. Such limitations do not apply,
however, to a suit instituted by a holder of a Note for the enforcement of the
payment of the principal of, premium, if any, or interest on such Note on or
after the respective due dates expressed in such Note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent Person would
exercise under the circumstances in the conduct of such Person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be
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continuing, the Trustee under the Indenture is not under any obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any of the holders unless such holders shall have offered to the
Trustee reasonable security or indemnity. Subject to certain provisions
concerning the rights of the Trustee, the holders of a majority in aggregate
principal amount of the outstanding Notes have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee under the
Indenture.
The Company is required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company and the Guarantors of their
respective obligations under the Indenture and as to any default in such
performance. The Company is also required to notify the Trustee within five
business days of any event which is, or after notice or lapse of time or both
would become, an Event of Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations
of the Company and the Guarantors with respect to the outstanding Notes
("defeasance"). Such defeasance means that the Company will be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, except for (i) the rights of holders of outstanding Notes to receive
payment in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due, (ii) the Company's obligations to issue
temporary Notes, register the transfer or exchange of any Notes, replace
mutilated, destroyed, lost or stolen Notes and maintain an office or agency for
payments in respect of the Notes, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and (iv) the defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to terminate
the obligations of the Company and any Guarantor with respect to certain
covenants that are set forth in the Indenture, some of which are described under
"-- Certain Covenants" above, and any omission to comply with such obligations
will not constitute a Default or an Event of Default with respect to the Notes
("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the holders of the Notes, cash in United States dollars, U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest on the outstanding Notes at maturity; (ii) the Company shall have
delivered to the Trustee an opinion of counsel to the effect that the holders of
the outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such defeasance or covenant defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance or covenant defeasance
had not occurred (in the case of defeasance, such opinion must refer to and be
based upon a ruling of the Internal Revenue Service or a change in applicable
federal income tax laws); (iii) no Default shall have occurred and be continuing
on the date of such deposit or insofar as clause (viii) under the first
paragraph under "-- Events of Default" is concerned, at any time during the
period ending on the 91st day after the date of deposit; (iv) such defeasance or
covenant defeasance shall not cause the Trustee to have a conflicting interest
with respect to any securities of the Company or any Guarantor; (v) such
defeasance or covenant defeasance shall not result in a breach or violation of,
or constitute a default under, any material agreement or instrument to which the
Company or any Guarantor is a party or by which it is bound; (vi) the Company
shall have delivered to the Trustee an opinion of counsel to the effect that
after the 91st day following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; and (vii) the Company shall have
delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that all conditions precedent under the Indenture to either
defeasance or covenant defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration or transfer of the Notes, as
expressly provided for in the Indenture) as to all outstanding Notes when (i)
either (a) all the Notes theretofore authenticated and delivered (except lost,
stolen or destroyed
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Notes which have been replaced or paid and Notes for whose payment money has
theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust) have
been delivered to the Trustee for cancellation or (b) all Notes not theretofore
delivered to the Trustee for cancellation have become due and payable and the
Company or any Guarantor has irrevocably deposited or caused to be deposited
with the Trustee funds in an amount sufficient to pay and discharge the entire
Indebtedness on the Notes not theretofore delivered to the Trustee for
cancellation, for principal of, premium, if any, and interest on the Notes to
the date of deposit together with irrevocable instructions from the Company
directing the Trustee to apply such funds to the payment thereof at maturity or
redemption, as the case may be; (ii) the Company or any Guarantor has paid all
other sums payable under the Indenture by the Company and the Guarantors; and
(iii) the Company and each of the Guarantors have delivered to the Trustee an
officers' certificate and an opinion of counsel each stating that all conditions
precedent under the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with.
AMENDMENTS AND WAIVERS
From time to time, the Company and the Guarantors, when authorized by
resolutions of their boards of directors, and the Trustee may, without the
consent of the holders of any outstanding Notes, amend, waive or supplement the
Indenture or the Notes for certain specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies, qualifying, or
maintaining the qualification of, the Indenture under the Trust Indenture Act of
1939, as amended, or making any change that does not materially adversely affect
the legal rights of any holder; provided, however, that the Company has
delivered to the Trustee an Opinion of Counsel (as such term is defined in the
Indenture) stating that such change does not materially adversely affect the
legal rights of any holder. Other amendments and modifications of the Indenture
or the Notes may be made by the Company, the Guarantors and the Trustee with the
consent of the holders of not less than a majority of the aggregate principal
amount of the outstanding Notes; provided, however, that no such modification or
amendment may, without the consent of the holder of each outstanding Note
affected thereby, (i) reduce the principal of or change the Stated Maturity of
any Note, or alter the provisions with respect to the redemption or repurchase
of the Notes in any manner adverse to the holders of the Notes; (ii) reduce the
rate of or change the time for payment of interest on any such Note; (iii)
change the place or currency of payment of principal of (or premium) or interest
on any such Note; (iv) modify any provisions of the Indenture relating to the
waiver of past defaults (other than to add sections of the Indenture or the
Notes subject thereto) or the right of the holders of Notes to institute suit
for the enforcement of any payment on or with respect to any such Note or any
Guarantee in respect thereof or the modification and amendment provisions of the
Indenture and the Notes (other than to add sections of the Indenture or the
Notes which may not be amended, supplemented or waived without the consent of
each holder therein affected); (v) reduce the percentage of the principal amount
of outstanding Notes necessary for amendment to or waiver of compliance with any
provision of the Indenture or the Notes or for waiver of any Default in respect
thereof; (vi) waive a default in the payment of principal of, interest on, or
redemption payment with respect to, the Notes (except a rescission of
acceleration of the Notes by the holders thereof as provided in the Indenture
and a waiver of the payment default that resulted from such acceleration); (vii)
modify the ranking or priority of any Note or the Guarantee in respect thereof
of any Guarantor in any manner adverse to the holders of the Notes; (viii)
modify the provisions of any covenant (or the related definitions) in the
Indenture requiring the Company to make and consummate a Change of Control Offer
upon a Change of Control Triggering Event or an Asset Sale Offer in respect of
an Asset Sale or modify any of the provisions or definitions with respect
thereto in a manner materially adverse to the holders of Notes affected thereby
otherwise than in accordance with the Indenture; or (ix) release any Guarantor
from any of its obligations under its Guarantee or the Indenture otherwise than
in accordance with the Indenture.
The holders of a majority in aggregate principal amount of the outstanding
Notes, on behalf of all holders of Notes, may waive compliance by the Company
and the Guarantors with certain restrictive provisions of the Indenture. Subject
to certain rights of the Trustee, as provided in the Indenture, the holders of a
majority in aggregate principal amount of the Notes, on behalf of all holders of
the Notes, may waive any past default under the Indenture (including any such
waiver obtained in connection with a tender offer or exchange offer
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for the Notes), except a default in the payment of principal, premium or
interest or a default arising from failure to purchase any Notes tendered
pursuant to an Offer to Purchase pursuant thereto, or a default in respect of a
provision that under the Indenture cannot be modified or amended without the
consent of the holder of each Note that is affected.
GOVERNING LAW
The Indenture and the Notes and the Guarantees are governed by the laws of
the State of New York, without regard to the principles of conflicts of law.
CERTAIN DEFINITIONS
"Accounts Receivable Subsidiary" means Younkers Credit Corporation and
Proffitt's Credit Corporation and any other present or future Subsidiary
(including any credit card bank) of the Company that is, directly or indirectly,
wholly owned by the Company (other than director qualifying shares) and
organized for the purpose of and engaged in (i) purchasing, financing, and
collecting accounts receivable obligations of customers of the Company or its
Subsidiaries, (ii) issuing credit cards and financing accounts receivable
obligations of customers of the Company and its Subsidiaries, (iii) the sale or
financing of such accounts receivable or interests therein and (iv) other
activities incident thereto.
"Acquired Indebtedness" means, with respect to any specified Person
Indebtedness of any other Person (i) assumed in connection with an Asset
Acquisition from such Person or (ii) existing at the time such Person becomes a
Restricted Subsidiary of any other Person (other than any Indebtedness incurred
in connection with, or in contemplation of, such Asset Acquisition or such
Person becoming such a Restricted Subsidiary).
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person (other than the G.R. Herberger's
401(k) Employee Stock Purchase Plan and Employment Stock Ownership Plan). For
the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of Voting Stock,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Affiliate Transaction" has the meaning set forth under "-- Limitation on
Transactions with Affiliates."
"Asset Acquisition" means (i) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person will
become a Restricted Subsidiary or will be merged or consolidated with or into
the Company or any Restricted Subsidiary or (ii) the acquisition by the Company
or any Restricted Subsidiary of the assets of any Person which constitute
substantially all of the assets of such Person, or any division or line of
business of such Person, or which is otherwise outside of the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance or
transfer or other disposition (including, without limitation, any merger,
consolidation or sale-leaseback transaction) to any Person other than the
Company or a Restricted Subsidiary, in one or a series of related transactions,
of (i) any Capital Stock of any Restricted Subsidiary; (ii) all or substantially
all of the assets of any division or line of business of the Company or any
Restricted Subsidiary; or (iii) any other properties or assets of the Company or
any Restricted Subsidiary other than in the ordinary course of business. For the
purposes of this definition, the term "Asset Sale" will not include (a) any
sale, issuance, conveyance, transfer, lease or other disposition of properties
or assets that is governed by the provisions described under the first paragraph
of "Consolidation, Merger, Sale of Assets, Etc."; (b) sales of surplus and other
property or equipment that has become worn out, obsolete or damaged or otherwise
unsuitable for use in connection with the business of the Company or any
Restricted Subsidiary, as the case may be; or (c) any transaction consummated in
compliance with "-- Certain Covenants -- Limitation on Restricted Payments." For
purposes of the covenant described under "Disposition of Proceeds of Asset
Sales," the term "Asset Sale" shall not include any sale, conveyance, transfer,
lease or other disposition of (x) any property or asset, whether in one
transaction or a series of related
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transactions (1) constituting a Capitalized Lease Obligation or a transfer
consisting solely of a grant of a security interest permitted by the Indenture
or (2) involving assets with a Fair Market Value not in excess of $1.0 million,
(y) accounts receivable to an Accounts Receivable Subsidiary or to third parties
that are not Affiliates of the Company or any Subsidiary of the Company in the
ordinary course of business or (z) the sale, transfer or other disposition of
shares of Capital Stock or Indebtedness of an Unrestricted Subsidiary or
Permitted Investments (other than Permitted Investments of the type described
under clause (f) of the definition thereof) to a third party that is not an
Affiliate of the Company or any Subsidiary of the Company.
"Asset Sale Offer" has the meaning set forth under "-- Disposition of
Proceeds of Asset Sales."
"Average Life to Stated Maturity" means, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from such date to the date or dates
of each successive scheduled principal payment (including, without limitation,
any sinking fund requirements) of such Indebtedness multiplied by (b) the amount
of each such principal payment by (ii) the sum of all such principal payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, any other interest or participation that confers
on a Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person and any rights (other than debt
securities convertible into capital stock), warrants or options exchangeable for
or convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real, personal
or mixed ) that is required to be classified and accounted for as a capital
lease obligation under GAAP, and, for the purpose of the Indenture, the amount
of such obligation at any date shall be the capitalized amount thereof at such
date, determined in accordance with GAAP consistently applied.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness
with a maturity of not more than one year issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit,
Eurodollar time deposits or bankers' acceptances with a maturity of not more
than one year of any financial institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of not
less than $500.0 million; (iii) commercial paper with a maturity of not more
than one year issued by a corporation that is not an Affiliate of the Company
organized under the laws of any state of the United States or the District of
Columbia and rated at least A-1 by Standard & Poor's Ratings Group, at least P-1
by Moody's Investors Service, Inc. the equivalent of any such category of
Standard & Poor's Ratings Group or Moody's Investor Services, Inc. used by
another nationally recognized Rating Agency; (iv) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clauses (i) and (ii) above; and (v) transaction deposit accounts
with domestic commercial banks.
"Change of Control" means the occurrence of any of the following events
(whether or not approved by the Board of Directors of the Company): (i) any
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a Person will be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 35% of the total voting power of
the then outstanding Voting Stock of the Company; (ii) the Company consolidates
with, or merges with or into, another Person or sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of its
assets to any Person, other than any such transaction where the holders of the
Voting Stock of the Company immediately prior to such transaction own, directly
or indirectly, not less than a majority of the total voting power of the then
outstanding Voting Stock of the surviving or transferee corporation immediately
after such transaction and the preceding clause (i) is not applicable; (iii)
during any consecutive two-year period, individuals who at the beginning of such
period constituted the Board of Directors of the Company (together with any new
directors whose election by such board or whose nomination for election by the
stockholders of the Company
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was approved by a vote of 66 2/3% of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office; or (iv) any
order, judgment or decree shall be entered against the Company decreeing the
dissolution or liquidation of the Company and such order shall remain
undischarged or unstayed for a period in excess of sixty days.
"Change of Control Triggering Event" means the occurrence of both a Change
of Control and a Rating Decline.
"Change of Control Offer" has the meaning set forth under "-- Change of
Control Triggering Event."
"Consolidated Cash Flow Available for Fixed Charges" means, for any period,
(i) the sum of, without duplication, the amounts for such period, taken as a
single accounting period, of (a) Consolidated Net Income, (b) to the extent
reducing Consolidated Net Income, Consolidated Non-cash Charges, (c) to the
extent reducing Consolidated Net Income, Consolidated Interest Expense, and (d)
to the extent reducing Consolidated Net Income, Consolidated Income Tax Expense
less (ii)(A) all non-cash items increasing Consolidated Net Income for such
period and (B) all cash payments during such period relating to non-cash charges
that were added back in determining Consolidated Cash Flow Available for Fixed
Charges in any prior period.
"Consolidated Fixed Charge Coverage Ratio" means the ratio of the aggregate
amount of Consolidated Cash Flow Available for Fixed Charges of the Company for
the four full fiscal quarters immediately preceding the date of the transaction
for which consolidated financial information of the Company is available (the
"Transaction Date") giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (such four full fiscal quarter period being referred to
herein as the "Four Quarter Period") to the aggregate amount of Consolidated
Fixed Charges of the Company for such Four Quarter Period. For purposes of this
definition, "Consolidated Cash Flow Available for Fixed Charges" and
"Consolidated Fixed Charges" will be calculated, without duplication, after
giving effect on a pro forma basis for the period of such calculation to (i) the
incurrence of any Indebtedness of the Company or any of the Restricted
Subsidiaries during the period commencing on the first day of the Four Quarter
Period to and including the Transaction Date (the "Reference Period"),
including, without limitation, the incurrence of the Indebtedness giving rise to
the need to make such calculation, as if such incurrence occurred on the first
day of the Reference Period, (ii) an adjustment to eliminate or include, as
applicable, the Consolidated Cash Flow Available for Fixed Charges and
Consolidated Fixed Charges of the Company directly attributable to assets which
are the subject of any Asset Sale or Asset Acquisition (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company or one of the Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness) occurring during the Reference Period, as if such Asset Sale or
Asset Acquisition occurred on the first day of the Reference Period, (iii) the
retirement of Indebtedness during the Reference Period which cannot thereafter
be reborrowed occurring as if retired on the first day of the Reference Period
and (iv) an adjustment to eliminate the Restructuring Charges. For purposes of
calculating "Consolidated Fixed Charges" for this "Consolidated Fixed Charge
Coverage Ratio," interest on Indebtedness incurred during the Reference Period
under any revolving credit facility which may be borrowed and repaid without
reducing the commitments thereunder shall be the actual interest during the
Reference Period. Furthermore, in calculating "Consolidated Fixed Charges" for
purposes of determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (1) interest on Indebtedness
determined on a fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter will be deemed to accrue at a fixed rate
per annum equal to the rate of interest on such Indebtedness in effect on the
Transaction Date; (2) if interest on any Indebtedness actually incurred on the
Transaction Date may optionally be determined on a fluctuating basis like prime
or a similar rate or a factor thereof, a eurocurrency interbank offered rate, or
other rates, then the interest rate in effect on the Transaction Date shall be
deemed to have been in effect during the Reference Period; and (3)
notwithstanding clause (1) above, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by agreements relating
to Interest Rate Protection Obligations, will be deemed to accrue at the rate
per annum resulting after giving effect to the operation of such agreements. If
the Company or any Restricted Subsidiary
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directly or indirectly guarantees Indebtedness of a third Person, the above
definition will give effect to the incurrence of such guaranteed Indebtedness as
if the Company or any Restricted Subsidiary had directly incurred or otherwise
assumed such guaranteed Indebtedness.
"Consolidated Fixed Charges" means, for any period, the sum of, without
duplication, the amounts for such period of (i) Consolidated Interest Expense;
and (ii) the product of (x) the aggregate amount of cash dividends and other
distributions paid, accrued or scheduled to be paid or accrued during such
period in respect of Redeemable Capital Stock times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the
then-current effective consolidated federal, state and local tax rate of such
Person expressed as a decimal.
"Consolidated Income Tax Expense" means, for any period, the provision for
federal, state, local and foreign income taxes payable by the Company and the
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Interest Expense" means, for any period, without duplication,
the sum of (a) the interest expense of the Company and the Restricted
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP, including, without limitation, (i) any amortization of debt discount
attributable to such period, (ii) the net cost under Interest Rate Protection
Obligations (including any amortization of discounts), (iii) the interest
portion of any deferred payment obligation, (iv) all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing and (v) all capitalized interest and all accrued interest,
and (b) the interest component of Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by the Company and the Restricted
Subsidiaries during such period and as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income" means, for any period, the consolidated net
income (or net loss) of the Company and the Restricted Subsidiaries for such
period as determined in accordance with GAAP, adjusted, to the extent included
in calculating such net income, by excluding, without duplication, (i) all
extraordinary gains or losses (net of fees and expenses relating to the
transaction giving rise thereto), (ii) income of the Company and the Restricted
Subsidiaries derived from or in respect of Investments in Unrestricted
Subsidiaries, except to the extent that cash dividends or distributions are
actually received by the Company or a Restricted Subsidiary, (iii) the portion
of net income (or net loss) of the Company and the Restricted Subsidiaries
allocable to minority interests in unconsolidated Persons, except to the extent
that cash dividends or distributions are actually received by the Company or one
of the Restricted Subsidiaries, (iv) net income (or net loss) of any Person
combined with the Company or one of the Restricted Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of combination,
(v) gains or losses in respect of any Asset Sales by the Company or any of the
Restricted Subsidiaries (on an after-tax basis and net of fees and expenses
relating to the transaction giving rise thereto), and (vi) the net income of any
Restricted Subsidiary to the extent that the declaration of dividends or similar
distributions by that Restricted Subsidiary of that income is not at the time
permitted, directly or indirectly, by operation of the terms of its charter or
any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulations applicable to that Restricted Subsidiary or its
stockholders.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, amortization and other noncash expenses of the Company and the
Restricted Subsidiaries reducing Consolidated Net Income for such period (other
than any non-cash item requiring an accrual or reserve for cash disbursements in
any future period), determined on a consolidated basis in accordance with GAAP.
"covenant defeasance" has the meaning set forth under "-- Defeasance or
Covenant Defeasance of Indenture."
"Credit Facility" means the Credit Agreement dated as of October 11, 1996,
among the Company, NationsBank of Texas, National Association, as Agent, and the
other financial institutions signatory thereto, as in effect on the Issue Date,
and as such agreement may be amended, renewed, extended, substituted,
refinanced, replaced, supplemented or otherwise modified from time to time, and
includes related notes, guarantees and other agreements executed in connection
therewith.
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"Currency Agreement" means the obligations of any Person pursuant to any
foreign exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect the Company or any Restricted Subsidiary against
fluctuations in currency values.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"defeasance" has the meaning set forth under "-- Defeasance or Covenant
Defeasance of Indenture."
"Designation" has the meaning set forth under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries."
"Designation Amount" has the meaning set forth under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries."
"Event of Default" has the meaning set forth under "-- Events of Default."
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the Commission thereunder.
"Fair Market Value" means, with respect to any asset, the price which could
be negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing buyer, neither of which is under pressure or
compulsion to complete the transaction. Fair Market Value shall be determined by
the Board of Directors of the Company acting in good faith conclusively
evidenced by a board resolution thereof delivered to the Trustee or, with
respect to any asset valued at up to $1.0 million, such determination may be
made by a duly authorized officer of the Company evidenced by an officer's
certificate delivered to the Trustee.
"Foreign Subsidiary" means a Restricted Subsidiary not organized or
existing under the laws of the United States, any state thereof, the District of
Columbia or any territory thereof.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio."
"GAAP" means, at any date of determination, generally accepted accounting
principles in effect in the United States which are applicable at the date of
determination and which are consistently applied for all applicable periods.
"Guarantee" means the guarantee by each of the Subsidiary Guarantors of the
Notes and the Company's obligations under the Indenture.
"guarantee" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit. A guarantee shall include,
without limitation, any agreement to maintain or preserve any other Person's
financial condition or to cause any other Person to achieve certain levels of
operating results.
"Guarantor" means (i) each of G.R. Herberger's Inc., Parisian, Inc.,
McRae's, Inc., McRae's Stores Partnership and McRae's of Alabama, Inc., and
their respective successors and (ii) each other Subsidiary formed, created or
acquired before or after the Issue Date required to become a Guarantor after the
Issue Date pursuant to "-- Certain Covenants -- Limitation on Guarantees by
Restricted Subsidiaries."
"incur" has the meaning set forth in "-- Certain Covenants -- Limitation on
Indebtedness."
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payable and other accrued
current liabilities incurred in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such Person in
connection with any letters of credit (but
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excluding obligations with respect to trade letters of credit to the extent such
trade letters of credit are not drawn upon or, if drawn upon, to the extent such
drawing is reimbursed not later than the third business day following receipt by
such Person of a demand for reimbursement), bankers' acceptances or other
similar credit transaction and in connection with any agreement obligating such
Person to purchase, redeem, exchange, convert or otherwise acquire for value any
Capital Stock of such Person, or any warrants, rights or options to acquire such
Capital Stock, now or hereafter outstanding, (ii) all obligations of such Person
evidenced by bonds, notes, debentures or other similar instruments, (iii) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), but
excluding trade accounts payable arising in the ordinary course of business,
(iv) all Capitalized Lease Obligations of such Person, (v) all Indebtedness
referred to in the preceding clauses of other Persons and all dividends of other
Persons, the payment of which is secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness (the amount of such obligation being
deemed to be the lesser of the value of such property or asset or the amount of
the obligation so secured), (vi) all guarantees by such Person of Indebtedness
of another Person (other than guarantees of operating leases of a Restricted
Subsidiary of such Person), (vii) all Redeemable Capital Stock valued at its
involuntary maximum fixed repurchase price plus accrued and unpaid dividends,
(viii) all net payment obligations under or in respect of Currency Agreements
and Interest Rate Protection Obligations of such Person, and (ix) any amendment,
supplement, modification, deferral, renewal, extension or refunding of any
liability of the types referred to in clauses (i) through (viii) above. For
purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital
Stock which does not have a fixed repurchase price will be calculated in
accordance with the terms of such Redeemable Capital Stock as if such Redeemable
Capital Stock were purchased on any date on which Indebtedness will be required
to be determined pursuant to the Indenture, and if such price is based upon, or
measured by, the Fair Market Value of such Redeemable Capital Stock, such Fair
Market Value to be determined in good faith by the Board of Directors of the
issuer of such Redeemable Capital Stock. Sales (on a "true-sale" non-recourse
basis) and the servicing of receivables transferred from the Company or a
Restricted Subsidiary, or transfers of cash, to an Accounts Receivable
Subsidiary as a capital contribution or in exchange for Indebtedness of such
Accounts Receivable Subsidiary or cash shall not be deemed Indebtedness
hereunder.
"Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or
indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount or any other arrangement involving payments by or to such Person
based upon fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect
advance, loan or other extension of credit (including by means of a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others or otherwise), or any purchase or acquisition by such Person of any
Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued by any other Person. Investments shall exclude extensions of
trade credit in accordance with normal trade practices. In addition to the
foregoing, any foreign exchange contract, Currency Agreement, Interest Rate
Protection Obligation or similar agreement shall constitute an Investment.
"Issue Date" means the original issue date of the Notes under the
Indenture.
"Leveraged Subsidiary" means any Restricted Subsidiary that has incurred
Indebtedness (other than Acquired Indebtedness pursuant to the first paragraph
of the covenant "Limitation on Indebtedness" and Indebtedness described in
clauses (iv), (v), (vii), (viii), (ix) and (xi) of the second paragraph of the
covenant "Limitation on Indebtedness" and any permitted refinancings or
replacements thereof incurred
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under clause (x)) pursuant to such covenant for so long as such Indebtedness, or
any refinancing thereof, is outstanding.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
privilege, security interest, hypothecation, cessation and transfer, assignment
for security, claim, deposit arrangement or other encumbrance upon or with
respect to any property of any kind, whether real, personal or mixed, movable or
immovable, now owned or hereafter acquired. A Person will be deemed to own
subject to a Lien any property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, Capitalized
Lease Obligation or other title retention agreement.
"Material Subsidiary" means each Restricted Subsidiary of the Company that
is a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X under
the Securities Act and the Exchange Act (as such regulation is in effect on the
Issue Date).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents (except to the extent that such obligations are financed or sold
with recourse to the Company or any Restricted Subsidiary) net of (i) brokerage
commissions and other reasonable fees and expenses (including fees and expenses
of legal counsel and investment bankers) related to such Asset Sale, (ii)
provisions for all taxes payable as a result of such Asset Sale, (iii) amounts
required to be paid to any Person (other than the Company or any Restricted
Subsidiary) owning a beneficial interest in the assets subject to the Asset Sale
and (iv) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve required in accordance with GAAP
consistently applied against any liabilities associated with such Asset Sale and
retained by the Company or any Restricted Subsidiary, as the case may be, after
such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale (provided that the amount of any such reserves shall be deemed
to constitute Net Cash Proceeds at the time such reserves shall have been
released or are not otherwise required to be retained as a reserve).
"Other Indebtedness" has the meaning set forth under "-- Certain
Covenants -- Limitation on Guarantees of Restricted Subsidiaries."
"Parisian Notes" means the 9 7/8% Senior Subordinated Notes due 2003 of
Parisian.
"Permitted Indebtedness" has the meaning set forth under "-- Certain
Covenants -- Limitation on Indebtedness."
"Permitted Investment" means (a) Cash Equivalents; (b) Investments in
prepaid expenses, negotiable instruments held for collection and lease, utility
and workers' compensation, performance and other similar deposits; (c) loans,
extensions of credit and advances to officers, directors and employees which are
outstanding on the Issue Date or which do not exceed $7.5 million in the
aggregate at any one time outstanding and payroll, travel and similar advances
to cover matters that are expected at the time of such advances ultimately to be
treated as expenses in accordance with GAAP; (d) Interest Rate Protection
Obligations permitted under clause (vii) of the second paragraph under
"-- Limitation on Indebtedness" and Currency Agreements; (e) Investments by any
Restricted Subsidiary in the Company; (f) Investments by the Company or any
Restricted Subsidiary in a Restricted Subsidiary that is a Guarantor or another
Person, if as a result of or in connection with such Investment such other
Person becomes a Restricted Subsidiary; (g) Investments represented by accounts
receivable created or acquired in the ordinary course of business; (h)
Investments in the form of the sale (on a "true-sale" non-recourse basis) or the
servicing of receivables transferred from the Company or any Restricted
Subsidiary, or transfers of cash, to an Accounts Receivable Subsidiary as a
capital contribution or in exchange for Indebtedness of such Accounts Receivable
Subsidiary or cash in the ordinary course of business; (i) Investments
representing capital stock or obligations issued to the Company or any
Restricted Subsidiary in settlement of claims against any other Person by reason
of a composition or readjustment of debt or a reorganization of any debtor of
the Company or such Restricted Subsidiary; (j) loans or other advances to
vendors in connection with in-store merchandising to be repaid
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either on a lump-sum basis or over a period of time by delivery of merchandise;
(k) Investments in credit card receivables arising from any proprietary credit
card issued by or for the benefit of the Company or an Affiliate of the Company
and (l) Investments acquired by the Company or any Restricted Subsidiary in
connection with an Asset Sale permitted under "-- Disposition of Proceeds of
Asset Sales" (other than pursuant to the second sentence of the first paragraph
thereof).
"Permitted Liens" means (a) Liens on property of (or on shares of Capital
Stock or debt securities of) a Person existing at the time such Person (i) is
merged into or consolidated with the Company or any Restricted Subsidiary or
(ii) becomes a Restricted Subsidiary; provided, however, that such Liens were in
existence prior to the contemplation of such merger, consolidation or
acquisition and do not secure any property or assets of the Company or any
Restricted Subsidiary other than the property or assets subject to the Liens
prior to such merger, consolidation or acquisition; (b) Liens imposed by law
such as landlords', carriers', warehousemen's and mechanics' Liens and other
similar Liens arising in the ordinary course of business which secure payment of
obligations not more than 60 days past due or which are being contested in good
faith and by appropriate proceedings; (c) Liens existing on the Issue Date; (d)
Liens securing only the Notes; (e) Liens in favor of the Company or Liens on any
property or assets of a Subsidiary (or on shares of Capital Stock or debt
securities of a Subsidiary) in favor of the Company or any Restricted
Subsidiary; (f) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent for more than 90 days or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded; provided, however, that any reserve or other appropriate provision as
shall be required in conformity with GAAP shall have been made therefor; (g)
easements, reservation of rights of way, restrictions and other similar
easements, licenses, restrictions on the use of properties, or imperfections of
title that in the aggregate are not material in amount and do not in any case
materially detract from the properties subject thereto or interfere with the
ordinary conduct of the business of the Company and the Restricted Subsidiaries;
(h) Liens resulting from the deposit of cash or notes in connection with
contracts, tenders or expropriation proceedings, or to secure workers'
compensation, surety or appeal bonds, costs of litigation when required by law,
public and statutory obligations, obligations under franchise arrangements
entered into in the ordinary course of business and other obligations of a
similar nature arising in the ordinary course of business; (i) Liens securing
any revolving credit facility under the Credit Facility; (j) Liens securing
Indebtedness consisting of Capitalized Lease Obligations, Purchase Money
Indebtedness (other than Indebtedness incurred to finance an Asset Acquisition),
mortgage financings, industrial revenue bonds or other monetary obligations, in
each case incurred solely for the purpose of financing all or any part of the
purchase price or cost of construction or installation of assets used in the
business of the Company or the Restricted Subsidiaries, or repairs, additions or
improvements to such assets; provided, however, that (I) such Liens secure
Indebtedness in an amount not in excess of the original purchase price or the
original cost of any such assets or repair, addition or improvement thereto
(plus an amount equal to the reasonable fees and expenses in connection with the
incurrence of such Indebtedness), (II) such Liens do not extend to any other
assets of the Company or the Restricted Subsidiaries (and, in the case of
repair, addition or improvements to any such assets, such Lien extends only to
the assets (and improvements thereto or thereon) repaired, added to or
improved), (III) the incurrence of such Indebtedness is permitted by "-- Certain
Covenants -- Limitation on Indebtedness" above and (IV) such Liens attach prior
to 90 days after such purchase, construction, installation, repair, addition or
improvement; (k) Liens to secure any Refinancings (or successive Refinancings),
in whole or in part, of any Indebtedness secured by Liens referred to in the
clauses above so long as such Lien does not extend to any other property (other
than improvements thereto); (l) Liens securing letters of credit entered into in
the ordinary course of business and consistent with past business practice; (m)
Liens on and pledges of the capital stock of (A) any Unrestricted Subsidiary
securing any Indebtedness of such Unrestricted Subsidiary and (B) an Accounts
Receivable Subsidiary; (n) leases or subleases granted to others that do not
materially interfere with the ordinary course of business of the Company and the
Restricted Subsidiaries, taken as a whole; (o) any interest or title of a lessor
in any property that is (i) subject to any lease or (ii) located on the real
property subject to any lease; (p) Liens arising from the rendering of a final
judgment or order against the Company or any Restricted Subsidiary that does not
give rise to an Event of Default; (q) Liens arising out of conditional sale,
title retention, consignment or similar arrangements for the sale of goods
entered into by the Company or any Restricted Subsidiary in the ordinary course
of business and (r) Liens on the property or assets or Capital
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Stock of Accounts Receivable Subsidiaries and Liens arising out of any sale of
accounts receivable in the ordinary course to or by an Accounts Receivable
Subsidiary.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" means, with respect to any Person, means Capital Stock of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Capital
Stock of any other class of such Person.
"Purchase Money Indebtedness" means Indebtedness of the Company or any
Restricted Subsidiary incurred for the purpose of financing all or any part of
the purchase price or the cost of construction or improvement of any real or
personal property; provided, however, that the aggregate principal amount of
such Indebtedness does not exceed the lesser of the Fair Market Value of such
property or the original purchase price or the original cost of any such assets
or repair, addition or improvement thereto (plus an amount equal to the
reasonable fees and expenses in connection with the incurrence of such
Indebtedness).
"Rating Agencies" means (i) Standard & Poor's Ratings Group and (ii)
Moody's Investor Service, Inc. or (iii) if Standard & Poor's Ratings Group or
Moody's Investors Service, Inc. or both shall not make a rating of the Notes
publicly available, a nationally recognized securities rating agency or
agencies, as the case may be, selected by the Company, which shall be
substituted for Standard & Poor's Ratings Group, Moody's Investors Service, Inc.
or both, as the case may be.
"Rating Category" means (i) with respect to Standard & Poor's Ratings
Group, any of the following categories: BB, B, CCC, CC, C and D (or equivalent
successor categories); (ii) with respect to Moody's Investors Service, Inc., any
of the following categories: Ba, B, Caa, Ca, C and D (or equivalent successor
categories); and (iii) the equivalent of any such category of Standard & Poor's
Ratings Group or Moody's Investors Service, Inc. used by another Rating Agency.
In determining whether the rating of the Notes has decreased by one or more
gradations, gradations within Rating Categories (+ and - for Standard & Poor's
Ratings Group; 1, 2 and 3 for Moody's Investors Service, Inc.; or the equivalent
gradations for another Rating Agency) shall be taken into account (e.g., with
respect to Standard & Poor's Ratings Group, a decline in a rating from BB- to
BB, as well as from BB- to B+, will constitute a decrease of one gradation).
"Rating Date" means the date which is 90 days prior to the earlier of (i) a
Change of Control and (ii) public notice of the occurrence of a Change of
Control or of the intention by the Company to effect a Change of Control.
"Rating Decline" means the occurrence of the following on, or within 90
days after, the earlier of (i) the occurrence of a Change of Control and (ii)
the date of public notice of the occurrence of a Change of Control or of the
public notice of the intention of the Company to effect a Change of Control
(which period shall be extended so long as the rating of the Notes is under
publicly announced consideration for possible downgrading by any of the Rating
Agencies): (a) in the event that the Notes have an Investment Grade Rating, the
rating of the Notes by both such Rating Agencies shall be reduced below
Investment Grade, or (b) in the event the Notes are rated below Investment Grade
by both such Rating Agencies on the Rating Date, the rating of the Notes by
either Rating Agency shall be decreased by one or more gradations (including
gradations within Rating Categories as well as between Rating Categories).
"Redeemable Capital Stock" means any class or series of Capital Stock to
the extent that, either by its terms, by the terms of any security into which it
is convertible or exchangeable, or by contract or otherwise, is or upon the
happening of an event or passage of time would be, required to be redeemed prior
to the final stated maturity of the Notes or is redeemable at the option of the
holder thereof at any time prior to such maturity, or is convertible into or
exchangeable for debt securities at any time prior to such maturity.
"Reference Period" has the meaning set forth under the definition of
"Consolidated Fixed Charge Coverage Ratio."
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"Refinance" means, with respect to any Indebtedness, any refinancing,
redemption, retirement, renewal, replacement, extension or refunding of such
Indebtedness.
"Restricted Payment" has the meaning set forth under "-- Certain
Covenants -- Limitation on Restricted Payments."
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a Board Resolution
delivered to the Trustee, as an Unrestricted Subsidiary pursuant to and in
compliance with the covenant described under "-- Certain Covenants -- Limitation
on Designations of Unrestricted Subsidiaries." Any such designation may be
revoked by a Board Resolution of the Company delivered to the Trustee, subject
to the provisions of such covenant.
"Restructuring Charges" means all nonrecurring charges related to Asset
Acquisitions and Asset Sales, including merger, restructuring and integration
charges incurred or accrued during the last full fiscal year of the Company
ending prior to the Issue Date.
"Revocation" has the meaning set forth under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries."
"Securities Act" mean the Securities Act of 1933, as amended, and the rules
and regulations promulgated by the Commission thereunder.
"Stated Maturity" means, with respect to any Note or any installment of
interest thereon, the dates specified in such Note as the fixed date on which
the principal of such Note or such installment of interest is due and payable,
and when used with respect to any other Indebtedness, means the date specified
in the instrument governing such Indebtedness as the fixed date on which the
principal of such Indebtedness or any installment of interest is due and
payable.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which the outstanding shares of Voting Stock having at least a majority of the
votes entitled to be cast in the election of directors shall at the time be
owned, directly or indirectly, by such Person, or (b) any other Person of which
at least a majority of the shares of Voting Stock are at the time, directly or
indirectly, owned by such first named Person.
"Subordinated Indebtedness" means, with respect to the Company,
Indebtedness of the Company which is expressly subordinated in right of payment
to the Notes or, with respect to any Guarantor, Indebtedness of such Guarantor
which is expressly subordinated in right of payment to the Guarantee of such
Guarantor.
"Surviving Entity" has the meaning set forth under "Consolidations,
Mergers, Sale of Assets, Etc."
"Transaction Date" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio."
"Unrestricted Subsidiary" means each Accounts Receivable Subsidiary and
each Subsidiary of the Company (other than a Guarantor) designated as such
pursuant to and in compliance with the covenant described under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries." Any such
Designation may be revoked by a Board Resolution of the Company delivered to the
Trustee, subject to the provisions of such covenant.
"Unutilized Net Available Proceeds" has the meaning set forth under
"-- Certain Covenants -- Disposition of Proceeds of Asset Sales."
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the Board of Directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes shall have, or might have, voting power by reason of
the happening of any contingency).
"Wholly-Owned Restricted Subsidiary" means any Restricted Subsidiary of
which 100% of the outstanding Capital Stock is owned by the Company and/or
another Wholly-Owned Restricted Subsidiary. For purposes of this definition, any
directors' qualifying shares or investments by foreign nationals mandated by
applicable law shall be disregarded in determining the ownership of a Restricted
Subsidiary.
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BOOK-ENTRY; DELIVERY AND FORM
Series A Notes
Series A Notes originally offered and sold to QIBs in reliance on Rule 144A
under the Securities Act, are represented by a single, permanent Global Note in
definitive, fully registered book-entry form (the "Rule 144A Global Note") which
has been registered in the name of Cede & Co., as nominee of DTC on behalf of
purchasers of the Series A Notes represented thereby for credit to the
respective accounts of such purchasers (or to such other accounts as they may
direct) at DTC.
Series A Notes originally offered and sold in reliance on Regulation S
under the Securities Act, if any, were initially represented by a single,
permanent Global Note in definitive, fully registered book-entry form (the
"Regulation S Global Note") which was registered in the name of Cede & Co., as
nominee of DTC and deposited on behalf of the purchasers of the Series A Notes
represented thereby with a custodian for DTC for credit to the respective
accounts of such purchasers (or to such other accounts as they directed) at the
Euroclear System ("Euroclear") or Cedel Bank, societe anonyme ("Cedel"). Prior
to the 40th day after the later of the commencement of the issuance of the
Series A Notes and the Issue Date, interests in the Regulation S Global Note may
only be held through Euroclear or Cedel.
Series A Notes (a) originally purchased by or transferred to Accredited
Investors who are not QIBs or (b) held by QIBs who elected to take physical
delivery of their certificates instead of holding their interest through the
Rule 144A Global Note (and which are thus ineligible to trade through DTC) (the
"Series A Non-Global Purchasers") will be issued in fully registered form
("Series A Certificated Notes"). Upon the transfer of such Series A Certificated
Notes to a QIB or in an offshore transaction under Rule 903 or 904 of Regulation
S under the Securities Act, such Series A Certificated Notes will, unless such
Rule 144A Global Note has previously been exchanged in whole for Series A
Certificated Notes, be exchanged for an interest in the Rule 144A Global Note
and/or the Regulation S Global Note upon delivery of appropriate certifications
to the Trustee. Transfers of Series A Certificated Notes, any interest in the
Rule 144A Global Note and any interest in the Regulation S Global Note will be
subject to certain restrictions.
Exchange Notes
Exchange Notes issued in exchange for Series A Notes originally offered and
sold (i) to QIBs in reliance on Rule 144A under the Securities Act, (ii) to
Accredited Investors or (iii) in reliance on Regulation S under the Securities
Act will be represented by a single, permanent Global Note in definitive, fully
registered book-entry form (the "Exchange Global Note"; and together with the
Rule 144A Global Note and the Regulation S Global Note, the "Global Notes"),
which will be registered in the name of Cede & Co., as nominee of DTC on behalf
of persons who receive Exchange Notes represented thereby for credit to the
respective accounts of such persons (or to such other accounts as they may
direct) at DTC.
Exchange Notes issued in exchange for Series A Notes will be issued, upon
request, in fully registered form (together with the Series A Certificated
Notes, the "Certificated Notes"), but otherwise such holders will only be
entitled to registration of their respective Exchange Notes in book-entry form
under the Exchange Global Note.
The Global Notes
The Company expects that pursuant to procedures established by DTC (a) upon
deposit of the Global Notes, DTC or its custodian will credit on its internal
system portions of the Global Notes, which shall be comprised of the
corresponding respective amount of the Global Notes to the respective accounts
of persons who have accounts with such depositary and (b) ownership of the Notes
will be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by DTC or its nominee (with respect to interests of
Participants (as defined below) and the records of Participants (with respect to
interests of persons other than Participants)). Ownership of beneficial
interests in the Global Notes will be limited to persons who have accounts with
DTC ("Participants") or persons who hold interests through Participants. Holders
may
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hold their interests in the Global Notes directly through DTC if they are
Participants in such system, or indirectly through organizations which are
Participants in such system.
So long as DTC or its nominee is the registered owner or holder of any of
the Notes, DTC or such nominee will be considered the sole owner or holder of
such Notes represented by the Global Notes for all purposes under the Indenture
and under the Notes represented thereby. No beneficial owner of an interest in
the Global Notes will be able to transfer such interest except in accordance
with the applicable procedures of DTC in addition to those provided for under
the Indenture.
Payments of the principal of, premium, if any, and interest (including
Additional Interest, if any) on the Global Notes will be made to DTC or its
nominee, as the case may be, as the registered owner thereof. None of the
Company, the Trustee or any Paying Agent under the Indenture will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
the principal of, premium, if any, and interest (including Additional Interest,
if any) on the Global Notes will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the Global Notes as shown on the records of DTC or its nominee. The
Company also expects that payments by Participants to owners of beneficial
interests in the Global Notes held through such Participants will be governed by
standing instructions and customary practice as is now the case with Notes held
for the accounts of customers registered in the names of nominees for such
customers. Such payment will be the responsibility of such Participants.
Transfers between Participants in DTC will be effected in accordance with
DTC rules and will be settled in immediately available funds. If a holder
requires physical delivery of a Certificated Note for any reason, including to
sell Notes to persons in states which require physical delivery of such Notes or
to pledge such Notes, such holder must transfer its interest in the Global Notes
in accordance with the normal procedures of DTC and in accordance with the
procedures set forth in the Indenture.
Before the 40th day after the later of the commencement of the issuance of
the Series A Notes and the Issue Date, transfers by an owner of a beneficial
interest in the Regulation S Global Note to a transferee who takes delivery of
such interest through the Rule 144A Global Note will be made only in accordance
with the applicable procedures and upon receipt by the Trustee and the Company
of a written certification from the transferor of the beneficial interest in the
form provided in the Indenture to the effect that such transfer is being made to
a person whom the transferor reasonably believes is a QIB within the meaning of
Rule 144A in a transaction meeting the requirements of Rule 144A and as
permitted consistent with Regulation S.
Transfers by an owner of a beneficial interest in the Rule 144A Global Note
to a transferee who takes delivery of such interest through the Regulation S
Global Note, whether before, on or after the 40th day after the later of the
commencement of the issuance of the Series A Notes and the Issue Date, will be
made only upon receipt by the Trustee and the Company of a certification to the
effect that such transfer is being made in accordance with Regulation S.
Transfers of Series A Certificated Notes held by institutional Accredited
Investors to persons who will hold beneficial interests in the Rule 144A Global
Note or the Regulation S Global Note will be subject to certifications provided
by the Trustee.
Any beneficial interest in one of the Global Notes that is transferred to a
person who takes delivery in the form of an interest in the other Global Note
will, upon transfer, cease to be an interest in such Global Note and become an
interest in the other Global Note and, accordingly, will thereafter be subject
to all transfer restrictions, if any, and other procedures applicable to
beneficial interests in such other Global Note for as long as it remains such an
interest.
DTC has advised the Company that DTC will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more Participants to whose
account the DTC interests in the Global Notes are credited and only in respect
of the aggregate principal amount as to which such Participant or Participants
has or have given such direction.
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However, if there is an Event of Default under the Indenture, DTC will exchange
the Global Notes for Certificated Notes, which it will distribute to its
Participants and which, in the case of Series A Certificated Notes, will be
legended.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold Notes for
its Participants and facilitate the clearance and settlement of Notes
transactions between Participants through electronic book-entry changes in
accounts of its Participants, thereby eliminating the need for physical movement
of certificates. Participants include Notes brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to the DTC system is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly.
Although DTC, Euroclear and Cedel are expected to follow the foregoing
procedures in order to facilitate transfers of interests in the Global Notes
among Participants of DTC, Euroclear and Cedel, as applicable, they are under no
obligation to perform such procedures, and such procedures may be discontinued
at any time. None of the Company, the Trustee, Registrar or the Paying Agent
will have any responsibility for the performance by DTC, Euroclear or Cedel or
their respective direct or indirect Participants of their respective obligations
under the rules and procedures governing their operations.
Certificated Notes
Interests in Global Notes will be exchanged for Certificated Notes if (i)
DTC notifies the Company that it is unwilling or unable to continue as
depositary for the Global Notes, or DTC ceases to be a "Clearing Agency"
registered under the Exchange Act, and a successor depositary is not appointed
by the Company within 90 days, or (ii) an Event of Default has occurred and is
continuing with respect to the Notes. Upon the occurrence of any of the events
described in the preceding sentence, the Company will cause the appropriate
Certificated Notes to be delivered.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
This summary discusses the material United States federal tax
considerations applicable to persons that acquire the Exchange Notes in exchange
for Series A Notes that were sold to the Initial Purchasers and to subsequent
owners of the Exchange Notes. It is not intended to be tax advice to any person,
nor is it binding upon the Internal Revenue Service (the "IRS"). This summary is
based on the Internal Revenue Code of 1986, as amended (the "Code") and existing
and proposed Treasury Regulations, revenue rulings and judicial decisions now in
effect, all of which are subject to change at any time by legislative, judicial
or administrative action, and such changes may be applied retroactively in a
manner that could adversely affect holders of Exchange Notes. This summary deals
only with Exchange Notes held as capital assets (within the meaning of Section
1221 of the Code) by a holder that is (i) a citizen or resident of the United
States, (ii) a domestic corporation or (iii) otherwise subject to United States
federal income taxation on a net income basis in respect of the Exchange Notes
of such holder (for the purposes of this section only, holders of Notes are
referred to as "Holders"), and does not purport to address all aspects of the
possible federal income tax consequences of ownership of Exchange Notes. In
particular, and without limiting the foregoing, this summary does not address
tax consequences of ownership of an Exchange Note that may be relevant to
investors in special tax situations, such as dealers in securities or
currencies, tax-exempt persons, certain financial institutions, life insurance
companies, persons holding Exchange Notes as part of a "straddle" (as defined in
Section 1092 of the Code), a "hedge" (as defined in Section 1256 of the Code),
or a "conversion transaction" (as defined in Section 1258 of the Code), persons
whose "functional currency" as defined in Section 985 of the Code is not United
States dollars, or foreign persons.
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INVESTORS CONSIDERING TENDERING SERIES A NOTES FOR EXCHANGE NOTES PURSUANT TO
THE EXCHANGE OFFER SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
APPLICATION OF THE UNITED STATES FEDERAL INCOME AND OTHER TAX LAWS TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF
ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX
TREATY.
The Company has not sought and will not seek any rulings from the IRS with
respect to the positions of the Company discussed below. There can be no
assurance that the IRS will not take a different position concerning the tax
consequences of the acquisition, ownership or disposition of the Exchange Notes
or that any such position would not be sustained.
EXCHANGE OF SENIOR NOTES FOR EXCHANGE NOTES
The exchange of Series A Notes for Exchange Notes pursuant to the Exchange
Offer will not be considered a taxable exchange for U.S. federal income tax
purposes because the Exchange Notes will not be considered to differ materially
in kind or extent from the Series A Notes. Exchange Notes received by a Holder
of Series A Notes will be treated as a continuation of the Series A Notes in the
hands of such Holder. Accordingly, there will not be any U.S. federal income tax
consequences to Holders exchanging Series A Notes for Exchange Notes in the
Exchange Offer. Holders of Exchange Notes will have identical United States
federal income tax consequences to Holders of the Series A Notes.
INTEREST PAYMENTS
Interest on an Exchange Note, other than interest that is not a payment of
"qualified stated interest" (as defined below under "Original Issue Discount"),
will be taxable to a Holder as ordinary income at the time it is received or
accrued, depending on the Holder's method of accounting for tax purposes.
ORIGINAL ISSUE DISCOUNT
The Series A Notes were issued with certain original issue discount
("OID"). The amount of OID is considered de minimus because the stated
redemption price at maturity (100% of par) did not exceed the issue price of the
Series A Notes (99.427% of par) by more than 0.25% of the stated redemption
price at maturity multiplied by the number of complete years to maturity.
Similarly, the Exchange Notes will be treated as having a de minimus amount of
OID. Accordingly, under applicable Treasury Regulations, a Holder of Exchange
Notes must include any such OID in income as stated principal payments are made.
The "issue price" of the Notes is the first price at which a substantial number
of Series A Notes were sold for money, excluding sales to underwriters,
placement agents or wholesalers. The "stated redemption price at maturity" is
the sum of all payments to be made on the Series A Notes other than "qualified
stated interest". The term "qualified stated interest" means, generally, stated
interest that is unconditionally payable in cash or in property (other than debt
instruments of the issuer) at least annually at a single fixed rate or, subject
to certain conditions, based on one or more interest indices. Interest is
payable at a single fixed rate only if the rate appropriately takes into account
the length of the interval between payments.
The OID regulations provide that options relating to a debt instrument may
affect whether an instrument has been issued with OID. In the event of a Change
of Control Triggering Event, the Company is required to offer to redeem all of
the Exchange Notes. The right of Holders of the Exchange Notes to require
redemption of the Exchange Notes upon the occurrence of a Change of Control
Triggering Event should not affect the yield or maturity date of the Exchange
Notes, provided, based on all the facts and circumstances as of the issue date,
the likelihood is remote that a Change of Control Triggering Event giving rise
to the redemption will occur. The Company has no present intention of treating
the redemption provisions of the Exchange Notes as affecting the computation of
the yield to maturity of any Exchange Note. See "Description of the
Notes -- Change of Control Triggering Event."
92
<PAGE> 95
EXCHANGE NOTES PURCHASED AT A PREMIUM
In general, if a Holder acquires an Exchange Note for an amount in excess
of its principal amount, the Holder may elect to treat such excess as
"amortizable bond premium," in which case the amount required to be included in
the holder's income each year with respect to interest on the Exchange Note is
reduced by the amount of amortizable bond premium allocable to such year based
on the Exchange Note's yield to maturity. Any such election applies to all debt
instruments (other than debt instruments the interest on which is excludable
from gross income) held by the Holder at the beginning of the first taxable year
to which the election applies or which are acquired thereafter by the Holder,
and such election is irrevocable without the consent of the IRS.
MARKET DISCOUNT ON RESALE OF EXCHANGE NOTES
A Holder of an Exchange Note should be aware that the acquisition or resale
of an Exchange Note may be affected by the "market discount" provisions of the
Code. The market discount rules generally provide that if a Holder of an
Exchange Note acquires the Exchange Note at a market discount (i.e., a discount
other than at original issue), any gain recognized upon the disposition of the
Exchange Note by the Holder is taxable as ordinary interest income, rather than
as capital gain, to the extent such gain does not exceed the accrued market
discount on the Exchange Note at the time of the disposition. "Market discount"
generally means the excess, if any, of an Exchange Note's stated redemption
price at maturity over the price paid by the holder therefor, subject to a de
minimis exception. A Holder who acquires an Exchange Note at a market discount
also may be required to defer the deduction of a portion of the amount of
interest that the Holder paid or accrued during the taxable year on indebtedness
incurred or maintained to purchase or carry such Exchange Note, if any.
Any principal payment on an Exchange Note acquired by a Holder at a market
discount is included in gross income as ordinary income (generally, as interest
income) to the extent that it does not exceed the accrued market discount at the
time of such payment. The amount of the accrued market discount for purposes of
determining the tax treatment of subsequent payments on, or dispositions of, the
Exchange Note is reduced by the amounts so treated as ordinary income.
A Holder of an Exchange Note acquired at a market discount may elect to
include market discount in gross income, for federal income tax purposes, as
such market discount accrues, either on a straight-line basis or on a constant
interest rate basis. This current inclusion election, once made, applies to all
market discount obligations acquired on or after the first day of the first
taxable year to which the election applies, and may not be revoked without the
consent of the IRS. If a Holder makes such an election, the foregoing rules
regarding the recognition of ordinary interest income on sales and other
dispositions and the receipt of principal payments with respect to such Exchange
Note, and regarding the deferral of interest deductions on indebtedness incurred
or maintained to purchase or carry such Exchange Note, will not apply.
SALE, EXCHANGE OR RETIREMENT OF THE EXCHANGE NOTES
A Holder will generally recognize gain or loss on the sale or retirement of
an Exchange Note equal to the difference between the amount realized on the
sale, exchange or retirement of the Exchange Note and the Holder's adjusted tax
basis in the Exchange Note. A Holder's adjusted tax basis in an Exchange Note is
its cost (or, if applicable, the tax basis of the Series A Note exchanged for
the Exchange Note), increased by the amount of any OID included in the Holder's
income with respect to the Exchange Note and reduced by the amount of any
interest payments on the Exchange Note that are not payments of qualified stated
interest. Except to the extent described above under "Original Issue Discount"
and "Market Discount," and except to the extent attributable to accrued but
unpaid interest, gain or loss recognized on the sale or retirement of an
Exchange Note is capital gain or loss, provided the Exchange Note was a capital
asset in the hands of the Holder, and is long-term capital gain or loss if the
Exchange Note was held for more than one year.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on an Exchange Note and payments of the
proceeds of the sale of an Exchange Note to certain
93
<PAGE> 96
noncorporate Holders, and a 31% backup withholding tax may apply to such
payments if the Holder (i) fails to furnish or certify his correct taxpayer
identification number to the payor in the manner required, (ii) is notified by
the IRS that he has failed to report payments of interest and dividends properly
or (iii) under certain circumstances, fails to certify that he has not been
notified by the IRS that he is subject to backup withholding for failure to
report interest and dividend payments. Any amounts withheld under the backup
withholding rules from a payment to a Holder will be allowed as a credit against
such Holder's United States federal income tax and may entitle the Holder to a
refund, provided that the required minimum information is furnished to the IRS.
ADDITIONAL INTEREST
The Company intends to take the position that Additional Interest, if any,
on the Notes will be taxable to the Holder as ordinary income in accordance with
the Holder's method of accounting for federal income tax purposes. The IRS may
take a different position, however, which could affect the timing of both a
Holder's income and the Company's deduction with respect to such Additional
Interest, if any.
LEGAL MATTERS
The validity of the Exchange Notes and the Exchange Note Guarantees being
offered hereby and certain other legal matters in connection with the Exchange
Offer have been passed upon for the Company by Alston & Bird LLP, Atlanta,
Georgia, and Sommer & Barnard, PC, Indianapolis Indiana.
EXPERTS
The consolidated financial statements of Proffitt's appearing elsewhere
herein as of February 1, 1997 and February 3, 1996 and for each of the three
years in the period ended February 1, 1997, have been audited by Coopers &
Lybrand L.L.P., independent accountants, as set forth in their report thereon
and included herein. Such consolidated financial statements are included herein
in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing. The consolidated financial statements included in this
prospectus in the registration statement for the year ended January 28, 1995 as
it relates to Younkers, Inc. and subsidiary, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein and
elsewhere in the registration statement, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of Parisian, Inc. as of February 3,
1996 and January 28, 1995, and for each of the three years in the period ended
February 3, 1996, appearing herein, have been audited by Coopers & Lybrand
L.L.P., independent accountants, as set forth in their report thereon, included
herein. Such consolidated financial statements are included herein in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
94
<PAGE> 97
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Financial Statements of Proffitt's, Inc.:
Report of Independent Accountants -- Coopers & Lybrand
L.L.P.................................................. F-2
Independent Auditors' Report -- Deloitte & Touche LLP..... F-3
Consolidated Statements of Income for the fiscal years
ended February 1, 1997, February 3, 1996 and January
28, 1995............................................... F-4
Consolidated Balance Sheets as of February 1, 1997 and
February 3, 1996....................................... F-5
Consolidated Statements of Shareholders' Equity for the
fiscal years ended February 1, 1997, February 3, 1996,
and February 28, 1995.................................. F-6
Consolidated Statements of Cash Flows for the fiscal years
ended February 1, 1997, February 3, 1996 and January
28, 1995............................................... F-7
Notes to Consolidated Financial Statements................ F-8 to F-22
Condensed Consolidated Financial Statements of Proffitt's,
Inc.:
Condensed Consolidated Balance Sheets as of May 3, 1997,
February 1, 1997 and May 4, 1996 (unaudited)........... F-23
Condensed Consolidated Statements of Income for the three
months ended May 3, 1997 and May 4, 1996 (unaudited)... F-24
Condensed Consolidated Statements of Cash Flows for the
three months ended May 3, 1997 and May 4, 1996
(unaudited)............................................ F-25
Notes to Condensed Consolidated Financial Statements
(unaudited)............................................ F-26 to F-27
Consolidated Financial Statements of Parisian, Inc.:
Report of Independent Accountants......................... F-28
Consolidated Balance Sheets as of January 28, 1995 and
February 3, 1996....................................... F-29
Consolidated Statements of Operations for the fiscal years
ended January 29, 1994, January 28, 1995 and February
3, 1996................................................ F-30
Consolidated Statements of Changes in Shareholders' Equity
for the fiscal years ended January 29, 1994, January
28, 1995 and February 3, 1996.......................... F-31
Consolidated Statements of Cash Flows for the fiscal years
ended January 29, 1994, January 28, 1995 and February
3, 1996................................................ F-32
Notes to Consolidated Financial Statements................ F-33 to F-42
</TABLE>
F-1
<PAGE> 98
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Proffitt's, Inc.
We have audited the accompanying consolidated balance sheets of Proffitt's,
Inc. and Subsidiaries as of February 1, 1997 and February 3, 1996, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended February 1, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The consolidated financial statements give retroactive effect to the
merger with Younkers, Inc., which has been accounted for as a pooling of
interests as described in Note 2 to the consolidated financial statements. We
did not audit the financial statements of Younkers for the year ended January
28, 1995. Such statements reflect total revenues constituting 39.6% of the
related consolidated totals in 1994. Those statements were audited by other
auditors, whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for Younkers, Inc., is based solely on the
report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Proffitt's, Inc. and
Subsidiaries as of February 1, 1997 and February 3, 1996 and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended February 1, 1997, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
March 20, 1997
F-2
<PAGE> 99
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Younkers, Inc.
We have audited the accompanying consolidated balance sheet of Younkers,
Inc. and subsidiary as of January 28, 1995, and the related consolidated
statements of earnings, shareholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The Company's financial statements as of January
29, 1994 and January 30, 1993 were audited by other auditors whose report, dated
March 3, 1994, expressed an unqualified opinion on those financial statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1995 consolidated financial statements present fairly,
in all material respects, the consolidated financial position of Younkers, Inc.
and subsidiary at January 28, 1995, and the consolidated results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Des Moines, Iowa
March 3, 1995
F-3
<PAGE> 100
PROFFITT'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES.............................................. $1,889,779 $1,661,056 $1,513,444
COSTS AND EXPENSES
Cost of sales........................................ 1,230,454 1,087,619 986,028
Selling, general and administrative expenses......... 440,502 398,999 352,448
Other operating expenses
Property and equipment rentals.................... 60,684 50,609 47,857
Depreciation and amortization..................... 41,037 43,013 40,305
Taxes other than income taxes..................... 40,403 36,938 34,421
Expenses related to hostile takeover defense......... 3,182
(Gains) losses from long-lived assets................ (1,094) 19,121
Merger, restructuring and integration costs.......... 15,929 20,822
---------- ---------- ----------
OPERATING INCOME............................. 61,864 753 52,385
OTHER INCOME (EXPENSE)
Finance charge income, net........................... 32,305 31,273 27,934
Interest expense..................................... (26,756) (29,389) (23,286)
Other income, net.................................... 1,572 4,051 4,826
---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES AND
EXTRAORDINARY LOSS......................... 68,985 6,688 61,859
Provision for income taxes............................. 31,586 6,047 24,411
---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY LOSS............. 37,399 641 37,448
Extraordinary loss on early extinguishment of debt (net
of tax).............................................. (2,060)
---------- ---------- ----------
NET INCOME (LOSS)............................ 37,399 (1,419) 37,448
Preferred stock dividends.............................. 796 1,950 1,694
Payment for early conversion of preferred stock........ 3,032
---------- ---------- ----------
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREHOLDERS............................... $ 33,571 $ (3,369) $ 35,754
========== ========== ==========
Earnings (loss) per common share
Primary.............................................. $ 1.31 $ (0.15)* $ 1.55
========== ========== ==========
Fully diluted........................................ $ 1.41 $ (0.15)* $ 1.52
========== ========== ==========
Weighted average common shares
Primary.............................................. 25,564 23,157 23,046
========== ========== ==========
Fully diluted........................................ 28,204 23,166 26,301
========== ========== ==========
</TABLE>
- ---------------
* Loss per share before extraordinary item was $.06, and the loss per share
attributable to the extraordinary item was $.09.
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 101
PROFFITT'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents................................. $ 3,382 $ 29,178
Residual interest in trade accounts receivable............ 85,400 44,878
Accounts receivable -- other.............................. 20,659 12,158
Merchandise inventories................................... 447,164 329,733
Other current assets...................................... 27,658 10,106
Deferred income taxes..................................... 11,700 4,961
---------- --------
Total current assets.............................. 595,963 431,014
Property and equipment, net of depreciation................. 510,502 410,256
Goodwill and tradenames, net of amortization................ 277,472 52,838
Other assets................................................ 19,859 24,905
---------- --------
Total assets...................................... $1,403,796 $919,013
========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable.................................... $ 116,434 $ 87,026
Accrued expenses.......................................... 86,220 60,516
Accrued compensation and related items.................... 19,188 16,155
Sales taxes payable....................................... 17,196 12,005
Current portion of long-term debt......................... 12,515 20,118
---------- --------
Total current liabilities......................... 251,553 195,820
Senior debt................................................. 276,810 168,937
Deferred income taxes....................................... 62,000 53,171
Other long-term liabilities................................. 47,768 14,328
Subordinated debt........................................... 225,767 100,505
Redeemable common stock held in ESOP........................ 58,881
Commitments and contingencies
Shareholders' equity
Preferred stock........................................... 28,850
Common stock.............................................. 2,802 2,711
Additional paid-in capital................................ 378,016 243,822
Retained earnings......................................... 168,858 73,469
Treasury stock at cost (6,811 shares in 1995)............. (21,481)
Deferred ESOP compensation................................ (9,778)
---------- --------
Total shareholders' equity........................ 539,898 327,371
---------- --------
Total liabilities and shareholders' equity........ $1,403,796 $919,013
========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 102
PROFFITT'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ADDITIONAL DEFERRED TOTAL
PREFERRED COMMON PAID-IN RETAINED TREASURY ESOP SHAREHOLDERS'
STOCK STOCK CAPITAL EARNINGS STOCK COMPENSATION EQUITY
--------- ------ ---------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 29, 1994............. $ -- $2,651 $223,829 $ 62,701 $(14,076) $ -- $275,105
Net income............................ 37,448 37,448
Issuance of common stock.............. 53 9,941 9,994
Issuance of Series B preferred
stock............................... 3,296 3,296
Issuance of Series A preferred
stock............................... 28,850 28,850
Income tax benefits related to
exercised stock options............. 112 112
Purchase of treasury stock............ (3,361) (3,361)
Increase in stock held in ESOP........ (30) (11,588) (11,618)
Conversion of Series B preferred
stock............................... (3,296) 16 3,280
Preferred stock dividends............. (1,694) (1,694)
Unrealized gain on released ESOP
shares.............................. 1 1
Common stock dividends, $.28 per
Herberger's share................... (1,126) (1,126)
-------- ------ -------- -------- -------- ------- --------
Balance at January 28, 1995............. 28,850 2,690 237,163 85,741 (17,437) -- 337,007
Net loss.............................. (1,419) (1,419)
Issuance of common stock.............. 36 6,241 6,277
Income tax benefits related to
exercised stock options............. 373 373
Purchase of treasury stock............ (4,044) (4,044)
Increase in stock held in ESOP........ (15) (7,857) (7,872)
Preferred stock dividends............. (1,950) (1,950)
Unrealized gain on released ESOP
shares.............................. 45 45
Common stock dividends, $.28 per
Herberger's share................... (1,046) (1,046)
-------- ------ -------- -------- -------- ------- --------
Balance at February 3, 1996............. 28,850 2,711 243,822 73,469 (21,481) -- 327,371
Net income............................ 37,399 37,399
Issuance of common stock.............. 348 117,437 117,785
Income tax benefits related to
exercised stock options............. 3,818 3,818
Purchase of treasury stock............ (2,056) (2,056)
Retirement of treasury stock.......... (689) (15,789) (7,059) 23,537
Reclassification of ESOP stock........ 290 (57) 69,907 (9,778) 60,362
Unrealized gain on released ESOP
shares.............................. 122 122
Preferred stock dividends............. (796) (796)
Payment for early conversion of
preferred stock..................... (3,032) (3,032)
Conversion of Series A preferred
stock............................... (28,850) 142 28,663 (45)
Common stock dividends, $.28 per
Herberger's share................... (1,030) (1,030)
-------- ------ -------- -------- -------- ------- --------
Balance at February 1, 1997............. $ -- $2,802 $378,016 $168,858 $ -- $(9,778) $539,898
======== ====== ======== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 103
PROFFITT'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Operating activities
Net income (loss)......................................... $ 37,399 $ (1,419) $ 37,448
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary loss on extinguishment of debt........... 3,433
Depreciation and amortization.......................... 41,257 43,626 41,013
Deferred income taxes.................................. 17,802 (13,477) 4,480
(Gains) losses from long-lived assets.................. (1,094) 19,121
Amortization of deferred compensation.................. 1,481 1,363 1,034
Changes in operating assets and liabilities:
Trade accounts receivable............................ 3,162 5,608 52,580
Merchandise inventories.............................. 17,940 (7,411) 1,219
Other current assets................................. (14,351) 710 (952)
Accounts payable and accrued expenses................ (20,709) 15,553 5,861
Other................................................ (375) (503) 580
--------- -------- ---------
Net cash provided by operating activities......... 82,512 66,604 143,263
Investing activities
Purchases of property and equipment, net.................. (61,031) (51,469) (53,293)
Proceeds from sale of assets.............................. 5,410
Acquisition of Parisian (1996)/Parks-Belk (1995)/McRae's
(1994)................................................. (119,070) (10,483) (184,067)
Other..................................................... (1,719)
--------- -------- ---------
Net cash used in investing activities............. (174,691) (61,952) (239,079)
Financing activities
Proceeds from long-term borrowings........................ 113,037 32,273 90,983
Payments on long-term debt................................ (49,318) (20,345) (35,161)
Proceeds from issuance of stock........................... 9,578 2,210 29,166
Purchase of treasury stock................................ (2,056) (4,043) (3,361)
Payments to preferred and common shareholders............. (4,858) (3,139) (1,954)
--------- -------- ---------
Net cash provided by financing activities......... 66,383 6,956 79,673
--------- -------- ---------
(Decrease) increase in cash and cash
equivalents..................................... (25,796) 11,608 (16,143)
Cash and cash equivalents at beginning of year.............. 29,178 17,570 33,713
--------- -------- ---------
Cash and cash equivalents at end of year.................... $ 3,382 $ 29,178 $ 17,570
========= ======== =========
</TABLE>
- ---------------
Noncash investing and financing activities are further described in the
accompanying notes.
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 104
PROFFITT'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Company is a retail organization operating regional department store
divisions under the store names of Proffitt's, McRae's, Younkers, Parisian, and
Herberger's. The Company's fiscal year ends on the Saturday nearest January 31.
Years 1996 and 1994 consisted of 52 weeks and ended on February 1, 1997 and
January 28, 1995, respectively. Year 1995 consisted of 53 weeks and ended on
February 3, 1996. The financial statements include the accounts of Proffitt's
and its subsidiaries. All significant intercompany balances and transactions
have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with
maturities of three months or less to be cash equivalents.
RESIDUAL INTEREST IN TRADE ACCOUNTS RECEIVABLE
Residual interest in trade accounts receivable represents an owned residual
interest in two special purpose subsidiaries that own the Company's proprietary
revolving charge accounts. In some cases, the account's terms provide for
payments exceeding one year. In accordance with usual industry practice, such
receivables are included in current assets. A portion of the finance charge
income on these receivables is earned by financial institutions in connection
with the sales of interests in accounts receivable (see Note 4).
INVENTORIES
Inventories are valued at the lower of cost or market as determined by the
retail inventory method using last-in, first-out (LIFO) costs for approximately
69% and 86% of the inventories at February 1, 1997 and February 3, 1996,
respectively, and using first-in, first-out (FIFO) costs for the balance. At
February 3, 1996 the LIFO value of inventory exceeded market, and as a result,
inventory was stated at the lower market amount. At February 1, 1997 the LIFO
value approximated the FIFO value.
Inventory costs include invoice cost, freight, and certain purchasing and
distribution costs.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally using the straight-line method over the
estimated useful lives of the assets for financial reporting purposes. Gains or
losses on the sales of assets are recorded at disposal. At each balance sheet
date, the Company evaluates recoverability of property and equipment based upon
expectations of nondiscounted cash flows and operating income.
F-8
<PAGE> 105
PROFFITT'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
GOODWILL AND TRADENAMES
The Company has allocated substantially all the cost in excess of fair
value of net tangible assets acquired in purchase transactions to goodwill and
tradenames, which is being amortized on a straight-line method over 15 to 40
years. The Company recognized amortization charges of $3,369, $1,523 and $1,100
for 1996, 1995 and 1994, respectively. As of February 1, 1997, the accumulated
amortization of intangible assets was $6,206. At each balance sheet date, the
Company evaluates the recoverability of intangible assets based upon
expectations of nondiscounted cash flows and operating income. Based upon its
most recent analysis, the Company believes that no impairment of intangible
assets exists at February 1, 1997.
EMPLOYEE STOCK OWNERSHIP PLANS
Shares acquired after January 30, 1994 are accounted for in accordance with
SOP 93-6, "Employers' Accounting for Employee Stock Ownership Plans." All other
unreleased shares are accounted for in accordance with SOP 76-3, "Accounting
Practices for Certain Employee Stock Ownership Plans."
STOCK-BASED COMPENSATION
Compensation cost is measured under the intrinsic value method in
accordance with Accounting Principles Bulletin No. 25. Pro forma disclosures of
net income and earnings per share are presented, as if the fair value method had
been applied, as required by SFAS No. 123.
REVENUES
Retail sales are recorded on the accrual basis and profits on installment
sales are recognized in full when the sales are recorded. Sales are net of
returns which are reflected as a period cost at the time of return.
LEASED DEPARTMENT SALES
The Company includes leased department sales as part of net sales. Leased
department sales were $62,804, $73,977 and $71,369 for 1996, 1995 and 1994,
respectively.
STORE PRE-OPENING COSTS
Store pre-opening costs are expensed when incurred.
ADVERTISING COSTS
Advertising and sales promotion costs are expensed as incurred. Advertising
and sales promotion costs were $68,602, $60,232 and $52,206, for 1996, 1995 and
1994, respectively.
INCOME TAXES
Deferred income taxes reflect the impact of "temporary differences" between
the amount of assets and liabilities for financial reporting purposes and such
amounts as measured by enacted tax rules and regulations.
EARNINGS PER COMMON SHARE
Primary earnings per common share have been computed based on the weighted
average number of common shares outstanding, including common stock equivalents,
after recognition of preferred stock dividends of $796, $1,950 and $1,694 for
1996, 1995 and 1994, respectively, and a payment of $3,032 for early conversion
of the preferred stock in 1996.
F-9
<PAGE> 106
PROFFITT'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's convertible subordinated debentures are not common stock
equivalents and are therefore considered only in fully diluted earnings per
share when dilutive.
Common stock issued upon the conversion of the preferred stock in June 1996
has been included in the weighted average number of shares outstanding
subsequent to that date for computing primary earnings per share. Fully diluted
earnings per share for 1996 have been presented based upon an "as if the shares
issued in the conversion were outstanding from the beginning of the year" basis.
Common shares acquired after January 30, 1994 and held by the ESOP are not
considered outstanding for earnings per share calculations until the shares are
committed to be released and the related compensation expense recognized.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." The new standard, which
was effective for all sales of accounts receivable beginning January 1, 1997,
requires that a gain be recognized at the time of sale to the extent the fair
value of the undivided interest in the receivables sold and the servicing rights
retained exceed the carrying value of the receivables. Historically, the Company
has recognized the excess interest earned on sold receivables over the life of
the receivables. The effect of this accounting change was immaterial to 1996.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share." The new
standard changes the presentation and method in which earnings per share are
computed and is effective for the Company's year ending January 31, 1998. The
new standard will be applied on a "retroactive restatement of all prior periods"
basis. The Company is currently in the process of ascertaining the impact the
new standard will have on its earnings per share amounts for 1996 and prior
periods.
NOTE 2 -- MERGERS WITH HERBERGER'S AND YOUNKERS
On February 1, 1997, Proffitt's, Inc. ("Proffitt's") issued 4,000 shares of
its common stock for all the outstanding common stock of G.R. Herberger's, Inc.
("Herberger's") (collectively, the "Company"). Herberger's operated 39 stores in
the Midwest. The merger has been accounted for as a pooling of interests and,
accordingly, these consolidated financial statements have been restated for all
periods to include the results of operations and financial position of
Herberger's.
F-10
<PAGE> 107
PROFFITT'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Separate results of the combined entities were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------------------
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Proffitt's................................... $1,567,995 $1,333,498 $1,216,498
Herberger's.................................. 321,784 327,558 296,946
---------- ---------- ----------
1,889,779 1,661,056 1,513,444
Extraordinary loss:
Proffitt's................................... 0 (2,060) 0
Herberger's.................................. 0 0 0
---------- ---------- ----------
0 (2,060) 0
========== ========== ==========
Net income (loss):
Proffitt's................................... 43,598 (8,459) 29,744
Herberger's.................................. (6,199) 7,040 7,704
---------- ---------- ----------
$ 37,399 $ (1,419) $ 37,448
========== ========== ==========
</TABLE>
Herberger's financial statements have been restated to conform to
Proffitt's accounting methods and to reflect certain reclassifications with an
immaterial effect on Herberger's previously reported income and shareholders'
equity.
On February 3, 1996, Proffitt's issued 8,816 shares of its common stock for
all the outstanding common stock of Younkers, Inc. ("Younkers"). Younkers
operated 51 stores in the Midwest. The merger was accounted for as a pooling of
interests and, accordingly, the consolidated financial statements were restated
for all periods to include the results of operations and financial position of
Younkers.
NOTE 3 -- ACQUISITIONS OF MCRAE'S, PARKS-BELK AND PARISIAN
MCRAE'S
On March 31, 1994, Proffitt's acquired McRae's, Inc. ("McRae's") which
operated 28 stores in the Southeast. The total acquisition price was
approximately $212 million and is detailed below. The McRae's transaction was
accounted for as a purchase and, accordingly, the results of the operations of
McRae's have been included in the Company's results of operations since the date
of acquisition. The purchase price has been allocated to McRae's tangible assets
and liabilities based on their estimated fair values at the date of acquisition,
with the remaining $45,574 allocated principally to goodwill.
PARKS-BELK
In April 1995, Proffitt's acquired the Parks-Belk Company, which operated
four department stores in northeast Tennessee. Consideration of less than $20
million was paid in Proffitt's, Inc. common stock and cash. Three of the
Parks-Belk locations were converted into Proffitt's Division stores, and one was
permanently closed.
PARISIAN
On October 11, 1996, Proffitt's acquired Parisian, Inc. ("Parisian"), which
operated 38 stores in the Southeast and Midwest. The total purchase price of the
Parisian transaction was approximately $224,000 (detailed below) plus the
assumption of Parisian's liabilities aggregating $289,000.
F-11
<PAGE> 108
PROFFITT'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Parisian transaction was accounted for as a purchase and, accordingly,
the financial results of the operations of Parisian have been included in the
Company's results of operations since the acquisition date. The purchase price
has been allocated to Parisian's tangible assets and liabilities based on their
estimated fair values at the date of acquisition, with the remaining $225,000
allocated to its tradename and goodwill.
The following unaudited pro forma summary presents the consolidated results
of operations as if the Parisian acquisition had occurred at the beginning of
the periods presented and does not purport to be indicative of what would have
occurred had the acquisition been made as of those dates or results which may
occur in the future.
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(UNAUDITED)
<S> <C> <C>
Pro forma:
Net sales................................................. $2,320,955 $2,324,884
Income before extraordinary loss.......................... 29,768 2,425
Net income................................................ 29,768 365
Earnings (loss) per common share:
Primary earnings before extraordinary loss............. 0.94 0.02
Primary earnings (loss)................................ 0.94 (0.06)
Fully diluted earnings before extraordinary loss....... 1.05 0.02
Fully diluted earnings (loss).......................... 1.05 (0.06)
</TABLE>
The purchase price of the Parisian and McRae's acquisitions consisted of
the following consideration paid plus the assumption of Parisian's and McRae's
liabilities:
<TABLE>
<CAPTION>
PARISIAN MCRAE'S
-------- --------
<S> <C> <C>
Cash payments and transaction costs......................... $119,000 $184,000
Issuance of 2,947 and 436 shares of common stock,
respectively.............................................. 101,000 10,000
Issuance of Series B preferred stock........................ 3,000
Issuance of promissory notes................................ 2,000
Issuance of subordinated debt............................... 13,000
Issuance of 406 replacement stock options................... 4,000
-------- --------
Consideration Paid.......................................... $224,000 $212,000*
======== ========
</TABLE>
- ---------------
* In connection with the acquisition, the Company purchased four regional mall
stores owned by McRae family partnerships for $18.5 million.
NOTE 4 -- ACCOUNTS RECEIVABLE SECURITIZATION
In April 1994, the Company began selling an undivided ownership interest in
its accounts receivable. In January 1997, the Company, through its subsidiary
Proffitt's Credit Corporation (a qualifying special purpose entity), entered
into an agreement to sell a revolving undivided ownership interest in the
accounts receivable of the Proffitt's, McRae's and Parisian Divisions. The
agreement, which expires in January 1998, provides for the sales of receivables
up to $300,000 and contains certain covenants requiring the maintenance of
various financial ratios.
Prior to February 3, 1996, Younkers utilized an accounts receivable
securitization program under which its receivables were used as collateral for
commercial paper issued by a wholly-owned special purpose subsidiary. Effective
with the February 3, 1996 merger, Younkers, through its subsidiary Younkers
Credit Corporation (a qualifying special purpose entity), replaced amounts
borrowed under the securitization
F-12
<PAGE> 109
PROFFITT'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
program by selling a revolving undivided ownership interest in its accounts
receivable. The agreement expires in 2000 and provides for the sales of
receivables up to $125,000, of which $75,000 is a fixed ownership interest and
remains fixed until 2000 at which time a portion of collections of outstanding
receivables will be retained by the purchaser until the $75,000 is extinguished.
The ownership interest transferred to the purchasers was $324,000 and
$220,229 at February 1, 1997 and February 3, 1996, respectively.
Finance charges earned by the purchasers were $16,013, $8,809 and $5,567
for 1996, 1995 and 1994, respectively.
NOTE 5 -- PROPERTY AND EQUIPMENT
A summary of property and equipment was as follows:
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
<S> <C> <C>
Land and land improvements................................. $ 59,140 $ 39,442
Buildings.................................................. 178,265 146,792
Leasehold improvements..................................... 98,697 91,795
Fixtures and equipment..................................... 304,479 286,225
Construction in progress................................... 8,242 17,134
--------- ---------
648,823 581,388
Accumulated depreciation................................... (159,668) (171,132)
--------- ---------
489,155 410,256
Stores held for sale, net of accumulated depreciation...... 21,347
--------- ---------
$ 510,502 $ 410,256
========= =========
</TABLE>
The Company realized gains (losses) from store sales or closings and
impairment charges as follows:
<TABLE>
<CAPTION>
1996 1995
------- --------
<S> <C> <C>
Write-down in carrying value of operating stores (3
Proffitt's, 1 McRae's and 2 Younkers in 1995; 1
Herberger's in 1996) due to recurring poor operating
results................................................... $(1,010) $(15,897)
Abandonment of stores and duplicate warehouses related to
the Parks-Belk acquisition and the Younkers merger........ (1,797)
Gain (loss) related to closed or sold stores, net........... 2,104 (1,427)
------- --------
$ 1,094 $(19,121)
======= ========
</TABLE>
F-13
<PAGE> 110
PROFFITT'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- INCOME TAXES
The components of income tax expense were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
---------------------------------------
FEBRUARY 1, FEBRUARY 3, JANUARY 28,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal............................................. $10,026 $ 14,432 $15,753
State............................................... 3,758 3,719 4,178
------- -------- -------
13,784 18,151 19,931
Deferred:
Federal............................................. 16,272 (10,962) 3,858
State............................................... 1,530 (2,515) 622
------- -------- -------
17,802 (13,477) 4,480
------- -------- -------
$31,586 $ 4,674 $24,411
======= ======== =======
</TABLE>
Components of the net deferred tax asset or liability recognized in the
consolidated balance sheets were as follows:
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
<S> <C> <C>
Current:
Deferred tax assets:
Trade accounts receivable.............................. $ 3,350 $ 2,400
Accrued expenses....................................... 18,700 10,972
Other.................................................. 250 552
-------- --------
22,300 13,924
Deferred tax liabilities:
Inventory.............................................. (9,100) (8,463)
Other.................................................. (1,500) (500)
-------- --------
(10,600) (8,963)
-------- --------
Net current deferred tax asset.................... $ 11,700 $ 4,961
======== ========
Noncurrent:
Deferred tax assets:
Capital leases......................................... $ 950 $ 900
Other long-term liabilities............................ 21,150 4,021
Deferred compensation.................................. 2,200 950
-------- --------
24,300 5,871
Deferred tax liabilities:
Property and equipment................................. (77,000) (52,342)
Other assets........................................... (8,100) (5,400)
Junior subordinated debentures......................... (1,200) (1,300)
-------- --------
(86,300) (59,042)
-------- --------
Net noncurrent deferred tax liability............. $(62,000) $(53,171)
======== ========
</TABLE>
F-14
<PAGE> 111
PROFFITT'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense varies from the amount computed by applying the
statutory federal income tax rate to income before taxes. The reasons for this
difference were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ----- ----
<S> <C> <C> <C>
Expected tax rate......................................... 35.0% 35.0% 35.0%
State income taxes, net of federal benefit................ 4.0 (6.5) 4.4
Nondeductible merger related costs........................ 2.7 92.1
Amortization of goodwill.................................. 1.9 15.9
Other items, net.......................................... 2.2 7.1 0.1
---- ----- ----
Actual tax rate........................................... 45.8% 143.6% 39.5%
==== ===== ====
</TABLE>
The Company made income tax payments, net of refunds received, of $33,884,
$12,263 and $16,882 during 1996, 1995 and 1994, respectively.
NOTE 7 -- SENIOR DEBT
A summary of senior debt was as follows:
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
<S> <C> <C>
Real estate and mortgage notes, interest ranging from 3.6%
to 10.38%, maturing 1998 to 2007, collateralized by
property and equipment.................................... $120,317 $ 97,365
Revolving credit agreement.................................. 154,437 41,400
Capital lease obligations, implicit interest ranging from
8.63% to 12.05%........................................... 10,735 11,318
Notes payable, interest ranging from 7.88% to 13.0%,
maturing 1997 to 2000..................................... 3,836 38,972
-------- --------
289,325 189,055
Current portion............................................. (12,515) (20,118)
-------- --------
$276,810 $168,937
======== ========
</TABLE>
Effective with the February 3, 1996 merger, Younkers replaced debt
collateralized by its trade accounts receivable with the sale of a revolving
undivided interest in its accounts receivable and canceled its revolving credit
facility. As a result of this early extinguishment of debt, certain deferred
debt costs aggregating $3,433 ($2,060 net of income taxes) were written off as
an extraordinary item.
In conjunction with a real estate mortgage note having a balance of $5,850
at February 1, 1997, the Company has an interest rate swap agreement for the
management of interest rate exposure. This agreement extends to June 30, 2003
and swaps the variable rate for a fixed rate of 5.7%. The differential to be
paid or received is included in interest expense.
In connection with the Parisian merger, the Company amended and restated
its existing revolving credit agreement ("Revolver") with certain banks. The
agreement provides for borrowings limited to 55% of merchandise inventories up
to an aggregate principal amount of $275,000, including a standby letter of
credit facility of $15,000. The Revolver includes interest rate options of prime
and Eurodollar. The agreement, which expires in 1999, requires the Company to
meet specific covenants related to net worth, capitalization, fixed charges,
capital expenditures, indebtedness and earnings.
Certain other notes also impose restrictions and financial covenants.
F-15
<PAGE> 112
PROFFITT'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At February 1, 1997, maturities of senior debt for the next five years and
thereafter, giving consideration to lenders' call privileges, were as follows:
<TABLE>
<S> <C>
1997........................................................ $ 12,515
1998........................................................ 35,010
1999........................................................ 185,524
2000........................................................ 10,192
2001........................................................ 23,304
Thereafter.................................................. 22,780
--------
$289,325
========
</TABLE>
The Company made interest payments of $28,304, $29,516 and $20,494 during
1996, 1995 and 1994, respectively. Capitalized interest was $368, $285 and $467
during 1996, 1995 and 1994, respectively.
NOTE 8 -- SUBORDINATED DEBT
Subordinated debt represents uncollateralized obligations subordinated in
right of payment to all senior debt and was composed of the following:
<TABLE>
<CAPTION>
FEBRUARY 1, FEBRUARY 3,
1997 1996
----------- -----------
<S> <C> <C>
Convertible debentures, interest at 4.75%, maturing November
2003...................................................... $ 86,250 $ 86,250
Notes, interest at 9.875%, maturing July 2003............... 125,000
Junior debentures, interest at 7.5%, maturing March 2004.... 14,517 14,255
-------- --------
$225,767 $100,505
======== ========
</TABLE>
The subordinated convertible debentures are convertible into the Company's
common stock at any time prior to maturity, unless previously redeemed, at a
conversion price of $42.70 per share. The debentures are redeemable for cash at
the option of the Company at specified redemption prices.
Effective with the Parisian acquisition, the Company assumed the existing
Parisian 9.875% subordinated notes. The notes are redeemable at the option of
the Company, in whole or in part, after July 15, 1998, 1999 and 2000 at
approximately 105%, 102.5% and 100% of face value, respectively. The notes
contain certain covenants, the most restrictive of which limits indebtedness,
dividends and transactions with Proffitt's and its other subsidiaries.
The 7.5% junior subordinated debentures were discounted at the date of
issue to reflect their fair value and are being accreted to a face value of
$17,500.
NOTE 9 -- OPERATING LEASES
The Company is committed under long-term leases primarily for the rentals
of retail stores. The leases generally provide for minimum annual rentals
(including executory costs such as real estate taxes and insurance) and
contingent rentals based on a percentage of sales in excess of stated amounts.
Generally, the leases have primary terms ranging from 20 to 30 years and include
renewal options ranging from 10 to 15 years.
F-16
<PAGE> 113
PROFFITT'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At February 1, 1997, minimum rental commitments under operating leases with
terms in excess of one year were as follows:
<TABLE>
<S> <C>
1997........................................................ $ 58,821
1998........................................................ 56,592
1999........................................................ 54,252
2000........................................................ 50,988
2001........................................................ 49,338
Thereafter.................................................. 445,972
--------
$715,963
========
</TABLE>
Total rental expense for operating leases was $60,684, $50,609 and $47,857
during 1996, 1995 and 1994, respectively, including contingent rents of
approximately $7,400, $5,600 and $4,800.
NOTE 10 -- RETIREMENT AND SAVINGS PLAN
The Company sponsors various profit sharing and savings plans that cover
substantially all full-time employees. Company contributions charged to expense
under these plans, or similar predecessor plans, excluding the Herberger's
employee stock ownership plan ("ESOP"; Note 12) for 1996, 1995 and 1994 were
$735, $1,382 and $1,106, respectively.
As a part of a 1987 acquisition, Younkers assumed certain obligations under
a frozen defined benefit pension plan. During 1996, the Company terminated the
plan realizing non-cash expenses of $1,362.
NOTE 11 -- SHAREHOLDERS' EQUITY
PREFERRED STOCK
On March 31, 1994, Proffitt's issued 600 shares of Series A Cumulative
Convertible Exchangeable Preferred Stock in a private offering (10,000 total
shares authorized). Net proceeds to the Company were approximately $28.9 million
after offering expenses. Dividends were cumulative and were paid at $3.25 per
annum per share. On June 28, 1996, the holder converted the preferred stock into
1,422 shares of common stock. The Company paid $3,032 to the holder of the
preferred stock to induce early conversion.
The Company has available 33 shares of authorized, unissued Series B
Preferred Stock.
COMMON STOCK
The Company has 100,000 shares of $.10 par value common shares authorized
of which 28,016 and 23,206 shares were issued and outstanding at February 1,
1997 and February 3, 1996, respectively.
Each outstanding share of common stock has one preferred stock purchase
right attached. The rights generally become exercisable ten days after an
outside party acquires, or makes an offer for, 20% or more of the common stock.
Each right entitles its holder to buy 1/100 share of Series C Junior Preferred
Stock at an exercise price of $85. Once exercisable, if the Company is involved
in a merger or other business combination or an outside party acquires 20% or
more of the common stock, each right will be modified to entitle its holder
(other than the acquiror) to purchase common stock of the acquiring company or,
in certain circumstances, common stock of the Company having a market value of
twice the exercise price of the right. The rights expire on March 28, 2005.
TREASURY STOCK
Previously, Herberger's was required to repurchase shares from inactive
participants of the ESOP at fair value. Treasury stock transactions were
accounted for under the cost method with gains or losses on
F-17
<PAGE> 114
PROFFITT'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
transactions credited or charged to additional paid-in capital. Total shares
purchased in 1996, 1995 and 1994 were 85, 179 and 164, respectively. In
connection with the rescission of the put option on the ESOP shares (see Note
12), the Company retired all 6,897 shares of the Company's common stock held in
treasury.
NOTE 12 -- EMPLOYEE STOCK PLANS
ESOP
Herberger's sponsors an employee stock ownership plan ("ESOP") for the
benefit of its employees. Contributions to the ESOP are made at the discretion
of the Board of Directors and were $3,670, $3,418 and $3,103 in 1996, 1995 and
1994, respectively. At various times, the ESOP has purchased shares of the
Company's common stock using the proceeds of ESOP loans (leveraged shares).
These shares are initially held in a suspense account by the Plan Trustee
(unallocated shares). As contributions are made and dividends are paid and the
ESOP debt is repaid, leveraged shares are released from suspense and allocated
to the accounts of participants, and the Company recognizes compensation
expense. Dividends earned on all shares acquired prior to January 30, 1994 are
recorded as a reduction of retained earnings, while dividends on unallocated
shares acquired after January 30, 1994 are reflected as a reduction of
compensation expense. Dividends on ESOP shares used for debt service were $264,
$226 and $130 in 1996, 1995 and 1994, respectively. For shares acquired after
January 30, 1994, expense is recorded equal to the estimated fair value of
shares allocated and those shares become outstanding for earnings per share
computations. For all other shares, expense is recorded equal to the cost of the
shares released. All shares acquired prior to January 30, 1994 are considered
outstanding for earnings per share calculations. Total ESOP expense recognized
was $4,130, $4,013 and $3,287 for 1996, 1995 and 1994, respectively, and
compensation expense recognized in 1996 reflects the increase in value of
Herberger's stock related to its merger with Proffitt's.
As of February 1, 1997, the number of shares held by the ESOP was as
follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
------------------------
ALLOCATED UNALLOCATED
--------- -----------
<S> <C> <C>
Shares acquired on or prior to January 30, 1994............. 387 152
Shares acquired after January 30, 1994...................... 68 332
</TABLE>
Prior to the merger, Herberger's shares distributed from the ESOP could be
put to Herberger's at fair value for cash under certain conditions. As such, the
shares were carried at fair value and not reflected on the balance sheet in
shareholders' equity. Effective with the merger, the put option was rescinded,
and accordingly, the ESOP shares are reflected in shareholders' equity.
STOCK OPTIONS AND GRANTS
The Company utilizes the intrinsic value method of accounting for stock
option grants. As the option exercise price is generally equal to or above fair
value of the common shares at the date of the option grant, no compensation cost
is recognized.
Had compensation cost for the two stock-based compensation plans been
determined under the fair value method provided in SFAS No. 123 (using the
Black-Scholes option-pricing model), the Company's net income (loss) and
earnings (loss) per share would have been reduced (increased) to the pro forma
amounts indicated below.
<TABLE>
<CAPTION>
1996 1995
----------------------- -----------------------
AS REPORTED PRO FORMA AS REPORTED PRO FORMA
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Net income (loss).................................. $37,399 $35,756 $(1,419) $(2,540)
Primary earnings (loss) per share.................. 1.31 1.25 (0.15) (0.19)
Fully diluted earnings (loss) per share............ 1.41 1.36 (0.15) (0.19)
</TABLE>
F-18
<PAGE> 115
PROFFITT'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The assumptions for determining compensation costs under the fair value
method included (i) a risk-free interest rate based on zero-coupon governmental
issues on each grant date with the maturity equal to the expected term of the
option (6.84% and 5.74% for 1996 and 1995, respectively), (ii) an expected term
of five years, (iii) an expected volatility of 37.1% and 39.9% for 1996 and
1995, respectively, and (iv) no expected dividend yield.
The Company maintains stock option plans for the granting of options, stock
appreciation rights and restricted shares to officers, key employees and
Directors. At February 1, 1997 the Company has available for grant 350 shares of
common stock. Options granted generally vest over a four-year period after issue
and have an exercise term of ten years from the grant date. Restricted shares
generally vest ten years after grant date with accelerated vesting if the
Company meets certain performance objectives.
A summary of the stock option plans for 1996, 1995 and 1994 is presented
below:
<TABLE>
<CAPTION>
1996
-------------------------
WEIGHTED-AVERAGE
EXERCISE 1995 1994
SHARES PRICE SHARES SHARES
------ ---------------- ------ ------
<S> <C> <C> <C> <C>
Outstanding at beginning of year............... 1,840 $19.25 1,652 1,030
Granted........................................ 490 34.00 455 783
Converted in acquisition....................... 406 22.50
Exercised...................................... (487) 19.67 (178) (118)
Forfeited...................................... (84) 25.00 (89) (43)
------ ------- ------ ------
Outstanding at end of year..................... 2,165 22.88 1,840 1,652
====== ======= ====== ======
Options exercisable at year end................ 1,466 $20.76
====== =======
Weighted average fair value of options granted
during the year.............................. $12.62 $11.71
====== ======
</TABLE>
Contemporaneous with the Parisian acquisition, outstanding Parisian stock
options were converted into Proffitt's options.
The following table summarizes information about stock options outstanding
at February 1, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------- --------------------------
WEIGHTED-
AVERAGE
NUMBER REMAINING WEIGHTED- NUMBER WEIGHTED-
OUTSTANDING CONTRACTUAL AVERAGE EXERCISABLE AVERAGE
RANGE OF AT FEBRUARY 1, LIFE EXERCISE AT FEBRUARY 1, EXERCISE
EXERCISE PRICES 1997 (YEARS) PRICE 1997 PRICE
- --------------- -------------- ----------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C>
$7.50 to $11.25................ 266 5 $ 9.40 266 $ 9.40
$11.26 to $16.88................ 39 6 12.00 39 12.00
$16.89 to $25.31................ 1,374 7 23.26 1,015 22.97
$25.32 to $37.97................ 467 8 29.64 142 28.30
$37.98 to $39.88................ 19 9 39.88 4 39.88
----- ------ ----- ------
2,165 $22.88 1,466 $20.76
===== ====== ===== ======
</TABLE>
The Company also granted restricted stock awards of 129, 20 and 8 shares to
certain employees in 1996, 1995 and 1994, respectively. The fair value of these
awards on the dates of grants was $3,763, $499 and $120 for 1996, 1995 and 1994,
respectively. During 1996, 1995 and 1994, compensation cost of $2,239, $449 and
$120, respectively, has been recognized in connection with these awards.
F-19
<PAGE> 116
PROFFITT'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK PURCHASE PLAN
The stock purchase plan (the "Plan") provides that an aggregate of 350
shares of the Company's common stock is available for purchase. Under the Plan,
an eligible employee may elect to participate by authorizing limited payroll
deductions to be applied toward the purchase of common stock at a 15% discount
to market value. Under the Plan, 14 and 13 shares of the Company's common stock
were purchased by employees in 1996 and 1995, respectively. At January 31, 1997
the Plan has available 323 shares for future offerings.
NOTE 13 -- RELATED PARTY TRANSACTIONS
In 1989, an unsecured $500 interest-free loan was made as a supplement to
the Chairman of the Board and Chief Executive Officer's base compensation. The
loan is due January 31, 1999.
During 1996, 1995 and 1994, the Company paid $796, $1,950 and $1,694 of
preferred stock dividends and a $3,032 payment for early conversion of the
preferred stock to an investment group in which a Director is a partner.
NOTE 14 -- FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument:
The fair values of cash and cash equivalents and short-term debt
approximates cost due to the immediate or short-term maturity of these
instruments.
For variable rate notes that reprice frequently, fair value
approximates carrying value. The fair value of fixed rate notes are
estimated using discounted cash flow analyses with interest rates currently
offered for loans with similar terms and credit risk. As of February 1,
1997, the fair value of fixed rate notes approximated the carrying value.
The fair values of the 4.75% convertible debentures and the 9.875%
notes are based on quoted market prices. For the junior debentures, the
fair value is estimated using discounted cash flow analyses with interest
rates currently offered for financial instruments with similar terms and
credit risk.
The fair values of the Company's aforementioned financial instruments at
February 1, 1997 were as follows:
<TABLE>
<CAPTION>
CARRYING ESTIMATED
AMOUNT FAIR VALUE
-------- ----------
<S> <C> <C>
4.75% convertible debentures................................ $ 86,250 $ 84,525
9.875% notes................................................ $125,000 $127,500
7.5% junior debentures...................................... $ 14,517 $ 14,517
</TABLE>
F-20
<PAGE> 117
PROFFITT'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15 -- MERGER, RESTRUCTURING AND INTEGRATION COSTS
Merger, restructuring and integration costs incurred in 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
1996
-------
<S> <C>
Merger transaction costs, principally investment banking,
legal and other direct merger costs -- Herberger's........ $ 2,649
Severance and related benefits -- Herberger's............... 3,129
Conversion and consolidation of information systems and
administrative operations -- Herberger's.................. 3,355
Abandonment of duplicate data processing equipment and
software and other assets -- Herberger's.................. 885
Termination of Younkers benefit plan........................ 1,362
Conversion and consolidation of management information
systems -- Younkers....................................... 4,549
-------
$15,929
=======
</TABLE>
<TABLE>
<CAPTION>
1995
-------
<S> <C>
Merger transaction costs, principally investment banking,
legal and other direct merger costs -- Younkers........... $ 8,778
Severance and related benefits -- Younkers.................. 3,235
Abandonment of duplicate administrative office space and
property and duplicate data processing equipment and
software (including leases) -- Younkers................... 7,422
Other costs -- Younkers..................................... 1,387
-------
$20,822
=======
</TABLE>
A reconciliation of the above charges to the amounts remaining unpaid at
February 1, 1997 was as follows:
<TABLE>
<CAPTION>
1996 1995
------- --------
<S> <C> <C>
Merger, restructuring and integration charges............... $15,929 $ 20,822
Amounts representing non-cash write-offs.................... (2,417) (4,086)
Amounts paid in 1995........................................ (1,636)
Amounts paid in 1996........................................ (7,308) (11,913)
------- --------
Amounts unpaid at February 1, 1997.......................... $ 6,204 $ 3,187
======= ========
</TABLE>
The significant amount of charges remaining unpaid from 1995 relate
principally to the lease payments related to the abandoned Younkers
administrative office space.
NOTE 16 -- HOSTILE TAKEOVER DEFENSE
In 1995, prior to the Proffitt's and Younkers merger, Younkers was
subjected to a hostile takeover attempt by Carson Pirie Scott. In defending
itself against this takeover attempt, Younkers incurred legal fees and
investment banking advisory fees aggregating $3,182.
F-21
<PAGE> 118
PROFFITT'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17 -- QUARTERLY FINANCIAL INFORMATION
In the following summary of quarterly financial information, all
adjustments necessary for a fair presentation of each period were included.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Fiscal year ended February 1, 1997
Net sales........................................... $365,179 $343,359 $453,256 $727,985
Gross margin........................................ 127,978 122,320 162,789 246,238
Net income.......................................... 6,308 3,533 12,141 15,417
Primary earnings per common share................... 0.25 0.01 0.47 0.54
Fully diluted earnings per common share............. 0.25 0.14 0.45 0.53
Primary -- pro forma(a)............................. 0.25 0.14 0.47 0.54
Fiscal year ended February 3, 1996
Net sales........................................... 353,809 351,419 412,148 543,680
Gross margin........................................ 123,080 124,837 146,098 179,422
Income (loss) before extraordinary item............. 3,125 2,866 10,130 (15,480)
Net income (loss)................................... 3,125 2,866 10,130 (17,540)
Primary earnings (loss) per common share:
Before extraordinary item........................ 0.11 0.10 0.42 (0.69)
Extraordinary item............................... (0.09)
Earnings (loss) per common share................. 0.11 0.10 0.42 (0.78)
</TABLE>
- ---------------
(a) Pro forma amounts represent primary earnings per common share assuming the
conversion of the preferred stock had occurred as of the beginning of the
year.
In addition to the extraordinary loss on the early extinguishment of debt,
the impairment of long-lived assets and the merger, restructuring and
integration charges recorded in the fourth quarters of 1996 and 1995, the
Company also revised certain estimates and recorded other charges related to
Herberger's and Younkers in the fourth quarters of 1996 and 1995, respectively.
In 1995, those charges were comprised principally of a strengthened provision
for bad debts of $2,000, litigation of $5,000, conversion of leased shoe
operations of $2,400, vendor chargebacks of $800 and depreciation of $700. In
1996, those charges were comprised principally of $1,000 of store closing and
conversion costs and $1,700 to strengthen various accruals.
F-22
<PAGE> 119
PROFFITT'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 3, FEBRUARY 1, MAY 4,
1997 1997 1996
---------- ----------- --------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................. $ 15,011 $ 3,382 $ 4,907
Residual interest in trade accounts receivable........ 79,711 85,400 32,038
Merchandise inventories............................... 499,396 447,164 373,663
Deferred income taxes................................. 18,663 11,700 4,953
Other current assets.................................. 42,373 48,317 21,421
---------- ---------- --------
Total current assets.......................... 655,154 595,963 436,982
Property and equipment, net............................. 505,413 510,502 408,238
Goodwill and tradenames, net............................ 275,658 277,472 52,450
Other assets............................................ 20,569 19,859 23,936
---------- ---------- --------
$1,456,794 $1,403,796 $921,606
========== ========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable................................ $ 157,123 $ 116,434 $105,041
Accrued expenses and other current liabilities........ 110,813 122,604 74,806
Current portion of long-term debt..................... 11,870 12,515 30,774
---------- ---------- --------
Total current liabilities..................... 279,806 251,553 210,621
Senior debt............................................. 279,268 276,810 146,969
Deferred income taxes................................... 66,501 62,000 54,878
Other long-term liabilities............................. 50,220 47,768 15,008
Subordinated debt....................................... 225,840 225,767 100,568
Redeemable common stock held in ESOP.................... 59,168
Shareholders' equity.................................... 555,159 539,898 334,394
---------- ---------- --------
$1,456,794 $1,403,796 $921,606
========== ========== ========
</TABLE>
See notes to condensed consolidated financial statements.
F-23
<PAGE> 120
PROFFITT'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------
MAY 3, 1997 MAY 4, 1996
----------- -----------
<S> <C> <C>
NET SALES................................................... $526,370 $365,179
COSTS AND EXPENSES
Cost of sales............................................. 335,882 237,201
Selling, general and administrative expenses.............. 127,079 88,485
Other operating expenses.................................. 42,568 30,719
Store pre-opening costs................................ 824 279
Merger, restructuring and integration costs............ 1,468 2,763
Losses (gains) from long-lived assets.................. 27 (2,260)
ESOP expenses.......................................... 726 188
-------- --------
OPERATING INCOME.................................. 17,796 7,804
OTHER INCOME (EXPENSE):
Finance charge income..................................... 15,237 10,634
Finance charge income allowed to purchaser of accounts
receivables............................................ (4,359) (3,474)
Interest expense.......................................... (10,692) (4,706)
Other income, net......................................... 136 498
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES.......... 18,118 10,756
Provision for income taxes.................................. 7,574 4,448
-------- --------
NET INCOME........................................ 10,544 6,308
Preferred stock dividends................................... 488
-------- --------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS....... $ 10,544 $ 5,820
======== ========
Earnings per share:
Primary................................................... $ 0.37 $ 0.25
======== ========
Fully diluted............................................. $ 0.37 $ 0.25
======== ========
Weighted average common shares:
Primary................................................... 28,451 23,466
======== ========
Fully diluted............................................. 30,539 23,655
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
F-24
<PAGE> 121
PROFFITT'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------
MAY 3, MAY 4,
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................ $ 10,544 $ 6,308
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization.......................... 10,898 10,174
Deferred income taxes.................................. (2,462) 1,715
Losses (gains) from long-lived assets.................. 27 (2,260)
Amortization of deferred compensation.................. 316 287
Other non-cash charges................................. 491 --
Changes in operating assets and liabilities, net....... (8,390) (23,277)
-------- --------
Net cash provided by (used in) operating
activities....................................... 11,424 (7,053)
INVESTING ACTIVITIES
Purchases of property and equipment, net.................. (24,090) (9,944)
Proceeds from sale of assets.............................. 21,347 5,000
Other, net................................................ (876) (42)
-------- --------
Net cash used in investing activities............. (3,619) (4,986)
FINANCING ACTIVITIES
Proceeds from long-term borrowings........................ 8,663 11,025
Payments on long-term debt................................ (6,850) (22,337)
Proceeds from issuance of stock........................... 3,135 1,202
Dividends paid to shareholders............................ (1,124) (2,122)
-------- --------
Net cash provided by (used in) financing activities.... 3,824 (12,232)
Increase (decrease) in cash and cash equivalents....... 11,629 (24,271)
Cash and cash equivalents at beginning of period....... 3,382 29,178
-------- --------
Cash and cash equivalents at end of period............. $ 15,011 $ 4,907
======== ========
</TABLE>
Cash paid (refunded) during the three months ended May 3, 1997 for interest
and income taxes totaled $7,241 and ($1,930), respectively. Cash paid during the
three months ended May 4, 1996 for interest and income taxes totaled $6,168 and
$2,662, respectively.
See notes to condensed consolidated financial statements.
F-25
<PAGE> 122
PROFFITT'S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of the Regulation S-K. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended May 3, 1997 are not necessarily indicative of the results that may be
expected for the year ending January 31, 1998. The financial statements include
the accounts of Proffitt's, Inc. and its subsidiaries. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended February 1, 1997.
The accompanying balance sheet at February 1, 1997 has been derived from the
audited financial statements at that date.
NOTE B -- BUSINESS COMBINATIONS
On October 11, 1996, Proffitt's, Inc. ("Proffitt's" or the "Company")
acquired Parisian, Inc. ("Parisian"), a specialty department store chain
currently operating 40 stores in the southeast and midwest. The Parisian
transaction was accounted for as a purchase, and accordingly, financial results
of the operations of Parisian have been included in the Company's results of
operations since the acquisition date. The following unaudited pro forma summary
presents the consolidated results of operations as if the Parisian acquisition
had occurred at the beginning of the period presented and does not purport to be
indicative of what would have occurred had the acquisition been made as of this
date or results which may occur in the future.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MAY 4, 1996
---------------------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C>
Pro forma:
Net sales................................................... $531,226
Net income.................................................. $ 8,977
Earnings per common share:
Primary................................................... $ .32
Fully diluted............................................. $ .32
</TABLE>
Effective February 1, 1997, immediately before the Company's fiscal year
end, Proffitt's combined its business with G.R. Herberger's, Inc.
("Herberger's"), a retail department store chain currently operating 39 stores
in the midwest. The merger has been accounted for as a pooling of interests, and
accordingly, the consolidated financial statements have been restated for the
prior year to include the results of operations and financial position of
Herberger's. In the quarters ended May 3, 1997 and May 4, 1996, the Company
incurred certain integration costs related to its business combinations with
Younkers, Parisian, and Herberger's. These pre-tax charges totaled $1.5 million
and $2.8 million, respectively, for the quarters ended May 3, 1997 and May 4,
1996, respectively.
A reconciliation of the aforementioned charges to the amounts of merger,
restructuring, and integration costs remaining unpaid at May 3, 1997 was as
follows (in thousands):
<TABLE>
<S> <C>
Amounts unpaid at February 1, 1997.......................... $ 9,391
Adjustments to amounts unpaid at February 1, 1997........... 0
Amounts related to continuing integration efforts during the
quarter................................................... 1,468
Amounts paid during the quarter............................. (5,067)
-------
Amounts unpaid at May 3, 1997............................... $ 5,792
</TABLE>
F-26
<PAGE> 123
PROFFITT'S, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE C -- INCOME TAXES
The difference between the actual income tax expense and the amount
expected by applying the statutory federal income tax rate is due to the
inclusion of state income taxes and the amortization of goodwill and tradenames,
which is not deductible for income tax purposes. The deferred income tax asset
and liability amounts reflect the impact of temporary differences between values
recorded for assets and liabilities for financial reporting purposes and values
utilized for measurement in accordance with tax laws. The major components of
these amounts result from the allocation of the purchase price to the assets and
liabilities related to the McRae's acquisition in March 1994 and the Parisian
acquisition in October 1996.
NOTE D -- RECENT FINANCING
On May 21, 1997, the Company completed the sale of $125 million of 6.125%
Senior Notes, due 2004 (the "Senior Notes"). The Senior Notes were offered in a
private placement to qualified institutional buyers. Proceeds from the Senior
Notes were used to repay existing mortgage notes and other unsecured obligations
and to reduce amounts outstanding under the Company's revolving credit facility.
The Company also intends to increase its existing $275 million revolving credit
facility and issue approximately $200 million of term asset-backed securities
against the Company's proprietary credit card receivables, replacing existing
commercial paper-based financing. In May and June 1997, the Company repurchased
approximately $32 million of the existing 9 7/8% Parisian Senior Subordinated
Notes which will result in an extraordinary loss from the early extinguishment
of debt of approximately $.9 million after tax. In connection with the Company's
Senior Notes offering and the anticipated issuance of the term asset-backed
securities, the Company entered into forward interest rate lock agreements in an
aggregate notional amount of $95 million as of May 3, 1997. The agreements are
settled contemporaneously with the completion of the financing. The Company's
policy is to use financial derivatives only to reduce risk in conjunction with
specific financing arrangements. Gains and losses on these hedges are included
in the respective debt and deferred financing cost amounts. Gains and losses
related to the hedges of firm commitments or anticipated transactions are
deferred and recognized in operating results over the lives of the related
assets or liabilities.
F-27
<PAGE> 124
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Parisian, Inc.
We have audited the accompanying consolidated balance sheets of Parisian,
Inc. and subsidiaries as of January 28, 1995 and February 3, 1996, and the
related consolidated statements of operations, changes in shareholders' equity
and cash flows for the years ended January 29, 1994, January 28, 1995, and
February 3, 1996. These financial statement are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Parisian, Inc.
and subsidiaries as of January 28, 1995 and February 3, 1996, and the
consolidated results of their operations and their cash flows for the years
ended January 29, 1994, January 28, 1995 and February 3, 1996, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
March 22, 1996
F-28
<PAGE> 125
PARISIAN INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 28, 1995 AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
JANUARY 28, FEBRUARY 3,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 394,377 $ 1,858,541
Restricted cash and short-term investments.................. 2,190,000 2,020,000
Accounts receivable, net.................................... 34,953,764 39,205,613
Merchandise inventory....................................... 119,924,513 143,045,118
Prepaid expenses............................................ 4,103,356 5,375,343
Deferred income taxes....................................... 3,412,662 3,668,660
Federal and state income tax receivable..................... 3,876,996
------------ ------------
Total current assets.............................. 168,855,668 195,173,275
============ ============
Property and equipment, less accumulated depreciation and
amortization.............................................. 74,479,814 71,469,103
Goodwill, net............................................... 62,137,207 60,268,477
Deferred financing costs, net............................... 4,239,446 3,686,542
Other....................................................... 13,409,614 13,608,883
------------ ------------
Total assets...................................... $323,121,749 $344,206,280
============ ============
LIABILITIES
Short-term debt, including current portion of long-term
debt...................................................... $ 8,549,410 $ 2,863,604
Accounts payable............................................ 40,949,864 42,305,004
Accrued store rent.......................................... 1,026,703 1,842,683
Federal and state income tax payable........................ 1,184,949
Sales tax payable........................................... 6,188,263 6,476,474
Other....................................................... 10,836,673 11,901,969
------------ ------------
Total current liabilities......................... 67,550,913 66,574,683
Long-term debt, less current portion above.................. 158,792,902 159,869,298
Deferred income taxes....................................... 8,170,795 8,167,214
Store opening reimbursements................................ 14,011,239 26,026,488
Other....................................................... 3,443,067 3,637,760
------------ ------------
Total liabilities................................. 251,968,916 264,275,443
------------ ------------
SHAREHOLDERS' EQUITY
Convertible preferred stock, par value $.01 per share,
12,000,000 shares, none issued............................
Common stock, par value $.01 per share, authorized
65,000,000 shares, issued and outstanding 7,355,846 shares
at January 28, 1995 and February 3, 1996.................. 73,558 73,558
Paid-in capital............................................. 87,959,792 87,959,792
Accumulated deficit......................................... (16,880,517) (8,102,513)
------------ ------------
Total shareholders' equity........................ 71,152,833 79,930,837
------------ ------------
Total liabilities and shareholders' equity........ $323,121,749 $344,206,280
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-29
<PAGE> 126
PARISIAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 28, 1995, AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------------------------------
JANUARY 29, JANUARY 28, FEBRUARY 3,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net sales, including leased departments.............. $517,667,748 $606,716,896 $663,827,999
Costs and expenses:
Cost of sales...................................... 328,505,911 393,948,510 419,055,866
Selling, general, and administrative expenses...... 137,110,373 159,987,520 165,236,749
Other operating expenses:
Property and equipment rentals.................. 14,436,483 21,583,330 29,787,936
Depreciation and amortization................... 12,850,190 12,855,933 12,618,367
Taxes other than income taxes................... 10,497,041 12,699,576 13,542,117
Reengineering costs............................. 3,184,725 304,369
------------ ------------ ------------
Operating income........................... 14,267,750 2,457,302 23,282,595
Other income (expense):
Finance charge income.............................. 9,930,691 8,046,347 7,125,115
Interest expense................................... (21,617,385) (18,051,210) (17,651,879)
Other, net......................................... 155,901 411,194 2,407,349
------------ ------------ ------------
Income (loss) before provision (benefit)
for income taxes and extraordinary
item..................................... 2,736,957 (7,136,367) 15,163,180
Provision (benefit) for income taxes................. 1,704,530 (1,673,554) 6,385,176
------------ ------------ ------------
Income (loss) before extraordinary item.... 1,032,427 (5,462,813) 8,778,004
Extraordinary loss from early retirement of debt (net
of income tax benefit of $3,092,179)............... (5,402,819)
------------ ------------ ------------
Net income (loss).......................... $ (4,370,392) $ (5,462,813) $ 8,778,004
============ ============ ============
Income (loss) per common and common equivalent share
before extraordinary item.......................... $ .17 $ (.78) $ 1.19
Extraordinary loss per common and common equivalent
share.............................................. (.87)
------------ ------------ ------------
Net income (loss) per common and common equivalent
share.............................................. $ (.70) $ (.78) $ 1.19
============ ============ ============
Weighted average common and common equivalent
shares............................................. 6,208,180 6,986,952 7,355,846
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-30
<PAGE> 127
PARISIAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 28, 1995, AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
TOTAL
PREFERRED COMMON PAID-IN ACCUMULATED SHAREHOLDERS'
STOCK STOCK CAPITAL DEFICIT EQUITY
--------- ------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, January 30, 1993............. $0 $62,082 $73,052,973 $ (7,047,312) $66,067,743
Net loss.............................. (4,370,392) (4,370,392)
-- ------- ----------- ------------ -----------
Balance, January 29, 1994............. 0 62,082 73,052,973 (11,417,704) 61,697,351
Issuance of common stock, net of
$81,705 in issuance costs, 1,147,666
shares.............................. 11,476 14,906,819 14,918,295
Net loss (5,462,813) (5,462,813)
-- ------- ----------- ------------ -----------
Balance, January 28, 1995............. 0 73,558 87,959,792 (16,880,517) 71,152,833
Net Income............................ 8,778,004 8,778,004
-- ------- ----------- ------------ -----------
Balance, February 3, 1996............. $0 $73,558 $87,959,792 $ (8,102,513) $79,930,837
== ======= =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-31
<PAGE> 128
PARISIAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 29, 1994, JANUARY 28, 1995, AND FEBRUARY 3, 1996
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
-------------------------------------------
JANUARY 29, JANUARY 28, FEBRUARY 3,
1994 1995 1996
------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ (4,370,392) $ (5,462,813) $ 8,778,004
------------- ------------ ------------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 12,850,190 12,855,933 12,618,367
Amortization of deferred financing costs................ 1,022,338 1,099,532 1,191,496
Proceeds from the initial sale of accounts receivable... 90,500,000
Provision for losses on accounts receivable............. 2,869,546 2,827,348 3,986,023
Loss (gain) on disposal of property and equipment....... 370,174 443,649 (1,814,341)
Deferred compensation................................... 231,544 114,887 198,091
Write-off of unamortized financing costs (net of tax)... 2,063,819
Loss from redemption of debt (net of tax)............... 3,339,000
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable................................ (6,301,365) (1,937,633) (8,237,872)
Merchandise inventory.............................. (14,002,448) (18,061,935) (23,120,605)
Prepaid expenses................................... 1,151,554 (247,182) (1,271,987)
Other.............................................. (10,433,472) (7,316,879) (5,294,953)
Increase (decrease) in:
Accounts payable................................... (3,765,665) 5,037,697 1,551,362
Accrued store rent................................. (234,160) 59,726 815,980
Federal and state income taxes..................... (2,850,263) (1,442,785) 5,061,945
Sales tax payable.................................. 589,857 152,475 288,211
Deferred income taxes.............................. 439,040 (1,734,382) (259,579)
Other liabilities.................................. 799,686 2,875,671 2,199,993
------------- ------------ ------------
Total adjustments................................ 78,639,375 (5,273,878) (12,087,869)
------------- ------------ ------------
Net cash provided by (used in) operating
activities..................................... 74,268,983 (10,736,691) (3,309,865)
------------- ------------ ------------
Cash flows from investing activities:
(Increase) decrease in restricted cash and short-term
investments............................................. 1,711,731 (270,000) 170,000
Proceeds from sale of property and equipment.............. 29,325 1,085 9,937,589
Increase in cash value of life insurance.................. (338,775) (364,613) (337,110)
Capital expenditures...................................... (14,974,339) (5,729,644) (10,735,276)
Store opening reimbursements.............................. 2,000,000 2,600,000 10,986,827
------------- ------------ ------------
Net cash provided by (used in) investing
activities....................................... (11,572,058) (3,763,172) 10,022,030
------------- ------------ ------------
Cash flows from financing activities:
Borrowings under revolving credit agreements.............. 28,200,000 38,500,000 36,905,343
Payments under revolving credit agreements................ (105,200,000) (36,500,000) (38,905,343)
Principal payments of long-term debt...................... (2,242,248) (2,395,323) (6,549,410)
Proceeds from the issuance of subordinated notes.......... 125,000,000
Redemption of subordinated debentures..................... (100,000,000)
Payment of financing costs................................ (5,575,969) (204,361) (638,591)
Premium paid on redemption of debentures (net of tax)..... (3,339,000)
Proceeds from issuance of common stock.................... 14,918,295
Proceeds from bond refunding.............................. 3,940,000
------------- ------------ ------------
Net cash provided by (used in) financing
activities....................................... (63,157,217) 14,318,611 (5,248,001)
------------- ------------ ------------
Net increase (decrease) in cash and cash
equivalents...................................... (460,292) (181,252) 1,464,164
Cash and cash equivalents, beginning of period.............. 1,035,921 575,629 394,377
------------- ------------ ------------
Cash and cash equivalents, end of period.................... $ 575,629 $ 394,377 $ 1,858,541
============= ============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest................................................ $ 23,065,471 $ 17,089,008 $ 17,001,105
============= ============ ============
Income taxes............................................ $ 2,203,733 $ 2,003,555 $ 4,991,703
============= ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-32
<PAGE> 129
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Company.
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Parisian Services, Inc. (Parisian Services),
Parisian Management Company, Inc., Parisian of Tennessee, Inc., and Hess
Specialty Department Store, L.L.C. Parisian Services was formed for the purpose
of financing customer accounts receivable of the Company and financing future
credit purchases by the Company's customers. All material intercompany accounts
and transactions have been eliminated.
The Company currently operates thirty-six specialty department stores
located in Alabama, Florida, Georgia, Tennessee, South Carolina, Ohio, Indiana,
and Michigan and one clearance center in Alabama. The Company sells moderate to
better-priced fashion merchandise including apparel, cosmetics, shoes,
accessories, and gifts for the family. The Company performs ongoing credit
evaluations of its customers and maintains reserves for potential credit losses.
The value of merchandise inventory is determined by the retail inventory
method, using last-in, first-out (LIFO) cost, which is lower than market for
approximately 18% and 17% of the inventory and the lower of average cost or
market for the balance of the inventory for 1995 and 1996, respectively. If
average cost had been used for all inventory, the January 28, 1995 and February
3, 1996 merchandise inventory would have been higher by approximately $2,439,000
and $2,709,000, respectively.
Certain expenditures incurred prior to the opening of new stores are
deferred and charged to income on the straight-line basis over a twelve-month
period following the date the related store is opened.
Property and equipment is recorded at cost and depreciation and
amortization are computed using the straight-line method. All property and
equipment, except improvements to leased premises and land, is depreciated over
its estimated useful life. Improvements to leased premises are amortized over
the noncancelable terms of the leases. Costs for repairs and maintenance are
expensed as incurred.
Expenditures for certain computer software and related customization are
recorded at cost and amortized using the straight-line method over the expected
life of the licensing agreement. Additionally, certain related leased computer
hardware and supporting software are being amortized using the straight-line
method from the beginning amortization dates of the licensing agreement to the
end of the hardware lease term. Such expenditures, included in other assets,
totaled $8,304,722 and $9,885,824 as of January 28, 1995 and February 3, 1996,
respectively. As of January 28, 1995 and February 3, 1996, accumulated
amortization of expenditures related to software systems implemented was
$1,035,794 and $2,542,732, respectively.
Store opening reimbursements represent amounts received from developers in
reimbursement of certain expenses incurred during the opening of a new store.
Store opening reimbursements are amortized over the noncancelable term of the
lease.
Goodwill, the excess of purchase price over the fair value of the net
assets acquired arising from a 1988 leveraged buy-out transaction, is being
amortized on a straight-line basis over 40 years. As of January 28, 1995 and
February 3, 1996, the accumulated amortization of goodwill is $12,611,997 and
$14,480,727, respectively.
Deferred financing costs represent fees and costs directly related to the
issuance of debt. These costs are amortized using the straight-line method over
the terms of the specific borrowings or commitments to which they relate and are
included in interest expense.
The Company expenses advertising cost when the advertising takes place.
Advertising expense was $10,570,390, $14,814,426, and $19,470,129 in 1994, 1995,
and in 1996, respectively.
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
F-33
<PAGE> 130
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes are recorded to reflect the tax consequences on
future years of differences between the tax bases of assets and liabilities and
their financial reporting amounts in accordance with Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes.
Reengineering costs include implementation of cost containment measures
primarily directed at payroll as well as customer surveys to refine the
Company's market focus.
Net income (loss) per common and common equivalent share is computed by
dividing net income (loss) by the weighted average number of common and common
equivalent shares outstanding during the periods. The effect of common stock
options on net income (loss) per common and common equivalent share for all
years presented is insignificant or antidilutive.
During the year ended February 3, 1996, the Company adopted SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of. The adoption of this accounting standard had no impact on the
Company's financial statements. SFAS No. 123, Accounting for Stock-Based
Compensation was issued during 1995. The Company anticipates that the adoption
of this accounting standard will not be material to its financial condition.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Certain reclassifications have been made in the previously reported
financial statements and accompanying notes to make the prior year amounts
comparable to those of the current year. Such reclassifications had no effect on
previously reported net income, total assets, or stockholders' equity.
2. ACCOUNTS RECEIVABLE
Accounts receivable is shown net of allowances for doubtful accounts and
return sales of $2,805,934 and $3,058,088 for January 28, 1995 and February 3,
1996, respectively. The provision for losses from bad debts, less recoveries, is
included in selling, general, and administrative expenses and amounted to
$2,869,546, $2,827,348, and $3,986,023 for the years ended January 29, 1994,
January 28, 1995, and February 3, 1996, respectively.
On March 31, 1993, the Company entered into an agreement through its
subsidiary, Parisian Services, with Sheffield Receivables Corporation
(Sheffield), whereby Sheffield agreed to provide up to $160 million in capital
against eligible accounts receivable generated by holders of the Company's
proprietary credit card accounts (the Receivables) pursuant to a nonrecourse
facility (the Receivables Facility), which expires in July 1998. As of such
date, Parisian Services sold an undivided interest in the Receivables to
Sheffield and utilized the proceeds from such sale to repay in full Parisian
Services' then outstanding indebtedness under the receivables loan agreement,
which was then terminated. At January 28, 1995 and February 3, 1996, $109.5 and
$101.0 million, respectively, of the available receivables had been sold to
Sheffield and accounted for as a reduction of accounts receivable. Parisian
Services retains a residual undivided interest in the Receivables equal to the
undivided interest not purchased by Sheffield. Sheffield undivided interest and,
accordingly, Parisian Services' undivided interest fluctuate each business day
based upon the amount of capital invested in relation to the pool of eligible
Receivables. The Company services and collects the Receivables. A cash reserve
equal to 2% of aggregate capital is required under the agreement and is included
in the restricted cash and short-term investments balance.
Sheffield finances the purchase of its undivided interest in the
Receivables primarily through the issuance of commercial paper or alternatively,
the obtaining of revolving loans from the Liquidity Facility (defined
F-34
<PAGE> 131
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
below). The discount and interest costs are funded from the Receivables. The
Receivables Facility receives liquidity support from a consortium of five banks
(the Liquidity Facility) which have agreed to provide standby funding under
certain specified conditions. Repayment of the amounts due under the commercial
paper or revolving loans is without recourse to Parisian Services and is made
solely through collections of Sheffield's undivided interest in Receivables.
3. PROPERTY AND EQUIPMENT
A summary of property and equipment is as follows:
<TABLE>
<CAPTION>
JANUARY 28, FEBRUARY 3,
1995 1996
----------- -----------
<S> <C> <C>
Land........................................................ $ 920,903 $ 893,474
Buildings................................................... 57,442,129 51,734,084
Furniture, fixtures, and equipment.......................... 52,297,250 53,018,433
Leasehold improvements...................................... 6,088,111 6,585,766
Transportation equipment.................................... 2,524,363 268,285
----------- -----------
119,272,756 112,500,042
Less accumulated depreciation and amortization.............. 44,792,942 41,030,939
----------- -----------
$74,479,814 $71,469,103
=========== ===========
</TABLE>
In November 1995, the Company sold its store location in Sarasota, Florida,
resulting in a gain of $1,725,783. The Sarasota store remained open throughout
most of January 1996 and closed prior to February 3, 1996. In connection with
this sale, the Company acquired the right to assume the lease for a store
location in Columbia, South Carolina and also received certain additional
consideration. The Company airplane was sold in 1995 resulting in a gain of
$1,180,090. In conjunction with the expansion and remodeling of one store, the
Company disposed of furniture, fixtures, and equipment with a net book value of
$893,269.
F-35
<PAGE> 132
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. SHORT-TERM AND LONG-TERM DEBT
Short-term and long-term debt consist of the following:
<TABLE>
<CAPTION>
JANUARY 28, 1995 FEBRUARY 31, 1996
----------------------- -----------------------
YEAR-END YEAR-END
AMOUNT RATE AMOUNT RATE
------------ -------- ------------ --------
<S> <C> <C> <C> <C>
Short-term debt:
Bank revolving credit agreement..... $ 2,000,000 9.75% $ 0
Tax-exempt promissory note -- On
April 1, 1995, the note became
payable on demand and was paid in
May 1995......................... 4,109,749 7.22% 0
Current portion of long-term debt... 2,439,661 Various 2,863,604 Various
------------ ------------
Total short-term debt....... $ 8,549,410 $ 2,863,604
============ ============
Long-term debt:
Senior subordinated notes........... $125,000,000 9.875% $125,000,000 9.875%
Mortgage loans -- five separate
loans, payments due monthly,
based on an original 27-year
amortization, principal payments
totaling $18,791,733 due in
1998............................. 19,258,204 10.5% 19,037,150 10.5%
Tax-exempt promissory
note -- payable in annual
installments ranging from
$185,000 to $525,000 through
April 1, 2007 plus interest at a
variable rate as determined on a
weekly basis..................... 3,755,000 5.25%
Obligations under capitalized
leases: Headquarters and
distribution center -- payable in
quarterly installments
aggregating $3,615,288 in the
year ended 1996, varying in each
year to $3,548,327 in the year
ended 2000, including interest at
prime rate within the range of
4.75% to 15.25%.................. 14,487,900 8.5% 12,072,900 8.25%
Other capitalized leases............ 46,798 Various 4,248 12.05%
------------ ------------
$158,792,902 $159,869,298
============ ============
</TABLE>
Under a bank credit agreement, the Company may borrow through August 31,
1997 up to an amount such that the sum of loans outstanding and certain letters
of credit issued thereunder (Total Commitment Amount) may not exceed
$50,000,000. At February 3, 1996, $36,778,879 was available under this agreement
as the Company had $13,221,121 in standby letters of credit outstanding under
this agreement. The agreement requires that there be no aggregate principal
amount outstanding on the loans for a period of thirty consecutive days during
each calendar year. The bank credit loans bear interest at the bank's base rate
plus 1.25%, payable monthly, with the rate adjustable to as low as the base rate
plus .75% if certain debt to equity ratios are met. Bank credit loans may
alternatively bear interest, at the request of the Company, at LIBOR plus a
margin of 2.5% per annum. Certain commitment fees are also payable based upon
unused commitment amounts. The Company has pledged all of the capital stock of
its subsidiaries and certain notes receivable of the Company from Parisian
Services as collateral for the bank credit loans.
F-36
<PAGE> 133
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under the bank credit agreement, the Company is subject to certain
affirmative and negative covenants. Some of the restrictive covenants are as
follows:
Negative covenants in the bank credit agreement include agreements
that the Company will not permit the current ratio at the end of any fiscal
quarter to be less than a range of 1.75 to 2.25, dependent on the fiscal
quarter, to 1.0; the ratio of long-term debt to equity at the end of any
fiscal quarter to be greater than a range of 2.6-2.15, dependent on the
fiscal quarter, to 1.0; earnings before interest, taxes, depreciation, and
amortization (EBITDA) to total debt service ratio at the end of any fiscal
quarter to be less than a range of 1.10 to 2.00, dependent on the fiscal
quarter, to 1.0; net worth, as defined, at the end of any fiscal quarter to
be less than the sum of (A) $55 million, (B) 80% of net income for each
fiscal year closed subsequent to January 29, 1995 for which net income was
positive, (C) certain capital contributions and (D) certain other
adjustments. Additionally, the Company may not declare, pay, or make any
dividend or distribution of any class of capital stock.
Information concerning the bank revolving credit agreements is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ----------- ----------
<S> <C> <C> <C>
Bank credit agreement:
Weighted average interest rate based on
daily amounts outstanding.............. 8% 8.63% 10.25%
Average daily borrowings outstanding...... $ 361,000 $ 4,292,000 $ 827,820
Maximum borrowings outstanding at any
month end.............................. $7,500,000 $29,000,000 $9,500,000
</TABLE>
On July 15, 1993, the Company issued $125.0 million of 9.875% Senior
Subordinated Notes due 2003 (the Notes) and notified the holders of its Senior
Subordinated Debentures in the aggregate principal amount of $100.00 million
(the Debentures) of its intention to redeem, as of August 14, 1993, all of its
outstanding Debentures at the stated redemption price of 105.25%. One July 15,
1993, in order to effect such redemption, the Company deposited $107.25 million
representing the $100.0 million principal of Debentures to be redeemed at the
stated redemption price of 105.25% plus accrued and unpaid interest thereon to
August 14, 1993, with AmSouth Bank, as escrow agent. The Company utilized
proceeds from the issuance of the Notes to effect such redemption.
The Company recorded an extraordinary loss of $5.4 million after taxes for
the early retirement of debt. The extraordinary loss consists of the redemption
premium paid to holders of the Debentures and the write-off of the unamortized
portion of deferred financing fees associated with the retired Debentures.
On or after July 15, 1998, the Notes are redeemable at the option of the
Company, in whole or in part, at the redemption prices below plus accrued
interest at the redemption date.
<TABLE>
<CAPTION>
IF REDEEMED DURING THE TWELVE-MONTH PERCENTAGE OF
PERIOD BEGINNING JULY 15 PRINCIPAL
----------------------------------- -------------
<S> <C>
1998............................................ 104.938%
1999............................................ 102.469
2000 and thereafter............................. 100.00
</TABLE>
The Notes are uncollateralized obligations and are subordinated in right of
payment to all senior indebtedness, as defined. Senior indebtedness was
approximately $45,390,540 at February 3, 1996.
The Company is subject to certain covenants set forth in the indenture to
the Notes including, among others, the following: limitations on certain
restricted payments; limitations on certain indebtedness; limitations on liens;
limitations on dividends and other payment restrictions affecting subsidiaries;
limitations on transactions with affiliates; limitations on preferred stock of
subsidiaries; and limitations on future senior subordinated indebtedness.
F-37
<PAGE> 134
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Indebtedness outstanding under the tax-exempt promissory note bears
interest at a floating rate based on prime, but in no event is the rate to be
less than 6% or greater than 10%. During the years ended January 29, 1994,
January 28, 1995, and February 3, 1996 the interest rate ranged from 6% per
annum to 74.6% of prime. The interest charged changes within limits to protect
the lender's yield when there is a change in the maximum federal corporate
income tax rate. In May 1995, the Company purchased the tax-exempt bond with
funds available under the Receivables Facility. On October 19, 1995, the bond
was refunded, with credit enhancement provided by a financial institution. The
outstanding indebtedness bears interest at a floating rate.
At February 3, 1996, property and equipment with a net book value of
approximately $45,085,127 was pledged as collateral on the mortgage loans,
obligations under capitalized leases, equipment loan and security agreement, and
mortgage note. Substantially all of the Company's bank accounts are pledged as
collateral on the bank revolving credit agreement, described above.
The noncurrent portion of long-term debt at February 3, 1996 is payable as
follows:
<TABLE>
<S> <C>
Second succeeding year...................................... $ 445,416
Third succeeding year....................................... 19,016,734
Fourth succeeding year...................................... 245,000
Fifth succeeding year....................................... 270,000
Thereafter.................................................. 127,815,000
------------
147,792,150
Capitalized lease obligations:
Payable in monthly, semi-annual and annual installments... 12,077,148
------------
$159,869,298
============
</TABLE>
The future minimum lease payments required under capitalized lease
obligations are disclosed in Note 6.
Based on the borrowing rates currently available to the Company for
long-term debt with similar terms and average maturities, the fair value of
long-term debt is approximately $137,359,119 at February 3, 1996.
5. INCOME TAXES
The components of the current deferred income tax asset are:
<TABLE>
<CAPTION>
JANUARY 28, FEBRUARY 3,
1995 1996
----------- -----------
<S> <C> <C>
Inventory capitalization.................................... $1,406,435 $1,829,259
Allowances for doubtful accounts and return sales........... 910,319 1,148,056
Compensation accruals....................................... 633,794 622,579
Other....................................................... 462,114 68,766
---------- ----------
$3,412,662 $3,688,660
========== ==========
</TABLE>
F-38
<PAGE> 135
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the noncurrent deferred income tax liability are:
<TABLE>
<CAPTION>
JANUARY 28, FEBRUARY 3,
1995 1996
----------- -----------
<S> <C> <C>
Property and equipment...................................... $ 7,094,128 $ 6,095,988
Computer software costs..................................... 2,318,070 2,567,467
Store pre-opening costs..................................... 734,011 477,852
Compensation accruals....................................... (632,739) (727,915)
Alternative minimum tax credit.............................. (1,330,723)
Other....................................................... (11,952) (246,178)
----------- -----------
$ 8,170,795 $ 8,167,214
=========== ===========
</TABLE>
The provision (benefit) for income taxes is comprised of the following:
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 28, FEBRUARY 3,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Federal:
Current......................................... $ 727,846 $ (58,003) $5,646,129
Deferred........................................ 1,055,992 (1,929,800) (243,627)
---------- ----------- ----------
1,783,838 (1,987,803) 5,402,502
---------- ----------- ----------
State:
Current......................................... 537,644 118,831 998,626
Deferred........................................ (616,952) 195,418 (15,952)
---------- ----------- ----------
(79,308) 314,249 982,674
---------- ----------- ----------
Provision for income taxes........................ $1,704,530 $(1,673,554) $6,385,176
========== =========== ==========
</TABLE>
In addition, an income tax benefit of $3,092,179 was recognized during the
year ended January 29, 1994 related to the extraordinary loss from early
retirement of debt.
The provision (benefit) for income taxes is different from the amount
computed by applying the federal income tax statutory rate to income (loss)
before provision (benefit) for income taxes. The reasons for this difference, as
a percentage of pretax income (loss), as follows:
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 28, FEBRUARY 3,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Federal income tax statutory rate..................... 34% (34)% 35%
Amortization of goodwill.............................. 23 9 5
State income taxes.................................... (3) 3 3
Other................................................. 8 (1) (1)
-- --- --
Effective income tax rate................... 62% (23)% 42%
== === ==
</TABLE>
F-39
<PAGE> 136
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Details of the deferred tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 28, FEBRUARY 3,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Inventory capitalization.......................... $ (41,639) $ (256,801) $ (422,824)
Property and equipment............................ (722,505) (210,083) (998,140)
Computer software costs........................... 583,534 249,397
Store pre-opening costs........................... 1,309,414 (154,624) (256,159)
Compensation accruals............................. (291,515) (6,076) (83,961)
Alternative minimum tax credit.................... (1,330,723) 1,330,723
Other, net........................................ 185,285 (359,609) (78,615)
---------- ----------- ----------
Deferred tax provision (benefit)........ $ 439,040 $(1,734,382) $ (259,579)
========== =========== ==========
</TABLE>
6. LEASES
The Company leases its headquarters and distribution center and another
facility under capitalized leases which expire in 2001 and 1996, respectively.
At expiration, the Company has the option to purchase the leased properties for
nominal amounts. In addition, the Company leases computer equipment under
capitalized leases expiring over the next three years.
The following is a summary of the leased property under capitalized leases
by major classes of property:
<TABLE>
<CAPTION>
JANUARY 28, FEBRUARY 3,
1995 1996
----------- -----------
<S> <C> <C>
Classes of Property
Buildings.............................................. $17,218,881 $17,219,894
Transportation equipment............................... 145,028
Furniture, fixtures, and equipment..................... 10,772,832 10,593,735
----------- -----------
28,136,741 27,813,629
Less accumulated amortization.......................... 10,871,026 11,119,920
----------- -----------
17,265,715 16,693,709
Land................................................... 711,507 711,507
----------- -----------
$17,977,222 $17,405,216
=========== ===========
</TABLE>
Future minimum lease payments required under capitalized lease obligations
together with the present value of the net minimum lease payments at February 3,
1996 are as follows:
<TABLE>
<S> <C>
First succeeding year....................................... $ 3,619,446
Second succeeding year...................................... 3,616,481
Third succeeding year....................................... 3,658,634
Fourth succeeding year...................................... 3,707,527
Fifth succeeding year....................................... 3,503,255
Thereafter..................................................
-----------
18,105,343
Less amount representing interest........................... 3,577,443
-----------
Present value of net minimum lease payments................. $14,527,900
===========
Current portion of above.................................... $ 2,455,000
===========
Noncurrent portion of above................................. $12,072,900
===========
</TABLE>
F-40
<PAGE> 137
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In addition, the Company conducts a substantial portion of its operations
from thirty-one leased stores. The leases are operating leases and expire at
various times during the next 20 years. The Company can, at its option, renew
most of these leases at predetermined fair rental values for periods of five to
fifteen years. The rental payments under the store leases are based on a minimum
rental plus a percentage of the stores' sales in excess of stipulated amounts.
The Company also leases certain computer equipment, vehicles, and loss
prevention equipment under operating leases. The future minimum rental payments
under operating leases having initial or remaining noncancelable lease terms in
excess of one year as of February 3, 1996 are as follows:
<TABLE>
<S> <C>
First succeeding year....................................... $ 26,705,012
Second succeeding year...................................... 26,335,196
Third succeeding year....................................... 24,720,623
Fourth succeeding year...................................... 23,539,730
Fifth succeeding year....................................... 22,210,711
Thereafter.................................................. 251, 487,144
------------
Total minimum payments required................... $374,998,416
============
</TABLE>
The following schedule shows total rental expense for all operating leases:
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 28, FEBRUARY 3,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Minimum rentals................................. $12,548,820 $20,319,741 $27,553,590
Contingent rentals.............................. 1,785,982 1,270,191 2,231,259
----------- ----------- -----------
$14,334,802 $21,589,932 $29,784,849
=========== =========== ===========
</TABLE>
The Company leases one of its stores from a limited partnership which
includes certain officers of the Company. Rental expense related to the lease
amounted to $568,213 for the year ended January 29, 1994, $565,574 for the year
ended January 28, 1995 and $556,453 for the year ended February 3, 1996. The
future minimum lease payments required under the lease as of February 3, 1996
are $8,917,082.
In addition, the Company has entered into a lease for a future store
opening. The future minimum rental payments under this operating lease having an
initial noncancelable lease term in excess of one year as of February 3, 1996 is
as follows:
<TABLE>
<S> <C>
First succeeding year....................................... $ 0
Second succeeding year.................................... 875,160
Third succeeding year....................................... 875,160
Fourth succeeding year...................................... 875,160
Fifth succeeding year....................................... 875,160
Thereafter.................................................. 15,590,700
-----------
Total minimum payments required................... $19,091,340
===========
</TABLE>
7. EMPLOYEE BENEFIT PLANS
The Company has a combined profit-sharing and Section 401(k) plan which
provides death, disability, termination, and retirement benefits to its eligible
employees who are at least 21 years of age and have completed one year and 1,00
hours of service with the Company. The profit-sharing portion and the Section
401(k) portion of the plan provides for discretionary contributions by the
Company as determined by resolutions of the Board of Directors.
F-41
<PAGE> 138
PARISIAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Beginning in 1993, the Company's contribution to the profit-sharing portion
of the plan was terminated. With the Company's growth, the number of
participants in the plan had grown and the amount allocated to each participant
became diluted. Existing accounts will remain and continue to be invested.
The Company contribution to the Section 401(k) plan totaled $700,00 for the
year ended January 29, 1994. No company contribution was made to the plan for
the year ended January 28, 1995. The Company contribution to the Section 401(k)
plan totaled $600,000 for the year ended February 3, 1996.
8. STOCK OPTION PLANS
The Company's stock option plan for officers, as amended, allows for the
grant of options to purchase 405,882 shares of common stock to certain officers.
During April 1988 and March 1992, 345,000 and 20,000 options to purchase common
shares were granted, respectively. An additional 17,037 options to purchase
common shares were granted during September 1995. The exercise price for all
such options is $20.40 per share. These options were granted at an exercise
price that was equal to or above fair value as determined by a committee
consisting of the Participant Representatives under the plan. As of February 3,
1996, 324,667 of these options were outstanding; 57,370 options have been
forfeited in accordance with the provisions of the Plan. The options generally
began to vest at the rate of 20% per year from February 3, 1990. Participants
may exercise their vested options following the date such options become fully
vested. At February 3, 1996, 314,445 options are vested and became exercisable
during the month of May 1994. In the case of certain specified events, the
options would become immediately fully vested and exercisable subject to certain
regulatory requirements.
The Company's Management Incentive Plan allows for the grant of options to
purchase 101,471 shares of common stock to certain managers of the Company.
During July 1990 and March 1992, 60,250 and 5,750 options to purchase common
shares were granted, respectively, at an exercise price of $20.40 per share.
These options were granted at an exercise price that was equal to or above fair
value as determined by a committee consisting of the Participant Representatives
under the plan. The options generally began to vest at the rate of 20% per year
from February 2, 1991. Participants may exercise their vested options following
the date such options become fully vested. At February 3, 1996, 56,850 options
are vested and became exercisable during the month of May 1994. In the case of
certain specified events, the options would become immediately fully vested and
exercisable subject to certain regulatory requirements. Since the year ended
February 2, 1991 grant, 9,150 nonvested options have been forfeited in
accordance with the provisions of the Plan; consequently, as of January 28, 1995
and February 3, 1996, 57,050 and 56,850, respectively, of these options were
outstanding.
F-42
<PAGE> 139
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE INITIAL PURCHASERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO
BUY, TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD
BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Explanatory Note...................... 2
Available Information................. 3
Cautionary Notice Regarding
Forward-Looking Statements.......... 3
Prospectus Summary.................... 4
Risk Factors.......................... 13
The Exchange Offer.................... 15
Plan of Distribution.................. 26
Use of Proceeds....................... 27
Capitalization........................ 27
Selected Financial Data............... 28
Pro Forma Combined Statement of Income
(unaudited)......................... 30
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 32
Business.............................. 41
Management............................ 50
Executive Compensation................ 53
Certain Transactions.................. 56
Principal Shareholders................ 58
Description of Other Indebtedness..... 60
Receivables Securitization
Facilities.......................... 63
Description of The Notes.............. 64
Certain Federal Income Tax
Considerations...................... 91
Legal Matters......................... 94
Experts............................... 94
Index to Financial Statements......... F-1
</TABLE>
======================================================
======================================================
[LOGO] PROFFITT'S INC.
OFFER TO EXCHANGE
$125,000,000 IN AGGREGATE
PRINCIPAL AMOUNT OF
8 1/8% SENIOR NOTES
DUE 2004, SERIES B
FOR ALL $125,000,000 IN
AGGREGATE OUTSTANDING
PRINCIPAL AMOUNT OF
8 1/8% SENIOR NOTES
DUE 2004, SERIES A
-------------------------
PROSPECTUS
-------------------------
JUNE , 1997
======================================================
<PAGE> 140
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
All amounts are estimates except the SEC registration fee.*
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 37,878.79
Accounting fees and expenses................................ 60,000
Legal fees and expenses..................................... 100,000
Printing and engraving expenses............................. 35,000
Blue Sky fees and expenses.................................. 1,000
Trustee, Exchange Agent, Transfer Agent and Registrar fees
and expenses.............................................. 5,000
Miscellaneous............................................... 7,500
-----------
Total............................................. $246,378.79
===========
</TABLE>
- ---------------
* Includes amounts incurred in connection with the original issuance of the
Notes.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-Laws of the Company provide that the Company shall indemnify to the
full extent authorized or permitted by the Tennessee Business Corporation Act
any person made, or threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that such person, or such person's testate
or intestate, is or was an officer or director of the Company or serves or
served as an officer or director of any other enterprise at the request of the
Company.
Section 48-18-503 of the Tennessee Business Corporation Act provides for
"mandatory indemnification," unless limited by the charter, by a corporation
against reasonable expenses incurred by a director who is wholly successful, on
the merits or otherwise, in the defense of any proceeding to which the director
was a party by reason of the director being or having been a director of the
corporation. Section 48-18-504 of the Tennessee Business Corporation Act states
that a corporation may, in advance of the final disposition of a proceeding,
reimburse reasonable expenses incurred by a director who is a party to a
proceeding if the director furnishes the corporation with a written affirmation
of the director's good faith belief that the director has met the standard of
conduct required by Section 48-18-502 of the Tennessee Business Corporation Act,
that the director will repay the advance if it is ultimately determined that
such director did not meet the standard of conduct required by Section 48-18-502
of the Tennessee Business Corporation Act, and that those making the decision to
reimburse the director determine that the facts then known would not preclude
indemnification under the Tennessee Business Corporation Act. Section 48-18-507
of the Tennessee Business Corporation Act provides for mandatory
indemnification, unless limited by the charter, of officers pursuant to the
provisions of Section 48-18-503 of the Tennessee Business Corporation Act
applicable to mandatory indemnification of directors.
The Company's By-Laws further provide that the Company may purchase and
maintain insurance on behalf of any person who is or was or has agreed to become
a director or officer of the Company, or is or was serving at the request of the
Company as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person or on such person's behalf in any such
capacity, or arising out of such person's status as such, whether or not the
Company would have the power to indemnify such person against such liability
under the By-Laws, provided that such insurance is available on acceptable terms
as determined by a majority of the Company's Board of Directors.
II-1
<PAGE> 141
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
[Complete]
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)The following exhibits are filed as a part of this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
2.1* Agreement and Plan of Merger, dated October 22, 1995, among
Proffitt's, Inc., Baltic Merger Corporation and Younkers,
Inc.(13)
2.2* Agreement and Plan of Merger, dated as of July 8, 1996,
among Proffitt's, Inc., Casablanca Merger Corp., and
Parisian, Inc.(23)
2.3* Agreement and Plan of Merger, dated November 8, 1996, among
Proffitt's, Inc., Prairie Merger Corporation and G.R.
Herberger's, Inc.(24)
2.4 Purchase Agreement, dated May 21, 1997, by and among
Proffitt's, Inc., the Subsidiary Guarantors listed therein,
and Merrill Lunch, Pierce, Fenner & Smith Incorporated,
Goldman, Sachs & Co., and Smith Barney Inc.
3.1* Charter of the Company, as amended(1), (6), (9), (12), (21)
3.2* Amended and Restated Bylaws of the Company(12)
4.1* Form of 7.5% Junior Subordinated Debentures due 2004(6)
4.2* Form of 4.75% Convertible Subordinated Debentures due
2003(4)
4.3* Form of Supplemental Indenture to the Indenture dated July
15, 1993 between Parisian, Inc. and AmSouth Bank of Alabama,
as Trustee(27)
4.4 Indenture, dated as of May 21, 1997, between Proffitt's
Inc., the Subsidiary Guarantors named therein, and The First
National Bank of Chicago.
4.5 Registration Rights Agreement, dated as of May 21, 1997, by
and among Proffitt's, Inc., the Subsidiary Guarantors named
therein, and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Goldman, Sachs & Co., and Smith Barney Inc.
5.1 Opinion and Consent of Alston & Bird LLP.
5.2 Opinion and Consent of Sommer & Barnard.
10.1* Registration Rights Agreement by and between Proffitt's,
Inc. and Richard D. McRae dated March 31, 1994(6)
10.2* Registration Rights Agreement between Proffitt's, Inc. and
Parisian, Inc. dated July 8, 1996(26)
10.3* Registration Rights Agreement by and among Proffitt's, Inc.
and Apollo Specialty Retail Partners, Inc. dated March 3,
1994(6)
10.4* Securities Purchase Agreement between Proffitt's, Inc. and
Apollo Specialty Retail Partners, L.P. dated March 3,
1994(6)
10.5* Non-competition Agreement by and between Proffitt's, Inc.
and Richard D. McRae dated March 31, 1994(6)
10.6* Credit Facilities and Reimbursement Agreement by and among
Proffitt's, Inc., certain lenders, and NationsBank of Texas,
N.A., as agent, dated October 11, 1996(25)
10.7* Amendment No. 1 and waiver to Credit Facilities and
Reimbursement Agreement between Proffitt's, Inc. and
NationsBank of Texas, National Association, as agent, dated
January 14, 1997(29)
10.8* Transfer and Administration Agreement dated by and between
Enterprise Funding Corporation and Proffitt's Credit
Corporation dated January 15, 1997(29)
</TABLE>
II-2
<PAGE> 142
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
10.9* Amendment to Transfer and Administration Agreement by and
between Enterprise Funding Corporation and Proffitt's Credit
Corporation dated January 30, 1997(29)
10.10* Receivables Purchase Agreement between Proffitt's, Inc. and
Proffitt's Credit Corporation dated January 15, 1997(29)
10.11* Receivables Purchase Agreement between McRae's, Inc. and
Proffitt's Credit Corporation dated January 15, 1997(29)
10.12* Receivables Purchase Agreement between Parisian Services,
Inc. and Parisian, Inc. and Proffitt's Credit Corporation
dated January 15, 1997(29)
10.13* Land Deed of Trust by and among McRae's, Inc., Don B.
Cannada, and Park Real Estate Company dated April 1, 1994(6)
10.14* Secured Promissory Note for the principal amount of
$3,906,558 by McRae's, Inc. payable to Park Real Estate
Company dated April 1, 1994(6)
10.15* Assumption, Consent, and Release Agreement, entered into
between McRae's, Inc. and Deposit Guaranty National Bank
dated April 1, 1994(6)
10.16* Amended and Restated Promissory Note for the principal
amount of $2,075,000 by McRae's, Inc. payable to First
Tennessee Bank National Association (Gautier) dated April 1,
1994(6)
10.17* Assumption, Consent, and Release Agreement, entered into
between McRae's, Inc. and First Tennessee Bank National
Association dated April 1, 1994(6)
10.18* Secured Promissory Note for the principal amount of $556,851
by McRae's, Inc. payable to Arvey Real Estate Company dated
April 1, 1994 (Gautier)(6)
10.19* Land Deed of Trust by and among McRae's, Inc., Don B.
Cannada, and Arvey Real Estate Company dated April 1,
1994(6)
10.20* Assumption, Consent, and Release Agreement, entered into
between McRae's, Inc. and First Tennessee Bank National
Association dated April 1, 1994 (Gautier)(6)
10.21* Secured Promissory Note for the principal amount of
$1,487,919 by McRae's, Inc. payable to Green's Crossing Real
Estate Company dated April 1, 1994(6)
10.22* Assumption, Consent, and Release Agreement, entered into
between McRae's, Inc. and Deposit Guaranty National Bank
dated April 1, 1994(6)
10.23* Land Deed of Trust by and among McRae's, Inc., Don B.
Cannada, and Green's Crossing Real Estate Company dated
April 1, 1994(6)
10.24* Secured Promissory Note for the principal amount of
$1,779,223 by McRae's, Inc. payable to Arvey Real Estate
Company dated April 1, 1994 (Laurel)(6)
10.25* Assumption, Consent, and Release Agreement, entered into
between McRae's, Inc. and AmSouth Bank National Association
dated April 1, 1994(6)
10.26* Leasehold Deed of Trust by and among McRae's, Inc., Don B.
Cannada, and Arvey Real Estate Company dated April 1, 1994
(Laurel)(6)
10.27* Indemnification and Confirmation of Lease Agreement entered
into among McRae's, Inc., Richard D. McRae, Jr., Susan McRae
Shanor, and Vaughan McRae dated March 31, 1994 (Heritage
Building)(6)
10.28* Guaranty Agreement of McRae's, Inc. to guarantee Richard D.
McRae, Jr., Carolyn McRae, Susan McRae Shanor, and Vaughan
W. McRae giving or extending credit to Proffitt's, Inc.,
dated March 31, 1994(6)
10.29* Land Deed of Trust by and among McRae's, Inc., Don B.
Cannada, Green's Grossing Real Estate Company dated April 1,
1994(6)
</TABLE>
II-3
<PAGE> 143
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
10.30* Guaranty Agreement by Proffitt's, Inc. to AmSouth Bank
guaranteeing credit extended to McRae's, Inc.(6)
10.31* Promissory Note by McRae's, Inc. payable to Selby W. McRae
in the principal sum of $1,346,442 dated January 25, 1938(5)
10.32* Form of Rights Certificate and Rights Agreement between
Proffitt's, Inc. and Union Planters National Bank, as rights
agent, dated March 28, 1995(9)
10.33* Pooling and Servicing Agreement among Younkers Credit
Corporation, Younkers, Inc., and Union Planters National
Bank, as rights agent, dated March 28, 1995(20)
10.34* Series 1995-1 Supplement to Pooling and Servicing Agreement
among Younkers Credit Corporation, Younkers, Inc., and
Chemical Bank, as Trustee, dated June 13, 1995(20)
10.35* Amendment No. 2 to Pooling and Servicing Agreement among
Younkers Credit Corporation, Proffitt's, Inc.
(successor-by-merger to Younkers, Inc.), and The Chase
Manhattan Bank (formerly known as Chase Bank), as Trustee,
dated February 1, 1997(29)
10.36* Receivables Purchase Agreement between Younkers Credit
Corporation and Younkers, Inc. dated June 13, 1995(20)
10.37* Series 1995-2 Supplement to Pooling and Servicing Agreement
dated as of June 13, 1995 among Younkers Credit Corporation,
Younkers, Inc., and Chemical Bank, as Trustee, dated July
18, 1995(20)
10.38* ISDA Master Agreement and Schedule thereto, each dated as of
July 19, 1995, between Younkers, Inc. and NationsBank of
Texas, N.A., with Confirmation of Interest Rate Cap
Transaction dated July 19, 1995, and Assignment Agreement
dated as of July 19, 1995 between Younkers Credit
Corporation, Younkers, Inc. and Chemical Bank, as
Trustee(20)
10.39* Proffitt's, Inc. 1987 Stock Option Plan, as amended(3)
10.40* Proffitt's, Inc. Employee Stock Purchase Plan(8)
10.41* Proffitt's, Inc. 1994 Long-Term Incentive Plan(7)
10.42* Proffitt's, Inc. 401(k) Retirement Plan(28)
10.43* G.R. Herberger's, Inc. 401(k) Employee Stock Purchase Plan
and Employee Stock Ownership Plan(29)
10.44* Third Amendment and Restatement of The Parisian, Inc. Stock
Option Plan for Officers(29)
10.45* First Amendment and Restatement of The Parisian, Inc.
Management Incentive Plan(29)
10.46* Younkers, Inc. Stock and Incentive Plan(14)
10.47* Younkers, Inc. Management Stock Option Plan(14)
10.48* Younkers, Inc. 1993 Long-Term Incentive Plan(16)
10.49* Form of Younkers, Inc. Deferred Compensation Plan(17)
10.50* Form of Severance Agreement between Younkers, Inc. and its
executive officers(19)
10.51* $500,000 Loan Agreement between Proffitt's, Inc. and R. Brad
Martin dated February 1, 1989(2)
10.52* Deferred Compensation Agreement between Younkers, Inc. and
W. Thomas Gould, as amended (14)
10.53* Amendment to Deferred Compensation Agreement between
Younkers, Inc. and W. Thomas Gould, dated February 13,
1997(29)
10.54* Form of Deferred Compensation Agreement between Younkers,
Inc. and Robert M. Mosco, as amended(14)
10.55* Form of Employment Agreement by and between Proffitt's, Inc.
and Gary L. Howard dated March 28, 1995(10)
</TABLE>
II-4
<PAGE> 144
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
10.56* Form of Employment Agreement by and between Proffitt's, Inc.
and John White dated February 2, 1996(21)
10.57* Form of Employment Agreement by and between Proffitt's, Inc.
and W. Thomas Gould dated October 22, 1995(21)
10.58* Form of Amendment to Employment Agreement by and between
Proffitt's, Inc. and W. Thomas Gould dated February 13,
1997(29)
10.59* Form of Employment Agreement by and between Proffitt's, Inc.
and Robert M. Mosco dated October 28, 1996(22)
10.60* Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1994 Long-Term Incentive Plan granted to
Robert M. Mosco dated October 28, 1996(22)
10.61* Form of Employment Agreement by and between Proffitt's, Inc.
and John B. Brownson dated November 8, 1996(22)
10.62* Form of Employment Agreement by and between Proffitt's, Inc.
and Douglas E. Coltharp dated November 25, 1996(22)
10.63* Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1994 Long-Term Incentive Plan granted to
Douglas E. Coltharp dated November 25, 1996(22)
10.64* Form of Employment Agreement by and between Proffitt's, Inc.
and Donald E. Hess dated July 8, 1996(22)
10.65* Form of Second Amended and Restated Employment Agreement by
and between Proffitt's, Inc. and Brian J. Martin dated
October 11, 1996(22)
10.66* Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1994 Long-Term Incentive Plan granted to
Brian J. Martin dated October 11, 1996(22)
10.67* Form of Second Amended and Restated Employment Agreement by
and between Proffitt's, Inc. and James A. Coggin dated
October 11, 1996(22)
10.68* Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1994 Long-Term Incentive Plan granted to
James A. Coggin dated October 11, 1996(22)
10.69* Form of Second Amended and Restated Employment Agreement by
and between Proffitt's, Inc. and R. Brad Martin dated
October 11, 1996(22)
10.70* Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1994 Long-Term Incentive Plan granted to R.
Brad Martin dated October 11, 1996(22)
10.71* Form of Employment Agreement by and between Proffitt's, Inc.
and Frank E. Kulp dated March 24, 1997(29)
10.72* Form of Employment Agreement by and between Proffitt's, Inc.
and Donald E. Wright dated April 1, 1997(29)
10.73* Form of Employment Agreement by and between Proffitt's, Inc.
and William D. Cappiello dated April 3, 1997(29)
10.74* Form of Second Amended and Restated Employment Agreement by
and between Proffitt's, Inc. and David Baker dated April 1,
1997(30)
10.75* Form of Employment Agreement by and between Proffitt's, Inc.
and R. Thomas Coan dated April 28, 1997(30)
10.76* Form of Employment Agreement by and between Proffitt's, Inc.
and John Parros dated April 28, 1997(30)
10.77* Form of Third Amended and Restated Employment Agreement by
and between Proffitt's, Inc. and R. Brad Martin dated May 9,
1997(30)
</TABLE>
II-5
<PAGE> 145
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
10.78* Form of Employment Agreement by and between Proffitt's, Inc.
and Dawn H. Robertson dated May 19, 1997(30)
10.79* Form of Employment Agreement by and between Proffitt's, Inc.
and Mark Shulman dated June 16, 1997(30)
10.80* Form of Employment Agreement by and between Proffitt's, Inc.
and Toni E. Browning dated June 16, 1997(30)
10.81* Form of Employment Agreement by and between Proffitt's, Inc.
and Mark Goldstein dated June 16, 1997(30)
11.1 Statement Regarding Computation of Historical Earnings Per
Common Share
12.1* Calculation of Earnings to Fixes Charges
21.1* Subsidiaries of the Company(29)
23.1 Consent of Alston & Bird LLP (included in Exhibit 5.1)
23.2 Consent of Sommer & Barnard (included in Exhibit 5.2)
23.3 Consent of Coopers & Lybrand
23.4 Consent of Coopers & Lybrand
23.5 Consent of Deloitte & Touche
24.1 Powers of Attorney (contained on pages II-9 to II-15)
25.1 Forms T-1 -- Statements of Eligibility of Trustee
27.1 Financial Data Schedule (for SEC use only)
99.1 Form of Letter of Transmittal
</TABLE>
- ---------------
* Previously filed and incorporated as follows:
(1) Incorporated by reference from the Exhibits to the Form S-1 Registration
Statement No. 33-13548 of Proffitt's, Inc. dated June 3, 1987.
(2) Incorporated by reference from the Exhibits to the Form 10-K of Proffitt's,
Inc. for the fiscal year ended January 28, 1989.
(3) Incorporated by reference from the Exhibits to the Form S-8 Registration
Statement No. 33-46306 of Proffitt's, Inc. dated March 10, 1992.
(4) Incorporated by reference from the Exhibits to the Form S-3 Registration
Statement No. 33-70000 of Proffitt's, Inc. dated October 19, 1993.
(5) Incorporated by reference from the Exhibits to the Form 10-K of Proffitt's,
Inc. for the fiscal year ended January 29, 1994.
(6) Incorporated by reference from the Exhibits to the Form 8-K of Proffitt's,
Inc. dated April 14, 1994.
(7) Incorporated by reference from the Exhibits to the Form S-8 Registration
Statement No. 33-80602 of Proffitt's, Inc. dated June 23, 1994.
(8) Incorporated by reference from the Exhibits to the Form S-8 Registration
Statement No. 33-88390 of Proffitt's, Inc. dated January 11, 1995.
(9) Incorporated by reference from the Exhibits to the Form 8-K of Proffitt's,
Inc. dated April 3, 1995.
(10) Incorporated by reference from the Exhibits to the Form 10-K of Proffitt's,
Inc. for the fiscal year ended January 28, 1995.
(11) Not applicable.
(12) Incorporated by reference from the Exhibits to the Form 10-Q of Proffitt's,
Inc. for the quarter ended July 29, 1995.
(13) Incorporated by reference from the Exhibits to the Form S-4 Registration
Statement No. 333-00029 of Proffitt's, Inc. dated January 3, 1996.
(14) Incorporated by reference from the Exhibits to the Form S-1 Registration
Statement No. 33-45771 of Younkers, Inc.
II-6
<PAGE> 146
(15) Not applicable.
(16) Incorporated by reference from the Exhibits to the Form S-8 Registration
Statement No. 33-59224 of Younkers, Inc.
(17) Incorporated by reference from the Exhibits to the Form 10-Q of Younkers,
Inc. for the quarter ended May 1, 1993.
(18) Incorporated by reference from the Exhibits to the Form 10-Q of Younkers,
Inc. for the quarter ended July 31, 1993.
(19) Incorporated by reference from Exhibit 4 of Younkers, Inc.
Solicitation/Recommendation Statement of Schedule 14D-9 dated January 9,
1995.
(20) Incorporated by reference from the Exhibits to the Form 10-Q of Younkers,
Inc. for the quarter ended July 29, 1995.
(21) Incorporated by reference from the Exhibits to the Form 10-K of Proffitt's,
Inc. for the fiscal year ended February 3, 1996.
(22) Incorporated by reference from the Exhibits to the Form 10-Q of Proffitt's,
Inc. for the quarter ended November 2, 1997.
(23) Incorporated by reference from the Exhibits to the Form 8-K of Proffitt's,
Inc. dated July 18, 1996.
(24) Incorporated by reference from the Exhibits to the Form 8-K of Proffitt's,
Inc. dated November 22, 1996.
(25) Incorporated by reference from the Exhibits to Amendment No. 1 to Form
8-K/A of Proffitt's, Inc. dated December 16, 1996.
(26) Incorporated by reference from the Exhibits to the Form S-4 Registration
Statement No. 333-09043 of Proffitt's, Inc. dated August 16, 1996.
(27) Incorporated by reference from the Exhibits to the Form S-3 Registration
Statement No. 333-09941 of Proffitt's, Inc. dated August 9, 1996.
(28) Incorporated by reference from the Exhibits to the Form S-8 Registration
Statement No. 333-25213 of Proffitt's, Inc. dated April 15, 1997.
(29) Incorporated by reference from the Exhibits to the Form 10-K of Proffitt's,
Inc. dated April 29, 1997.
(30) Incorporated by reference from the Exhibits to the Form 10-Q of Proffitt's,
Inc. for the quarter ended May 3, 1997.
ITEM 17. UNDERTAKINGS.
Each of the undersigned registrants hereby undertakes:
1. To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
II-7
<PAGE> 147
Commission by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
4. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
payment by the registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person of the registrant in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
II-8
<PAGE> 148
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jackson, State of
Mississippi, on June 4, 1997.
PROFFITT'S, INC.
By: /s/ R. BRAD MARTIN
-----------------------------------
R. Brad Martin
Chairman of the Board and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Brian J. Martin and Douglas E. Coltharp, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, including any
Registration Statement filed pursuant to Rule 462(b) of the Securities Act of
1933, as amended, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ R. BRAD MARTIN Chairman of the Board and Chief June 12, 1997
- ----------------------------------------------------- Executive Officer
R. Brad Martin
/s/ RONALD DE WAAL Vice Chairman of the Board June 12, 1997
- -----------------------------------------------------
Ronald de Waal
/s/ DOUGLAS E. COLTHARP Executive Vice President and June 12, 1997
- ----------------------------------------------------- Chief Financial Officer
Douglas E. Coltharp (Principal Financial Officer)
/s/ DONALD E. WRIGHT Senior Vice President of Finance June 12, 1997
- ----------------------------------------------------- and Accounting (Principal
Donald E. Wright Accounting Officer)
/s/ BERNARD E. BERNSTEIN Director June 12, 1997
- -----------------------------------------------------
Bernard E. Bernstein
Director June , 1997
- -----------------------------------------------------
Edmond D. Cicala
</TABLE>
II-9
<PAGE> 149
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ GERARD K. DONNELLY Director June 12, 1997
- -----------------------------------------------------
Gerard K. Donnelly
/s/ DONALD F. DUNN Director June 12, 1997
- -----------------------------------------------------
Donald F. Dunn
/s/ THOMAS GOULD Director June 12, 1997
- -----------------------------------------------------
Thomas Gould
/s/ MICHAEL S. GROSS Director June 12, 1997
- -----------------------------------------------------
Michael S. Gross
/s/ DONALD E. HESS Director June 12, 1997
- -----------------------------------------------------
Donald E. Hess
/s/ G. DAVID HURD Director June 12, 1997
- -----------------------------------------------------
G. David Hurd
/s/ RICHARD D. MCRAE Director June 12, 1997
- -----------------------------------------------------
Richard D. McRae
/s/ C. WARREN NEEL Director June 12, 1997
- -----------------------------------------------------
C. Warren Neel
/s/ HARWELL W. PROFFITT Director June 12, 1997
- -----------------------------------------------------
Harwell W. Proffitt
/s/ MARGUERITE W. SALLEE Director June 12, 1997
- -----------------------------------------------------
Marguerite W. Sallee
/s/ GERALD TSAI, JR. Director June 12, 1997
- -----------------------------------------------------
Gerald Tsai, Jr.
</TABLE>
II-10
<PAGE> 150
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of St. Cloud, State of
Minnesota, on June 12, 1997.
G.R. HERBERGER'S, INC.
By: /s/ FRANK KULP
------------------------------------
Frank Kulp
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Brian J. Martin and Douglas E. Coltharp, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, including any
Registration Statement filed pursuant to Rule 462(b) of the Securities Act of
1933, as amended, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement to be signed by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ FRANK KULP President June 12, 1997
- ----------------------------------------------------- (Principal Executive Officer)
Frank Kulp
/s/ DOUGLAS E. COLTHARP Executive Vice President and June 12, 1997
- ----------------------------------------------------- Chief Financial Officer
Douglas E. Coltharp (Principal Financial Officer)
/s/ DONALD E. WRIGHT Senior Vice President (Principal June 12, 1997
- ----------------------------------------------------- Accounting Officer)
Donald E. Wright
/s/ BRIAN J. MARTIN Director June 12, 1997
- -----------------------------------------------------
Brian J. Martin
/s/ R. BRAD MARTIN Director June 12, 1997
- -----------------------------------------------------
R. Brad Martin
/s/ JAMES A. COGGIN Director June 12, 1997
- -----------------------------------------------------
James A. Coggin
</TABLE>
II-11
<PAGE> 151
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jackson, State of
Mississippi, on June 12, 1997.
MCRAE'S, INC.
By: /s/ DAWN ROBERTSON
-----------------------------------
Dawn Robertson
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Brian J. Martin and Douglas E. Coltharp, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, including any
Registration Statement filed pursuant to Rule 462(b) of the Securities Act of
1933, as amended, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement to be signed by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DAWN ROBINSON President (Principal Executive June 12, 1997
- ----------------------------------------------------- Officer)
Dawn Robinson
/s/ DOUGLAS E. COLTHARP Executive Vice President and June 12, 1997
- ----------------------------------------------------- Chief Financial Officer
Douglas E. Coltharp (Principal Financial Officer)
/s/ DONALD E. WRIGHT Senior Vice President (Principal June 12, 1997
- ----------------------------------------------------- Accounting Officer)
Donald E. Wright
/s/ BRIAN J. MARTIN Director June 12, 1997
- -----------------------------------------------------
Brian J. Martin
/s/ R. BRAD MARTIN Director June 12, 1997
- -----------------------------------------------------
R. Brad Martin
/s/ JAMES A. COGGIN Director June 12, 1997
- -----------------------------------------------------
James A. Coggin
</TABLE>
II-12
<PAGE> 152
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jackson, State of
Mississippi, on June 12, 1997.
MCRAE'S, INC., as Managing General
Partner of
MCRAE's STORES PARTNERSHIP
By: /s/ DOUGLAS E. COLTHARP
-----------------------------------
Douglas E. Coltharp
Executive Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the entity for which a signature
appears below constitutes and appoints Brian J. Martin and Douglas E. Coltharp,
and each of them, its true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for it and in its name, place and
stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto and other documents in connection therewith, including
any Registration Statement filed pursuant to Rule 462(b) of the Securities Act
of 1933, as amended, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as it might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or its substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement to be signed by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
NAME DATE
---- ----
<S> <C> <C>
MCRAE'S, INC., as Managing General Partner June 12, 1997
By: /s/ DOUGLAS E. COLTHARP
-------------------------------------------------
Name: Douglas E. Coltharp
Title: Executive Vice President
</TABLE>
II-13
<PAGE> 153
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Jackson, State of
Mississippi, on June 12, 1997.
MCRAE'S OF ALABAMA, INC.
By: /s/ JAMES A. COGGIN
-----------------------------------
James A. Coggin
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Brian J. Martin and Douglas E. Coltharp, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, including any
Registration Statement filed pursuant to Rule 462(b) of the Securities Act of
1933, as amended, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement to be signed by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ JAMES A. COGGIN President and Director (Principal June 12, 1997
- ----------------------------------------------------- Executive Officer)
James A. Coggin
/s/ DOUGLAS E. COLTHARP Executive Vice President and June 12, 1997
- ----------------------------------------------------- Chief Financial Officer
Douglas E. Coltharp (Principal Financial Officer)
/s/ DONALD E. WRIGHT Senior Vice President (Principal June 12, 1997
- ----------------------------------------------------- Accounting Officer)
Donald E. Wright
/s/ BRIAN J. MARTIN Director June 12, 1997
- -----------------------------------------------------
Brian J. Martin
/s/ R. BRAD MARTIN Director June 12, 1997
- -----------------------------------------------------
R. Brad Martin
</TABLE>
II-14
<PAGE> 154
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Birmingham, State of
Georgia, on June 12, 1997.
PARISIAN, INC.
By: /s/ WILLIAM CAPPIELLO
------------------------------------
William Cappiello
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Brian J. Martin and Douglas E. Coltharp, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, including any
Registration Statement filed pursuant to Rule 462(b) of the Securities Act of
1933, as amended, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement to be signed by the following persons in the capacities
and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ WILLIAM CAPPIELLO President (Principal Executive June 12, 1997
- ----------------------------------------------------- Officer)
William Cappiello
/s/ DOUGLAS E. COLTHARP Executive Vice President and June 12, 1997
- ----------------------------------------------------- Chief Financial Officer
Douglas E. Coltharp (Principal Financial Officer)
/s/ DONALD E. WRIGHT Senior Vice President (Principal June 12, 1997
- ----------------------------------------------------- Accounting Officer)
Donald E. Wright
/s/ R. BRAD MARTIN Director June 12, 1997
- -----------------------------------------------------
R. Brad Martin
/s/ JAMES A. COGGIN Director June 12, 1997
- -----------------------------------------------------
James A. Coggin
/s/ DONALD HESS Director June 12, 1997
- -----------------------------------------------------
Donald Hess
</TABLE>
II-15
<PAGE> 155
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
2.1* Agreement and Plan of Merger, dated October 22, 1995, among
Proffitt's, Inc., Baltic Merger Corporation and Younkers,
Inc.(13)
2.2* Agreement and Plan of Merger, dated as of July 8, 1996,
among Proffitt's, Inc., Casablanca Merger Corp., and
Parisian, Inc.(23)
2.3* Agreement and Plan of Merger, dated November 8, 1996, among
Proffitt's, Inc., Prairie Merger Corporation and G.R.
Herberger's, Inc.(24)
2.4 Purchase Agreement, dated May 21, 1997, by and among
Proffitt's, Inc., the Subsidiary Guarantors listed therein,
and Merrill Lunch, Pierce, Fenner & Smith Incorporated,
Goldman, Sachs & Co., and Smith Barney Inc.
3.1* Charter of the Company, as amended(1), (6), (9), (12), (21)
3.2* Amended and Restated Bylaws of the Company(12)
4.1* Form of 7.5% Junior Subordinated Debentures due 2004(6)
4.2* Form of 4.75% Convertible Subordinated Debentures due
2003(4)
4.3* Form of Supplemental Indenture to the Indenture dated July
15, 1993 between Parisian, Inc. and AmSouth Bank of Alabama,
as Trustee(27)
4.4 Indenture, dated as of May 21, 1997, between Proffitt's
Inc., the Subsidiary Guarantors named therein, and The First
National Bank of Chicago
4.5 Registration Rights Agreement, dated as of May 21, 1997, by
and among Proffitt's, Inc., the Subsidiary Guarantors named
therein, and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Goldman, Sachs & Co., and Smith Barney Inc.
5.1 Opinion and Consent of Alston & Bird LLP
5.2 Opinion and Consent of Sommer & Barnard
10.1* Registration Rights Agreement by and between Proffitt's,
Inc. and Richard D. McRae dated March 31, 1994(6)
10.2* Registration Rights Agreement between Proffitt's, Inc. and
Parisian, Inc. dated July 8, 1996(26)
10.3* Registration Rights Agreement by and among Proffitt's, Inc.
and Apollo Specialty Retail Partners, Inc. dated March 3,
1994(6)
10.4* Securities Purchase Agreement between Proffitt's, Inc. and
Apollo Specialty Retail Partners, L.P. dated March 3,
1994(6)
10.5* Non-competition Agreement by and between Proffitt's, Inc.
and Richard D. McRae dated March 31, 1994(6)
10.6* Credit Facilities and Reimbursement Agreement by and among
Proffitt's, Inc., certain lenders, and NationsBank of Texas,
N.A., as agent, dated October 11, 1996(25)
10.7* Amendment No. 1 and waiver to Credit Facilities and
Reimbursement Agreement between Proffitt's, Inc. and
NationsBank of Texas, National Association, as agent, dated
January 14, 1997(29)
10.8* Transfer and Administration Agreement dated by and between
Enterprise Funding Corporation and Proffitt's Credit
Corporation dated January 15, 1997(29)
10.9* Amendment to Transfer and Administration Agreement by and
between Enterprise Funding Corporation and Proffitt's Credit
Corporation dated January 30, 1997(29)
10.10* Receivables Purchase Agreement between Proffitt's, Inc. and
Proffitt's Credit Corporation dated January 15, 1997(29)
</TABLE>
<PAGE> 156
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
10.11* Receivables Purchase Agreement between McRae's, Inc. and
Proffitt's Credit Corporation dated January 15, 1997(29)
10.12* Receivables Purchase Agreement between Parisian Services,
Inc. and Parisian, Inc. and Proffitt's Credit Corporation
dated January 15, 1997(29)
10.13* Land Deed of Trust by and among McRae's, Inc., Don B.
Cannada, and Park Real Estate Company dated April 1, 1994(6)
10.14* Secured Promissory Note for the principal amount of
$3,906,558 by McRae's, Inc. payable to Park Real Estate
Company dated April 1, 1994(6)
10.15* Assumption, Consent, and Release Agreement, entered into
between McRae's, Inc. and Deposit Guaranty National Bank
dated April 1, 1994(6)
10.16* Amended and Restated Promissory Note for the principal
amount of $2,075,000 by McRae's, Inc. payable to First
Tennessee Bank National Association (Gautier) dated April 1,
1994(6)
10.17* Assumption, Consent, and Release Agreement, entered into
between McRae's, Inc. and First Tennessee Bank National
Association dated April 1, 1994(6)
10.18* Secured Promissory Note for the principal amount of $556,851
by McRae's, Inc. payable to Arvey Real Estate Company dated
April 1, 1994 (Gautier)(6)
10.19* Land Deed of Trust by and among McRae's, Inc., Don B.
Cannada, and Arvey Real Estate Company dated April 1,
1994(6)
10.20* Assumption, Consent, and Release Agreement, entered into
between McRae's, Inc. and First Tennessee Bank National
Association dated April 1, 1994 (Gautier)(6)
10.21* Secured Promissory Note for the principal amount of
$1,487,919 by McRae's, Inc. payable to Green's Crossing Real
Estate Company dated April 1, 1994(6)
10.22* Assumption, Consent, and Release Agreement, entered into
between McRae's, Inc. and Deposit Guaranty National Bank
dated April 1, 1994(6)
10.23* Land Deed of Trust by and among McRae's, Inc., Don B.
Cannada, and Green's Crossing Real Estate Company dated
April 1, 1994(6)
10.24* Secured Promissory Note for the principal amount of
$1,779,223 by McRae's, Inc. payable to Arvey Real Estate
Company dated April 1, 1994 (Laurel)(6)
10.25* Assumption, Consent, and Release Agreement, entered into
between McRae's, Inc. and AmSouth Bank National Association
dated April 1, 1994(6)
10.26* Leasehold Deed of Trust by and among McRae's, Inc., Don B.
Cannada, and Arvey Real Estate Company dated April 1, 1994
(Laurel)(6)
10.27* Indemnification and Confirmation of Lease Agreement entered
into among McRae's, Inc., Richard D. McRae, Jr., Susan McRae
Shanor, and Vaughan McRae dated March 31, 1994 (Heritage
Building)(6)
10.28* Guaranty Agreement of McRae's, Inc. to guarantee Richard D.
McRae, Jr., Carolyn McRae, Susan McRae Shanor, and Vaughan
W. McRae giving or extending credit to Proffitt's, Inc.,
dated March 31, 1994(6)
10.29* Land Deed of Trust by and among McRae's, Inc., Don B.
Cannada, Green's Grossing Real Estate Company dated April 1,
1994(6)
10.30* Guaranty Agreement by Proffitt's, Inc. to AmSouth Bank
guaranteeing credit extended to McRae's, Inc.(6)
10.31* Promissory Note by McRae's, Inc. payable to Selby W. McRae
in the principal sum of $1,346,442 dated January 25, 1938(5)
</TABLE>
<PAGE> 157
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
10.32* Form of Rights Certificate and Rights Agreement between
Proffitt's, Inc. and Union Planters National Bank, as rights
agent, dated March 28, 1995(9)
10.33* Pooling and Servicing Agreement among Younkers Credit
Corporation, Younkers, Inc., and Union Planters National
Bank, as rights agent, dated March 28, 1995(20)
10.34* Series 1995-1 Supplement to Pooling and Servicing Agreement
among Younkers Credit Corporation, Younkers, Inc., and
Chemical Bank, as Trustee, dated June 13, 1995(20)
10.35* Amendment No. 2 to Pooling and Servicing Agreement among
Younkers Credit Corporation, Proffitt's, Inc.
(successor-by-merger to Younkers, Inc.), and The Chase
Manhattan Bank (formerly known as Chase Bank), as Trustee,
dated February 1, 1997(29)
10.36* Receivables Purchase Agreement between Younkers Credit
Corporation and Younkers, Inc. dated June 13, 1995(20)
10.37* Series 1995-2 Supplement to Pooling and Servicing Agreement
dated as of June 13, 1995 among Younkers Credit Corporation,
Younkers, Inc., and Chemical Bank, as Trustee, dated July
18, 1995(20)
10.38* ISDA Master Agreement and Schedule thereto, each dated as of
July 19, 1995, between Younkers, Inc. and NationsBank of
Texas, N.A., with Confirmation of Interest Rate Cap
Transaction dated July 19, 1995, and Assignment Agreement
dated as of July 19, 1995 between Younkers Credit
Corporation, Younkers, Inc. and Chemical Bank, as
Trustee(20)
10.39* Proffitt's, Inc. 1987 Stock Option Plan, as amended(3)
10.40* Proffitt's, Inc. Employee Stock Purchase Plan(8)
10.41* Proffitt's, Inc. 1994 Long-Term Incentive Plan(7)
10.42* Proffitt's, Inc. 401(k) Retirement Plan(28)
10.43* G.R. Herberger's, Inc. 401(k) Employee Stock Purchase Plan
and Employee Stock Ownership Plan(29)
10.44* Third Amendment and Restatement of The Parisian, Inc. Stock
Option Plan for Officers(29)
10.45* First Amendment and Restatement of The Parisian, Inc.
Management Incentive Plan(29)
10.46* Younkers, Inc. Stock and Incentive Plan(14)
10.47* Younkers, Inc. Management Stock Option Plan(14)
10.48* Younkers, Inc. 1993 Long-Term Incentive Plan(16)
10.49* Form of Younkers, Inc. Deferred Compensation Plan(17)
10.50* Form of Severance Agreement between Younkers, Inc. and its
executive officers(19)
10.51* $500,000 Loan Agreement between Proffitt's, Inc. and R. Brad
Martin dated February 1, 1989(2)
10.52* Deferred Compensation Agreement between Younkers, Inc. and
W. Thomas Gould, as amended (14)
10.53* Amendment to Deferred Compensation Agreement between
Younkers, Inc. and W. Thomas Gould, dated February 13,
1997(29)
10.54* Form of Deferred Compensation Agreement between Younkers,
Inc. and Robert M. Mosco, as amended(14)
10.55* Form of Employment Agreement by and between Proffitt's, Inc.
and Gary L. Howard dated March 28, 1995(10)
10.56* Form of Employment Agreement by and between Proffitt's, Inc.
and John White dated February 2, 1996(21)
10.57* Form of Employment Agreement by and between Proffitt's, Inc.
and W. Thomas Gould dated October 22, 1995(21)
</TABLE>
<PAGE> 158
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
10.58* Form of Amendment to Employment Agreement by and between
Proffitt's, Inc. and W. Thomas Gould dated February 13,
1997(29)
10.59* Form of Employment Agreement by and between Proffitt's, Inc.
and Robert M. Mosco dated October 28, 1996(22)
10.60* Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1994 Long-Term Incentive Plan granted to
Robert M. Mosco dated October 28, 1996(22)
10.61* Form of Employment Agreement by and between Proffitt's, Inc.
and John B. Brownson dated November 8, 1996(22)
10.62* Form of Employment Agreement by and between Proffitt's, Inc.
and Douglas E. Coltharp dated November 25, 1996(22)
10.63* Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1994 Long-Term Incentive Plan granted to
Douglas E. Coltharp dated November 25, 1996(22)
10.64* Form of Employment Agreement by and between Proffitt's, Inc.
and Donald E. Hess dated July 8, 1996(22)
10.65* Form of Second Amended and Restated Employment Agreement by
and between Proffitt's, Inc. and Brian J. Martin dated
October 11, 1996(22)
10.66* Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1994 Long-Term Incentive Plan granted to
Brian J. Martin dated October 11, 1996(22)
10.67* Form of Second Amended and Restated Employment Agreement by
and between Proffitt's, Inc. and James A. Coggin dated
October 11, 1996(22)
10.68* Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1994 Long-Term Incentive Plan granted to
James A. Coggin dated October 11, 1996(22)
10.69* Form of Second Amended and Restated Employment Agreement by
and between Proffitt's, Inc. and R. Brad Martin dated
October 11, 1996(22)
10.70* Form of Restricted Stock Grant Agreement under the
Proffitt's, Inc. 1994 Long-Term Incentive Plan granted to R.
Brad Martin dated October 11, 1996(22)
10.71* Form of Employment Agreement by and between Proffitt's, Inc.
and Frank E. Kulp dated March 24, 1997(29)
10.72* Form of Employment Agreement by and between Proffitt's, Inc.
and Donald E. Wright dated April 1, 1997(29)
10.73* Form of Employment Agreement by and between Proffitt's, Inc.
and William D. Cappiello dated April 3, 1997(29)
10.74* Form of Second Amended and Restated Employment Agreement by
and between Proffitt's, Inc. and David Baker dated April 1,
1997(30)
10.75* Form of Employment Agreement by and between Proffitt's Inc.
and R. Thomas Coan dated April 28, 1997(30)
10.76* Form of Employment Agreement by and between Proffitt's, Inc.
and John Parros dated April 28, 1997(30)
10.77* Form of Third Amended and Restated Employment Agreement by
and between Proffitt's, Inc. and R. Brad Martin dated May 9,
1997(30)
10.78* Form of Employment Agreement by and between Proffitt's, Inc.
and Dawn H. Robertson dated May 19, 1997(30)
10.79* Form of Employment Agreement by and between Proffitt's, Inc.
and Mark Shulman dated June 16, 1997(30)
</TABLE>
<PAGE> 159
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <C> <S>
10.80* Form of Employment Agreement by and between Proffitt's, Inc.
and Toni E. Browning dated June 16, 1997(30)
10.81* Form of Employment Agreement by and between Proffitt's, Inc.
and Mark Goldstein dated June 16, 1997(30)
11.1 Statement Regarding Computation of Historical Earnings Per
Common Share
12.1* Calculation of Earnings to Fixes Charges
21.1* Subsidiaries of the Company(29)
23.1 Consent of Alston & Bird LLP (included in Exhibit 5.1)
23.2 Consent of Sommer & Barnard (included in Exhibit 5.2)
23.3 Consent of Coopers & Lybrand
23.4 Consent of Coopers & Lybrand
23.5 Consent of Deloitte & Touche
24.1 Powers of Attorney (contained on pages II-9 to II-15)
25.1 Forms T-1 -- Statements of Eligibility of Trustee
27.1 Financial Data Schedule (for SEC use only)
99.1 Form of Letter of Transmittal
</TABLE>
- ---------------
* Previously filed and incorporated as follows:
(1) Incorporated by reference from the Exhibits to the Form S-1 Registration
Statement No. 33-13548 of Proffitt's, Inc. dated June 3, 1987.
(2) Incorporated by reference from the Exhibits to the Form 10-K of Proffitt's,
Inc. for the fiscal year ended January 28, 1989.
(3) Incorporated by reference from the Exhibits to the Form S-8 Registration
Statement No. 33-46306 of Proffitt's, Inc. dated March 10, 1992.
(4) Incorporated by reference from the Exhibits to the Form S-3 Registration
Statement No. 33-70000 of Proffitt's, Inc. dated October 19, 1993.
(5) Incorporated by reference from the Exhibits to the Form 10-K of Proffitt's,
Inc. for the fiscal year ended January 29, 1994.
(6) Incorporated by reference from the Exhibits to the Form 8-K of Proffitt's,
Inc. dated April 14, 1994.
(7) Incorporated by reference from the Exhibits to the Form S-8 Registration
Statement No. 33-80602 of Proffitt's, Inc. dated June 23, 1994.
(8) Incorporated by reference from the Exhibits to the Form S-8 Registration
Statement No. 33-88390 of Proffitt's, Inc. dated January 11, 1995.
(9) Incorporated by reference from the Exhibits to the Form 8-K of Proffitt's,
Inc. dated April 3, 1995.
(10) Incorporated by reference from the Exhibits to the Form 10-K of Proffitt's,
Inc. for the fiscal year ended January 28, 1995.
(11) Not applicable.
(12) Incorporated by reference from the Exhibits to the Form 10-Q of Proffitt's,
Inc. for the quarter ended July 29, 1995.
(13) Incorporated by reference from the Exhibits to the Form S-4 Registration
Statement No. 333-00029 of Proffitt's, Inc. dated January 3, 1996.
(14) Incorporated by reference from the Exhibits to the Form S-1 Registration
Statement No. 33-45771 of Younkers, Inc.
(15) Not applicable.
(16) Incorporated by reference from the Exhibits to the Form S-8 Registration
Statement No. 33-59224 of Younkers, Inc.
(17) Incorporated by reference from the Exhibits to the Form 10-Q of Younkers,
Inc. for the quarter ended May 1, 1993.
(18) Incorporated by reference from the Exhibits to the Form 10-Q of Younkers,
Inc. for the quarter ended July 31, 1993.
<PAGE> 160
(19) Incorporated by reference from Exhibit 4 of Younkers, Inc.
Solicitation/Recommendation Statement of Schedule 14D-9 dated January 9,
1995.
(20) Incorporated by reference from the Exhibits to the Form 10-Q of Younkers,
Inc. for the quarter ended July 29, 1995.
(21) Incorporated by reference from the Exhibits to the Form 10-K of Proffitt's,
Inc. for the fiscal year ended February 3, 1996.
(22) Incorporated by reference from the Exhibits to the Form 10-Q of Proffitt's,
Inc. for the quarter ended November 2, 1997.
(23) Incorporated by reference from the Exhibits to the Form 8-K of Proffitt's,
Inc. dated July 18, 1996.
(24) Incorporated by reference from the Exhibits to the Form 8-K of Proffitt's,
Inc. dated November 22, 1996.
(25) Incorporated by reference from the Exhibits to Amendment No. 1 to Form
8-K/A of Proffitt's, Inc. dated December 16, 1996.
(26) Incorporated by reference from the Exhibits to the Form S-4 Registration
Statement No. 333-09043 of Proffitt's, Inc. dated August 16, 1996.
(27) Incorporated by reference from the Exhibits to the Form S-3 Registration
Statement No. 333-09941 of Proffitt's, Inc. dated August 9, 1996.
(28) Incorporated by reference from the Exhibits to the Form S-8 Registration
Statement No. 333-25213 of Proffitt's, Inc. dated April 15, 1997.
(29) Incorporated by reference from the Exhibits to the Form 10-K of Proffitt's,
Inc. dated April 29, 1997.
(30) Incorporated by reference from the Exhibits to the Form 10-Q of Proffitt's,
Inc. for the quarter ended May 3, 1997.
<PAGE> 1
EXHIBIT 2.4
PROFFITT'S, INC.
$125,000,000
8 1/8% Senior Notes due 2004
PURCHASE AGREEMENT
Dated as of May 15, 1997
<PAGE> 2
$125,000,000
PROFFITT'S, INC.
(a Tennessee corporation)
8 1/8% Senior Notes due 2004
PURCHASE AGREEMENT
May 15, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
GOLDMAN, SACHS & CO.
SMITH BARNEY INC.
c/o Merrill Lynch & Co.
North Tower
World Financial Center
New York, New York 10281-1305
Ladies and Gentlemen:
Proffitt's, Inc., a Tennessee corporation (the "Company") confirms its
agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), Goldman, Sachs & Co. ("Goldman") and Smith
Barney Inc. ("Smith Barney" and collectively with Merrill Lynch and Goldman,
the "Initial Purchasers", which term shall also include any initial purchaser
substituted as hereinafter provided in Section 12 hereof for whom Merrill Lynch
is acting as representative (in such capacity, the "Representative")) with
respect to the issue and sale by the Company (the "Offering") and the purchase
by the Initial Purchasers, acting severally and not jointly, of the respective
principal amounts set forth in Schedule A of $125,000,000 aggregate principal
amount of the Company's 8 1/8% Senior Notes due 2004 (the "Notes").
The Notes will be guaranteed (the "Guarantees" and, collectively with the
Notes, the "Securities"), on a senior basis by each of the Company's
subsidiaries set forth on Schedule B (the "Guarantors"). The Securities will
be issued pursuant to an indenture to be dated as of May 21, 1997 (the
"Indenture") among the Company, as issuer of the Notes, the Guarantors and The
First National Bank of Chicago, as trustee (the "Trustee"). The Company and
the Guarantors are hereinafter referred to collectively as the "Issuers" and
this agreement (this "Agreement" or the "Purchase Agreement"), the Indenture,
the Securities, the Exchange Securities (as defined below), the Private
Exchange Securities (as defined in the Registration Rights Agreement) and the
Registration Rights Agreement (as defined below) are referred to collectively
as the "Operative Documents."
<PAGE> 3
Capitalized terms used herein without definition have the respective
meanings specified in the Offering Memorandum referred to below.
The Securities will be offered and sold to the Initial Purchasers without
registration under the Securities Act of 1933, as amended (the "Act"), in
reliance upon an exemption from the registration requirements of the Act. The
Company has prepared and delivered to each Initial Purchaser copies of a
preliminary offering memorandum dated May 2, 1997 (the "Preliminary Offering
Memorandum") and has prepared and will deliver to each Initial Purchaser, on
the date hereof or the first day thereafter, copies of a final offering
memorandum dated May 15, 1997 (the "Final Offering Memorandum"), each to be
used by such Initial Purchaser in connection with its solicitation of purchases
of, or offering of, the Securities. "Offering Memorandum" means, with respect
to any date or time referred to in this Agreement, the most recent offering
memorandum (whether the Preliminary Offering Memorandum or the Final Offering
Memorandum, together with any amendment or supplement to either such document),
including exhibits thereto which have been prepared and delivered by the
Company to the Initial Purchasers in connection with their solicitation of
purchases of, or offering of, the Securities. The Company hereby confirms that
it has authorized the use of the Preliminary Offering Memorandum and the
Offering Memorandum in connection with the offer and resale of the Securities
by the Initial Purchasers as set forth in the Offering Memorandum and Section 4
hereof.
The Company understands that the Initial Purchasers propose to make an
offering of the Securities to purchasers ("Subsequent Purchasers") only on the
terms and in the manner set forth in the Offering Memorandum and Section 4
hereof, as soon as the Initial Purchasers deem advisable after this Agreement
has been executed and delivered, (i) to persons in the United States whom the
Initial Purchasers reasonably believe to be qualified institutional buyers
("Qualified Institutional Buyers") as defined in Rule 144A under the Act, as
amended ("Rule 144A"), in transactions under Rule 144A, (ii) to a limited
number of other institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Act) that the Initial Purchasers
reasonably believe to be accredited investors ("Accredited Investors") in
private sales exempt from registration under the Act or (iii) pursuant to
offers and sales to non-U.S. persons that occur outside the United States
within the meaning of Regulation S under the Act ("Regulation S"), to whom the
Initial Purchasers reasonably believe offers and sales may be made pursuant to
Rule 904 of Regulation S.
The holders of Securities (including the Initial Purchasers and subsequent
transferees) will be entitled to the benefits of a registration rights
agreement, to be dated as of May 21, 1997 (the "Registration Rights
Agreement"), between the Issuers and the Initial Purchasers. Pursuant to the
Registration Rights Agreement, the Issuers will agree to file with the
Securities and Exchange Commission (the "Commission") under the circumstances
set forth therein either (i) a registration statement under the Act registering
the Exchange Securities (as defined in the Registration Rights Agreement) to be
offered in exchange for the Securities and to use their best efforts to cause
such registration statement to be declared effective and (ii) under certain
circumstances set forth therein, to file with the Commission a shelf
registration statement pursuant to Rule 415 under the Act relating to the
resale of the Securities by holders thereof or, if applicable, relating to the
resale of Private Exchange (as defined in the Registration Rights Agreement) by
the Initial Purchasers pursuant to an exchange of the Securities for Private
-2-
<PAGE> 4
Exchange Securities, and to use their best efforts to cause such shelf
registration statement to be declared effective.
SECTION 1. Representations and Warranties. (A) The Issuers, jointly and
severally, represent and warrant to each of the Initial Purchasers as of the
date hereof and as of the Closing Time (as defined in Section 3 hereof) that:
(i) As of their respective dates, neither the Preliminary Offering
Memorandum nor the Final Offering Memorandum, as amended or supplemented,
contained or will contain, as the case may be, an untrue statement of a
material fact or omitted or will omit, as the case may be, to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided that this representation and warranty does not apply to
statements or omissions made in reliance upon and in conformity with
information described in Section 14 hereof furnished in writing by the
Initial Purchasers through the Representatives to the Company expressly
for use in the Offering Memorandum or any amendment or supplement
thereto.
(ii) When the Securities are issued and delivered pursuant to this
Agreement, such securities will not be of the same class (within the
meaning of Rule 144A) as securities of any of the Issuers which are
listed on a national securities exchange registered under Section 6 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
quoted in a U.S. automated inter-dealer quotation system. The Company
has been advised that the Securities have been designated PORTAL eligible
securities in accordance with the rules and regulations of the National
Association of Securities Dealers, Inc. (the "NASD").
(iii) None of the Issuers, nor any of their affiliates (as defined
in Rule 501(b) under the Act) has, directly or through any agent, sold,
offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as defined in the Act) which is or will be
integrated with the sale of the Securities in a manner that would
require the registration of the Securities under the Act.
(iv) None of the Issuers or any of their respective affiliates (as
such term is defined in Rule 501(b) under the Act) or any person (other
than the Initial Purchasers, as to which the Issuers make no
representation) acting at the request of the Issuers has engaged, in
connection with the offering of the Securities, (A) in any form of
general solicitation or general advertising within the meaning of Rule
502(c) under the Act, (B) in any directed selling efforts within the
meaning of Rule 902 under the Act in the United States in connection with
the Securities being offered and sold pursuant to Regulation S under the
Act, (C) in any manner involving a public offering within the meaning of
Section 4(2) of the Act or (D) in any action which would require the
registration under the Act of the offering and sale of the Securities
pursuant to this Agreement or which would violate applicable state
securities or "blue sky" laws.
(v) Assuming that the representations and warranties of the Initial
Purchasers contained in Section 4 are true, correct and complete, and
assuming compliance by the
-3-
<PAGE> 5
Initial Purchasers with their covenants in Section 4, and assuming that
the representations and warranties contained in each Transferee Letter of
Representations (each, a "Transferee Letter") (substantially in the form
of Appendix A to the Offering Memorandum) have been completed by
Accredited Investors purchasing Securities, are true and correct as of
the date hereof and the Closing Time, and assuming compliance by such
Accredited Investors, as the case may be, with the agreements in the
Transferee Letters, it is not necessary in connection with the offer,
sale and delivery of the Securities to the Initial Purchasers in the
manner contemplated by, or in connection with the initial resale of such
Securities by the Initial Purchasers in accordance with, this Agreement
to register the Securities under the Act or to qualify the Indenture in
respect of the Securities under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
(vi) The only subsidiaries of the Company as of the date hereof are
those listed on Schedule C hereto (also referred to herein as the
"Subsidiaries"). Each of the Company and the Subsidiaries has been duly
organized or incorporated, as the case may be, and is validly existing in
good standing under the laws of its jurisdiction of incorporation or
organization, with all requisite power and authority (corporate,
partnership or otherwise) under such laws, and all necessary
authorizations, approvals, orders, licenses, certificates and permits of
and from regulatory or governmental officials, bodies and tribunals, (a)
to own, lease and operate their respective properties and to conduct
their respective businesses as now conducted and as described in the
Offering Memorandum and (b) to enter into, deliver, incur and perform
their respective obligations under the Operative Documents, except, in
the case of the foregoing subclause (a) for authorizations, approvals,
orders, leases, certificates and permits, the failure of which to possess
could not reasonably be expected to have a Material Adverse Effect (as
defined below); and are all duly qualified to do business as foreign
corporations in good standing in all other jurisdictions where the
ownership or leasing of their respective properties or the conduct of
their respective businesses requires such qualification, except where the
failure to be so qualified could not reasonably be expected to have a
Material Adverse Effect (as defined below). As used herein, "Material
Adverse Effect" shall mean a material adverse effect on the business,
condition (financial or otherwise), results of operations, business
affairs or business prospects of the Company and the Subsidiaries taken
as a whole.
(vii) The Notes, the Exchange Securities and the Private Exchange
Securities have been duly authorized by the Company and the Company has
all requisite corporate power and authority to execute, issue and deliver
the Notes, the Exchange Securities and the Private Exchange Securities
and to incur and perform its respective obligations provided for therein;
the Guarantees have been duly authorized by each of the Guarantors and
each of the Guarantors has all requisite corporate power and authority to
execute, issue and deliver the Guarantees and to incur and perform their
respective obligations provided for therein.
(viii) The Notes, when executed, authenticated and issued in
accordance with the terms of the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the Trustee)
and when delivered against payment of the purchase price therefor as
provided in this Agreement, will constitute valid and binding obligations
of the
-4-
<PAGE> 6
Company, entitled to the benefits of the Indenture and enforceable
against the Company in accordance with the terms thereof; and the
Guarantees, upon endorsement on the Notes by the Guarantors and upon
execution of the Notes by the Company and authentication thereof by the
Trustee (assuming the due authorization, execution and delivery of the
Indenture by the Trustee), issued thereof in accordance with the
Indenture and payment therefor in accordance with the terms of this
Agreement, will constitute valid and binding obligations of each of the
Guarantors, enforceable against the Guarantors in accordance with the
terms thereof; and the Exchange Securities and the Private Exchange
Securities, if any, when executed, authenticated, issued and delivered by
the Issuers in exchange for the Securities in accordance with the terms
of the Registration Rights Agreement, will constitute valid and binding
obligations of each of the Issuers, entitled to the benefits of the
Indenture and enforceable against each of the Issuers in accordance with
the terms thereof to the extent each is a party; subject, in the case of
each of the foregoing, to (a) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally, (b) general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law) and
(c) the discretion of the court before which any proceeding therefor may
be brought (clauses (a), (b) and (c) being referred to herein as the
"Enforceability Limitations").
(ix) This Agreement has been duly authorized, executed and delivered
by each of the Issuers.
(x) The Registration Rights Agreement has been duly authorized by
the Issuers and, when duly executed and delivered by the Issuers
(assuming the due execution and delivery thereof by the Initial
Purchasers), will constitute a valid and binding obligation of each of
the Issuers, enforceable against each of the Issuers in accordance with
the terms thereof, except as such enforceability may be limited by (a)
the Enforceability Limitations and (b) as to rights of indemnification
and contribution, by principles of public policy or federal or state
securities laws relating thereto.
(xi) The Indenture has been duly authorized by the Issuers and, when
duly executed and delivered by the Issuers (assuming the due execution
and delivery thereof by the Trustee), will constitute a valid and binding
obligation of each of the Issuers, enforceable against each of the
Issuers in accordance with the terms thereof, except as such
enforceability may be limited by the Enforceability Limitations.
(xii) No consent, waiver, authorization, approval, license,
qualification or order of, or filing or registration with, any court or
governmental or regulatory agency or body, domestic or foreign, is
required for the issuance and sale of the Securities, the Exchange
Securities, if any, or the issuance of the Guarantees by the Guarantors,
the performance by the Issuers of their obligations under the Operative
Documents, or for the consummation of any of the transactions
contemplated hereby or thereby, including, without limitation, the
issuance and sale of the Securities hereunder, except, such as may be
required (A) in connection with the registration under the Act of the
Exchange Securities or the Private Exchange Securities, if any, pursuant
to the Registration Rights Agreement (including any filings, if any, with
the NASD), (B) in connection with the registration under the Act of
-5-
<PAGE> 7
the Exchange Securities or the Private Exchange Securities pursuant to
the Registration Rights Agreement, the qualification of the Indenture
under the Trust Indenture Act or (C) by state securities or "blue sky"
laws in connection with the offer and sale of the Securities or the
registration thereof or of the Private Exchange Securities or the
Exchange Securities pursuant to the Registration Rights Agreement.
(xiii) The issuance, sale and delivery of the Securities, the
Exchange Securities and the Private Exchange Securities, if any, by the
Issuers, and the execution, delivery and performance by the Issuers of
this Agreement, the Registration Rights Agreement and the Indenture, the
consummation by the Issuers of the transactions contemplated hereby, and
in the Offering Memorandum and the compliance by the Issuers with the
terms of the foregoing agreements and instruments do not, and, at the
Closing Time will not, conflict with or constitute or result in a breach
or violation by the Company or any of the Subsidiaries of (A) any of the
terms or provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) by any of
the Company or the Subsidiaries or give rise to any right to accelerate
the maturity or require the prepayment of any indebtedness under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or the Subsidiaries under any
contract, indenture, mortgage, deed of trust, loan agreement, note,
lease, license, franchise agreement, authorization, permit, certificate
or other agreement or document to which any of the Issuers or the
Subsidiaries is a party or by which any of them may be bound, or to which
any of them or any of their respective assets or businesses is subject
which is material to the Company and its Subsidiaries, taken as a whole
(collectively, "Contracts"), (B) the articles or by-laws (or other
similar organizational document, as the case may be (each, an
"Organizational Document"), of each of the Company and the Subsidiaries
or (C) any law, statute, rule or regulation, or any judgment, decree or
order, in any such case, of any domestic or foreign court or governmental
or regulatory agency or other body having jurisdiction over the Company
or any of the Subsidiaries or any of their respective properties or
assets.
(xiv) The Securities, the Exchange Securities, the Registration
Rights Agreement and the Indenture will each conform in all material
respects to the descriptions thereof in the Offering Memorandum.
(xv) The audited consolidated financial statements included in the
Offering Memorandum, including the notes thereto, present fairly, in all
material respects, the financial position of the Company and its
consolidated subsidiaries at the dates indicated and the statements of
operations, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries for the periods have been prepared in
conformity with United States generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved.
The selected financial data and the summary financial information
included in the Offering Memorandum present fairly, in all material
respects, the information shown therein and have been prepared on a basis
consistent with that of the financial statements included in the Offering
Memorandum. Coopers & Lybrand, L.L.P. and Deloitte & Touche LLP, which
have audited certain of such financial statements as set forth in their
reports included in the Offering Memorandum, are
-6-
<PAGE> 8
independent public accounting firms with respect to the Company and its
Subsidiaries within the meaning of Regulation S-X under the Act. The pro
forma financial information relating to the Company and its subsidiaries
and the related notes thereto included in the Offering Memorandum present
fairly in all material respects the information shown therein, have been
prepared in all material respects in accordance with the Commission's
rules and guidelines with respect to pro forma financial adjustments
(except with respect to "Other Financial Data" included in the Offering
Memorandum Summary) and have been properly computed on the bases
described therein, and the assumptions used in the preparation thereof
are reasonable and the adjustments used therein are appropriate to give
effect to the transactions and circumstances referred to therein.
(xvi) Since the respective dates as of which information is given
in the Offering Memorandum, except as otherwise specifically stated
therein, there has been no (A) material adverse change in the business,
condition (financial or otherwise), results of operations, business
affairs or business prospects of the Company and the Subsidiaries taken
as a whole, whether or not arising in the ordinary course of business (a
"Material Adverse Change"), (B) transaction entered into by the Company
or any of the Subsidiaries, other than in the ordinary course of
business, that is material to the Company and the Subsidiaries, taken as
a whole or (C) dividend or distribution of any kind declared, paid or
made by the Company on its capital stock.
(xvii) As of February 1, 1997, the Company had the authorized,
issued and outstanding capitalization set forth in the Offering
Memorandum under the subheading "Actual" under the caption
"Capitalization"; all of the outstanding capital stock of the Company has
been duly authorized and validly issued, is fully paid and nonassessable
and was not issued in violation of any preemptive or similar rights
(whether provided contractually or pursuant to any Organizational
Document). None of the Issuers owns, directly or indirectly, any
material amount of shares, or any other material amount of equity or
long-term debt securities or have any material equity interest in any
firm, partnership, joint venture or other entity other than the
Subsidiaries. No holder of any securities of the Company is entitled to
have such securities (other than the Securities, the Exchange Securities
and the Private Exchange Securities, if any) registered under any
registration statement contemplated by the Registration Rights Agreement.
All of the outstanding capital stock of each of the Subsidiaries has
been duly authorized and, to the knowledge of the Issuers, validly
issued, is fully paid and nonassessable and was not issued in violation
of any preemptive or similar rights (whether provided contractually or
pursuant to any Organizational Document).
(xviii) Neither of the Company nor any of the Subsidiaries is (A) in
violation of its respective Organizational Documents, (B) in default (or,
with notice or lapse of time or both, would be in default) in the
performance or observance of any obligation, agreement, covenant or
condition contained in any Contract, or (C) in violation of any law,
statute, judgment, decree, order, rule or regulation of any domestic or
foreign court with jurisdiction over the Company or the Subsidiaries or
any of their respective assets or properties, or other governmental or
regulatory authority, agency or other body, other than, in the case of
clause (B) or (C), such defaults or violations which, individually or in
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<PAGE> 9
the aggregate, could not reasonably be expected to have or result in a
Material Adverse Effect; and any real property and buildings held under
lease by the Company or the Subsidiaries which are material (individually
or in the aggregate) to the Company and the Subsidiaries, on a
consolidated basis, are held by the Company or such Subsidiary, as the
case may be, under valid, subsisting and enforceable leases, except where
the invalidity or unenforceability of any such lease would not,
individually or in the aggregate, be reasonably expected to have or
result in a Material Adverse Effect.
(xix) Each of the Company and the Subsidiaries own or possess, or
can acquire on reasonable terms, adequate licenses, trademarks, service
marks, trade names, copyrights and know-how (including trade secrets and
other proprietary or confidential information, systems or procedures)
(collectively, "intellectual property") necessary to conduct the business
now or proposed to be operated by each of them as described in the
Offering Memorandum, except where the failure to own, possess or have the
ability to acquire any such intellectual property could not, individually
or in the aggregate, be reasonably expected to have a Material Adverse
Effect; and none of the Issuers has received any notice of infringement
of or conflict with (and none of them knows of any such infringement of
or conflict with) asserted rights of others with respect to any of such
intellectual property.
(xx) Each of the Company and the Subsidiaries have obtained all
material consents, approvals, orders, certificates, licenses, permits,
franchises and other authorizations of and from, and has made all
material declarations and filings with, all governmental and regulatory
authorities, all self-regulatory organizations and all courts and other
tribunals necessary to own, lease, license and use their respective
properties and assets and to conduct their respective businesses in the
manner described in the Offering Memorandum, except where the failure to
so obtain or so declare or file would not be reasonably likely to have or
result in a Material Adverse Effect.
(xxi) There is no legal action, suit, proceeding inquiry or
investigation before or by any court or governmental body or agency,
domestic or foreign, now pending or, to the best knowledge of the
Issuers, threatened against the Company or any of the Subsidiaries or
affecting the Company or the Subsidiaries or any of their respective
properties which would be required to be disclosed in a registration
statement filed under the Act which would, individually or in the
aggregate, have a Material Adverse Effect. Except as set forth in the
Offering Memorandum, none of the Company or any of the Subsidiaries has
received any notice or claim of any default (or event, condition or
omission which with notice or lapse of time or both would result in a
default) under any of its respective Contracts or has knowledge of any
breach of any of such Contracts by the other party or parties thereto in
each case which would, individually or in the aggregate, have a Material
Adverse Effect.
(xxii) Each of the Company and the Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns,
and has paid all taxes shown as due thereon; and there is no tax
deficiency that has been asserted against any of the Issuers or
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<PAGE> 10
the Subsidiaries, in each case other than as would not individually or in
the aggregate have a Material Adverse Effect.
(xxiii) Each of the Company and the Subsidiaries has (i) good and
marketable title to all real property described in the Offering
Memorandum as being owned by it, (ii) good title to all personal property
described in the Offering Memorandum as being owned by it and (iii) good
title to the leasehold estate in the real and personal property described
in the Offering Memorandum as being leased by it, in each case, free and
clear of all liens, charges, encumbrances or restrictions, except as
provided in the related lease and to the extent the failure to have such
title or the existence of such liens, charges, encumbrances or
restrictions would not be reasonably expected to result in a Material
Adverse Effect.
(xxiv) Neither the Company nor any of the Subsidiaries is an
"investment company" or a company "controlled by" an "investment company"
as such terms are defined in the Investment Company Act of 1940, as
amended, and the rules and regulations thereunder.
(xxv) Neither the Company nor any of the Subsidiaries nor any of
their respective directors, officers or controlling persons has taken,
directly or indirectly, any action designed, or which might reasonably be
expected to cause or result, under the Exchange Act, in, or which has
constituted, stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of the Securities, the
Exchange Securities or the Private Exchange Securities.
(xxvi) No strike, labor problem, dispute, slowdown, work stoppage
or disturbance with the employees of the Company or any of the
Subsidiaries exists or, to the knowledge of the Issuers, is threatened
which, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect.
(xxvii) The Company has insurance in such amounts and covering such
risks and liabilities as are in accordance, in all material respects,
with normal industry practice.
(xxviii) Other than as disclosed in the Offering Memorandum, none of
the Company nor any Subsidiary has any profit sharing, deferred
compensation, stock option, stock purchase, phantom stock or similar
plans, including agreements evidencing rights to purchase securities or
to share in the profits of the Company or any Subsidiary which is
material to the Company and its Subsidiaries, taken as a whole.
(xxix) The statistical and market-related data included in the
Offering Memorandum are based on or derived from sources which the
Company believes to be reliable and accurate in all material respects or
represent the Company's good faith estimates that are made on the basis
of data derived from such sources.
(xxx) The Issuers are, and immediately after the Closing Time will
be, Solvent. As used herein, the term "Solvent" means, with respect to
the Issuers on a particular date, that (after giving effect, in the case
of each of the Guarantors, to the limitations contained
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<PAGE> 11
in such Guarantor's Guarantee) on such date (A) the fair market value of
the assets of each of the Issuers exceeds its respective liabilities
(including, without limitation, stated liabilities and identified
contingent liabilities), (B) the present fair salable value of the assets
of each of the Issuers will exceed its respective probable liabilities on
its debts (including, without limitation, stated liabilities and
identified contingent liabilities), (C) the fair market value of each of
the Issuers' total assets exceeds its total liabilities, including
identified contingent liabilities, by an amount at least equal to the
total par value of its common stock, both immediately prior to and after
the Offering, (D) each of the Issuers is and will be able to pay its
debts (including, without limitation, stated liabilities and identified
contingent liabilities) as such debts mature and (E) each of the Issuers
will not have unreasonably small capital with which to conduct its
present and anticipated business.
(xxxi) Except as described in the Offering Memorandum or as would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect (A) each of the Company and the Subsidiaries is
in compliance with and not subject to any known liability under
applicable Environmental Laws (as defined below), (B) each of the Company
and the Subsidiaries has made all filings and provided all notices
required under any applicable Environmental Law, and has, and is in
compliance with, all permits required under any applicable Environmental
Laws and each of them is in full force and effect, (C) (x) there is no
pending civil, criminal or administrative action, or pending hearing or
suit, (y) neither the Company nor any other Issuer has received any
demand, claim, or notice of violation and (z) to the knowledge of the
Issuers, there is no investigation, proceeding, notice or demand letter
or request for information threatened against the Company or any of the
Subsidiaries in the case of (x), (y) and (z), under any Environmental
Law, (D) no lien, charge, encumbrance or restriction has been recorded
under any Environmental Law with respect to any assets, facility or
property owned, operated, leased or controlled by the Company or any
Subsidiary, (E) neither the Company nor any Subsidiary has received
notice that it has been identified as a potentially responsible party
under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), or any comparable state
law, (F) no property or facility of the Company or any Subsidiary is (i)
listed or, to the knowledge of the Issuers proposed for listing on the
National Priorities List under CERCLA or is (ii) listed in the
Comprehensive Environmental Response, Compensation, Liability Information
System List promulgated pursuant to CERCLA, or on any comparable list
maintained by any state or local governmental authority.
For purposes of this Agreement, "Environmental Laws" means all
applicable federal, provincial, state and local laws or regulations,
codes, orders, decrees, judgments or injunctions issued, promulgated,
approved or entered thereunder, relating to pollution or protection of
public or employee health and safety or the environment, including,
without limitation, laws relating to (i) emissions, discharges, releases
or threatened releases of Hazardous Materials (as defined below) into the
environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), (ii) the manufacture,
processing, distribution, use, generation, treatment, storage, disposal,
transport or handling of Hazardous Materials, and (iii) underground and
above ground storage tanks and related piping, and emissions, discharges,
releases or threatened
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<PAGE> 12
releases therefrom. The term "Hazardous Material" means (a) any
"hazardous substance" as defined in the Comprehensive Environmental
Response, the Resource Conservation and Recovery Act, as amended, (b) any
"hazardous waste" as defined by the Resource Conservation and Recovery
Act, as amended, (c) any petroleum or petroleum product, (d) any
polychlorinated biphenyl and (e) any pollutant or contaminant or
hazardous, dangerous or toxic chemical, material, waste or substance.
(xxxii) Except as described in the Offering Memorandum, neither the
Company nor any of the Subsidiaries has incurred any liability for any
prohibited transaction or funding deficiency or any complete or partial
withdrawal liability with respect to any pension, profit sharing or other
plan which is subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), to which the Company or the Subsidiaries
makes or ever has made a contribution and in which any employee of the
Company or any such Subsidiary is or has ever been a participant, which
in the aggregate would reasonably be expected to have a Material Adverse
Effect. With respect to such plans, each of the Company and the
Subsidiaries is in compliance in all respects with all applicable
provisions of ERISA, except where the failure to so comply would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(b) Any certificate signed by any officer of any of the Issuers and
delivered to the Initial Purchasers or to counsel for the Initial Purchasers
pursuant to the terms of this Agreement shall be deemed a representation and
warranty by the Issuers to the Initial Purchasers as to the matters covered
thereby.
SECTION 2. Purchase and Sale of the Securities. The Company agrees
to sell to the Initial Purchasers and, subject to the terms and conditions and
in reliance upon the representations and warranties of the Issuers herein set
forth, each of the Initial Purchasers agrees, severally, to purchase from the
Company, at a purchase price of 97.427% of the principal amount thereof, the
respective principal amount of Securities set forth in Schedule A attached
hereto opposite the name of such Initial Purchaser.
SECTION 3. Delivery and Payment. Delivery of and payment for the
Securities shall be made at 9:00 A.M., New York City time, on May 21, 1997, or
such later date and time not more than ten (10) business days thereafter as the
Representative and the Company shall agree (such date and time of delivery and
payment for the Securities being herein called the "Closing Time"). Delivery
of the Securities shall be made to the Initial Purchasers against payment by
the Initial Purchasers of the purchase price thereof by wire transfer of funds
immediately available to the order of the Company or as the Company may
direct. Delivery of the Securities in definitive form shall be made at the
offices of Alston & Bird, One Atlantic Center, 1201 W. Peachtree Street,
Atlanta, Georgia 30309-3424 or at such location as the Representative shall
reasonably designate in advance of the Closing Time and payment for the
Securities shall be made in funds immediately available for the account of the
Company or at such other account or accounts designated by the Company. It is
understood that each Initial Purchaser has authorized the Representative, for
its account, to accept delivery of, receipt for, and make payment of the
purchase price for, the Securities which it has agreed to purchase. Merrill
Lynch, individually and not as Representative of the Initial Purchasers, may
(but shall not
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<PAGE> 13
be obligated to) make payment of the purchase price for the Securities to be
purchased by any Initial Purchaser whose funds have not been received by the
Closing Time, but such payment shall not relieve such Initial Purchaser from
its obligations hereunder. Certificates for the Securities shall be registered
in such names and in such denominations ($1,000 or integral multiples thereof)
as the Representative may request not less than one full business day in
advance of the Closing Time.
The Company agrees to have the Securities available for inspection,
checking and packaging by the Initial Purchasers in New York, New York, not
later than 10:00 A.M. on the business day prior to the Closing Time.
SECTION 4. Resale of the Securities. (A) The Initial Purchasers have
advised the Issuers that they propose to offer the Securities for resale upon
the terms and conditions set forth in this Agreement and in the Offering
Memorandum. Each Initial Purchaser hereby represents and warrants (as to
itself only) to, and agrees with, the Issuers that it is purchasing the
Securities for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "Qualified
Institutional Buyer" and is aware that the sale to it is being made in reliance
on Rule 144A under the Act or an Accredited Investor.
(b) Each Initial Purchaser acknowledges that the Securities have not been
registered under the Act and that offers and sales of the Securities will be
made only by the Initial Purchasers or Affiliates thereof qualified to do so in
the jurisdictions in which such offers or sales are made. Each Initial
Purchaser agrees that each such offer or sale shall only be made (i) to persons
whom the offeror or seller reasonably believes to be Qualified Institutional
Buyers that purchase such Securities for their own accounts or for the account
of a Qualified Institutional Buyer to whom notice is given that the transfer is
being made in reliance on Rule 144A, (ii) to persons whom the offeror or seller
reasonably believes to be Accredited Investors that acquire such Securities for
their own accounts or for the account of an Accredited Investor that, prior to
such transfer, furnishes to the Trustee a signed letter containing certain
representations and agreements (the form of which letter can be obtained from
the Trustee), and is acquiring Securities having an aggregate principal amount
of not less than $250,000 or (iii) to non-U.S. Persons outside the United
States to whom the offeror or seller reasonably believes offers and sales of
the Securities may be made in reliance upon Regulation S under the Act.
(c) Each Initial Purchaser will take all reasonable steps to inform, and
cause each of its U.S. affiliates to take all reasonable steps to inform,
persons acquiring Securities from such Initial Purchaser or affiliate, as the
case may be, in the United States that the Securities (i) have not been and
will not be registered under the Act, (ii) are being sold to them without
registration under the Securities Act in reliance on Rule 144A or in accordance
with another exemption from registration under the Act, as the case may be, and
(iii) may not be offered, sold or otherwise transferred except (A) to the
Company or its Subsidiaries, (B) inside the United States to an Accredited
Investor that is acquiring such Securities for its own account or for the
account of an Accredited Investor for investment purposes and not with a view
to, or for offer or sale in connection with, and distribution in violation of
the Act and that, prior to such transfer, furnishes to the Trustee a signed
letter containing certain representations and agreements (the form of which a
letter can be obtained from the Trustee), and is acquiring Securities, and is
acquiring
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<PAGE> 14
Securities having an aggregate principal amount of not less than $250,000, (C)
for so long as such Securities are eligible for resale pursuant to Rule 144A,
to a person it reasonably believes is a Qualified Institutional Buyer that
purchases such Securities for its own account or for the account of a Qualified
Institutional Buyer to whom notice is given that the transfer is being made in
reliance on Rule 144A, (D) pursuant to offers and sales to non-U.S. Persons
that occur outside the United States pursuant to Rule 904 of Regulation S, (E)
pursuant to an effective registration statement under the Act or (F) pursuant
to another available exemption from the registration requirements of the Act.
(d) Each Initial Purchaser (i) understands that all of the Securities
will bear a legend substantially similar to that set forth in the Indenture,
unless otherwise agreed by the Company and the Trustee; (ii) acknowledges that
none of the Trustee, Transfer Agent or Registrar will be required to accept for
registration of transfer any Securities acquired by it, except upon
presentation of evidence satisfactory to the Company and the Trustee, Transfer
Agent or Registrar, as the case may be, that the restrictions set forth herein
have been complied with; and (iii) acknowledges that the Issuers, the Trustee,
and others will rely upon the truth and accuracy of the foregoing
acknowledgments, representations and agreements and agrees that if any of the
acknowledgments, representations or agreements deemed to have been made by its
purchase of the Securities are no longer accurate, it shall promptly notify the
Issuers and the Trustee. If it is acquiring the Securities as a fiduciary or
agent for one or more investor accounts, each Initial Purchaser represents that
it has sole investment discretion with respect to each such account and it has
full power to make the foregoing acknowledgments, representations and
agreements on behalf of each account, and that such acknowledgments,
representations and agreements are true and complete with respect to each such
account.
(e) No sale of the Securities to any one purchaser will be for less
than $250,000 principal amount. If any Subsequent Purchaser is a non-bank
fiduciary acting on behalf of others, each person for whom it is acting must
purchase at least $250,000 principal amount of the Securities.
SECTION 5. Covenants of the Issuers. Each of the Issuers covenant with
the Initial Purchasers as follows:
(a) The Issuers will furnish to the Initial Purchasers and counsel
for the Initial Purchasers, without charge, such number of copies of the
Preliminary Offering Memorandum and the Final Offering Memorandum and any
amendments or supplements thereto as the Initial Purchasers and their
counsel may reasonably request.
(b) The Issuers will not at any time make any amendment or
supplement to the Preliminary Offering Memorandum or the Offering
Memorandum without the prior written consent of the Initial Purchasers,
which consent will not be unreasonably withheld or delayed. Neither the
consent of the Initial Purchasers, nor the Initial Purchasers' delivery
of any such amendment or supplement, shall, in and of itself, constitute
a waiver of any of the conditions set forth in Section 7 hereof.
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<PAGE> 15
(c) The Company will immediately notify each Initial Purchaser and
confirm such notice in writing of (x) any filing made by any Issuer
relating to the offering of the Securities with any securities exchange
or any other regulatory body in the United States or any other
jurisdiction and (y) prior to the completion of the placement of the
Securities by the Initial Purchasers as evidenced by a notice in writing
from the Initial Purchasers to the Company, any material changes in or
affecting the earnings, business affairs or business prospects of the
Company and its Subsidiaries which (i) make any statement in the Offering
Memorandum materially false or misleading or (ii) are not disclosed in
the Offering Memorandum and are required to be so disclosed. In such
event or if at any time prior to completion of the placement of the
Securities by the Initial Purchasers to purchasers who are not its
affiliates (as determined by the Initial Purchasers) any other event
shall occur or condition shall exist as a result of which it is
reasonably necessary, in the opinion of the Company, counsel for the
Company, the Initial Purchasers or counsel for the Initial Purchasers, to
amend or supplement the Offering Memorandum in order that the Offering
Memorandum, as then amended or supplemented, will not include an untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser, not
misleading or if in the opinion of the Company, counsel for the Company,
the Initial Purchasers or counsel for the Initial Purchasers, such
amendment or supplement is necessary to comply with applicable law, the
Issuers will, subject to paragraph (b) of this Section 5, promptly
prepare, at their own expense, such amendment or supplement as may be
necessary to correct such untrue statement or omission or to effect such
compliance (in form and substance reasonably satisfactory to the
Representative and counsel to the Initial Purchasers and whose consent
thereto shall not be unreasonably withheld or delayed), so that as so
amended or supplemented, the statements in the Offering Memorandum will
not include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances existing at the time it is delivered to a
purchaser, not misleading or so that such Offering Memorandum as so
amended or supplemented will comply with applicable law, as the case may
be, and furnish to the Initial Purchasers such number of copies of such
amendment or supplement as the Initial Purchasers may reasonably request.
Each of the Issuers agrees to notify the Initial Purchasers in writing
to suspend use of the Offering Memorandum as promptly as practicable
after the occurrence of an event specified in this paragraph (c), and the
Initial Purchasers hereby agree upon receipt of such notice from the
Issuers to suspend use of the Offering Memorandum until the Issuers have
amended or supplemented the Offering Memorandum to correct such
misstatement or omission or to effect such compliance.
(d) None of the Issuers nor any of their affiliates (as defined in
Rule 501(b) under the Act ("Affiliates")) will solicit any offer to buy
or offer to sell the Securities, the Exchange Securities or the Private
Exchange Securities, if any, by means of any form of general solicitation
or general advertising (as such terms are used in Regulation D under the
Act), or by means of any directed selling efforts (as defined in Rule 902
under the Act) in the United States in connection with the Securities
being offered and sold pursuant to Regulation S or in any manner
involving a public offering (within the meaning of
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<PAGE> 16
Section 4(2) of the Act) and not exempt under Regulation S, in each case
prior to the effectiveness of a registration statement with respect to
the Securities, the Exchange Securities or the Private Exchange
Securities, as applicable.
(e) None of the Issuers nor any of their affiliates (as defined in
Rule 501(b) under the Act) will offer, sell or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act)
which could be integrated with the sale of the Securities in a manner
that would require the registration of the Securities under the Act.
(f) The Company will, so long as the Securities are outstanding,
furnish to the Trustee on a timely basis, pursuant to the Indenture,
whether or not the Company has a class of securities registered under the
Exchange Act (i) audited year-end consolidated financial statements of
the Company (including a balance sheet, income statement and statement of
changes of cash flow) prepared in accordance with GAAP and substantially
in the form required under Regulation S-X under the Act and the
information described in Item 303 of Regulation S-K under the Act with
respect to such period and (ii) unaudited quarterly consolidated
financial statements of the Company (including a balance sheet, income
statement and statement of cash flows) prepared in accordance with GAAP
and substantially in the form required by Regulation S-X under the Act
and the information described in Item 303 of Regulation S-K under the Act
with respect to such period and will furnish to the Initial Purchasers
copies of all such reports and information, together with such other
documents, reports and information as shall be furnished by the Company
to the holders of the Securities or to the Trustee. In the event the
Company is not subject to Section 13 or 15(d) of the Exchange Act, the
Company will furnish to holders of Securities and prospective purchasers
of Securities designated by such holders, upon request of such holders or
such prospective purchasers, the information required to be delivered
pursuant to Rule 144A(d)(4) under the Act to permit compliance with Rule
144A in connection with resales of the Securities.
(g) Each of the Issuers will use its reasonable best efforts in
cooperation with the Initial Purchasers to (i) permit the Securities to
be eligible for clearance and settlement through The Depository Trust
Company and (ii) permit the Securities to be designated as PORTAL
securities in accordance with the rules and regulations of the NASD.
(h) Prior to the Closing Time, the Company, will furnish on a
confidential basis to the Initial Purchasers, if and promptly after they
have been prepared, a copy of any unaudited interim consolidated
financial statements of the Company for any period subsequent to the
period covered by the most recent financial statements of the Company
appearing in the Offering Memorandum which have been prepared in the
ordinary course of business.
(i) The Issuers will arrange for the registration and qualification
of the Securities for offering and sale under the applicable securities
or "blue sky" laws of such states and other jurisdictions as the Initial
Purchasers may reasonably designate in connection with the resale of the
Securities as contemplated by this Agreement and the Offering Memorandum
and will continue such qualifications in effect for as long as may be
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<PAGE> 17
necessary to complete the placement of the Securities by the Initial
Purchasers; provided that in no event shall any of the Issuers be
obligated to (i) qualify as a foreign corporation or as a broker or
dealer in securities in any jurisdiction where it would not otherwise be
required to so qualify but for this Section 5(i), (ii) file any general
consent to service of process in any jurisdiction where it is not at the
Closing Time then so subject or (iii) subject itself to taxation in any
such jurisdiction if it is not so subject. The Issuers will file such
statements and reports as may be required by the laws of each
jurisdiction in which the Securities have been qualified as above
provided. The Issuers shall promptly advise the Initial Purchasers of
the receipt by any of the Issuers of any notification with respect to the
suspension of the qualification or exemption from qualification of the
Securities for offering or sale in any jurisdiction or the institution,
threatening or contemplation of any proceeding for such purpose.
(j) The Company will use the proceeds received from the sale of the
Securities in the manner specified in the Offering Memorandum under the
heading "Use of Proceeds."
(k) The Issuers shall not, for a period of 90 days from the date of
the Offering Memorandum, without the prior written consent of the Initial
Purchasers, directly or indirectly, offer, sell, grant any option to
purchase or otherwise dispose of any debt securities of the Company or
any of the Subsidiaries or securities that are convertible into debt
securities (other than the Exchange Securities and the Private Exchange
Securities, if any). The foregoing shall not include any asset backed
securities or interests therein related to accounts receivables of the
Company and/or any Subsidiary.
(l) Until the expiration of two years after the original issuance of
the Securities, the Company will not, and will cause its Subsidiaries not
to, purchase or agree to purchase or otherwise acquire any Securities
which are "restricted securities" (as such term is defined under Rule
144(a)(3) under the 1933 Act), whether as beneficial owner or otherwise
(except as agent acting as a securities broker on behalf of and for the
account of customers in the ordinary course of business in unsolicited
broker's transactions) unless, upon any such purchase, the Company or any
such affiliate shall submit such Securities to the Trustee for
cancellation.
SECTION 6. Payment of Expenses. (a) Whether or not any sale of the
Securities is consummated, the Issuers agree, jointly and severally, to pay and
bear all costs and expenses incident to the performance of all of the Issuers'
obligations under this Agreement, including (i) the Issuers' preparation and
printing of the Preliminary Offering Memorandum, the Offering Memorandum and
any amendments or supplements thereto and the cost of furnishing copies thereof
to the Initial Purchasers, (ii) the preparation, issuance and printing of the
Securities, the Exchange Securities, the Private Exchange Securities, if any,
and any survey of state securities or "blue sky" laws or legal investment
memoranda, (iii) the delivery to the Initial Purchasers of the Securities, the
Exchange Securities or the Private Exchange Securities, (iv) the fees and
disbursements of the Issuers' counsel and accountants, (v) the qualification,
if required, of the Securities under the applicable state securities or "blue
sky" laws in accordance with the provisions of Section 5(i) hereof and any
filing for review of the offering, if required, with the
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<PAGE> 18
NASD, including filing fees and reasonable fees and disbursements of counsel to
the Initial Purchasers in connection therewith and in connection with the
preparation of any survey of state securities or "blue sky" laws or legal
investment memoranda, (vi) any fees charged by rating agencies for rating the
Securities, the Exchange Securities and the Private Exchange Securities, if
any, (vii) the fees and expenses of the Trustee, including the fees and
disbursements of counsel for the Trustee, (viii) all expenses (including travel
expenses) of the Issuers in connection with any meetings with prospective
investors in the Securities, (ix) one-half of the expenses related to the
charter or use of any aircraft used in connection with any meetings with
prospective investors in the Securities, and (x) all expenses and listing fees
in connection with the application for designation of the Securities as PORTAL
securities and to permit the Securities, the Exchange Securities and the
Private Exchange Securities, as applicable, to be eligible for clearance
through The Depository Trust Company. It being understood that, except as
otherwise expressly provided in this Section 6, the Initial Purchasers shall
pay all other costs and expenses of the Initial Purchasers (including, without
limitation, travel, legal fees and expenses and one-half of the expenses
related to the charter or use of any aircraft used in connection with any
meetings with prospective investors in the Securities).
(b) If the sale of the Securities provided for herein is not
consummated because the Issuers shall have breached any representation,
warranty or covenant or because of any failure, refusal or inability on the
part of any of the Issuers to perform all obligations and satisfy all
conditions on their part to be performed or satisfied hereunder; provided, that
the Initial Purchasers are not at such time in breach or default of their
obligations hereunder and the Initial Purchasers have given notice to the
Company that they are otherwise willing to close the transactions contemplated
hereby at the Closing Time, then the Issuers agree, jointly and severally, to
reimburse the Initial Purchasers promptly upon demand for all reasonable out-
of-pocket expenses (including reasonable fees and disbursements of their
counsel) that shall have been incurred by it in connection with the proposed
purchase and sale of the Securities.
SECTION 7. Conditions of the Initial Purchasers' Obligations. The
obligations of the Initial Purchasers to purchase and pay for the Securities
are subject to the continued accuracy, as of the Closing Time, of the
representations and warranties of the Issuers herein contained, to the accuracy
of the statements of the Issuers and officers of the Issuers made in any
certificate pursuant to the provisions hereof, to the performance by the
Issuers of their respective obligations hereunder, and to the following further
conditions:
(a) At the Closing Time, the Initial Purchasers shall have received
the opinions of each of Brian J. Martin, Executive Vice President of Law
and General Counsel of the Company, Sommer & Barnard, PC, and Alston &
Bird LLP, each dated as of the Closing Time, which, collectively, are in
the form set forth below and otherwise reasonably satisfactory to the
Initial Purchasers and counsel for the Initial Purchasers, to the effect
that:
(1) The Company and each of the Guarantors has been duly
organized or incorporated, as the case may be, and is validly
existing under the laws of its respective state of incorporation,
with corporate power and authority to own, lease and operate its
assets and properties and conduct its business as described in the
Offering Memorandum and to enter into and perform its obligations
under this
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Agreement and each of the other Operative Documents; the Company
and each of the Guarantors is duly qualified as a foreign
corporation to transact business and is in good standing in each
jurisdiction in which it conducts its business (based on
certificates of officers of the Company) and such qualification is
required, whether by reason of the ownership or leasing of property
or the conduct of business, except where the failure so to qualify
or to be in good standing would not result in a Material Adverse
Effect;
(2) Each of the Issuers has the requisite corporate or
partnership power and authority to own, lease and operate its
assets and properties and to conduct its business as described in
the Offering Memorandum. Each of the Issuers has the requisite
corporate or partnership power and authority to execute, deliver
and perform its obligations under the Operative Documents to which
it is or is to be a party. Each of the Operative Documents has
been duly authorized by each Issuer which is a party thereto;
(3) No consent, waiver, approval, authorization, license,
qualification or order of or filing or registration with, any court
or governmental or regulatory agency or body is required for the
execution and delivery by the Issuers of this Agreement, the
Registration Rights Agreement or the Indenture or for the issue and
sale of the Securities, the Exchange Securities or the Private
Exchange Securities (other than with respect to the delivery in
book-entry form), if any, or the issuance of the Guarantees by the
Guarantors, the performance by the Issuers of their obligations
under the Operative Documents, or for the consummation of any of
the transactions contemplated hereby or thereby, except, such as
may be required (A) in connection with the registration under the
Act of the Exchange Securities or the Private Exchange Securities,
if any, pursuant to the Registration Rights Agreement (including
any filing with the NASD), (B) in connection with the registration
under the Act of the Exchange Securities or the Private Exchange
Securities pursuant to the Registration Rights Agreement, the
qualification of the Indenture under the Trust Indenture Act and
(C) under the "blue sky" laws of any jurisdiction in connection
with the purchase and distribution of the Securities by the Initial
Purchasers (as to which such counsel need express no opinion);
(4) The issuance, sale and delivery of the Securities, the
Exchange Securities and the Private Exchange Securities (other than
with respect to the delivery in book-entry form), if any, the
execution, delivery and performance by the Issuers of this
Agreement, the Registration Rights Agreement and the Indenture (in
each case assuming due authorization and execution by each party
other than the Company), and the consummation by the Issuers of the
transactions contemplated hereby and thereby and the compliance by
the Issuers with the terms of the foregoing do not, and, at the
Closing Time, will not conflict with or constitute or result in a
breach or violation by the Company or any of the Guarantors of (A)
any provision of the Certificate of Incorporation or By-laws of the
Company or such Guarantors, (B) any of the terms or provisions of,
or constitute a default (or an event which, with notice or lapse of
time or both, would
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<PAGE> 20
constitute a default) by the Issuers, or give rise to any right to
accelerate the maturity or require the prepayment of any
indebtedness under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the
Issuers under any material Contract known to such counsel or (C)
any law, statute, rule, or regulation or any order, decree or
judgment known to such counsel to be applicable to the Issuers, of
any court or governmental or regulatory agency or body or
arbitrator known to such counsel to have jurisdiction over the
Issuers or any of their respective properties or assets;
(5) The Purchase Agreement has been duly authorized, executed
and delivered by the Company and each of the Guarantors;
(6) The Registration Rights Agreement has been duly
authorized, executed and delivered by the Company and each of the
Guarantors and assuming the due execution and delivery thereof by
the Initial Purchasers, constitutes a valid and binding obligation
of each of the Issuers;
(7) The Indenture has been duly authorized, executed and
delivered by the Company and each of the Guarantors and, assuming
the due execution and delivery thereof by the Trustee, constitutes
a valid and binding obligation of each of the Issuers;
(8) The Notes have been duly authorized by the Company and,
when executed and authenticated in accordance with the provisions
of the Indenture and delivered and paid for in accordance with the
terms of this Agreement, and the Exchange Securities and the
Private Exchange Securities (other than with respect to the
delivery in book-entry form), if any, when executed, authenticated
and delivered in exchange for the Securities in accordance with the
terms of the Registration Rights Agreement, will be entitled to the
benefits of the Indenture and will constitute valid and binding
obligations of the Company;
(9) the Guarantees have been duly authorized by the Guarantors
and when executed and delivered by the Guarantors in accordance
with the provisions of the Indenture (assuming the due
authentication of the Notes by the Trustee) will be entitled to the
benefits of the Indenture and will be valid and binding obligations
of each of the Guarantors;
(10) To the knowledge of such counsel, other than as described
in the Offering Memorandum, no legal, regulatory or governmental
proceedings are pending or threatened to which the Company or any
of the Subsidiaries is a party or to which the property or assets
of the Company or any of the Subsidiaries are subject which in the
judgment of the Company could reasonably be expected to have a
Material Adverse Effect;
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<PAGE> 21
(11) The descriptions of the Notes, the Guarantees, the
Indenture and the Registration Rights Agreement contained in the
Offering Memorandum fairly describe or summarize such documents in
all material respects;
(12) Neither the Company nor any of the Subsidiaries is in
violation of its respective Organizational Documents; provided,
that with respect to the business purpose clauses of the charter of
the Company and its Subsidiaries, such opinion may be limited to
the knowledge of such counsel after due inquiry; to the knowledge
of such counsel, no default by the Company or any of the Guarantors
exists in the due performance or observance of any material
obligation, agreement, covenant or condition contained in any
Contract; and to the knowledge of such counsel, none of the Issuers
is in breach or violation of any law, statute, rule or regulation,
or any judgment, decree or order or governmental or regulatory
agency or other body having jurisdiction over the Company or any of
the Guarantors or any of their respective properties or assets;
(13) Assuming that the representations and warranties of the
Initial Purchasers contained in Section 4 of this Agreement are
true, correct and complete, and assuming compliance by the Initial
Purchasers with their covenants in Section 4 hereof, and assuming
that the representations and warranties contained in the Transferee
Letter (substantially in the form of Appendix A to the Offering
Memorandum) completed by Accredited Investors purchasing Securities
from the Initial Purchasers are true and correct as of the Closing
Time, and assuming compliance by such Accredited Investors with the
agreements in the Transferee Letter, it is not necessary in
connection with the offer, sale and delivery of the Securities to
the Initial Purchasers under, or in connection with the initial
resale of such Securities by the Initial Purchasers in accordance
with, this Agreement to register the Securities under the Act or
to qualify the Indenture under the Trust Indenture Act;
(14) None of the Issuers is an "investment company" or a
company "controlled by" or required to register as an investment
company as such terms are defined in the Investment Company Act of
1940, as amended, and the rules and regulations thereunder;
(15) When the Securities are issued and delivered pursuant to
this Agreement, such Securities will not be of the same class
(within the meaning of Rule 144A) as securities of any of the
Issuers which are listed on a national securities exchange
registered under Section 6 of the Exchange Act or quoted in a U.S.
automated inter-dealer quotation system; and
(16) Neither the consummation of the transactions contemplated
hereby nor the sale, issuance, execution or delivery of the
Securities will violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
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<PAGE> 22
In addition such counsel shall state that such counsel has
participated in conferences with representatives of the Initial
Purchasers, officers and other representatives of the Issuers and
representatives of the independent certified accountants of the Issuers,
at which conferences the contents of the Offering Memorandum and the
business and affairs of the Company and its Subsidiaries were discussed,
and although such counsel has not verified and does not pass upon or
assume any responsibility for the accuracy, completeness or fairness of
the statements contained in the Offering Memorandum (except and only to
the extent set forth in subclause (11) above), on the basis of the
foregoing, no facts have come to the attention of such counsel which lead
such counsel to believe that the Offering Memorandum at the date thereof
or as of the Closing Time, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading (it being understood that such
counsel need not express any comment with respect to the financial
statements, including the notes thereto and supporting schedules, or any
other financial data set forth or referred to in the Offering
Memorandum).
In rendering such opinions, such counsel (A) need not express any
opinion with regard to the application of laws of any jurisdiction other
than the Federal law of the United States, the General Corporation Law of
the State of Delaware and the laws of the States of Georgia and Indiana
and (B) may rely, as to matters of fact, to the extent they deem proper
on representations or certificates of responsible officers of the Issuers
and certificates of public officials.
References to the Offering Memorandum in this subsection (a) include
any supplements thereto at or prior to the Closing Time.
(b) The Initial Purchasers shall have received the opinion, dated as
of the Closing Time, of Cahill Gordon & Reindel, counsel for the Initial
Purchasers, with respect to certain matters set forth in clauses (6),
(7), (8), (9), (11) and (13) of subsection (a) of this Section 7;
provided, however, that for purposes of the opinions expressed in clauses
(6) through (9), such counsel shall additionally opine on the enforcement
of such documents and agreements.
In rendering such opinions, such counsel (A) need not express any
opinion with regard to the application of laws of any jurisdiction other
than the Federal laws of the United States, the General Corporation Law
of the State of Delaware and the laws of the State of New York and (B)
may rely, as to matters of fact, to the extent they deem proper on
representations or certificates of responsible officers of the Company
and certificates of public officials.
In addition, such counsel shall additionally state that such counsel
has participated in conferences with officers and other representatives
of the Issuers and representatives of the independent accountants for the
Issuers at which conferences the contents of the Offering Memorandum and
related matters were discussed, and although such counsel has not
verified and does not pass upon and does not assume any responsibility
for the
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<PAGE> 23
accuracy, completeness or fairness of the statements contained in the
Offering Memorandum, on the basis of the foregoing (relying as to
materiality to the extent such counsel deems appropriate upon the
representations and opinions of officers and other representatives of the
Issuers), no facts have come to the attention of such counsel which lead
such counsel to believe that the Offering Memorandum, at the date thereof
or as of the Closing Time, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading (it being understood that such
counsel need express no comment with respect to the financial statements,
including the notes thereto, or any other financial or statistical data
found in or derived from the internal accounting or other records of the
Company and its subsidiaries set forth or referred to in the Offering
Memorandum).
(c) The following conditions contained in clauses (i) and (ii) of
this subsection (c) shall have been satisfied at and as of the Closing
Time and the Company shall have furnished to the Initial Purchasers a
certificate, signed by the Chairman of the Board or the President or the
principal financial or accounting officer of the Company, dated as of the
Closing Time, to the effect that the signer of such certificate has
carefully examined the Offering Memorandum, any amendment or supplement
to the Offering Memorandum, and this Agreement and that:
(i) the representations and warranties of the Issuers in this
Agreement are true and correct in all material respects on and as
of the Closing Time with the same effect as if made at the Closing
Time and the Issuers have complied with all the agreements and
satisfied all the conditions under this Agreement on its part to be
performed or satisfied in all material respects at or prior to the
Closing Time;
(ii) since the date of the most recent financial statements
included in the Offering Memorandum (exclusive of any amendment or
supplement thereto), there has been no Material Adverse Change,
whether or not arising in the ordinary course of business. As
used in this subparagraph, the term "Offering Memorandum" means the
Offering Memorandum in the form first used to confirm sales of the
Securities; and
(iii) the sale of the Securities has not been enjoined
(temporarily or permanently).
(d) At the time that this Agreement is signed and at the Closing
Time, Coopers & Lybrand, L.L.P. shall have furnished to the Initial
Purchasers a letter or letters, dated respectively as of the date of this
Agreement and as of the Closing Time, in form and substance satisfactory
to the Initial Purchasers, confirming that they are independent certified
public accountants within the meaning of the Act and the applicable
published rules and regulations thereunder and containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to Initial Purchasers with respect to financial statements and
certain financial information contained in the Offering
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<PAGE> 24
Memorandum, in form and substance reasonably satisfactory to counsel for
the Initial Purchasers.
(e) Subsequent to the date hereof or, if earlier, the dates as of
which information is given in the Offering Memorandum (exclusive of any
amendment or supplement thereto) and prior to the Closing Time, there
shall not have been any Material Adverse Change, or any development
involving a prospective Material Adverse Change, in or affecting the
business or properties of the Issuers.
(f) At the Closing Time, counsel for the Initial Purchasers shall
have been furnished with such information, certificates and documents as
they may reasonably require for the purpose of enabling them to pass upon
the issuance and sale of the Securities as contemplated herein and
related proceedings, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all opinions and certificates mentioned
above or elsewhere in this Agreement shall be reasonably satisfactory in
form and substance to the Initial Purchasers and counsel for the Initial
Purchasers.
(g) The Issuers and the Trustee shall have entered into the
Indenture.
(h) The Issuers and the Initial Purchasers shall have entered into
the Registration Rights Agreement.
(i) At the Closing Time, the Securities shall be rated at least Ba2
by Moody's Investor's Service Inc. and BB by Standard & Poor's Ratings
Group, and the Representative shall have received evidence satisfactory
to the Representative, confirming that the Securities have such ratings;
and since the date of this Agreement, there shall not have occurred a
downgrading in the rating assigned to the Securities or any of the
Company's other debt securities by any nationally recognized securities
rating agency, and no such securities rating agency shall have publicly
announced that it has under surveillance or review, with possible
negative implications, its rating of the Securities or any of the
Company's other debt securities.
If any condition specified in this Section 7 shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be
terminated by the Initial Purchasers by notice to the Issuers, and such
termination shall be without liability of any party to any other party except
as provided in Section 6. Notwithstanding any such termination, the provisions
of Sections 1, 8, 9, 13 and 16 shall remain in effect. Notice of such
cancellation shall be given to the Issuers in writing or by telephone,
facsimile transmission or telegraph confirmed in writing. The Issuers shall
furnish to the Initial Purchasers such conformed copies of such opinions,
certificates, letters and documents in such quantities as the Initial
Purchasers and counsel for the Initial Purchasers shall reasonably request.
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<PAGE> 25
SECTION 8. Indemnification.
(a) The Issuers agree, jointly and severally, to indemnify and hold
harmless the Initial Purchasers, their respective Affiliates, and each person,
if any, who controls any Initial Purchaser or their respective affiliates
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Memorandum or the Final Offering Memorandum (or any
amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided that
(subject to Sections 8(c) and 8(d) below) any such settlement is effected
with the written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including reasonable fees and disbursements of one counsel chosen by
Merrill Lynch (in addition to any local counsel)), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced
or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of any Initial Purchaser through Merrill Lynch expressly for use in
the Preliminary Offering Memorandum or the Final Offering Memorandum (or any
amendment or supplement thereto).
The foregoing indemnity with respect to any untrue statement
contained in or any omission from the Preliminary Offering Memorandum shall not
inure to the benefit of any Initial Purchaser (or any Affiliate or person who
controls such Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act) from whom the person asserting any such loss,
liability, claim, damage or expense purchased any of the Securities that are
the subject thereof if such person was not sent or given a copy of the Final
Offering Memorandum (or any amendment or supplement thereto), if the Company
shall have previously furnished copies thereof to the Initial Purchasers in
accordance with this Agreement, at or prior to the written confirmation of the
sale of such Securities to such person and the untrue statement contained in or
the omission
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<PAGE> 26
from the Preliminary Offering Memorandum was corrected in the Final Offering
Memorandum (or any amendment or supplement thereto).
(b) Each Initial Purchaser agrees, severally and not jointly, to
indemnify and hold harmless the Issuers, their respective directors and each
person, if any, who controls the Issuers within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection
(a) of this Section 8, as incurred, but only with respect to untrue statements
or omissions, or alleged untrue statements or omissions, made in the
Preliminary Offering Memorandum or Final Offering Memorandum (or any amendment
or supplement thereto) in reliance upon and in conformity with written
information furnished to the Issuers by such Initial Purchaser through Merrill
Lynch expressly for use in the Preliminary Offering Memorandum or Final
Offering Memorandum (or any amendment or supplement thereto).
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, enclosing a copy of all
papers properly served on such indemnified party, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
hereunder to the extent it is not materially prejudiced as a result thereof and
in any event shall not relieve it from any liability which it may have
otherwise than on account of this indemnity agreement. In the case of parties
indemnified pursuant to Section 8(a) above, one counsel to all the indemnified
parties shall be selected by Merrill Lynch, and, in the case of parties
indemnified pursuant to Section 8(b) above, counsel to all the indemnified
parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
that counsel to the indemnifying party shall not (except with the consent of
the indemnified party) also be counsel to the indemnified party.
Notwithstanding the foregoing, if it so elects within a reasonable time after
receipt of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume the defense of such
action with counsel chosen by it and approved by the indemnified parties
defendant in such action (which approval shall not be unreasonably withheld),
unless such indemnified parties reasonably object to such assumption on the
ground that there may be legal defenses available to them which are different
from or in addition to those available to such indemnifying party. If an
indemnifying party assumes the defense of such action, the indemnifying parties
shall not be liable for any fees and expenses of counsel for the indemnified
parties incurred thereafter in connection with such action. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent
of the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 8 or Section 9 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such settlement,
compromise or consent (i) includes a full and unconditional release of each
indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and the offer and sale
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<PAGE> 27
of any Securities and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any indemnified
party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as to which such indemnified party is liable pursuant to Section 8(a),
(b) or (c), as the case may be, then such indemnifying party agrees that it
shall be liable for any settlement of the nature contemplated by Section
8(a)(ii) effected without its written consent if (i) such settlement is entered
into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
SECTION 9. Contribution. If the indemnification provided for in Section
8 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Issuers on the one hand and the
Initial Purchasers on the other hand from the offering of the Securities
pursuant to this Agreement or (ii) if the allocation provided by clause (i) is
not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Issuers on the one hand and of the Initial Purchasers
on the other hand in connection with the statements or omissions which resulted
in such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations.
The relative benefits received by the Issuers on the one hand and the
Initial Purchasers on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Initial
Purchasers, bear to the aggregate initial offering price of the Securities.
The relative fault of the Issuers on the one hand and the Initial
Purchasers on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Issuers or by the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Issuers and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro
rata allocation (even if the Initial Purchasers were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 9. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 9 shall be deemed
to include any legal or
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other expenses reasonably incurred by such indemnified party in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue or alleged untrue statement or
omission or alleged omission.
Notwithstanding the provisions of this Section 9, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities purchased by it were offered to subsequent
purchasers exceeds the amount of any damages which such Initial Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 9, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act shall have the same rights to contribution as such Initial
Purchaser, and each director of any of the Issuers, each executive officer of
any of the Issuers and each person, if any, who controls any of the Issuers
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
shall have the same rights to contribution as the Issuers. The Initial
Purchasers' respective obligations to contribute pursuant to this Section 9 are
several in proportion to the principal amount of Securities set forth opposite
their respective names in Schedule A hereto and not joint.
SECTION 10. Representations, Warranties and Agreements To Survive
Delivery. All representations, warranties, indemnities, agreements and other
statements of the Issuers and their respective officers and of the Initial
Purchasers contained in or made pursuant to this Agreement shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any Initial Purchaser or controlling person, or by or on behalf
of the Issuers, and shall survive delivery of the Securities to the Initial
Purchasers and the payment therefor by the Initial Purchasers.
SECTION 11. Termination of Agreement.
(a) Termination: General. (a) The Representative may terminate this
Agreement, by notice to the Company, at any time at or prior to the Closing
Time if (i) there has been, since the time of execution of this Agreement or
since the respective dates as of which information is given in the Offering
Memorandum and on or prior to the Closing Time, any Material Adverse Change
whether or not arising in the ordinary course of business, or (ii) since the
date of this Agreement and on or prior to the Closing Time, (A) there has
occurred any material adverse change in the financial markets in the United
States, any outbreak of hostilities or escalation of existing hostilities or
other national or international calamity or crisis or any change or development
involving a prospective change in national or international political,
financial or economic conditions, in each case the effect of which is such as
to make it, in the judgment of the Representative, impracticable to market the
Securities or to enforce contracts for the sale of the Securities, or (B)
trading in any securities of the Company has been suspended or limited by the
-27-
<PAGE> 29
Commission or the Nasdaq National Market System, or trading generally on the
New York Stock Exchange, the American Stock Exchange or the Nasdaq National
Market System has been suspended or limited, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices for securities generally
have been required, by any such exchange or by order of the Commission, the
NASD or any other governmental authority or (C) a general banking moratorium
has been declared by either Federal or New York authorities. As used in this
Section 11(a), the term "Offering Memorandum" means the Offering Memorandum in
the form first used to confirm sales of the Securities.
(b) If this Agreement is terminated pursuant to this Section 11, such
termination shall be without liability of any party to any other party except
as provided in Section 6 hereof, and provided further that Sections 1, 8, 9, 13
and 16 shall survive such termination and remain in full force and effect.
(c) This Agreement may also terminate pursuant to the provisions of
Section 7, with the effect stated in such Section.
SECTION 12. Default By One of the Initial Purchasers. If one of the
Initial Purchasers shall fail at the Closing Time to purchase the Securities
which it is obligated to purchase under this Agreement (the "Defaulted
Securities"), the other Initial Purchasers shall have the right, but not the
obligation, within 24 hours thereafter, to make arrangements for the
nondefaulting Initial Purchasers, or any other Initial Purchasers reasonably
satisfactory to the Company, to purchase all, but not less than all, of the
Defaulted Securities in such amounts as may be agreed upon and upon the terms
herein set forth; if, however, the other Initial Purchasers shall not have
completed such arrangements within such 24-hour period, then this Agreement
shall terminate without liability on the part of any nondefaulting Initial
Purchaser.
No action pursuant to this Section shall relieve any defaulting Initial
Purchaser from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement, either the non-defaulting Initial Purchasers or an Issuer shall
have the right to postpone the Closing Time for a period not exceeding seven
days in order to effect any required changes in the Offering Memorandum or in
any other documents or arrangements. As used herein, the term "Initial
Purchaser" includes any person substituted for an Initial Purchaser under this
Section 12.
SECTION 13. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Initial
Purchasers shall be directed to the Initial Purchasers c/o Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, North Tower, World
Financial Center, New York, New York 10281-1305, attention: Bennett Rosenthal,
Managing Director; and notices to the Issuers shall be directed to Proffitt's
Inc., 750 Lakeshore Parkway, Birmingham, Alabama 35211, attention: Brian J.
Martin, with a copy to Alston & Bird LLP, One Atlantic Center, 1201 W.
Peachtree Street, Atlanta, Georgia 30309-3424, attention: H. Sadler Poe and
Ralph F. MacDonald, III, and to Sommer & Barnard, PC,
-28-
<PAGE> 30
4000 Bank One Tower, 111 Monument Circle, Indianapolis, Indiana 46204,
attention: James A. Strain.
SECTION 14. Information Supplied by the Initial Purchasers. The
statements set forth in the last paragraph on the front cover page and in the
third, fifth and sixth paragraphs under the heading "Plan of Distribution" in
the Offering Memorandum (to the extent such statements relate to the Initial
Purchasers) constitute the only information furnished by the Initial Purchasers
to the Company for the purposes of Sections 1 and 8 hereof.
SECTION 15. Parties. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchasers and the Issuers and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Initial Purchasers and the Issuers and their respective successors and the
controlling persons and officers and directors referred to in Sections 8 and 9
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under, by virtue of or in respect of this Agreement or any provision
herein contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the Initial Purchasers and
the Issuers and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives and for the
benefit of no other person, firm or corporation. No purchaser of Securities
from any Initial Purchaser shall be deemed to be a successor by reason merely
of such purchase.
SECTION 16. Governing Law and Time. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. Specified times
of day refer to New York time.
SECTION 17. Counterparts. This Agreement may be executed in one or more
counterparts and, when each party has executed a counterpart, all such
counterparts taken together shall constitute one and the same agreement.
[Remainder of Page Intentionally Left Blank]
-29-
<PAGE> 31
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement by and among the Initial Purchasers, the Company and the Guarantors
in accordance with its terms.
Very truly yours,
PROFFITT'S, INC.
By:
------------------------------------
Name:
Title:
G.R.
HERBERGER'S, INC.
By:
------------------------------------
Name:
Title:
PARISIAN, INC.
By:
------------------------------------
Name:
Title:
MCRAE'S, INC.
By:
------------------------------------
Name:
Title:
MCRAE'S STORES PARTNERSHIP
By:
------------------------------------
McRae's, Inc., as managing general
partner
-30-
<PAGE> 32
By:
---------------------------------------
Name:
Title:
MCRAE'S OF ALABAMA, INC.
By:
---------------------------------------
Name:
Title:
Confirmed and accepted as of the date
first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:
----------------------------
Name:
Title:
GOLDMAN, SACHS & CO.
By:
----------------------------
(Goldman, Sachs & Co.)
SMITH BARNEY INC.
By:
---------------------------
Name:
Title:
-31-
<PAGE> 33
SCHEDULE A
<TABLE>
<CAPTION>
Principal
Amount of
Name of Initial Purchaser Securities
- -------------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated. $ 68,750,000
Goldman, Sachs & Co................................ 28,125,000
Smith Barney Inc................................... 28,125,000
------------
Total............................................. $125,000,000
</TABLE>
<PAGE> 34
SCHEDULE B
Guarantors
<TABLE>
<S> <C>
G.R. Herberger's, Inc. Delaware
McRae's, Inc. Mississippi
McRae's of Alabama, Inc. Alabama
McRae's Stores Partnership Mississippi
Parisian, Inc. Alabama
</TABLE>
<PAGE> 35
SCHEDULE C
Subsidiaries of the Company
<TABLE>
<CAPTION>
Organized and
Name of Entity Under Laws of
- -------------- -------------
<S> <C>
G.R. Herberger's, Inc. Delaware
McRae's, Inc. Mississippi
McRae's of Alambama, Inc. Alabama
McRae's Stores Partnership Mississippi
Parisian, Inc. Alabama
Profitt's Credit Corporation Nevada
Yonkers Credit Corporation Delaware
</TABLE>
<PAGE> 1
===============================================================================
PROFFITT'S, INC., as Issuer
THE SUBSIDIARY GUARANTORS named herein, as Guarantors
and
THE FIRST NATIONAL BANK OF CHICAGO, as Trustee
-----------------------
INDENTURE
Dated as of May 21, 1997
-----------------------
$125,000,000
8 1/8% Senior Notes due 2004, Series A
8 1/8% Senior Notes due 2004, Series B
===============================================================================
<PAGE> 2
Reconciliation and tie between Trust Indenture Act of 1939, as
amended, and Indenture, dated as of May 21, 1997
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- ------------------ -------------
<S> <C>
Section 310 (a)(1) . . . . . . .. . . . . . . . . . . . . 6.09
(a)(2) . . . . . . . . . . . . . . . . . . . 6.09
(a)(3) . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . 6.08, 6.10
Section 311 (a) . . . . . . . . . . . . . . . . . . . . . 6.07
(b) . . . . . . . . . . . . . . . . . . . . . 6.07
(c) . . . . . . . . . . . . . . . . . . . . . Not Applicable
Section 312 (a) . . . . . . . . . . . . . . . . . . . . . 3.05, 7.01
(b) . . . . . . . . . . . . . . . . . . . . . 7.02
(c) . . . . . . . . . . . . . . . . . . . . . 7.02
Section 313 (a) . . . . . . . . . . . . . . . . . . . . . 7.03
(b) . . . . . . . . . . . . . . . . . . . . . 7.03
(c) . . . . . . . . . . . . . . . . . . . . . 7.03
(d) . . . . . . . . . . . . . . . . . . . . . 7.03
Section 314 (a) . . . . . . . . . . . . . . . . . . . . . 7.04
(a)(4) . . . . . . . . . . . . . . . . . . . 10.10
(b) . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . 1.04, 4.04, 12.01(c)
(c)(2) . . . . . . . . . . . . . . . . . . . 1.04, 4.04, 12.01(c)
(c)(3) . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . 1.04
Section 315 (a) . . . . . . . . . . . . . . . . . . . . . 6.01(a)
(b) . . . . . . . . . . . . . . . . . . . . . 6.02
(c) . . . . . . . . . . . . . . . . . . . . . 6.01(b)
(d) . . . . . . . . . . . . . . . . . . . . . 6.01(c)
(e) . . . . . . . . . . . . . . . . . . . . . 5.14
Section 316 (a) (last sentence) . . . . . . . . . . . . . 3.14
(a)(1)(A) . . . . . . . . . . . . . . . . . . 5.12
(a)(1)(B) . . . . . . . . . . . . . . . . . . 5.13
(a)(2) . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . 5.08
Section 317 (a)(1) . . . . . . . . . . . . . . . . . . . 5.03
(a)(2) . . . . . . . . . . . . . . . . . . . 5.04
(b) . . . . . . . . . . . . . . . . . . . . . 10.03
Section 318 (a) . . . . . . . . . . . . . . . . . . . . . 1.08
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitions. . . . . . . . . . . . . . . . . . 20
Section 1.03. Rules of Construction. . . . . . . . . . . . . . . . 20
Section 1.04. Form of Documents Delivered to Trustee. . . . . . . . 21
Section 1.05. Acts of Holders. . . . . . . . . . . . . . . . . . . 21
Section 1.06. Notices, etc., to the Trustee, the Company
and the Guarantors. . . . . . . . . . . . . . . . . . 22
Section 1.07. Notice to Holders; Waiver. . . . . . . . . . . . . . 22
Section 1.08. Conflict with Trust Indenture Act. . . . . . . . . . 23
Section 1.09. Effect of Headings and Table of Contents. . . . . . . 23
Section 1.10. Successors and Assigns. . . . . . . . . . . . . . . . 23
Section 1.11. Separability Clause. . . . . . . . . . . . . . . . . 23
Section 1.12. Benefits of Indenture. . . . . . . . . . . . . . . . 23
Section 1.13. Governing Law. . . . . . . . . . . . . . . . . . . . 24
Section 1.14. No Recourse Against Others. . . . . . . . . . . . . . 24
Section 1.15. Independence of Covenants. . . . . . . . . . . . . . 24
Section 1.16. Exhibits. . . . . . . . . . . . . . . . . . . . . . . 24
Section 1.17. Counterparts. . . . . . . . . . . . . . . . . . . . . 24
Section 1.18. Duplicate Originals. . . . . . . . . . . . . . . . . 24
ARTICLE TWO NOTE AND GUARANTEE FORMS24
Section 2.01. Form and Dating. . . . . . . . . . . . . . . . . . . 24
ARTICLE THREE THE NOTES
Section 3.01. Title and Terms. . . . . . . . . . . . . . . . . . . 25
Section 3.02. Registrar and Paying Agent. . . . . . . . . . . . . . 26
Section 3.03. Execution and Authentication. . . . . . . . . . . . . 26
Section 3.04. Temporary Notes. . . . . . . . . . . . . . . . . . . 28
Section 3.05. Transfer and Exchange.. . . . . . . . . . . . . . . . 28
Section 3.06. Mutilated, Destroyed, Lost and Stolen Notes . . . . . 29
</TABLE>
-i-
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 3.07. Payment of Interest; Interest Rights Preserved. . . .30
Section 3.08. Persons Deemed Owners . . . . . . . . . . . . . . . .31
Section 3.09. Cancellation. . . . . . . . . . . . . . . . . . . . .31
Section 3.10. Computation of Interest. . . . . . . . . . . . . . .31
Section 3.11. Legal Holidays. . . . . . . . . . . . . . . . . . . .31
Section 3.12. CUSIP and CINS Numbers. . . . . . . . . . . . . . . .32
Section 3.13. Paying Agent To Hold Money in Trust. . . . . . . . .32
Section 3.14. Treasury Notes. . . . . . . . . . . . . . . . . . . .32
Section 3.15. Deposits of Monies. . . . . . . . . . . . . . . . . .32
Section 3.16. Book-Entry Provisions for Global Notes. . . . . . . .33
Section 3.17. Special Transfer Provisions . . . . . . . . . . . . .34
ARTICLE FOUR DEFEASANCE OR COVENANT DEFEASANCE
Section 4.01. Company's Option To Effect Defeasance or Covenant
Defeasance. . . . . . . . . . . . . . . . . . . . . .37
Section 4.02. Defeasance and Discharge. . . . . . . . . . . . . . .37
Section 4.03. Covenant Defeasance . . . . . . . . . . . . . . . . .38
Section 4.04. Conditions to Defeasance or Covenant Defeasance . . .38
Section 4.05. Deposited Money and U.S. Government Obligations
To Be Held in Trust; Other Miscellaneous
Provisions. . . . . . . . . . . . . . . . . . . . . .40
Section 4.06. Reinstatement . . . . . . . . . . . . . . . . . . . .40
ARTICLE FIVE REMEDIES
Section 5.01. Events of Default . . . . . . . . . . . . . . . . . .41
Section 5.02. Acceleration of Maturity; Rescission and
Annulment . . . . . . . . . . . . . . . . . . . . . .43
Section 5.03. Collection of Indebtedness and Suits for
Enforcement by Trustee. . . . . . . . . . . . . . . .44
Section 5.04. Trustee May File Proofs of Claims . . . . . . . . . .45
Section 5.05. Trustee May Enforce Claims Without Possession
of Notes. . . . . . . . . . . . . . . . . . . . . . .45
Section 5.06. Application of Money Collected. . . . . . . . . . . .45
Section 5.07. Limitation on Suits . . . . . . . . . . . . . . . . .46
Section 5.08. Unconditional Right of Holders To Receive Principal,
Premium and Interest. . . . . . . . . . . . . . . . .47
Section 5.09. Restoration of Rights and Remedies. . . . . . . . . .47
Section 5.10. Rights and Remedies Cumulative. . . . . . . . . . . .47
Section 5.11. Delay or Omission Not Waiver. . . . . . . . . . . . .47
Section 5.12. Control by Majority . . . . . . . . . . . . . . . . .47
Section 5.13. Waiver of Past Defaults . . . . . . . . . . . . . . .48
Section 5.14. Undertaking for Costs . . . . . . . . . . . . . . . .48
Section 5.15. Waiver of Stay, Extension or Usury Laws. . . . . . .48
Section 5.16. Unconditional Right of Holders To Receive Payment . .49
</TABLE>
-ii-
<PAGE> 5
<TABLE>
<S> <C> <C>
ARTICLE SIX THE TRUSTEE
Section 6.01. Certain Duties and Responsibilities. . . . . . . . . 49
Section 6.02. Notice of Defaults . . . . . . . . . . . . . . . . . 50
Section 6.03. Certain Rights of Trustee . . . . . . . . . . . . . 50
Section 6.04. Trustee Not Responsible for Recitals,
Dispositions of Notes or Application of
Proceeds Thereof . . . . . . . . . . . . . . . . . . 51
Section 6.05. Trustee and Agents May Hold Notes;
Collections; Etc.. . . . . . . . . . . . . . . . . . 51
Section 6.06. Money Held in Trust . . . . . . . . . . . . . . . . 52
Section 6.07. Compensation and Indemnification of Trustee
and Its Prior Claim. . . . . . . . . . . . . . . . . 52
Section 6.08. Conflicting Interests. . . . . . . . . . . . . . . . 52
Section 6.09. Corporate Trustee Required; Eligibility. . . . . . . 52
Section 6.10. Resignation and Removal; Appointment of
Successor Trustee. . . . . . . . . . . . . . . . . . 53
Section 6.11. Acceptance of Appointment by Successor . . . . . . . 54
Section 6.12. Merger, Conversion, Amalgamation,
Consolidation or Succession to Business. . . . . . . 55
ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY55
Section 7.01. Preservation of Information; Company To Furnish
Trustee Names and Addresses of Holders. . . . . . . 55
Section 7.02. Communications of Holders. . . . . . . . . . . . . . 56
Section 7.03. Reports by Trustee. . .. . . . . . . . . . . . . . . 56
Section 7.04. Reports by Company and Each Guarantor. . . . . . . . 56
ARTICLE EIGHT CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
Section 8.01. Company May Consolidate, etc., Only on
Certain Terms. . . . . . . . . . . . . . . . . . . . 57
Section 8.02. Successor Substituted. . . . . . . . . . . . . . . . 58
ARTICLE NINE SUPPLEMENTAL INDENTURES AND WAIVERS 59
Section 9.01. Supplemental Indentures, Agreements and Waivers
Without Consent of Holders. . . . . . . . . . . . . 59
Section 9.02. Supplemental Indentures, Agreements and Waivers
with Consent of Holders. . . . . . . . . . . . . . . 60
Section 9.03. Execution of Supplemental Indentures, Agreements
and Waivers. . . . . . . . . . . . . . . . . . . . . 61
Section 9.04. Effect of Supplemental Indentures. . . . . . . . . . 62
Section 9.05. Conformity with Trust Indenture Act. . . . . . . . . 62
Section 9.06. Reference in Notes to Supplemental Indentures. . . . 62
Section 9.07. Record Date. . . . . . . . . . . . . . . . . . . . . 62
Section 9.08. Revocation and Effect of Consents. . . . . . . . . . 62
</TABLE>
-iii-
<PAGE> 6
<TABLE>
<S> <C> <C>
ARTICLE TEN COVENANTS
Section 10.01. Payment of Principal, Premium and Interest . . . . . 63
Section 10.02. Maintenance of Officeor Agency. . . . . . . . . . . 63
Section 10.03. Money for Note Payments To Be Held in Trust. . . . . 63
Section 10.04. Corporate Existence. . . . . . . . . . . . . . . . . 65
Section 10.05. Payment of Taxes and Other Claims. . . . . . . . . . 65
Section 10.06. Maintenance of Properties. . . . . . . . . . . . . . 65
Section 10.07. Insurance. . . . . . . . . . . . . . . . . . . . . . 65
Section 10.08. Books and Records. . .. . . . . . . . . . . . . . . 66
Section 10.09. Note Guarantees. . . . . . . . . . . . . . . . . . . 66
Section 10.10. Provision of Financial Statements. . . . . . . . . . 66
Section 10.11. Change of Control Triggering Event . . . . . . . . . 66
Section 10.12. Limitation on Indebtedness . . . . . . . . . . . . . 68
Section 10.13. Statement by Officers as to Default. . . . . . . . . 70
Section 10.14. Limitation on Restricted Payments. . . . . . . . . . 71
Section 10.15. Limitation on Transactions with Affiliates . . . . . 74
Section 10.16. Disposition of Proceeds of Asset Sales . . . . . . . 75
Section 10.17. Limitation on Liens. . . . . . . . . . . . . . . . . 78
Section 10.18. Limitation on Guarantees by Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . 78
Section 10.19. Restrictions on Preferred Stock of Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . 79
Section 10.20. Limitation on Dividends and
Other Payment Restrictions Affecting Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . 79
Section 10.21. Limitation on Designations of Unrestricted
Subsidiaries . . . . . . . . . . . . . . . . . . . . 80
Section 10.22. Compliance Certificates and Opinions . . . . . . . . 81
Section 10.23. Application of Fall Away Covenants . . . . . . . . . 82
ARTICLE ELEVEN SATISFACTION AND DISCHARGE
Section 11.01. Satisfaction and Discharge of Indenture . . . . . . 82
Section 11.02. Application of Trust Money . . . . . . . . . . . . . 83
ARTICLE TWELVE GUARANTEE OF NOTES
Section 12.01. Unconditional Guarantee. . . . . . . . . . . . . . . 83
Section 12.02. Execution and Delivery of Note Guarantee . . . . . . 84
Section 12.03. Additional Guarantors. . . . . . . . . . . . . . . . 85
Section 12.04. Release of a Guarantor . . . . . . . . . . . . . . . 85
Section 12.05. Waiver of Subrogation . . . . . . . . . . . . . . . 85
Section 12.06. Reliance on Judicial Order or Certificate of
Liquidating Agent Regarding Dissolution, etc.
of Guarantors . . . . . . . . . . . . . . . . . . . 86
Section 12.07. Article Twelve Applicable to Paying Agents . . . . . 86
Section 12.08. No Suspension of Remedies. . . . . . . . . . . . . . 87
Section 12.09. Limitation of Subsidiary Guarantor's Liability . . . 87
Section 12.10. Contribution from Other Guarantors . . . . . . . . . 87
</TABLE>
-iv-
<PAGE> 7
<TABLE>
<S> <C> <C>
Section 12.11. Obligations Reinstated. . . . . . . . . . . . . . . .87
Section 12.12. No Obligation To Take Action Against the Company. . .87
Section 12.13. Dealing with the Company and Others . . . . . . . . .88
</TABLE>
-v-
<PAGE> 8
<TABLE>
<S> <C> <C>
Exhibit A-1 - Form of Series A Note
Exhibit A-2 - Form of Series B Note
Exhibit B - Form of Legend for Book-Entry Securities
Exhibit C - Form of Certificate To Be Delivered in Connection with
Transfers to Non-QIB Accredited Investors
Exhibit D - Form of Certificate To Be Delivered in Connection with
Transfers Pursuant to Regulation S
Exhibit E - Form of Note Guarantee
</TABLE>
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<PAGE> 9
INDENTURE, dated as of May 21, 1997, among Proffitt's, Inc., a
corporation incorporated under the laws of the State of Tennessee (the
"Company"), as issuer, the Subsidiary Guarantors named herein ("Guarantors"), as
guarantors, and THE FIRST NATIONAL BANK OF CHICAGO, as trustee (the "Trustee").
RECITALS
The Company has duly authorized the creation of an issue of (i)
8 1/8% Senior Notes due 2004, Series A, and (ii) 8 1/8% Senior Notes due 2004,
Series B, to be issued in exchange for the 8 1/8% Senior Notes due 2004, Series
A, pursuant to the Registration Rights Agreement (the "Notes", such term to
include the Initial Notes, the Private Exchange Notes, if any, and the
Unrestricted Notes, if any, treated as a single class of securities under this
Indenture), of substantially the tenor and amount hereinafter set forth, and to
provide therefor the Company has duly authorized the execution and delivery of
this Indenture.
The Guarantors have duly authorized their senior guarantee of
the Notes and to provide therefor, the Guarantors have duly authorized the
execution and delivery of this Indenture and their Note Guarantees (as
hereinafter defined) under the terms set forth herein.
All things necessary have been done to make the Notes and the
Note Guarantees, when executed by the Company and the Guarantors, respectively,
and authenticated and delivered hereunder and duly issued by the Company and the
Guarantors, respectively, the valid obligations of the Company and the
Guarantors and to make this Indenture a valid agreement of each of the Company,
the Guarantors and the Trustee in accordance with the terms hereof.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders (as hereinafter defined) of the
Notes, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions.
"Accounts Receivable Subsidiary" means Younkers Credit
Corporation and Proffitt's Credit Corporation and any other present or future
Subsidiary (including any credit card bank) of the Company that is, directly or
indirectly, wholly owned by the Company (other than director qualifying shares)
and organized for the purpose of and engaged in (i) purchasing, financing, and
collecting accounts receivable obligations of customers of the Company or its
Subsidiaries, (ii) issuing credit cards and financing accounts receivable
obligations of customers of
<PAGE> 10
the Company and its Subsidiaries, (iii) the sale or financing of such accounts
receivable or interests therein and (iv) other activities incident thereto.
"Acquired Indebtedness" means, with respect to any specified
Person Indebtedness of any other Person (i) assumed in connection with an Asset
Acquisition from such Person or (ii) existing at the time such Person becomes a
Restricted Subsidiary of any other Person (other than any Indebtedness incurred
in connection with, or in contemplation of, such Asset Acquisition or such
Person becoming such a Restricted Subsidiary).
"Affiliate" means, with respect to any specified Person, any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person (other than the G.R.
Herberger's 401(k) Employee Stock Purchase Plan and Employment Stock Ownership
Plan). For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of Voting
Stock, by contract or otherwise; and the terms "controlling" and "controlled"
have meanings correlative to the foregoing.
"Asset Acquisition" means (i) an Investment by the Company or
any Restricted Subsidiary in any other Person pursuant to which such Person will
become a Restricted Subsidiary or will be merged or consolidated with or into
the Company or any Restricted Subsidiary or (ii) the acquisition by the Company
or any Restricted Subsidiary of the assets of any Person which constitute
substantially all of the assets of such Person, or any division or line of
business of such Person, or which is otherwise outside of the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance,
conveyance or transfer or other disposition (including, without limitation, any
merger, consolidation or sale-leaseback transaction) to any Person other than
the Company or a Restricted Subsidiary, in one or a series of related
transactions, of (i) any Capital Stock of any Restricted Subsidiary; (ii) all or
substantially all of the assets of any division or line of business of the
Company or any Restricted Subsidiary; or (iii) any other properties or assets of
the Company or any Restricted Subsidiary other than in the ordinary course of
business. For the purposes of this definition, the term "Asset Sale" will not
include (a) any sale, issuance, conveyance, transfer, lease or other disposition
of properties or assets that is governed by the first paragraph of Section 8.01;
(b) sales of surplus and other property or equipment that has become worn out,
obsolete or damaged or otherwise unsuitable for use in connection with the
business of the Company or any Restricted Subsidiary, as the case may be; or (c)
any transaction consummated in compliance with Section 10.14. For purposes of
Section 10.16, the term "Asset Sale" shall not include any sale, conveyance,
transfer, lease or other disposition of (x) any property or asset, whether in
one transaction or a series of related transactions (1) constituting a
Capitalized Lease Obligation or a transfer consisting solely of a grant of a
security interest permitted by the Indenture or (2) involving assets with a Fair
Market Value not in excess of $1.0 million, (y) accounts receivable to an
Accounts Receivable Subsidiary or to third parties that are not Affiliates of
the Company or any Subsidiary of the Company in the ordinary course of business
or (z) the sale, transfer or other disposition of shares of Capital Stock or
Indebtedness of an Unrestricted Subsidiary or Permitted Investments (other
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<PAGE> 11
than Permitted Investments of the type described under clause (f) of the
definition thereof) to a third party that is not an Affiliate of the Company or
any Subsidiary of the Company.
"Average Life to Stated Maturity" means, with respect to any
Indebtedness, as at any date of determination, the quotient obtained by dividing
(i) the sum of the products of (a) the number of years from such date to the
date or dates of each successive scheduled principal payment (including, without
limitation, any sinking fund requirements) of such Indebtedness multiplied by
(b) the amount of each such principal payment by (ii) the sum of all such
principal payments.
"Bankruptcy Law" means Title 11, United States Code or any
similar federal or state law relating to bankruptcy, insolvency, receivership,
winding-up, liquidation, reorganization or relief of debtors or the law of any
other jurisdiction relating to bankruptcy, insolvency, receivership, winding-up,
liquidation, reorganization or relief of debtors or any amendment to, succession
to or change in any such law.
"Bankruptcy Order" means any court order made in a proceeding
pursuant to or within the meaning of any Bankruptcy Law, containing an
adjudication of bankruptcy or insolvency, or providing for liquidation,
receivership, winding-up, dissolution, "concordate" or reorganization, or
appointing a Custodian of a debtor or of all or any substantial part of a
debtor's property, or providing for the staying, arrangement, adjustment or
composition of indebtedness or other relief of a debtor.
"Board of Directors" means the board of directors of the
Company or any Guarantor, as the case may be, or any duly authorized committee
of such board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company or any Guarantor, as the
case may be, to have been duly adopted by its respective Board of Directors and
to be in full force and effect on the date of such certification, and delivered
to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in The City of New
York, State of New York or Charlotte, North Carolina are authorized or obligated
by law, regulation or executive order to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations, rights in or other equivalents (however
designated) of such Person's capital stock, any other interest or participation
that confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person and any rights (other than
debt securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation under a
lease of (or other agreement conveying the right to use) any property (whether
real, personal or mixed ) that is required to be classified and accounted for as
a capital lease obligation under GAAP, and, for the
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<PAGE> 12
purpose of the Indenture, the amount of such obligation at any date shall be the
capitalized amount thereof at such date, determined in accordance with GAAP
consistently applied.
"Cash Equivalents" means, at any time, (i) any evidence of
Indebtedness with a maturity of not more than one year issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof); (ii) certificates of deposit,
Eurodollar time deposits or bankers' acceptances with a maturity of not more
than one year of any financial institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of not
less than $500.0 million; (iii) commercial paper with a maturity of not more
than one year issued by a corporation that is not an Affiliate of the Company
organized under the laws of any state of the United States or the District of
Columbia and rated at least A-1 by Standard & Poor's Ratings Group, at least P-1
by Moody's Investors Service, Inc. the equivalent of any such category of
Standard & Poor's Ratings Group or Moody's Investor Services, Inc. used by
another nationally recognized Rating Agency; (iv) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clauses (i) and (ii) above; and (v) transaction deposit accounts
with domestic commercial banks.
"Cedel" means Cedel Bank, Societe anonyme.
"Change of Control" means the occurrence of any of the
following events (whether or not approved by the Board of Directors of the
Company): (i) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person will be
deemed to have "beneficial ownership" of all securities that such Person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 35% of the total
voting power of the then outstanding Voting Stock of the Company; (ii) the
Company consolidates with, or merges with or into, another Person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, other than any such transaction
where the holders of the Voting Stock of the Company immediately prior to such
transaction own, directly or indirectly, not less than a majority of the total
voting power of the then outstanding Voting Stock of the surviving or transferee
corporation immediately after such transaction and the preceding clause (i) is
not applicable; (iii) during any consecutive two-year period, individuals who at
the beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such board or whose
nomination for election by the stockholders of the Company was approved by a
vote of 66 2/3% of the directors then still in office who were either directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office; or (iv) any order, judgment or
decree shall be entered against the Company decreeing the dissolution or
liquidation of the Company and such order shall remain undischarged or unstayed
for a period in excess of sixty days.
"Change of Control Triggering Event" means the occurrence of
both a Change of Control and a Rating Decline.
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<PAGE> 13
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, or if at any time after the execution of this
Indenture such Commission is not existing and performing the applicable duties
now assigned to it, then the body or bodies performing such duties at such time.
"Company" means the person named as the "Company" in the first
paragraph of this Indenture, until a successor person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor person.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by any one of its Chairman of the Board,
its Vice-Chairman, its Chief Executive Officer, its President or a Vice
President, and by its Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and delivered to the Trustee.
"Consolidated Cash Flow Available for Fixed Charges" means, for
any period, (i) the sum of, without duplication, the amounts for such period,
taken as a single accounting period, of (a) Consolidated Net Income, (b) to the
extent reducing Consolidated Net Income, Consolidated Non-cash Charges, (c) to
the extent reducing Consolidated Net Income, Consolidated Interest Expense, and
(d) to the extent reducing Consolidated Net Income, Consolidated Income Tax
Expense less (ii)(A) all non-cash items increasing Consolidated Net Income for
such period and (B) all cash payments during such period relating to non-cash
charges that were added back in determining Consolidated Cash Flow Available for
Fixed Charges in any prior period.
"Consolidated Fixed Charge Coverage Ratio" means the ratio of
the aggregate amount of Consolidated Cash Flow Available for Fixed Charges of
the Company for the four full fiscal quarters immediately preceding the date of
the transaction for which consolidated financial information of the Company is
available (the "Transaction Date") giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio (such four full fiscal quarter period
being referred to herein as the "Four Quarter Period") to the aggregate amount
of Consolidated Fixed Charges of the Company for such Four Quarter Period. For
purposes of this definition, "Consolidated Cash Flow Available for Fixed
Charges" and "Consolidated Fixed Charges" will be calculated, without
duplication, after giving effect on a pro forma basis for the period of such
calculation to (i) the incurrence of any Indebtedness of the Company or any of
the Restricted Subsidiaries during the period commencing on the first day of the
Four Quarter Period to and including the Transaction Date (the "Reference
Period"), including, without limitation, the incurrence of the Indebtedness
giving rise to the need to make such calculation, as if such incurrence occurred
on the first day of the Reference Period, (ii) an adjustment to eliminate or
include, as applicable, the Consolidated Cash Flow Available for Fixed Charges
and Consolidated Fixed Charges of the Company directly attributable to assets
which are the subject of any Asset Sale or Asset Acquisition (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company or one of the Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness) occurring during the Reference Period, as if such Asset Sale or
Asset Acquisition occurred on the first day of the Reference Period, (iii) the
retirement of Indebtedness during the Reference Period which cannot
-5-
<PAGE> 14
thereafter be reborrowed occurring as if retired on the first day of the
Reference Period and (iv) an adjustment to eliminate the Restructuring Charges.
For purposes of calculating "Consolidated Fixed Charges" for this "Consolidated
Fixed Charge Coverage Ratio," interest on Indebtedness incurred during the
Reference Period under any revolving credit facility which may be borrowed and
repaid without reducing the commitments thereunder shall be the actual interest
during the Reference Period. Furthermore, in calculating "Consolidated Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio," (1) interest on Indebtedness
determined on a fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter will be deemed to accrue at a fixed rate
per annum equal to the rate of interest on such Indebtedness in effect on the
Transaction Date; (2) if interest on any Indebtedness actually incurred on the
Transaction Date may optionally be determined on a fluctuating basis like prime
or a similar rate or a factor thereof, a eurocurrency interbank offered rate, or
other rates, then the interest rate in effect on the Transaction Date shall be
deemed to have been in effect during the Reference Period; and (3)
notwithstanding clause (1) above, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by agreements relating
to Interest Rate Protection Obligations, will be deemed to accrue at the rate
per annum resulting after giving effect to the operation of such agreements. If
the Company or any Restricted Subsidiary directly or indirectly guarantees
Indebtedness of a third Person, the above definition will give effect to the
incurrence of such guaranteed Indebtedness as if the Company or any Restricted
Subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"Consolidated Fixed Charges" means, for any period, the sum of,
without duplication, the amounts for such period of (i) Consolidated Interest
Expense; and (ii) the product of (x) the aggregate amount of cash dividends and
other distributions paid, accrued or scheduled to be paid or accrued during such
period in respect of Redeemable Capital Stock times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the
then-current effective consolidated federal, state and local tax rate of such
Person expressed as a decimal.
"Consolidated Income Tax Expense" means, for any period, the
provision for federal, state, local and foreign income taxes payable by the
Company and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, without
duplication, the sum of (a) the interest expense of the Company and the
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP, including, without limitation, (i) any amortization of
debt discount attributable to such period, (ii) the net cost under Interest Rate
Protection Obligations (including any amortization of discounts), (iii) the
interest portion of any deferred payment obligation, (iv) all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and (v) all capitalized interest and all accrued
interest, and (b) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by the Company and the Restricted
Subsidiaries during such period and as determined on a consolidated basis in
accordance with GAAP.
-6-
<PAGE> 15
"Consolidated Net Income" means, for any period, the
consolidated net income (or net loss) of the Company and the Restricted
Subsidiaries for such period as determined in accordance with GAAP, adjusted, to
the extent included in calculating such net income, by excluding, without
duplication, (i) all extraordinary gains or losses (net of fees and expenses
relating to the transaction giving rise thereto), (ii) income of the Company and
the Restricted Subsidiaries derived from or in respect of Investments in
Unrestricted Subsidiaries, except to the extent that cash dividends or
distributions are actually received by the Company or a Restricted Subsidiary,
(iii) the portion of net income (or net loss) of the Company and the Restricted
Subsidiaries allocable to minority interests in unconsolidated Persons, except
to the extent that cash dividends or distributions are actually received by the
Company or one of the Restricted Subsidiaries, (iv) net income (or net loss) of
any Person combined with the Company or one of the Restricted Subsidiaries on a
"pooling of interests" basis attributable to any period prior to the date of
combination, (v) gains or losses in respect of any Asset Sales by the Company or
any of the Restricted Subsidiaries (on an after-tax basis and net of fees and
expenses relating to the transaction giving rise thereto), and (vi) the net
income of any Restricted Subsidiary to the extent that the declaration of
dividends or similar distributions by that Restricted Subsidiary of that income
is not at the time permitted, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulations applicable to that Restricted Subsidiary or its
stockholders.
"Consolidated Non-cash Charges" means, for any period, the
aggregate depreciation, amortization and other noncash expenses of the Company
and the Restricted Subsidiaries reducing Consolidated Net Income for such period
(other than any non-cash item requiring an accrual or reserve for cash
disbursements in any future period), determined on a consolidated basis in
accordance with GAAP.
"control" means, with respect to any specified person, the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of Voting Stock, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Corporate Trust Office" means the office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at One First National Plaza, Suite 1026, Chicago, Illinois 60670-0126,
Attention: Corporate Trust Administration except for purposes of Section 3.02
and 10.02. For purposes of such sections, such office is located at 14 Wall
Street, 8th Floor, New York, New York 10005.
"Credit Facility" means the Credit Agreement dated as of
October 11, 1996, among the Company, NationsBank of Texas, National Association,
as Agent, and the other financial institutions signatory thereto, as in effect
on the Issue Date, and as such agreement may be amended, renewed, extended,
substituted, refinanced, replaced, supplemented or otherwise modified from time
to time, and includes related notes, guarantees and other agreements executed in
connection therewith.
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<PAGE> 16
"Currency Agreement" means the obligations of any Person
pursuant to any foreign exchange contract, currency swap agreement or other
similar agreement or arrangement designed to protect the Company or any
Restricted Subsidiary against fluctuations in currency values.
"Custodian" means any receiver, interim receiver, receiver
and manager, receiver-manager, trustee, assignee, liquidator, sequestrator or
similar official under any Bankruptcy Law or any other law respecting secured
creditors and the enforcement of their security or any other person with like
powers whether appointed judicially or out of court and whether pursuant to an
interim or final appointment.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Depository" means The Depository Trust Company, its nominees and successors.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels Office, as operator of the Euroclear System.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the Commission thereunder.
"Exchange Notes" means the 8 1/8% Senior Notes due 2004, Series
B, to be issued in exchange for the Initial Notes pursuant to the Registration
Rights Agreement.
"Exchange Offer" shall have the meaning specified in the
Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset, the price
which could be negotiated in an arm's- length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under pressure
or compulsion to complete the transaction. Fair Market Value shall be determined
by the Board of Directors of the Company acting in good faith conclusively
evidenced by a board resolution thereof delivered to the Trustee or, with
respect to any asset valued at up to $1.0 million, such determination may be
made by a duly authorized officer of the Company evidenced by an officer's
certificate delivered to the Trustee.
"Foreign Subsidiary" means a Restricted Subsidiary not
organized or existing under the laws of the United States, any state thereof,
the District of Columbia or any territory thereof.
"Four Quarter Period" has the meaning set forth in the
definition of "Consolidated Fixed Charge Coverage Ratio."
"GAAP" means, at any date of determination, generally accepted
accounting principles in effect in the United States which are applicable at the
date of determination and which are consistently applied for all applicable
periods.
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<PAGE> 17
"Global Notes" means one or more Regulation S Global Notes and
144A Global Notes.
"guarantee" means, as applied to any obligation, (i) a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any part
or all of such obligation and (ii) an agreement, direct or indirect, contingent
or otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit. A guarantee shall include,
without limitation, any agreement to maintain or preserve any other Person's
financial condition or to cause any other Person to achieve certain levels of
operating results.
"Guarantor" means (i) each of G.R. Herberger's, Inc., Parisian,
Inc., McRae's, Inc., McRae's Stores Partnership, McRae's of Alabama, Inc., and
their respective successors and (ii) each other Subsidiary formed, created or
acquired before or after the Issue Date required to become a Guarantor after the
Issue Date pursuant to Section 10.18.
"Holder" or "Noteholder" means a Person in whose name a Note is
registered in the Note Register.
"Indebtedness" means, with respect to any Person, without
duplication, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, excluding any trade payable
and other accrued current liabilities incurred in the ordinary course of
business, but including, without limitation, all obligations, contingent or
otherwise, of such Person in connection with any letters of credit (but
excluding obligations with respect to trade letters of credit to the extent
such trade letters of credit are not drawn upon or, if drawn upon, to the
extent such drawing is reimbursed not later than the third Business Day
following receipt by such Person of a demand for reimbursement), bankers'
acceptances or other similar credit transaction and in connection with any
agreement obligating such Person to purchase, redeem, exchange, convert or
otherwise acquire for value any Capital Stock of such Person, or any warrants,
rights or options to acquire such Capital Stock, now or hereafter outstanding,
(ii) all obligations of such Person evidenced by bonds, notes, debentures or
other similar instruments, (iii) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even if the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), but excluding trade accounts payable arising in the
ordinary course of business, (iv) all Capitalized Lease Obligations of such
Person, (v) all Indebtedness referred to in the preceding clauses of other
Persons and all dividends of other Persons, the payment of which is secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien upon property (including, without
limitation, accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness (the amount of such obligation being deemed to be the lesser of
the value of such property or asset or the amount of the obligation so
secured), (vi) all guarantees by such Person of Indebtedness of another Person
(other than guarantees of operating leases of a Restricted Subsidiary of such
Person), (vii) all
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<PAGE> 18
Redeemable Capital Stock valued at its involuntary maximum fixed repurchase
price plus accrued and unpaid dividends, (viii) all net payment obligations
under or in respect of Currency Agreements and Interest Rate Protection
Obligations of such Person, and (ix) any amendment, supplement, modification,
deferral, renewal, extension or refunding of any liability of the types referred
to in clauses (i) through (viii) above. For purposes hereof, the "maximum fixed
repurchase price" of any Redeemable Capital Stock which does not have a fixed
repurchase price will be calculated in accordance with the terms of such
Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on
any date on which Indebtedness will be required to be determined pursuant to the
Indenture, and if such price is based upon, or measured by, the Fair Market
Value of such Redeemable Capital Stock, such Fair Market Value to be determined
in good faith by the Board of Directors of the issuer of such Redeemable Capital
Stock. Sales (on a "true-sale" non-recourse basis) and the servicing of
receivables transferred from the Company or a Restricted Subsidiary, or
transfers of cash, to an Accounts Receivable Subsidiary as a capital
contribution or in exchange for Indebtedness of such Accounts Receivable
Subsidiary or cash shall not be deemed Indebtedness hereunder.
"Indenture" means this instrument as originally executed
(including all exhibits and schedules hereto) and as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof.
"Indenture Obligations" means the obligations of the Company
and any other obligor under this Indenture or under the Notes, to pay principal
of, premium, if any, and interest on the Notes when due and payable, whether at
maturity, by acceleration, call for redemption or repurchase or otherwise, and
all other amounts due or to become due under or in connection with this
Indenture, the Notes or the Note Guarantees and the performance of all other
obligations to the Trustee (including, but not limited to, payment of all
amounts due the Trustee under Section 6.07 hereof) and the Holders of the Notes
under this Indenture, the Notes and the Note Guarantees, according to the terms
thereof.
"Initial Notes" means the 8 1/8% Senior Notes due 2004, Series
A, of the Company.
"Initial Purchasers" means Merrill Lynch, Goldman Sachs & Co.
and Smith Barney Inc.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"interest," when used with respect to any Note, means the
amount of all interest accruing on such Note, including all additional interest
payable on the Notes pursuant to the Registration Rights Agreement and all
interest accruing subsequent to the occurrence of any events specified in
Sections 5.01(h), (i) and (j) or which would have accrued but for any such
event, whether or not such claims are allowable under applicable law.
"Interest Payment Date" means, when used with respect to any
Note, the Stated Maturity of an installment of interest on such Note, as set
forth in such Note.
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<PAGE> 19
"Interest Rate Protection Obligations" means the obligations of
any Person pursuant to any arrangement with any other Person whereby, directly
or indirectly, such Person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person
calculated by applying a fixed or a floating rate of interest on the same
notional amount or any other arrangement involving payments by or to such Person
based upon fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or
indirect advance, loan or other extension of credit (including by means of a
guarantee) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others or otherwise), or any purchase or acquisition by such Person of
any Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued by any other Person. Investments shall exclude extensions of
trade credit in accordance with normal trade practices. In addition to the
foregoing, any foreign exchange contract, Currency Agreement, Interest Rate
Protection Obligation or similar agreement shall constitute an Investment.
"Investment Grade Rating" means a rating of BBB-- and Baa3 or
higher, in each case by the applicable Rating Agency, or the equivalents
thereof.
"Issue Date" means the original issue date of the Notes
hereunder.
"Leveraged Subsidiary" means any Restricted Subsidiary that has
incurred Indebtedness (other than Acquired Indebtedness pursuant to the first
paragraph of Section 10.12 and Indebtedness described in clauses (iv), (v),
(vii), (viii), (ix) and (xi) of the second paragraph of Section 10.12 and any
permitted refinancings or replacements thereof incurred under clause (x))
pursuant to such covenant for so long as such Indebtedness, or any refinancing
thereof, is outstanding.
"Lien" means any mortgage, charge, pledge, lien (statutory or
other), privilege, security interest, hypothecation, cessation and transfer,
assignment for security, claim, deposit arrangement or other encumbrance upon or
with respect to any property of any kind, whether real, personal or mixed,
movable or immovable, now owned or hereafter acquired. A Person will be deemed
to own subject to a Lien any property which it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement,
Capitalized Lease Obligation or other title retention agreement.
"Material Subsidiary" means each Restricted Subsidiary of the
Company that is a "significant subsidiary" as defined in Rule 1-02 of Regulation
S-X under the Securities Act and the Exchange Act (as such regulation is in
effect on the Issue Date).
"Maturity Date" means, with respect to any Note, the date on
which any principal of such Note becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
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<PAGE> 20
"Merrill Lynch" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents (except to the extent that such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary) net of (i)
brokerage commissions and other reasonable fees and expenses (including fees and
expenses of legal counsel and investment bankers) related to such Asset Sale,
(ii) provisions for all taxes payable as a result of such Asset Sale, (iii)
amounts required to be paid to any Person (other than the Company or any
Restricted Subsidiary) owning a beneficial interest in the assets subject to the
Asset Sale and (iv) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve required in accordance
with GAAP consistently applied against any liabilities associated with such
Asset Sale and retained by the Company or any Restricted Subsidiary, as the case
may be, after such Asset Sale, including, without limitation, pension and other
postemployment benefit liabilities, liabilities related to environmental matters
and liabilities under any indemnification obligations associated with such Asset
Sale (provided that the amount of any such reserves shall be deemed to
constitute Net Cash Proceeds at the time such reserves shall have been released
or are not otherwise required to be retained as a reserve).
"Non-U.S. Person" has the meaning assigned to such term in
Regulation S.
"Note Guarantee" means the guarantee by each of the Guarantors
of the Notes and the Company's obligations under this Indenture.
"Notes" shall have the meaning specified in the recitals of this Indenture.
"Offering Memorandum" means the Offering Memorandum dated May
15, 1997 pursuant to which the Notes and the Note Guarantees were offered, and
any supplement thereto.
"Officer" means, with respect to the Company or any Guarantor,
the Chairman of the Board, a Vice Chairman, the President, a Vice President, the
Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, a Vice Chairman, the President or a Vice President, and
by the Secretary, an Assistant Secretary, the Treasurer or an Assistant
Treasurer, of the Company or any Guarantor, as the case may be, and delivered to
the Trustee.
"144A Global Note" means a permanent global note in registered
form representing the aggregate principal amount of Notes sold in reliance on
Rule 144A under the Securities Act.
"Opinion of Counsel" means a written opinion of counsel who may
be counsel for the Company, a Guarantor, or the Trustee, and who shall be
reasonably acceptable to the Trustee.
"Outstanding" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture, except:
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<PAGE> 21
(I) Notes theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(II) Notes, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore
deposited with the Trustee or any Paying Agent (other than the Company
or any Guarantor or any Affiliate thereof) in trust or set aside and
segregated in trust by the Company or any Guarantor or any Affiliate
thereof (if the Company or such Guarantor or Affiliate shall act as
Paying Agent) for the Holders of such Notes; provided, however, that
if such Notes are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;
(III) Notes with respect to which the Company has effected
defeasance or covenant defeasance as provided in Article Four, to the
extent provided in Sections 4.02 and 4.03; and
(IV) Notes in exchange for or in lieu of which other Notes
have been authenticated and delivered pursuant to this Indenture,
other than any such Notes in respect of which there shall have been
presented to the Trustee proof satisfactory to it that such Notes are
held by a bona fide purchaser in whose hands the Notes are valid
obligations of the Company; provided, however, that in determining
whether the Holders of the requisite principal amount of Outstanding
Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, Notes owned by the Company, any
Guarantor or any other obligor upon the Notes or any Affiliate of the
Company, any Guarantor or such other obligor shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes that a
Responsible Officer of the Trustee knows to be so owned shall be so
disregarded. The Company shall notify the Trustee, in writing, when it
repurchases or otherwise acquires Notes, of the aggregate principal
amount of such Notes so repurchased or otherwise acquired. Notes so
owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Notes and
that the pledgee is not the Company, any Guarantor or any other
obligor upon the Notes or any Affiliate of the Company, any Guarantor
or such other obligor. If the Paying Agent holds, in its capacity as
such, on any Maturity Date or on any optional redemption date money
sufficient to pay all accrued interest and principal with respect to
such Notes payable on that date and is not prohibited from paying such
money to the Holders thereof pursuant to the terms of this Indenture,
then on and after that date such Notes cease to be Outstanding and
interest on them ceases to accrue. Notes may also cease to be
outstanding to the extent expressly provided in Article Four.
"Parisian Notes" means the 9 7/8% Senior Subordinated Notes
due 2003 of Parisian.
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<PAGE> 22
"Permitted Investment" means (a) Cash Equivalents; (b)
Investments in prepaid expenses, negotiable instruments held for collection and
lease, utility and workers' compensation, performance and other similar
deposits; (c) loans, extensions of credit and advances to officers, directors
and employees which are outstanding on the Issue Date or which do not exceed
$7.5 million in the aggregate at any one time outstanding and payroll, travel
and similar advances to cover matters that are expected at the time of such
advances ultimately to be treated as expenses in accordance with GAAP; (d)
Interest Rate Protection Obligations permitted under clause (vii) of the second
paragraph of Section 10.12 and Currency Agreements; (e) Investments by any
Restricted Subsidiary in the Company; (f) Investments by the Company or any
Restricted Subsidiary in a Restricted Subsidiary that is a Guarantor or another
Person, if as a result of or in connection with such Investment such other
Person becomes a Restricted Subsidiary; (g) Investments represented by accounts
receivable created or acquired in the ordinary course of business; (h)
Investments in the form of the sale (on a "true-sale" non-recourse basis) or the
servicing of receivables transferred from the Company or any Restricted
Subsidiary, or transfers of cash, to an Accounts Receivable Subsidiary as a
capital contribution or in exchange for Indebtedness of such Accounts Receivable
Subsidiary or cash in the ordinary course of business; (i) Investments
representing capital stock or obligations issued to the Company or any
Restricted Subsidiary in settlement of claims against any other Person by reason
of a composition or readjustment of debt or a reorganization of any debtor of
the Company or such Restricted Subsidiary; (j) loans or other advances to
vendors in connection with in-store merchandising to be repaid either on a
lump-sum basis or over a period of time by delivery of merchandise; (k)
Investments in credit card receivables arising from any proprietary credit card
issued by or for the benefit of the Company or an Affiliate of the Company; and
(l) Investments acquired by the Company or any Restricted Subsidiary in
connection with an Asset Sale permitted under Section 10.16 (other than pursuant
to the second sentence of the first paragraph thereof).
"Permitted Liens" means (a) Liens on property of (or on shares
of Capital Stock or debt securities of) a Person existing at the time such
Person (i) is merged into or consolidated with the Company or any Restricted
Subsidiary or (ii) becomes a Restricted Subsidiary; provided, however, that such
Liens were in existence prior to the contemplation of such merger, consolidation
or acquisition and do not secure any property or assets of the Company or any
Restricted Subsidiary other than the property or assets subject to the Liens
prior to such merger, consolidation or acquisition; (b) Liens imposed by law
such as landlords', carriers', warehousemen's and mechanics' Liens and other
similar Liens arising in the ordinary course of business which secure payment of
obligations not more than 60 days past due or which are being contested in good
faith and by appropriate proceedings; (c) Liens existing on the Issue Date; (d)
Liens securing only the Notes; (e) Liens in favor of the Company or Liens on any
property or assets of a Subsidiary (or on shares of Capital Stock or debt
securities of a Subsidiary) in favor of the Company or any Restricted
Subsidiary; (f) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent for more than 90 days or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded; provided, however, that any reserve or other appropriate provision as
shall be required in conformity with GAAP shall have been made therefor; (g)
easements, reservation of rights of way, restrictions and other similar
easements, licenses, restrictions on the use of properties, or imperfections of
title that in the aggregate are not material in amount and do not in any case
materially detract from the
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<PAGE> 23
properties subject thereto or interfere with the ordinary conduct of the
business of the Company and the Restricted Subsidiaries; (h) Liens resulting
from the deposit of cash or notes in connection with contracts, tenders or
expropriation proceedings, or to secure workers' compensation, surety or appeal
bonds, costs of litigation when required by law, public and statutory
obligations, obligations under franchise arrangements entered into in the
ordinary course of business and other obligations of a similar nature arising in
the ordinary course of business; (i) Liens securing any revolving credit
facility under the Credit Facility; (j) Liens securing Indebtedness consisting
of Capitalized Lease Obligations, Purchase Money Indebtedness (other than
Indebtedness incurred to finance an Asset Acquisition), mortgage financings,
industrial revenue bonds or other monetary obligations, in each case incurred
solely for the purpose of financing all or any part of the purchase price or
cost of construction or installation of assets used in the business of the
Company or the Restricted Subsidiaries, or repairs, additions or improvements to
such assets; provided, however, that (I) such Liens secure Indebtedness in an
amount not in excess of the original purchase price or the original cost of any
such assets or repair, addition or improvement thereto (plus an amount equal to
the reasonable fees and expenses in connection with the incurrence of such
Indebtedness), (II) such Liens do not extend to any other assets of the Company
or the Restricted Subsidiaries (and, in the case of repair, addition or
improvements to any such assets, such Lien extends only to the assets (and
improvements thereto or thereon) repaired, added to or improved), (III) the
incurrence of such Indebtedness is permitted by Section 10.12 and (IV) such
Liens attach prior to 90 days after such purchase, construction, installation,
repair, addition or improvement; (k) Liens to secure any Refinancings (or
successive Refinancings), in whole or in part, of any Indebtedness secured by
Liens referred to in the clauses above so long as such Lien does not extend to
any other property (other than improvements thereto); (l) Liens securing letters
of credit entered into in the ordinary course of business and consistent with
past business practice; (m) Liens on and pledges of the capital stock of (A) any
Unrestricted Subsidiary securing any Indebtedness of such Unrestricted
Subsidiary and (B) an Accounts Receivable Subsidiary; (n) leases or subleases
granted to others that do not materially interfere with the ordinary course of
business of the Company and the Restricted Subsidiaries, taken as a whole; (o)
any interest or title of a lessor in any property that is (i) subject to any
lease or (ii) located on the real property subject to any lease; (p) Liens
arising from the rendering of a final judgment or order against the Company or
any Restricted Subsidiary that does not give rise to an Event of Default; (q)
Liens arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into by the Company or any Restricted
Subsidiary in the ordinary course of business and (r) Liens on the property or
assets or Capital Stock of Accounts Receivable Subsidiaries and Liens arising
out of any sale of accounts receivable in the ordinary course to or by an
Accounts Receivable Subsidiary.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Predecessor Note" means, with respect to any particular Note,
every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purposes of this definition, any
Note authenticated and delivered under Section 3.06 hereof in exchange for a
mutilated Note or in lieu of a lost, destroyed or stolen Note shall be deemed to
evidence the same debt as the mutilated, lost, destroyed or stolen Note.
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<PAGE> 24
"Preferred Stock" means, with respect to any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends or distributions, or as to the distribution of
assets upon any voluntary or involuntary liquidation or dissolution of such
Person, over Capital Stock of any other class of such Person.
"Private Exchange Securities" shall have the meaning specified
in the Registration Rights Agreement.
"Private Placement Legend" shall mean the first paragraph of
the legend initially set forth in the Securities in the form set forth on
Exhibit A-1.
"Purchase Money Indebtedness" means Indebtedness of the Company
or any Restricted Subsidiary incurred for the purpose of financing all or any
part of the purchase price or the cost of construction or improvement of any
real or personal property; provided, however, that the aggregate principal
amount of such Indebtedness does not exceed the lesser of the Fair Market Value
of such property or the original purchase price or the original cost of any such
assets or repair, addition or improvement thereto (plus an amount equal to the
reasonable fees and expenses in connection with the incurrence of such
Indebtedness).
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
"Rating Agencies" means (i) Standard & Poor's Ratings Group and
(ii) Moody's Investors Service, Inc. or (iii) if Standard & Poor's Ratings Group
or Moody's Investors Service, Inc. or both shall not make a rating of the Notes
publicly available, a nationally recognized securities rating agency or
agencies, as the case may be, selected by the Company, which shall be
substituted for Standard & Poor's Ratings Group, Moody's Investors Service, Inc.
or both, as the case may be.
"Rating Category" means (i) with respect to Standard & Poor's
Ratings Group, any of the following categories: BB, B, CCC, CC, C and D (or
equivalent successor categories); (ii) with respect to Moody's Investors
Service, Inc., any of the following categories: Ba, B, Caa, Ca, C and D (or
equivalent successor categories); and (iii) the equivalent of any such category
of Standard & Poor's Ratings Group or Moody's Investors Service, Inc. used by
another Rating Agency. In determining whether the rating of the Notes has
decreased by one or more gradations, gradations within Rating Categories (+ and
- -- for Standard & Poor's Ratings Group; 1, 2 and 3 for Moody's Investors
Service, Inc.; or the equivalent gradations for another Rating Agency) shall be
taken into account (e.g., with respect to Standard & Poor's Ratings Group, a
decline in a rating from BB+ to BB, as well as from BB-- to B+, will constitute
a decrease of one gradation).
"Rating Date" means the date which is 90 days prior to the
earlier of (i) a Change of Control and (ii) public notice of the occurrence of a
Change of Control or of the intention by the Company to effect a Change of
Control.
"Rating Decline" means the occurrence of the following on, or
within 90 days after, the earlier of (i) the occurrence of a Change of Control
and (ii) the date of public notice of
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<PAGE> 25
the occurrence of a Change of Control or of the public notice of the intention
of the Company to effect a Change of Control (which period shall be extended so
long as the rating of the Notes is under publicly announced consideration for
possible downgrading by any of the Rating Agencies): (a) in the event that the
Notes have an Investment Grade Rating, the rating of the Notes by both such
Rating Agencies shall be reduced below Investment Grade, or (b) in the event the
Notes are rated below Investment Grade by both such Rating Agencies on the
Rating Date, the rating of the Notes by either Rating Agency shall be decreased
by one or more gradations (including gradations within Rating Categories as well
as between Rating Categories).
"Redeemable Capital Stock" means any class or series of Capital
Stock to the extent that, either by its terms, by the terms of any security into
which it is convertible or exchangeable, or by contract or otherwise, is or upon
the happening of an event or passage of time would be, required to be redeemed
prior to the final stated maturity of the Notes or is redeemable at the option
of the holder thereof at any time prior to such maturity, or is convertible into
or exchangeable for debt securities at any time prior to such maturity.
"Reference Period" has the meaning set forth in the definition
of "Consolidated Fixed Charge Coverage Ratio."
"Refinance" means, with respect to any Indebtedness, any
refinancing, redemption, retirement, renewal, replacement, extension or
refunding of such Indebtedness.
"Registrable Securities" shall have the meaning specified in
the Registration Rights Agreement.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of May 21, 1997 by and among the Company, the Subsidiary
Guarantors named therein and the Initial Purchasers, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof.
"Regular Record Date" means the Regular Record Date specified
in the Notes.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Note" means a permanent global note in
registered form representing the aggregate principal amount of Notes sold in
reliance on Regulation S under the Securities Act.
"Responsible Officer" means, with respect to the Trustee, the
chairman or vice chairman of the board of directors, the chairman or vice
chairman of the executive committee of the board of directors, the president,
any vice president, the secretary, any assistant secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any trust officer or
assistant trust officer, the controller and any assistant controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer of the Trustee to whom
any corporate trust matter is referred because of his or her knowledge of and
familiarity with the particular subject.
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"Restricted Note" means a Note that constitutes a "restricted
security" within the meaning of Rule 144(a)(3) under the Securities Act;
provided, however, that the Trustee shall be entitled to request and
conclusively rely on an Opinion of Counsel with respect to whether any Note
constitutes a Restricted Note.
"Restricted Subsidiary" means any Subsidiary of the Company
that has not been designated by the Board of Directors of the Company, by a
Board Resolution delivered to the Trustee, as an Unrestricted Subsidiary
pursuant to and in compliance with Section 10.21 hereof. Any such designation
may be revoked by a Board Resolution of the Company delivered to the Trustee,
subject to the provisions of Section 10.21 hereof.
"Restructuring Charges" means all nonrecurring charges related
to Asset Acquisitions and Asset Sales, including merger, restructuring and
integration charges incurred or accrued during the last full fiscal year of the
Company ending prior to the Issue Date.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated by the Commission thereunder.
"Special Record Date" means, with respect to the payment of any
Defaulted Interest, a date fixed by the Trustee pursuant to Section 3.07 hereof.
"Stated Maturity" means, with respect to any Note or any
installment of interest thereon, the dates specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable and, when used with respect to any other Indebtedness, means the
date specified in the instrument governing such Indebtedness as the fixed date
on which the principal of such Indebtedness, or any installment of interest, is
due and payable.
"Subordinated Indebtedness" means, with respect to the Company,
Indebtedness of the Company which is expressly subordinated in right of payment
to the Notes or, with respect to any Guarantor, Indebtedness of such Guarantor
which is expressly subordinated in right of payment to the Note Guarantee of
such Guarantor.
"Subsidiary" means, with respect to any Person, (a) any
corporation of which the outstanding shares of Voting Stock having at least a
majority of the votes entitled to be cast in the election of directors shall at
the time be owned, directly or indirectly, by such Person, or (b) any other
Person of which at least a majority of the shares of Voting Stock are at the
time, directly or indirectly, owned by such first named Person.
"Surviving Entity" has the meaning set forth under
"Consolidations, Mergers, Sale of Assets, Etc."
"Transaction Date" has the meaning set forth in the definition
of "Consolidated Fixed Charge Coverage Ratio."
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<PAGE> 27
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of
1939, as amended.
"Trustee" means the person named as the "Trustee" in the first
paragraph of this Indenture, until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Notes" means one or more Notes that do not and
are not required to bear the Private Placement Legend in the form set forth in
Exhibit A, including, without limitation, the Exchange Notes.
"Unrestricted Subsidiary" means each Accounts Receivable
Subsidiary and each Subsidiary of the Company (other than a Guarantor)
designated as such pursuant to and in compliance with the covenant described in
Section 10.21. Any such Designation may be revoked by a Board Resolution of the
Company delivered to the Trustee, subject to the provisions of such covenant.
"U.S. Government Obligations" means securities that are (i)
direct obligations of the United States of America for the timely payment of
which its full faith and credit is pledged or (ii) obligations of a Person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the option of
the issuer thereof at any time prior to the Stated Maturity of the Notes, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt, provided, however, that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal of or interest on the U.S. Government Obligation evidenced by such
depository receipt.
"Voting Stock" means any class or classes of Capital Stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the Board of Directors,
managers or trustees of any Person (irrespective of whether or not, at the time,
stock of any other class or classes shall have, or might have, voting power by
reason of the happening of any contingency).
"Wholly-Owned Restricted Subsidiary" means any Restricted
Subsidiary of which 100% of the outstanding Capital Stock is owned by the
Company and/or another Wholly-Owned Restricted Subsidiary. For purposes of this
definition, any directors' qualifying shares or investments by foreign nationals
mandated by applicable law shall be disregarded in determining the ownership of
a Restricted Subsidiary.
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Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Act" 1.05
"Affiliate Transaction" 10.15
"Agent Member" 3.16
"Asset Sale Offer" 10.16
"Asset Sale Offer Purchase Date" 10.16
"Change of Control Date" 10.11
"Change of Control Offer" 10.11
"Change of Control Purchase Date" 10.11
"covenant defeasance" 4.03
"Defaulted Interest" 3.07
"defeasance" 4.02
"Defeased Notes" 4.01
"Designation" 10.21
"Designation Amount" 10.21
"Event of Default" 5.01
"incur" 10.12
"insolvent person" 4.04
"Note Register" 3.05
"Registrar" 3.02
"Other Indebtedness" 10.18
"Paying Agent" or "Agent" 3.02
"Permitted Indebtedness" 10.12
"Physical Notes" 2.01
"Restricted Payment" 10.14
"Restricted Period" 3.17
"Revocation" 10.21
"Surviving Entity" 8.01
"Unutilized Net Cash Proceeds" 10.16
</TABLE>
Section 1.03. Rules of Construction.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(A) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(B) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
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<PAGE> 29
(C) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with GAAP;
(D) the words "herein" "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(E) all references to "$" or "dollars" refer to the lawful
currency of the United States of America; and
(F) the words "include," "included" and "including" as used
herein are deemed in each case to be followed by the phrase "without
limitation."
Section 1.04. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
person, or that they be so certified or covered by only one document, but one
such person may certify or give an opinion with respect to some matters and one
or more other persons as to other matters, and any such person may certify or
give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company or any
Guarantor may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such officer
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or opinion
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Company or any
Guarantor stating that the information with respect to such factual matters is
in the possession of the Company or any Guarantor, unless such counsel knows, or
in the exercise of reasonable care should know, that the certificate or opinion
or representations with respect to such matters are erroneous.
Where any person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated,
with proper identification of each matter covered therein, and form one
instrument.
Section 1.05. Acts of Holders.
(A) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given
or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in
person or by an agent duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee and, where
it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and
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evidenced thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments. Proof of execution (as
provided below in subsection (b) of this Section 1.05) of any such
instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to Section
6.01 hereof) conclusive in favor of the Trustee and the Company, if
made in the manner provided in this Section.
(B) The fact and date of the execution by any person of any
such instrument or writing may be proved in any reasonable manner which
the Trustee deems sufficient.
(C) The ownership of Notes shall be proved by the Note
Register.
(D) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Note shall bind
every future Holder of the same Note or the Holder of every Note issued
upon the transfer thereof or in exchange therefor or in lieu thereof to
the same extent as the original Holder, in respect of anything done,
suffered or omitted to be done by the Trustee, any Paying Agent or the
Company or any Guarantor in reliance thereon, whether or not notation
of such action is made upon such Note.
Section 1.06. Notices, etc., to the Trustee, the
Company and the Guarantors. .
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with:
(A) the Trustee by any Holder or by the Company or any
Guarantor shall be sufficient for every purpose hereunder if made,
given, furnished or filed, in writing, to or with the Trustee at One
First National Plaza, Suite 1026, Chicago, Illinois 60670-0126,
Attention: Corporate Trust Administration or at any other address
previously furnished in writing to the Holders, the Company and the
Guarantors by the Trustee; or
(B) the Company or a Guarantor by the Trustee or by any Holder
shall be sufficient for every purpose (except as otherwise expressly
provided herein) hereunder if in writing and mailed, first-class
postage prepaid, to the Company or such Guarantor addressed to it at
Proffitt's, Inc., 750 Lakeshore Parkway, Birmingham, Alabama 35211,
Attention: Chief Executive Officer, or at any other address previously
furnished in writing to the Trustee by the Company.
Section 1.07. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise expressly
provided herein) if in writing and mailed, first-class postage prepaid, to each
Holder affected by such event, at the address of such Holder as it appears in
the Note Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any
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particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Any notice when mailed to a Holder in the aforesaid manner shall
be conclusively deemed to have been received by such Holder whether or not
actually received by such Holder. Where this Indenture provides for notice in
any manner, such notice may be waived in writing by the person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or
by reason of any other cause, it shall be impracticable to mail notice of any
event as required by any provision of this Indenture, then any method of giving
such notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Section 1.08. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which is required or
deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such provision or requirement of the Trust Indenture Act shall
control.
If any provision of this Indenture modifies or excludes any
provision of the Trust Indenture Act that may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as so modified or 2
excluded, as the case may be.
Section 1.09. Effect of Headings and Table of
Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
Section 1.10. Successors and Assigns.
All covenants and agreements in this Indenture by the Company
and the Guarantors, shall bind their respective successors and assigns, whether
so expressed or not.
Section 1.11. Separability Clause.
In case any provision in this Indenture or in the Notes or any
Note Guarantee issued pursuant hereto shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Section 1.12. Benefits of Indenture.
Nothing in this Indenture or in the Notes or in any Note
Guarantee issued pursuant hereto, express or implied, shall give to any person
(other than the parties hereto and their successors hereunder, any Paying Agent
and the Holders) any benefit or any legal or equitable right, remedy or claim
under this Indenture.
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Section 1.13. Governing Law.
THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 1.14. No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the
Company or of a Guarantor shall not have any liability for any obligations of
the Company or a Guarantor under the Notes, the Note Guarantee or this Indenture
or for any claim based on, in respect of or by reason of such obligations or
their creation.
Section 1.15. Independence of Covenants.
All covenants and agreements in this Indenture shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default if such action is taken or condition exists.
Section 1.16. Exhibits.
All exhibits attached hereto are by this reference made a part
hereof with the same effect as if herein set forth in full.
Section 1.17. Counterparts.
This Indenture may be executed in any number of counterparts
and by telecopier, each of which shall be an original; but such counterparts
shall together constitute but one and the same instrument.
Section 1.18. Duplicate Originals.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
ARTICLE TWO
NOTE AND GUARANTEE FORMS
Section 2.01. Form and Dating.
The Notes and the Trustee's certificate of authentication with
respect thereto and the Note Guarantees shall be in substantially the forms set
forth, or referenced, in Exhibit A-1, Exhibit A-2 and Exhibit E, respectively,
annexed hereto, with such appropriate insertions,
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omissions, substitutions and other variations as are required or permitted by
this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with any applicable law or with the rules of the Depository,
any clearing agency or any securities exchange or as may, consistently herewith,
be determined by the officers executing such Notes and Note Guarantees, as
evidenced by their execution thereof.
The definitive Notes and Note Guarantees shall be printed,
typewritten, lithographed or engraved or produced by any combination of these
methods or may be produced in any other manner permitted by the rules of any
securities exchange on which the Notes and such Note Guarantees may be listed,
all as determined by the officers executing such Notes and Note Guarantees, as
evidenced by their execution of such Notes and Note Guarantees.
Each Note shall be dated the date of its issuance and shall
show the date of its authentication. The terms and provisions contained in the
Notes shall constitute, and are expressly made, a part of this Indenture.
ARTICLE THREE
THE NOTES
Section 3.01. Title and Terms.
The aggregate principal amount of Notes which may be
authenticated and delivered under this Indenture is limited to $125,000,000 in
aggregate principal amount of Notes, except for Notes authenticated and
delivered upon registration of transfer of, or in exchange for, or in lieu of,
other Notes pursuant to Section 3.03, 3.04, 3.05, 3.06, 9.06, 10.11 or 10.16.
The final Stated Maturity of the Notes shall be May 15, 2004,
and the Notes shall bear interest at the rate of 8 1/8% per annum from the Issue
Date or from the most recent Interest Payment Date to which interest has been
paid, as the case may be, payable semi-annually thereafter on May 15 and
November 15, in each year, commencing on November 15, 1997, to the Holders of
record at the close of business on the May 1 and November 1, respectively,
immediately preceding such Interest Payment Dates, until the principal thereof
is paid or duly provided for. Interest on any overdue principal, interest (to
the extent lawful) or premium, if any, shall be payable on demand.
The Notes shall be not be redeemable at the option of the
Company at any time.
At the election of the Company, the entire Indebtedness on the
Notes or certain of the Company's obligations and covenants and certain Events
of Default thereunder may be defeased as provided in Article Four.
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Section 3.02. Registrar and Paying Agent.
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in The City of New York, State of New York)
where Notes may be presented for registration of transfer or for exchange (the
"Registrar"), an office or agency (which shall be located in the Borough of
Manhattan in The City of New York, State of New York) where Notes may be
presented for payment (the "Paying Agent" or "Agent") and an office or agency
where notices and demands to or upon the Company in respect of the Notes, the
Note Guarantees and this Indenture may be served. The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Company may have
one or more co-registrars and one or more additional paying agents. The term
"Paying Agent" or "Agent" includes any additional paying agent. The Company may
act as its own Paying Agent, except for the purposes of payments on account of
principal on the Notes pursuant to Sections 10.11 and 10.16 hereof.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, which shall incorporate the
provisions of the Trust Indenture Act. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall notify
the Trustee of the name and address of any such Agent. If the Company fails to
maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the
Trustee shall act as such and shall be entitled to appropriate compensation in
accordance with Section 6.07 hereof.
The Company initially appoints the Trustee as the Registrar and
Paying Agent and agent for service of notices and demands in connection with the
Notes.
Section 3.03. Execution and Authentication.
The Initial Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A-1 hereto. The
Exchange Notes and the Trustee's certificate of authentication relating thereto
shall be substantially in the form of Exhibit A-2 hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. The Company shall approve the form of the Notes and any notation, legend
or endorsement thereon. Each Note shall be dated the date of issuance and shall
show the date of its authentication. Each Note shall have an executed Note
Guarantee from each of the Guarantors endorsed thereon substantially in the form
of Exhibit E hereto.
The terms and provisions contained in the Notes annexed hereto
as Exhibits A-1 and A-2 shall constitute, and are hereby expressly made, a part
of this Indenture and, to the extent applicable, the Company, the Guarantors and
the Trustee, by their execution and delivery of this Indenture, expressly agree
to such terms and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A and Notes
offered and sold in reliance on Regulation S shall be issued initially in the
form of one or more Global Notes, substantially in the form set forth in Exhibit
A-1, deposited with the Trustee, as custodian for the Depository, duly executed
by the Company (and having an executed Note Guarantee from each of the
Guarantors endorsed thereon) and authenticated by the Trustee as hereinafter
provided and
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shall bear the legend set forth in Exhibit B. The aggregate principal amount of
the Global Notes may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the Depository, as 2
hereinafter provided.
Notes (i) offered and sold to institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act) and (ii) issued in exchange for interests in a Global Note pursuant to
Section 3.17 may be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A-1 (the
"Physical Notes").
All Notes offered and sold in reliance on Regulation S shall
remain in the form of a Global Note until the consummation of the Exchange Offer
pursuant to the Registration Rights Agreement; provided, however, that all of
the time periods specified in the Registration Rights Agreement to be complied
with by the Company and the Guarantors have been so complied with.
Two Officers, or an Officer and an Assistant Secretary, shall
sign, or one Officer shall sign, and one Officer or an Assistant Secretary (each
of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to, the Notes for the Company, and the Note
Guarantees for the Guarantors, by manual or facsimile signature.
If an Officer or Assistant Secretary whose signature is on a
Note or a Note Guarantee, as the case may be, was an Officer or Assistant
Secretary at the time of such execution but no longer holds that office or
position at the time the Trustee authenticates the Note, the Note shall
nevertheless be valid.
The Trustee shall authenticate (i) Initial Notes for original
issue in an aggregate principal amount not to exceed $125,000,000, (ii) Private
Exchange Notes from time to time only in exchange for a like principal amount of
Initial Notes and (iii) Unrestricted Notes from time to time only in exchange
for (A) a like principal amount of Initial Notes or (B) a like principal amount
of Private Exchange Notes, in each case upon a written order of the Company in
the form of an Officers' Certificate of the Company. Each such written order
shall specify the amount of Notes to be authenticated and the date on which the
Notes are to be authenticated, whether the Notes are to be Initial Notes,
Private Exchange Notes or Unrestricted Notes and whether (subject to this
Section 3.03) the Notes are to be issued as Physical Notes or Global Notes and
such other information as the Trustee may reasonably request. The aggregate
principal amount of Notes outstanding at any time may not exceed $125,000,000,
except as provided in Section 3.06.
Notwithstanding the foregoing, all Notes issued under this
Indenture shall vote and consent together on all matters (as to which any of
such Notes may vote or consent) as one class and no series of Notes will have
the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Notes. Unless otherwise provided in
the appointment, an authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
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The Notes shall be issuable in fully registered form only,
without coupons, in denominations of $1,000 and any integral multiple thereof.
Section 3.04. Temporary Notes.
Until definitive Notes are prepared and ready for delivery,
the Company may execute and upon a Company Order the Trustee shall authenticate
and deliver temporary Notes. Temporary Notes shall be substantially in the form
of definitive Notes, in any authorized denominations, but may have variations
that the Company reasonably considers appropriate for temporary Notes as
conclusively evidenced by the Company's execution of such temporary Notes.
If temporary Notes are issued, the Company will cause
definitive Notes to be prepared without unreasonable delay but in no event later
than the date that the Exchange Offer is consummated. After the preparation of
definitive Notes, the temporary Notes shall be exchangeable for definitive Notes
upon surrender of the temporary Notes at the office or agency of the Company
designated for such purpose pursuant to Section 10.02, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of like tenor and of
authorized denominations. Until so exchanged the temporary Notes shall in all
respects be entitled to the same benefits under this Indenture as definitive
Notes.
Section 3.05. Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to Section 10.02 being sometimes
referred to herein as the "Note Register") in which, subject to such reasonable
regulations as the Registrar may prescribe, the Company shall provide for the
registration of Notes and of transfers and exchanges of Notes. The Trustee is
hereby initially appointed Registrar for the purpose of registering Notes and
transfers of Notes as herein provided.
When Notes are presented to the Registrar or a co-Registrar
with a request from the Holder of such Notes to register the transfer or
exchange for an equal principal amount of Notes of other authorized
denominations, the Registrar shall register the transfer or make the exchange as
requested; provided, however, that every Note presented or surrendered for
registration of transfer or exchange shall be duly endorsed or be accompanied by
a written instrument of transfer or exchange in form satisfactory to the Company
and the Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing. Whenever any Notes are so presented for exchange, the
Company and any Guarantor shall execute, and the Trustee shall authenticate and
deliver, the Notes and Note Guarantees which the Holder making the exchange is
entitled to receive. No service charge shall be made to the Noteholder for any
registration of transfer or exchange. The Company may require from the
Noteholder payment of a sum sufficient to cover any transfer taxes or other
governmental charge that may be imposed in relation to a transfer or exchange,
but this provision shall not apply to any exchange pursuant to Section 10.11,
10.16 or 9.06 hereof (in which events the Company will be responsible for the
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payment of all such taxes which arise solely as a result of the transfer or
exchange and do not depend on the tax status of the Holder). The Trustee shall
not be required to exchange or register the transfer of any Note for a period of
15 days immediately preceding the first mailing of notice of redemption of Notes
to be redeemed or of any Note selected, called or being called for redemption
except, in the case of any Note where public notice has been given that such
Note is to be redeemed in part, the portion thereof not to be redeemed.
All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Company, evidencing the same
Indebtedness, and entitled to the same benefits under this Indenture, as the
Notes surrendered upon such registration of transfer or exchange.
Any Holder of a beneficial interest in a Global Note shall, by
acceptance of such Global Note, agree that transfers of beneficial interests in
such Global Notes may be effected only through a book-entry system maintained by
the Holder of such Global Note (or its agent), and that ownership of a
beneficial interest in the Note shall be required to be reflected in a
book-entry system.
Section 3.06. Mutilated, Destroyed, Lost and
Stolen Notes.
If a mutilated Note is surrendered to the Trustee or if the
Holder of a Note of any series claims that the Note has been lost, destroyed or
wrongfully taken, the Company shall execute and upon a Company Order, the
Trustee shall authenticate and deliver a replacement Note of like tenor and
principal amount, bearing a number not contemporaneously outstanding, and the
Guarantors shall execute a replacement Note Guarantee, if the Holder of such
Note furnishes to the Company and to the Trustee evidence reasonably acceptable
to them of the ownership and the destruction, loss or theft of such Note and an
indemnity bond shall be posted by such Holder, sufficient in the judgment of the
Company or the Trustee, as the case may be, to protect the Company, the Trustee
or any Agent from any loss that any of them may suffer if such Note is replaced.
The Company may charge such Holder for the Company's and any Guarantor's
expenses in replacing such Note (including (i) expenses of the Trustee charged
to the Company and (ii) any tax or other governmental charge that may be
imposed) and the Trustee may charge the Company for the Trustee's expenses in
replacing such Note.
Every replacement Note and Note Guarantee issued pursuant to
this Section in lieu of any destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Company and each Guarantor,
whether or not the destroyed, lost or stolen Note shall be at any time
enforceable by anyone, and shall be entitled to all benefits of this Indenture
equally and proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
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carry the rights to interest accrued and unpaid, and to accrue, which were
carried by such other Note.
Section 3.08. Persons Deemed Owners.
Prior to and at the time of due presentment for registration
of transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the person in whose name any Note is registered in the Note
Register as the owner of such Note for the purpose of receiving payment of
principal of, premium, if any, and (subject to Section 3.07) interest on such
Note and for all other purposes whatsoever, whether or not such Note shall be
overdue, and neither the Company, the Trustee nor any agent of the Company or
the Trustee shall be affected by notice to the contrary.
Section 3.09. Cancellation.
All Notes surrendered for payment, redemption, registration of
transfer or exchange shall be delivered to the Trustee and, if not already
canceled, shall be promptly canceled by it. The Company and any Guarantor may at
any time deliver to the Trustee for cancellation any Notes previously
authenticated and delivered hereunder which the Company or such Guarantor may
have acquired in any manner whatsoever, and all Notes so delivered shall be
promptly canceled by the Trustee. The Registrar and the Paying Agent shall
forward to the Trustee any Notes surrendered to them for registration of
transfer or exchange, redemption or payment. The Trustee and no one else shall
cancel all Notes surrendered for registration of transfer, exchange, payment,
replacement or cancellation. No Notes shall be authenticated in lieu of or in
exchange for any Notes canceled as provided in this Section 3.09, except as
expressly permitted by this Indenture. All canceled Notes held by the Trustee
shall be destroyed and certification of their destruction delivered to the
Company unless by a Company Order the Company shall direct that the canceled
Notes be returned to it. The Trustee shall provide the Company a list of all
Notes that have been canceled from time to time as requested by the Company.
Section 3.10. Computation of Interest.
Interest on the Notes shall be computed on the basis of a
360-day year of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed.
Section 3.11. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date,
date established for the payment of Defaulted Interest or Stated Maturity of any
Note shall not be a Business Day, then (notwithstanding any other provision of
this Indenture or of the Notes) payment of principal, premium, if any, or
interest need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the Interest Payment
Date, Redemption Date, date established for the payment of Defaulted Interest or
at the Stated Maturity, as the case may be. In such event, no interest shall
accrue with respect to such payment for the period from and after such Interest
Payment Date, Redemption Date, date established for
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Section 3.07. Payment of Interest; Interest Rights
Preserved.
Interest on any Note which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the person
in whose name that Note (or one or more Predecessor Notes) is registered at the
close of business on the Regular Record Date for such interest.
Any interest on any Note which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date and interest
on such defaulted interest at the then applicable interest rate borne by the
Notes, to the extent lawful (such defaulted interest and interest thereon herein
collectively called "Defaulted Interest") shall forthwith cease to be payable to
the Holder on the Regular Record Date; and such Defaulted Interest may be paid
by the Company, at its election in each case, as provided in subsection (a) or
(b) below:
(A) The Company may elect to make payment of any Defaulted
Interest to the persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Note and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for
such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the persons entitled
to such Defaulted Interest as provided in this subsection (a).
Thereupon the Trustee shall fix a Special Record Date for the payment
of such Defaulted Interest which shall be not more than 15 days and not
less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company in
writing of such Special Record Date. In the name and at the expense of
the Company, the Trustee shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be
mailed, first-class postage prepaid, to each Holder at its address as
it appears in the Note Register, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor having been so mailed,
such Defaulted Interest shall be paid to the persons in whose names the
Notes (or their respective Predecessor Notes) are registered on such
Special Record Date and shall no longer be payable pursuant to the
following subsection (b).
(B) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such
notice as may be required by such exchange, if, after written notice
given by the Company to the Trustee of the proposed payment pursuant to
this subsection (b), such payment shall be deemed practicable by the
Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall
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the payment of Defaulted Interest or Stated Maturity, as the case may be, to the
next succeeding Business Day and, with respect to any Interest Payment Date,
interest for the period from and after such Interest Payment Date shall accrue
with respect to the next succeeding Interest Payment Date.
Section 3.12. CUSIP and CINS Numbers.
The Company in issuing the Notes may use "CUSIP" and "CINS"
numbers (if then generally in use), and if so, the Trustee shall use the CUSIP
or CINS numbers, as the case may be, in notices of redemption or exchange as a
convenience to Holders; provided, however, that any such notice may state that
no representation is made as to the correctness or accuracy of the CUSIP or CINS
number, as the case may be, printed in the notice or on the Notes, and that
reliance may be placed only on the other identification numbers printed on the
Notes. The Company shall promptly notify the Trustee in writing of any change in
the CUSIP or CINS number of any type of Notes.
Section 3.13. Paying Agent To Hold Money in Trust.
Each Paying Agent shall hold in trust for the benefit of the
Noteholders or the Trustee all money held by the Paying Agent for the payment of
principal of, premium, if any, or interest on the Notes, and shall notify the
Trustee of any default by the Company in making any such payment. Money held in
trust by the Paying Agent need not be segregated except as required by law and
in no event shall the Paying Agent be liable for any interest on any money
received by it hereunder. The Company at any time may require the Paying Agent
to pay all money held by it to the Trustee and account for any funds disbursed
and the Trustee may at any time during the continuance of any Event of Default,
upon a Company Order to the Paying Agent, require such Paying Agent to pay
forthwith all money so held by it to the Trustee and to account for any funds
disbursed. Upon making such payment, the Paying Agent shall have no further
liability for the money delivered to the Trustee.
Section 3.14. Treasury Notes.
In determining whether the Holders of the required aggregate
principal amount of Notes have concurred in any direction, waiver, consent or
notice, Notes owned by the Company or an Affiliate of the Company shall be
considered as though they are not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which the Trustee actually knows are so
owned shall be so considered. The Company shall notify the Trustee, in writing,
when it or any of its Affiliates repurchases or otherwise acquires Notes, of the
aggregate principal amount of such Notes so repurchased or otherwise acquired.
Section 3.15. Deposits of Monies.
Prior to 12:00 p.m. noon New York City time on each Interest
Payment Date, maturity date, Change of Control Purchase Date and Asset Sale
Offer Purchase Date, the Company shall have deposited with the Paying Agent in
immediately available funds money
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sufficient to make cash payments, if any, due on such Interest Payment Date,
maturity date, Change of Control Purchase Date and Asset Sale Offer Purchase
Date, as the case may be, in a timely manner which permits the Paying Agent to
remit payment to the Holders on such Interest Payment Date, maturity date,
Change of Control Purchase Date and Asset Sale Offer Purchase Date, as the case
may be.
Section 3.16. Book-Entry Provisions for Global
Notes.
(A) The Global Notes initially shall (i) be registered in the
name of the Depository or the nominee of such Depository, (ii) be
delivered to the Trustee as custodian for such Depository and (iii)
bear legends as set forth in Exhibit B.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depository, or the Trustee as its custodian, or
under the Global Note, and the Depository may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of the
Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
(B) Transfers of Global Notes shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their
respective nominees. Interests of beneficial owners in the Global Notes
may be transferred or exchanged for Physical Notes in accordance with
the rules and procedures of the Depository and the provisions of
Sections 3.03 and 3.17. In addition, Physical Notes shall be
transferred to all beneficial owners in exchange for their beneficial
interests in Global Notes if (i) the Depository notifies the Company
that it is unwilling or unable to continue as Depository for any Global
Note, or that it will cease to be a "Clearing Agency" under the
Exchange Act, and in either case a successor Depository is not
appointed by the Company within 90 days of such notice or (ii) an Event
of Default has occurred and is continuing and the Registrar has
received a written request from the Depository to issue Physical Notes.
(C) In connection with any transfer or exchange of a portion of
the beneficial interest in any Global Note to beneficial owners
pursuant to paragraph (b), the Registrar shall (if one or more Physical
Notes are to be issued) reflect on its books and records the date and a
decrease in the principal amount of the Global Note in an amount equal
to the principal amount of the beneficial interest in the Global Note
to be transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Physical Notes of like tenor and
principal amount of authorized denominations.
(D) In connection with the transfer of Global Notes as an
entirety to beneficial owners pursuant to paragraph (b), the Global
Notes shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall
authenticate and deliver, to each beneficial owner identified by the
Depository in exchange
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for its beneficial interest in the Global Notes, an equal aggregate
principal amount at maturity of Physical Notes of like tenor of
authorized denominations.
(E) Any Physical Note constituting a Restricted Note delivered
in exchange for an interest in a Global Note pursuant to subparagraph
(b), (c) or (d) of this Section 3.16 shall, except as otherwise
provided by Section 3.17, bear the Private Placement Legend.
(F) The Holder of any Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which
a Holder is entitled to take under this Indenture or the Notes.
Section 3.17. Special Transfer Provisions.
(A) Transfers to Non-QIB Institutional Accredited Investors.
The following additional provisions shall apply with respect to the
registration of any proposed transfer of an Initial Note to any
Institutional Accredited Investor which is not a QIB:
(I) the Registrar shall register the transfer of any Initial
Note, whether or not such Note bears the Private Placement Legend, if
(x) the requested transfer is after the second anniversary of the Issue
Date; provided, however, that neither the Company nor any Affiliate of
the Company has held any beneficial interest in such Note, or portion
thereof, at any time on or prior to the second anniversary of the Issue
Date and such transfer can otherwise be lawfully made under the
Securities Act without registering such Initial Notes thereunder or (y)
the proposed transferee has delivered to the Registrar a certificate
substantially in the form of Exhibit C hereto and any legal opinions
and certifications required thereby;
(II) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Global Note, upon receipt by the Registrar of
(x) written instructions given in accordance with the Depository's and
the Registrar's procedures and (y) the appropriate certificate, if any,
required by clause (y) of paragraph (i) above, together with any
required legal opinions and certifications, the Registrar shall
register the transfer and reflect on its books and records the date and
a decrease in the principal amount of the Global Note from which such
interests are to be transferred in an amount equal to the principal
amount of the Notes to be transferred and the Company shall execute and
upon a Company Order, the Trustee shall authenticate Physical Notes in
a principal amount equal to the principal amount of the Global Note to
be transferred.
(B) Transfers to Non-U.S. Persons. The following
additional provisions shall apply with respect to the registration of
any proposed transfer of an Initial Note to any Non-U.S. Person:
(I) the Registrar shall register the transfer of any Initial
Note, whether or not such Note bears the Private Placement Legend, if
(x) the requested transfer is after the second anniversary of the Issue
Date; provided, however, that neither the Company nor
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any Affiliate of the Company has held any beneficial interest in such
Note, or portion thereof, at any time on or prior to the second
anniversary of the Issue Date and such transfer can otherwise be
lawfully made under the Securities Act without registering such Initial
Notes thereunder or (y) the proposed transferor has delivered to the
Registrar a certificate substantially in the form of Exhibit D hereto;
(II) if the proposed transferee is an Agent Member and the
Notes to be transferred consist of Physical Notes which after transfer
are to be evidenced by an interest in the Regulation S Global Note upon
receipt by the Registrar of (x) written instructions given in
accordance with the Depository's and the Registrar's procedures and (y)
the appropriate certificate, if any, required by clause (y) of
paragraph (i) above, together with any required legal opinions and
certifications, the Registrar shall register the transfer and reflect
on its books and records the date and an increase in the principal
amount of the Regulation S Global Note in an amount equal to the
principal amount of Physical Notes to be transferred, and the Trustee
shall cancel the Physical Notes so transferred;
(III) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Global Note, upon receipt by the Registrar of
(x) written instructions given in accordance with the Depository's and
the Registrar's procedures and (y) the appropriate certificate, if any,
required by clause (y) of paragraph (i) above, together with any
required legal opinions and certifications, the Registrar shall
register the transfer and reflect on its books and records the date and
(A) a decrease in the principal amount of the Global Note from which
such interests are to be transferred in an amount equal to the
principal amount of the Notes to be transferred and (B) an increase in
the principal amount of the Regulation S Global Note in an amount equal
to the principal amount of the Global Note to be transferred; and
(IV) until the 41st day after the Issue Date (the "Restricted
Period"), an owner of a beneficial interest in the Regulation S Global
Note may not transfer such interest to a transferee that is a U.S.
person or for the account or benefit of a U.S. person within the
meaning of Rule 902(o) of the Securities Act. During the Restricted
Period, all beneficial interests in the Regulation S Global Note shall
be transferred only through Cedel or Euroclear, either directly if the
transferor and transferee are participants in such systems, or
indirectly through organizations that are participants.
(C) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of an
Initial Note to a QIB (excluding Non-U.S. Persons):
(I) the Registrar shall register the transfer of any Initial
Note, whether or not such Note bears the Private Placement Legend, if
(x) the requested transfer is after the second anniversary of the Issue
Date; provided, however, that neither the Company nor any Affiliate of
the Company has held any beneficial interest in such Note, or portion
thereof, at any time on or prior to the second anniversary of the Issue
Date and such transfer can otherwise be lawfully made under the
Securities Act without registering such Initial Note thereunder or (y)
such transfer is being made by a proposed transferor who
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has checked the box provided for on the form of Note stating, or has
otherwise advised the Company and the Registrar in writing, that the
sale has been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form of
Note stating, or has otherwise advised the Company and the Registrar in
writing, that it is purchasing the Note for its own account or an
account with respect to which it exercises sole investment discretion
and that it and any such account is a QIB within the meaning of Rule
144A, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information
regarding the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order
to claim the exemption from registration provided by Rule 144A;
(II) if the proposed transferee is an Agent Member and the
Notes to be transferred consist of Physical Notes which after transfer
are to be evidenced by an interest in the 144A Global Note, upon
receipt by the Registrar of written instructions given in accordance
with the Depository's and the Registrar's procedures, the Registrar
shall register the transfer and reflect on its book and records the
date and an increase in the principal amount of the 144A Global Note in
an amount equal to the principal amount of Physical Notes to be
transferred, and the Trustee shall cancel the Physical Note so
transferred; and
(III) if the proposed transferor is an Agent Member seeking to
transfer an interest in a Global Note, upon receipt by the Registrar of
written instructions given in accordance with the Depository's and the
Registrar's procedures, the Registrar shall register the transfer and
reflect on its books and records the date and (A) a decrease in the
principal amount of the Global Note from which interests are to be
transferred in an amount equal to the principal amount of the Notes to
be transferred and (B) an increase in the principal amount of the 144A
Global Note in an amount equal to the principal amount of the Global
Note to be transferred.
(D) Private Placement Legend. Upon the registration of
transfer, exchange or replacement of Notes not bearing the Private
Placement Legend, the Registrar shall deliver Notes that do not bear
the Private Placement Legend. Upon the registration of transfer,
exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement
Legend unless (i) the circumstances contemplated by paragraph (a)(i)(x)
of this Section 3.17 exist, (ii) there is delivered to the Registrar an
Opinion of Counsel reasonably satisfactory to the Company and the
Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance
with the provisions of the Securities Act or (iii) such Note has been
sold pursuant to an effective registration statement under the
Securities Act.
(E) Other Transfers. If a Holder proposes to transfer a Note
constituting a Restricted Note pursuant to any exemption from the
registration requirements of the Securities Act other than as provided
for by Section 3.17(a), (b) and (c), the Registrar shall only register
such transfer or exchange if such transferor delivers an Opinion of
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Counsel satisfactory to the Company and the Registrar that such
transfer is in compliance with the Securities Act and the terms of this
Indenture; provided, however, that the Company may, based upon the
opinion of its counsel, instruct the Registrar by a Company Order not
to register such transfer in any case where the proposed transferee is
not a QIB Non-U.S. person or Institutional Accredited Investor.
(F) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and
in the Private Placement Legend and agrees that it will transfer such
Note only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 3.16 or this
Section 3.17. The Company shall have the right to inspect and make
copies of all such letters, notices or other written communications at
any reasonable time upon the giving of reasonable prior written notice
to the Registrar.
ARTICLE FOUR
DEFEASANCE OR COVENANT DEFEASANCE
Section 4.01. Company's Option To Effect
Defeasance or Covenant Defeasance.
The Company may, at its option by Board Resolution, at any
any time, with respect to the Notes, elect to have either Section 4.02 or
Section 4.03 be applied to all of the Outstanding Notes (the "Defeased
Notes"), upon compliance with the conditions set forth below in this Article
Four.
Section 4.02. Defeasance and Discharge.
Upon the Company's exercise under Section 4.01 of the option
applicable to this Section 4.02, the Company and each Guarantor shall be deemed
to have been discharged from their obligations with respect to the Defeased
Notes and the related Note Guarantees on the date the conditions set forth below
are satisfied (hereinafter, "defeasance"). For this purpose, such defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the Defeased Notes, which shall thereafter be deemed
to be "Outstanding" only for the purposes of Section 4.05 and the other Sections
of this Indenture referred to in (a) and (b) below, and to have satisfied all
its other obligations under such Notes and this Indenture insofar as such Notes
are concerned (and the Trustee, at the expense of the Company, and, upon Company
Request, shall execute proper instruments acknowledging the same), except for
the following, which shall survive until otherwise terminated or discharged
hereunder: (a) the rights of Holders of Defeased Notes to receive, solely from
the trust fund described in Section 4.04 and as more fully set forth in such
Section, payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due, (b) the Company's obligations with
respect to such Defeased Notes under Sections 3.04, 3.05, 3.06,
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10.02 and 10.03, (c) the rights, powers, trusts, duties and immunities of the
Trustee hereunder, including, without limitation, the Trustee's rights under
Section 6.07, and (d) this Article Four. Subject to compliance with this Article
Four, the Company may exercise its option under this Section 4.02
notwithstanding the prior exercise of its option under Section 4.03 with respect
to the Notes.
Section 4.03. Covenant Defeasance.
Upon the Company's exercise under Section 4.01 of the option
applicable to this Section 4.03, the Company and each Guarantor shall be
released from their obligations under any covenant or provision contained in
Sections 10.06 through 10.22 and the provisions of Articles Eight shall not
apply, with respect to the Defeased Notes, on and after the date the conditions
set forth below are satisfied (hereinafter, "covenant defeasance"), and the
Defeased Notes shall thereafter be deemed not to be "Outstanding" for the
purposes of any direction, waiver, consent or declaration or Act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "Outstanding" for all other purposes hereunder. For this
purpose, such covenant defeasance means that, with respect to the Defeased
Notes, the Company and each Guarantor may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
Section or Article, whether directly or indirectly, by reason of any reference
elsewhere herein to any such Section or Article or by reason of any reference in
any such Section or Article to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under Section 5.01(c) or (d), but, except as specified above, the
remainder of this Indenture and such Defeased Notes shall be unaffected thereby.
Section 4.04. Conditions to Defeasance or Covenant
Defeasance.
The following shall be the conditions to application of either
Section 4.02 or Section 4.03 to the Defeased Notes:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 6.09 who shall agree to comply with the
provisions of this Article Four applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Notes, (a) cash in an amount, or (b) U.S. Government
Obligations which through the scheduled payment of principal, premium,
if any, and interest in respect thereof in accordance with their terms
will provide, not later than one day before the due date of any
payment, money in an amount, or (c) a combination thereof, in any such
case, sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or other qualifying trustee) to pay and
discharge, the principal of, premium, if any, and interest on the
Defeased Notes at the Stated Maturity of such principal or installment
of principal, premium, if any, or interest; provided, however, that the
Trustee shall have been irrevocably instructed to apply such cash or
the proceeds of such U.S. Government Obligations to said payments with
respect to the Notes;
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(2) No Default shall have occurred and be continuing on the
date of such deposit or, insofar as Sections 5.01(h), (i) or (j) are
concerned, at any time during the period ending on the ninety-first day
after the date of such deposit (it being understood that this condition
shall not be deemed satisfied until the expiration of such period);
(3) Neither the Company nor any Subsidiary of the Company is an
"insolvent person" within the meaning of any applicable Bankruptcy Law
on the date of such deposit or at any time during the period ending on
the ninety-first day after the date of such deposit (it being
understood that this condition shall not be deemed satisfied until the
expiration of such period);
(4) Such defeasance or covenant defeasance shall not cause the
Trustee for the Notes to have a conflicting interest in violation of
Section 6.08 and for purposes of the Trust Indenture Act with respect
to any securities of the Company or any Guarantor;
(5) Such defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, this Indenture
or any other material agreement or instrument to which the Company or
any Guarantor is a party or by which it is bound;
(6) In the case of an election under Section 4.02, the Company
shall have delivered to the Trustee an Opinion of Counsel stating that
(x) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (y) since the date hereof, there
has been a change in the applicable Federal income tax law, in either
case to the effect that, and based thereon such opinion shall confirm
that, the Holders of the Outstanding Notes will not recognize income,
gain or loss for Federal income tax purposes as a result of such
defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such defeasance had not occurred;
(7) In the case of an election under Section 4.03, the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the Outstanding Notes will not recognize income,
gain or loss for Federal income tax purposes as a result of such
covenant defeasance and will be subject to Federal income tax on the
same amounts, in the same manner and at the same times as would have
been the case if such covenant defeasance had not occurred;
(8) The Company shall have delivered to the Trustee, an Opinion
of Counsel to the effect that, immediately following the ninety-first
day after the deposit, the trust funds established pursuant to this
Article will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally under any applicable U.S. Federal or state law;
(9) The Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit made by the Company
pursuant to its election under Section 4.02 or 4.03 was not made by the
Company with the intent of preferring the Holders or any
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Guarantor over the other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding creditors of the Company or others;
and
(10) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that (i)
all conditions precedent (other than conditions requiring the passage
of time) provided for relating to either the defeasance under Section
4.02 or the covenant defeasance under Section 4.03 (as the case may be)
have been complied with as contemplated by this Section 4.04 and (ii)
if any other Indebtedness of the Company or any Guarantor shall then be
outstanding or committed, such defeasance or covenant defeasance will
not violate the provisions of the agreements or instruments evidencing
such Indebtedness.
Opinions required to be delivered under this Section may have
such qualifications as are customary for opinions of the type required and
reasonably acceptable to the Trustee.
Section 4.05. Deposited Money and U.S. Government
Obligations To Be Held in Trust;
Other Miscellaneous Provisions.
Subject to the proviso of the last paragraph of Section 10.03,
all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee, collectively for
purposes of this Section 4.05, the "Trustee") pursuant to Section 4.04 in
respect of the Defeased Notes shall be held in trust and applied by the Trustee,
in accordance with the provisions of such Notes and this Indenture, to the
payment, either directly or through any Paying Agent (other than the Company) as
the Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee and hold it
harmless against any tax, fee or other charge imposed on or assessed against the
U.S. Government Obligations deposited pursuant to Section 4.04 or the principal,
premium, if any, and interest received in respect thereof other than any such
tax, fee or other charge which by law is for the account of the Holders of the
Defeased Notes.
Anything in this Article Four to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 4.04 which, in the opinion of an internationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance.
Section 4.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 4.02 or 4.03, as the case
may be, by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting
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such application, then the obligations of the Company and of any Guarantor under
this Indenture, the Notes and the Note Guarantees shall be revived and
reinstated as though no deposit had occurred pursuant to Section 4.02 or 4.03,
as the case may be, until such time as the Trustee or Paying Agent is permitted
to apply all such money and U.S. Government Obligations in accordance with
Section 4.02 or 4.03, as the case may be; provided, however, that if the Company
makes any payment of principal, premium, if any, or interest on any Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money and U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE FIVE
REMEDIES
Section 5.01. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(A) default in the payment of the principal of or premium, if
any, when due and payable, on any of the Notes (at its Stated Maturity,
upon optional redemption, required purchase, scheduled principal
payment or otherwise); or
(B) default in the payment of an installment of interest on any
of the Notes, when due and payable, continued for 30 days or more; or
(C) the Company or any Guarantor fails to comply with any of
its obligations described under Article Eight or Sections 10.11 or
10.16 hereof; or
(D) the Company or any Guarantor fails to perform or observe
any other term, covenant or agreement contained in the Notes, any Note
Guarantee or this Indenture (other than a default specified in (a), (b)
or (c) above) for a period of 45 days after written notice of such
failure requiring the Company to remedy the same and stating that such
notice is a "Notice of Default" hereunder shall have been given (x) to
the Company by the Trustee or (y) to the Company and the Trustee by the
Holders of at least 25% in aggregate principal amount of the Notes then
Outstanding; or
(E) default or defaults under one or more agreements,
indentures or instruments under which the Company or any Restricted
Subsidiary then has outstanding Indebtedness in excess of $25,000,000
individually or in the aggregate and either (i) such Indebtedness is
already due and payable in full or (ii) such default or defaults
results in the acceleration of the maturity of such Indebtedness; or
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(F) any Note Guarantee ceases to be in full force and effect or
is declared null and void or any Guarantor denies that it has any
further liability under any Note Guarantee, or gives notice to such
effect (other than by reason of the termination of this Indenture or
the release of any such Note Guarantee in accordance with Section 12.04
hereof) and such condition shall have continued for a period of 30 days
after written notice of such condition requiring the same to be
remedied and stating that such notice is a "Notice of Default"
hereunder shall have been given (x) to the Company by the Trustee or
(y) to the Company and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Notes then Outstanding; or
(G) one or more judgments, orders or decrees of any court or
regulatory or administrative agency for the payment of money in excess
of $25,000,000 either individually or in the aggregate shall have been
rendered against the Company or any Restricted Subsidiary or any of
their respective properties and shall not have been discharged and
either (a) any creditor shall have commenced an enforcement proceeding
upon such judgment, order or decree or (b) there shall have been a
period of 60 consecutive days during which a stay of enforcement of
such judgment, order or decree, by reason of a pending appeal or
otherwise, will not be in effect; or
(H) the Company or any Material Subsidiary of the Company
pursuant to or under or within the meaning of any Bankruptcy Law:
(I) commences a voluntary case or proceeding;
(II) consents to the making of a Bankruptcy Order in an
involuntary case or proceeding or the commencement of any case against
it;
(III) consents to the appointment of a Custodian of it or
for any substantial part of its property;
(IV) makes a general assignment for the benefit of its
creditors;
(V) files an answer or consent seeking reorganization or
relief;
(VI) shall admit in writing its inability to pay its debts
generally; or
(VII) consents to the filing of a petition in bankruptcy;
or
(I) a court of competent jurisdiction in any involuntary
case or proceeding enters a Bankruptcy Order against the Company or
any Material Subsidiary, and such Bankruptcy Order remains unstayed
and in effect for 60 consecutive days; or
(J) a Custodian shall be appointed out of court with respect to
the Company or any Material Subsidiary or with respect to all or any
substantial part of the assets or properties of the Company or any
Material Subsidiary.
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Section 5.02. Acceleration of Maturity; Rescission
and Annulment.
If (x) an Event of Default (other than an Event of Default specified in
Section 5.01(h), (i) or (j) with respect to the Company) occurs and is
continuing then and in every such case the Trustee or the Holders of at least
25% in aggregate principal amount of the Notes then outstanding may, and the
Trustee upon the request of the Holders of not less than 25% in aggregate
principal amount of the Notes then Outstanding shall, declare all principal of
all the Notes to be due and payable immediately in an amount equal to the
principal amount of the Notes, premium, if any, thereon plus accrued and unpaid
interest, if any, to the date the Notes become due and payable by a notice in
writing to the Company (and to the Trustee, if given by the Holders) and upon
any such declaration such principal, premium, if any, and interest, shall become
immediately due and payable. If an Event of Default specified in Section
5.01(h), (i) or (j) with respect to the Company occurs and is continuing, then
the principal of, premium, if any, and accrued and unpaid interest, if any, on
all the Notes then outstanding shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder of Notes.
At any time after a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article, the Holders of a majority
in aggregate principal amount of the Notes then Outstanding, by written notice
to the Company and the Trustee, may rescind and annul such declaration of
acceleration and its consequences if:
(A) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(I) all amounts due the Trustee under Section 6.07, including the
reasonable compensation, fees, expenses, disbursements and advances of the
Trustee, its agents and counsel,
(II) all overdue interest on all Notes,
(III) the principal of and premium, if any, on any Notes which have
become due otherwise than by such declaration of acceleration and interest
thereon at the rate then borne by the Notes, and
(IV) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate then borne by the Notes; and
(B) all Events of Default, other than the non-payment of principal of,
premium, if any, and any accrued and unpaid interest on, the Notes that have
become due solely by such declaration of acceleration, have been cured or waived
as provided in Section 5.13.
No such rescission shall affect any subsequent Default or impair any
right consequent thereon.
Notwithstanding the foregoing, in the event of a declaration of
acceleration in respect of the Notes because an Event of Default specified in
Section 5.01(e) shall have occurred
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and be continuing, such declaration of acceleration shall be automatically
annulled if the Indebtedness that is the subject of such Event of Default has
been discharged or paid or the requisite holders thereof have rescinded their
declaration of acceleration in respect of such Indebtedness and written notice
of such discharge or rescission, as the case may be, shall have been given to
the Trustee by the Company and by the requisite holders of such Indebtedness or
a trustee, fiduciary or agent for such holders, within 60 days after such
declaration of acceleration in respect of the Notes and no other Event of
Default has occurred which has not been cured or waived during such 60-day
period.
Section 5.03. Collection of Indebtedness and Suits
for Enforcement by Trustee.
The Company and each Guarantor covenant that if an Event of
Default specified in Section 5.01(i) or 5.01(ii) shall have occurred and be
continuing, the Company and each Guarantor will, jointly and severally, upon
demand of the Trustee, pay to the Trustee, for the benefit of the Holders of
such Notes, the whole amount then due and payable on such Notes for principal,
premium, if any, and interest, with interest upon the overdue principal,
premium, if any, and, to the extent that payment of such interest shall be
legally enforceable, upon overdue installments of interest, at the rate then
borne by the Notes; and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
If the Company and each Guarantor, fail to pay such amounts
forthwith upon such demand, the Trustee, in its own name and as trustee of an
express trust, may, but is not obligated under this paragraph to, institute a
judicial proceeding for the collection of the sums so due and unpaid and may,
but is not obligated under this paragraph to, prosecute such proceeding to
judgment or final decree, and may, but is not obligated under this paragraph to,
enforce the same against the Company, any Guarantor or any other obligor upon
the Notes and collect the moneys adjudged or decreed to be payable in the manner
provided by law out of the property of the Company or any Guarantor or any other
obligor upon the Notes, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion, but is not obligated under this paragraph to, (i) proceed
to protect and enforce its rights and the rights of the Holders under this
Indenture or any Note Guarantee by such appropriate private or judicial
proceedings as the Trustee shall deem most effectual to protect and enforce such
rights, whether for the specific enforcement of any covenant or agreement
contained in this Indenture or in aid of the exercise of any power granted
herein, including, without limitation, seeking recourse against any Guarantor or
(ii) proceed to protect and enforce any other proper remedy, including, without
limitation, seeking recourse against any Guarantor. No recovery of any such
judgment upon any property of the Company or any Guarantor shall affect or
impair any rights, powers or remedies of the Trustee or the Holders.
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Section 5.04. Trustee May File Proofs of Claims.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon the
Notes, including each Guarantor or the property of the Company or of such other
obligor or their creditors, the Trustee (irrespective of whether the principal
of the Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand on the Company for the payment of overdue principal or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(A) to file and prove a claim for the whole amount of
principal, premium, if any, and interest owing and unpaid in respect of
the Notes and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, fees, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
of the Holders allowed in such judicial proceeding, and
(B) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same;
and any Custodian, in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.07 hereof.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment or composition affecting the
Notes or the rights of any Holder thereof, or to authorize the Trustee to vote
in respect of the claim of any Holder in any such proceeding.
Section 5.05. Trustee May Enforce Claims Without
Possession of Notes.
All rights of action and claims under this Indenture, the
Notes or any Note Guarantee may be prosecuted and enforced by the Trustee
without the possession of any of the Notes or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name and as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, fees, expenses, disbursements and advances of the Trustee, its
agents and counsel, be for the ratable benefit of the Holders of the Notes in
respect of which such judgment has been recovered.
Section 5.06. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such
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money on account of principal, premium, if any, or interest, upon presentation
of the Notes and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
First: to the Trustee for amounts due under Section 6.07;
Second: to Holders for interest accrued on the Notes,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for interest;
Third: to Holders for principal and premium, if any, amounts
owing under the Notes, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for
principal and premium, if any; and
Fourth: the balance, if any, to the Company.
The Trustee, upon prior written notice to the Company, may fix
a record date and payment date for any payment to Noteholders pursuant to this
Section 5.06.
Section 5.07. Limitation on Suits.
No Holder of any Notes shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(A) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(B) the Holders of not less than 25% in principal amount of
the Outstanding Notes shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
(C) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(D) the Trustee for 15 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(E) no direction inconsistent with such written request has
been given to the Trustee during such 15- day period by the Holders of
a majority in aggregate principal amount of the Outstanding Notes;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture, any Note or any Note Guarantee to affect, disturb or prejudice
the rights of any other Holders, or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this Indenture,
any Note or any Note Guarantee, except in the manner provided in this Indenture
and for the equal and ratable benefit of all the Holders.
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Section 5.08. Unconditional Right of Holders To
Receive Principal, Premium and
Interest.
Notwithstanding any other provision in this Indenture, the
Holder of any Note shall have the right, which is absolute and unconditional, to
receive cash payment of the principal of, premium, if any, and (subject to
Section 3.07 hereof) interest on such Note on the respective Stated Maturities
expressed in such Note (or, in the case of redemption, on the respective
Redemption Date) and to institute suit for the enforcement of any such payment,
and such rights shall not be impaired without the consent of such Holder.
Section 5.09. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture, any Note or any Note Guarantee
and such proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to the Trustee or to such Holder, then and in every
such case the Company, each of the Guarantor, the Trustee and the Holders shall,
subject to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
Section 5.10. Rights and Remedies Cumulative.
Except as provided in Section 3.06, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 5.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Note to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this Article
Five or by law to the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or by the Holders,
as the case may be.
Section 5.12. Control by Majority.
The Holders of a majority in aggregate principal amount of the
Outstanding Notes shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, provided, however, that:
(A) such direction shall not be in conflict with any rule of
law or with this Indenture, any Note or any Note Guarantee or expose
the Trustee to personal liability; and
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(B) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Section 5.13. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Notes may on behalf of the Holders of all the Notes
waive any past Default hereunder and its consequences, except a Default
(A) in the payment of the principal of, premium, if any, or
interest on any Note or
(B) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Note affected thereby.
Upon any such waiver, such Default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.
Section 5.14. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any
Note by his acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Trustee for any action
taken, suffered or omitted by it as Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit, and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.14 shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Notes, or to
any suit instituted by any Holder for the enforcement of the payment of the
principal of, premium, if any, or interest on any Note on or after the
respective Stated Maturities expressed in such Note (or, in the case of
redemption, on or after the respective Redemption Dates).
Section 5.15. Waiver of Stay, Extension or Usury Laws.
Each of the Company and the Guarantors covenants (to the extent
that it may lawfully do so) that it will not at any time insist upon, or plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law or any usury or other law wherever enacted, now or at any time
hereafter in force, which would prohibit or forgive the Company or any Guarantor
from paying all or any portion of the principal of, premium, if any, or interest
on the Notes contemplated herein or in the Notes or which may affect the
covenants or the performance of this Indenture; and each of the Company and the
Guarantors (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the
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Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
Section 5.16. Unconditional Right of Holders To Receive
Payment.
Notwithstanding any other provision in this Indenture and any
other provision of any Note, the right of any Holder of any Note to receive
payment of the principal of, premium, if any, and interest on such Note on or
after the respective Stated Maturities (or the respective Redemption Dates, in
the case of redemption) expressed in such Note, or after such respective dates,
shall not be impaired or affected without the consent of such Holder.
ARTICLE SIX
THE TRUSTEE
Section 6.01. Certain Duties and Responsibilities.
(A) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such certificates or opinions
which by provision hereof are specifically required to be furnished to
the Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Indenture.
(B) In case an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it
by this Indenture, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(C) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct, except
that no provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
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(D) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to
the provisions of this Section 6.01.
Section 6.02. Notice of Defaults.
Within 60 days after the occurrence of any Default, the Trustee
shall transmit by mail to all Holders, as their names and addresses appear in
the Note Register, notice of such Default hereunder known to the Trustee, unless
such Default shall have been cured or waived; provided, however, that, except in
the case of a Default in the payment of the principal of, premium, if any, or
interest on any Note, the Trustee shall be protected in withholding such notice
if and so long as a trust committee of Responsible Officers of the Trustee in
good faith determines that the withholding of such notice is in the interest of
the Holders.
Section 6.03. Certain Rights of Trustee.
Subject to Section 6.01 hereof and the provisions of Section
315 of the Trust Indenture Act:
(A) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or
presented by the proper party or parties;
(B) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors of the Company or any
Guarantor may be sufficiently evidenced by a Board Resolution thereof;
(C) the Trustee may consult with counsel and any written advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon in
accordance with such advice or Opinion of Counsel;
(D) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by the Trustee in compliance with such request or direction;
(E) the Trustee shall not be liable for any action taken or
omitted by it in good faith and believed by it to be authorized or
within the discretion, rights or powers conferred upon it by this
Indenture other than any liabilities arising out of its own negligence;
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(F) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, approval, appraisal, bond, debenture, note, coupon,
security, other evidence of indebtedness or other paper or document
unless requested in writing so to do by the Holders of not less than
a majority in aggregate principal amount of the Notes then
Outstanding; provided, however, that, if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation is, in
the opinion of the Trustee, not reasonably assured to the Trustee by
the security afforded to it by the terms of this Indenture, the
Trustee may require reasonable indemnity against such expenses or
liabilities as a condition to proceeding; the reasonable expenses of
every such investigation shall be paid by the Company or, if paid by
the Trustee or any predecessor Trustee, shall be repaid by the Company
upon demand; provided, further, the Trustee in its discretion may make
such further inquiry or investigation into such facts or matters as it
may deem fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or
attorney; and
(G) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder.
Section 6.04. Trustee Not Responsible for
Recitals, Dispositions of Notes or
Application of Proceeds Thereof.
The recitals contained herein and in the Notes, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company and the Guarantors, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Notes or of any Note Guarantee except
that the Trustee represents that it is duly authorized to execute and deliver
this Indenture, authenticate the Notes and perform its obligations hereunder and
that the statements made by it in a Statement of Eligibility and Qualification
on Form T-1, if any, to be supplied to the Company are true and accurate subject
to the qualifications set forth therein. The Trustee shall not be accountable
for the use or application by the Company of Notes or the proceeds thereof.
Section 6.05. Trustee and Agents May Hold Notes;
Collections; Etc.
The Trustee, any Paying Agent, Registrar or any other agent
of the Company, in its individual or any other capacity, may become the owner
or pledgee of Notes, with the same rights it would have if it were not the
Trustee, Paying Agent, Registrar or such other agent and, subject to Sections
6.08 and 6.13 hereof and Sections 310 and 311 of the Trust Indenture Act, may
otherwise deal with the Company and receive, collect, hold and retain
collections from the Company with the same rights it would have if it were not
the Trustee, Paying Agent, Registrar or such other agent.
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Section 6.06. Money Held in Trust.
All moneys received by the Trustee shall, until used or applied
as herein provided, be held in trust for the purposes for which they were
received, but need not be segregated from other funds except to the extent
required herein or by law. The Trustee shall not be under any liability for
interest on any moneys received by it hereunder.
Section 6.07. Compensation and Indemnification of
Trustee and Its Prior Claim.
The Company and each Guarantor covenant and agree: (a) to pay to
the Trustee from time to time, and the Trustee shall be entitled to, reasonable
compensation for all services rendered by it hereunder (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust); (b) to reimburse the Trustee and each predecessor Trustee upon
its request for all reasonable expenses, fees, disbursements and advances
incurred or made by or on behalf of it in accordance with any of the provisions
of this Indenture (including the reasonable compensation, fees, and the expenses
and disbursements of its counsel and of all agents and other persons not
regularly in its employ), except any such expense, disbursement or advance as
may arise from its negligence or bad faith; and (c) to indemnify the Trustee and
each predecessor Trustee for, and to hold it harmless against, any loss,
liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of this
Indenture or the trusts hereunder and its duties hereunder, including
enforcement of this Section 6.07. The obligations of the Company and each
Guarantor under this Section to compensate and indemnify the Trustee and each
predecessor Trustee and to pay or reimburse the Trustee and each predecessor
Trustee for expenses, fees, disbursements and advances shall constitute an
additional obligation hereunder and shall survive the satisfaction and discharge
of this Indenture. To secure the obligations of the Company and of each
Guarantor to the Trustee under this Section 6.07, the Trustee shall have a prior
Lien upon all property and funds held or collected by the Trustee as such,
except funds and property paid by the Company or any Guarantor and held in trust
for the benefit of the Holders of particular Notes.
Section 6.08. Conflicting Interests.
The Trustee shall be subject to and comply with the provisions
of Section 310(b) of the Trust Indenture Act.
Section 6.09. Corporate Trustee Required;
Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under Trust Indenture Act Sections 310(a)(1) and (2)
and which shall have a combined capital and surplus of at least $100,000,000,
and have a Corporate Trust Office in the Borough of Manhattan in The City of New
York, State of New York. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of any Federal, state,
territorial or District of Columbia supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any
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time the Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Trustee shall resign immediately in the manner and with the
effect hereinafter specified in this Article.
Section 6.10. Resignation and Removal; Appointment
of Successor Trustee.
(A) No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the successor Trustee under
Section 6.11.
(B) The Trustee, or any trustee or trustees hereinafter
appointed, may at any time resign by giving written notice thereof to
the Company at least 20 Business Days prior to the date of such
proposed resignation. Upon receiving such notice of resignation, the
Company shall promptly appoint a successor trustee by written
instrument executed by authority of the Board of Directors of the
Company, a copy of which shall be delivered to the resigning Trustee
and a copy to the successor Trustee. If an instrument of acceptance by
a successor Trustee shall not have been delivered to the Trustee within
20 Business Days after the giving of such notice of resignation, the
resigning Trustee may, or (if an instrument of acceptance by a
successor Trustee shall not have been delivered to the Trustee within
30 Business Days after the giving of such notice of resignation) any
Holder who has been a bona fide Holder of a Note for at least six
months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a
successor Trustee. Such court may thereupon, after such notice, if any,
as it may deem proper, appoint a successor Trustee.
(C) The Trustee may be removed at any time by an Act of the
Holders of a majority in principal amount of the Outstanding Notes,
delivered to the Trustee and to the Company.
(D) If at any time:
(1) the Trustee shall fail to comply with the provisions of
Section 310(b) of the Trust Indenture Act in accordance with Section
6.08 hereof after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Note for at least six
months, or
(2) the Trustee shall cease to be eligible under Section 6.09
hereof and shall fail to resign after written request therefor by the
Company or by any Holder who has been a bona fide Holder of a Note for
at least six months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take charge
or control of the Trustee or of its property or affairs for the purpose
or rehabilitation, conservation or liquidation,
then, in any case, (i) the Company by a Board Resolution may remove the Trustee,
or (ii) subject to Section 5.14, the Holder of any Note who has been a bona fide
Holder of a Note for at least six
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months may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee. Such court may thereupon, after such notice,
if any, as it may deem proper and prescribe, remove the Trustee and appoint a
successor Trustee.
(E) If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of Trustee for any
cause, the Company, by a Board Resolution of its Board of Directors,
shall promptly appoint a successor Trustee. If, within one year after
such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Notes delivered to
the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment,
become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so
appointed by the Company or the Holders of the Notes and accepted
appointment in the manner hereinafter provided, the Holder of any Note
who has been a bona fide Holder for at least six months may, subject to
Section 5.14, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a
successor Trustee.
(F) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by
mailing written notice of such event by first-class mail, postage
prepaid, to the Holders of Notes as their names and addresses appear in
the Note Register. Each notice shall include the name of the successor
Trustee and the address of its Corporate Trust Office.
Section 6.11. Acceptance of Appointment by
Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee as if originally named as
Trustee hereunder; but, nevertheless, on the written request of the Company or
the successor Trustee, upon payment of amounts due it pursuant to Section 6.07,
such retiring Trustee shall duly assign, transfer and deliver to the successor
Trustee all moneys and property at the time held by it hereunder and shall
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers, duties and obligations of the retiring Trustee. Upon request of
any such successor Trustee, the Company shall execute any and all instruments
for more fully and certainly vesting in and confirming to such successor Trustee
all such rights and powers. Any Trustee ceasing to act shall, nevertheless,
retain a prior claim upon all property or funds held or collected by such
Trustee to secure any amounts then due it pursuant to the provisions of Section
6.07.
No successor Trustee with respect to the Notes shall accept
appointment as provided in this Section 6.11 unless at the time of such
acceptance such successor Trustee shall be eligible to act as Trustee under this
Article.
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Upon acceptance of appointment by any successor Trustee as
provided in this Section 6.11, the successor shall give notice thereof to the
Holders of the Notes, by mailing such notice to such Holders at their addresses
as they shall appear on the Note Register. If the acceptance of appointment is
substantially contemporaneous with the resignation, then the notice called for
by the preceding sentence may be combined with the notice called for by Section
6.10. If the Company fails to give such notice within 10 days after acceptance
of appointment by the successor Trustee, the successor Trustee shall cause such
notice to be given at the expense of the Company.
Section 6.12. Merger, Conversion, Amalgamation,
Consolidation or Succession to
Business
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated or amalgamated, or any
corporation resulting from any merger, conversion, amalgamation or consolidation
to which the Trustee shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder without the execution or filing of any paper
or any further act on the part of any of the parties hereto, provided such
corporation shall be eligible under this Article Six to serve as Trustee
hereunder.
In case at the time such successor to the Trustee under this
Section 6.12 shall succeed to the trusts created by this Indenture any of the
Notes shall have been authenticated but not delivered, any such successor to the
Trustee may adopt the certificate of authentication of any predecessor Trustee
and deliver such Notes so authenticated; and, in case at that time any of the
Notes shall not have been authenticated, any successor to the Trustee under this
Section 6.12 may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor Trustee; and in all such cases such
certificate shall have the full force which it is anywhere in the Notes or in
this Indenture provided that the certificate of the Trustee shall have been
authenticated.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.01. Preservation of Information; Company
To Furnish Trustee Names and
Addresses of Holders.
(A) The Trustee shall preserve the names and addresses of the
Noteholders and otherwise comply with TIA Section 312(a). If the
Trustee is not the Registrar, the Company shall furnish or cause the
Registrar to furnish to the Trustee before each Interest Payment Date,
and at such other times as the Trustee may request in writing, a list
in such form and as of such date as the Trustee may reasonably require
of the names and addresses of the Noteholders. Neither the Company nor
the Trustee shall be under any responsibility with regard to the
accuracy of such list.
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(B) The Company will furnish or cause to be furnished to the Trustee
(I) semi-annually, not more than 15 days after each Regular
Record Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of such Regular
Record Date; and
(II) at such other times as the Trustee may reasonably request
in writing, within 30 days after receipt by the Company of any such
request, a list of similar form and content as of a date not more than
15 days prior to the time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Registrar, no
such list need be furnished pursuant to this Subsection 7.01(b).
Section 7.02. Communications of Holders.
Holders may communicate with other Holders with respect to
their rights under this Indenture or under the Notes pursuant to Section 312(b)
of the Trust Indenture Act. The Company and the Trustee and any and all other
persons benefited by this Indenture shall have the protection afforded by
Section 312(c) of the Trust Indenture Act.
Section 7.03. Reports by Trustee.
Within 60 days after May 1 of each year commencing with the
first May 1 following the date of this Indenture, the Trustee shall mail to all
Holders, as their names and addresses appear in the Note Register, a brief
report dated as of such May 1, in accordance with, and to the extent required
under Section 313 of the Trust Indenture Act. At the time of its mailing to
Holders, a copy of each such report shall be filed by the Trustee with the
Company, the Commission and with each stock exchange on which the Notes are
listed. The Company shall notify the Trustee when the Notes are listed on any
stock exchange.
Section 7.04. Reports by Company and Each
Guarantor.
The Company and each Guarantor shall:
(A) file with the Commission, the copies of annual reports and
of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to
time by rules and regulations prescribe) required to be filed with
Commission pursuant to Section 13 or Section 15 of the Exchange Act,
whether or not the Company or any Guarantor has a class of securities
registered under the Exchange Act;
(B) file with the Trustee within 15 days after it files or
would be required to file the information specified in subsection (a)
of this Section 7.04 reports and documents with the Commission copies
of such information;
(C) file with the Trustee and the Commission in accordance with
rules and regulations prescribed from time to time by the Commission,
such additional information,
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documents and reports with respect to compliance by the Company and
each Guarantor with the conditions and covenants of this Indenture
as may be required from time to time by such rules and regulations;
and
(D) transmit by mail to all Holders, as their names and
addresses appear in the Note Register, within 30 days after the filing
thereof with the Trustee, such summaries of any information, documents
and reports required to be filed by the Company and each Guarantor
pursuant to subsections (a) and (c) of this Section as may be required
by rules and regulations prescribed from time to time by the
Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
Section 8.01. Company May Consolidate, etc., Only
on Certain Terms.
The Company will not, in a single transaction or through a
series of related transactions, merge or consolidate with or into or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of its properties and assets as an entirety to, any Person or Persons, and the
Company will not permit any of the estricted Subsidiaries to enter into any such
transaction or series of related transactions if such transaction or series of
related transactions, in the aggregate, would result in the sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all of
the properties and assets of the Company and the Restricted Subsidiaries
(determined on a consolidated basis for the Company and the Restricted
Subsidiary), to any other Person or Persons, unless at the time and after giving
effect thereto:
(I) either (A)(1) if the transaction or transactions is a
merger or consolidation involving the Company, the Company shall be the
surviving Person of such merger or consolidation or (2) if the
transaction or transactions is a merger or consolidation involving a
Restricted Subsidiary, such Restricted Subsidiary shall be the
surviving Person of such merger or consolidation, or (B)(1) the Person
formed by such consolidation or into which the Company or such
Restricted Subsidiary is merged or to which the properties and assets
of the Company or such Restricted Subsidiary, as the case may be,
substantially as an entirety, are transferred (any such surviving
Person or transferee Person being the "Surviving Entity") shall be a
corporation organized and existing under the laws of the United States
of America, any State thereof or the District of Columbia, and (2)(x)
in the case of a transaction involving the Company, the Surviving
Entity shall expressly assume, by a supplemental indenture executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Notes and this Indenture and the
Registration Rights Agreement and, in each case, the Notes, this
Indenture and the Registration Rights Agreement shall remain in full
force and effect, or (y) in the case of a transaction involving a
Restricted Subsidiary that is a Guarantor, the Surviving Entity shall
expressly assume by a supplemental indenture executed and delivered to
the Trustee, in form satisfactory to the Trustee, all the obligations
of such
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Restricted Subsidiary under its Note Guarantee and this Indenture and
the Registration Rights Agreement and, in each case, such Note
Guarantee and this Indenture and the Registration Rights Agreement
shall remain in full force and effect;
(II) immediately after giving effect to such transaction or
series of transactions on a pro forma basis, no Default shall have
occurred and be continuing;
(III) if the Company is then subject to Section 10.12, the
Company, or the Surviving Entity, as the case may be, immediately after
giving effect to such transaction or series of transactions on a pro
forma basis (including, without limitation, any Indebtedness incurred
or anticipated to be incurred in connection with or in respect of such
transaction or series of transactions), could incur $1.00 of additional
Indebtedness under Section 10.12 hereof;
(IV) each Guarantor, unless it is the other party to the
transaction or transactions described above or in connection therewith
its Guarantee will be released and discharged in accordance with the
terms of this Indenture, shall have by supplemental indenture confirmed
that its Note Guarantee shall apply to the obligations of the Company
or the Surviving Entity, as the case may be, under this Indenture and
the Notes; and
(V) the Company or the Surviving Entity, as the case may be,
shall have delivered to the Trustee, in form and substance reasonably
satisfactory to the Trustee, an Officers' Certificate and an Opinion of
Counsel each stating that such transaction or series of related
transactions and, if a supplemental indenture is required in connection
with such transaction or series of related transactions to effectuate
such assumption, such supplemental indenture complies with this
Indenture.
No Guarantor (other than a Guarantor whose Note Guarantee is to
be released in accordance with the terms of its Note Guarantee and this
Indenture as provided in the second sentence of Section 10.18 shall, in any
transaction or series of related transactions, consolidate with or merge with or
into another Person, whether or not such Person is affiliated with such
Guarantor and whether or not such Guarantor is the Surviving Entity, unless (i)
the Surviving Entity (if other than such Guarantor) is a corporation organized
and validly existing under the laws of the United States, any State thereof or
the District of Columbia; (ii) the Surviving Entity (if other than such
Guarantor) expressly assumes by a supplemental indenture all the obligations of
such Guarantor under its Note Guarantee and the performance and observance of
every covenant of this Indenture and the Registration Rights Agreement to be
performed or observed by such Guarantor; and (iii) immediately after giving
effect to such transaction or series of related transactions on a pro forma
basis, no Default shall have occurred and be continuing.
Section 8.02. Successor Substituted.
Upon any consolidation, combination or merger, or any sale,
assignment, conveyance, transfer, lease or other disposition of all or
substantially all of the properties and assets of the Company or any Guarantor
in accordance with Section 8.01 hereof in which the Company or a Guarantor is
not the Surviving Entity, such Surviving Entity shall succeed to, and
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be substituted for, and may exercise every right and power of, the Company
or such Guarantor, as the case may be, under this Indenture, the Notes, the Note
Guarantee of such Guarantor and the Registration Rights Agreement with the same
effect as if such successor had been named as the Company or such Guarantor, as
the case may be, herein, and in the Notes and, thereafter, except in the case of
(a) a lease or (b) any sale, assignment, conveyance, transfer, lease or other
disposition to a Restricted Subsidiary of the Company or such Guarantor, the
Company or such Guarantor, as the case may be, shall be discharged from all
obligations and covenants under this Indenture, the Notes, the Note Guarantees
and the Registration Rights Agreement, as applicable.
For all purposes of this Indenture and the Notes (including
this Article Eight and Sections 10.12, 10.14 and 10.17 hereof), Subsidiaries of
any Surviving Entity will, upon such transaction or series of related
transactions described in this Article Eight, become Restricted Subsidiaries or
Unrestricted Subsidiaries as provided pursuant to Section 10.21 and all
Indebtedness, and all Liens on property or assets, of the Company and the
Restricted Subsidiaries in existence immediately prior to such transaction or
series of related transactions will be deemed to have been incurred upon such
transaction or series of related transactions.
ARTICLE NINE
SUPPLEMENTAL INDENTURES AND WAIVERS
Section 9.01. Supplemental Indentures, Agreements
and Waivers Without Consent of
Holders.
Without the consent of any Holders, the Company and the
Guarantors, when authorized by a Board Resolution of the Board of Directors of
the Company and each Guarantor, and the Trustee, at any time and from time to
time, may amend, waive, modify or supplement this Indenture or the Notes or the
Note Guarantees for any of the following purposes:
(A) to evidence the succession of another person to the Company
or a Guarantor, and the assumption by any such successor of the
covenants of the Company or such Guarantor herein and in the Notes
and/or in any Note Guarantee, as the case may be;
(B) to add to the covenants of the Company or any Guarantor for
the benefit of the Holders, or to surrender any right or power herein
conferred upon the Company or any Guarantor, as applicable, herein, in
the Notes or in any Note Guarantee, as the case may be;
(C) to cure any ambiguity, to correct or supplement any
provision herein, in the Notes or in any Note Guarantee which may be
defective or inconsistent with any other provision herein or to make
any other provisions with respect to matters or questions arising under
this Indenture, the Notes or any Note Guarantee; provided, however,
that, in each case, such provisions shall not materially adversely
affect the legal rights of the Holders;
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(D) to comply with the requirements of the Commission in order
to effect or maintain the qualification of this Indenture under the
Trust Indenture Act, as contemplated by Section 9.05 hereof or
otherwise;
(E) to add a Guarantor pursuant to the requirements of
Section 10.18 hereof or otherwise;
(F) to evidence and provide the acceptance of the appointment
of a successor Trustee hereunder;
(G) to mortgage, pledge, hypothecate or grant a security
interest in any property or assets in favorof the Trustee for the
benefit of the Holders as security for the payment and performance of
the Indenture Obligations; or
(H) to make any other change that does not materially adversely
affect the legal rights of any Holder;
provided, however, that the Company has delivered to the Trustee an Opinion of
Counsel stating that such change, agreement or waiver does not materially
adversely affect the legal rights of any Holder.
Section 9.02. Supplemental Indentures, Agreements
and Waivers with Consent of Holders.
With the written consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Notes delivered to the
Company, each Guarantor and the Trustee, the Company and each Guarantor (if a
party thereto) when authorized by a Board Resolution, together with the Trustee,
may amend, waive, modify or supplement any other provision of this Indenture or
the Notes or the Note Guarantees; provided, however, that no such amendment,
waiver, modification or supplement may, without the written consent of the
Holder of each Outstanding Note affected thereby:
(I) reduce the principal of or change the Stated Maturity of
any Note, or alter the provisions with respect to the redemption or
repurchase of the Notes in any manner adverse to the Holders of the
Notes;
(II) reduce the rate of or change the time for payment of
interest on any such Note;
(III) change the place or currency of payment of principal of
(or premium) or interest on any such Note;
(IV) modify any provisions of this Indenture relating to the
waiver of past defaults (other than to add sections of this Indenture
or the Notes subject thereto) or the right of the Holders of Notes to
institute suit for the enforcement of any payment on or with respect to
any such Note or any Note Guarantee in respect thereof or the
modification and amendment provisions of this Indenture and the Notes
(other than to add
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sections of this Indenture or the Notes which may not be amended,
supplemented or waived without the consent of each Holder therein
affected);
(V) modify any of the provisions of clauses (i) through (ix)
of this Section 9.02 or reduce the percentage of the principal amount
of outstanding Notes necessary for amendment to or waiver of compliance
with any provision of this Indenture or the Notes or for waiver of any
Default in respect thereof;
(VI) waive a default in the payment of principal of, interest
on, or redemption payment with respect to, the Notes (except a
rescission of acceleration of the Notes by the Holders thereof as
provided in this Indenture and a waiver of the payment default that
resulted from such acceleration);
(VII) modify the ranking or priority of any Note or the Note
Guarantee in respect thereof of any Guarantor in any manner adverse to
the Holders of the Notes;
(VIII) modify the provisions of Section 10.11 or 10.16 or modify
any of the provisions or definitions with respect thereto in a manner
materially adverse to the Holders of Notes affected thereby otherwise
than in accordance with this Indenture; or
(IX) release any Guarantor from any of its obligations under
its Note Guarantee or this Indenture otherwise than in accordance with
this Indenture.
Upon the written request of the Company and each Guarantor
accompanied by a copy of a Board Resolution of the Board of Directors of each of
them authorizing the execution of any such supplemental indenture or other
agreement, instrument or waiver, and upon the filing with the Trustee of
evidence of the consent of Holders as aforesaid, the Trustee shall join with the
Company and each Guarantor in the execution of such supplemental indenture or
other agreement, instrument or waiver.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture or
other agreement, instrument or waiver, but it shall be sufficient if such Act
shall approve the substance thereof.
Section 9.03. Execution of Supplemental
Indentures, Agreements and Waivers.
In executing, or accepting the additional trusts created by,
any supplemental indenture, agreement, instrument or waiver permitted by this
Article Nine or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Section
6.01 hereof) shall be fully protected in relying upon, an Opinion of Counsel
and an Officers' Certificate from each obligor under the Notes entering into
such supplemental indenture, agreement, instrument or waiver, each stating that
the execution of such supplemental indenture, agreement, instrument or waiver
(a) is authorized or permitted by this Indenture and (b) does not violate the
provisions of any agreement or instrument evidencing any other Indebtedness of
the Company, any Guarantor or any other Subsidiary of the Company. The Trustee
may, but shall not be obligated to, enter into any such supplemental indenture,
agreement, instrument or waiver
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which affects the Trustee's own rights, duties or immunities under this
Indenture, the Notes, any Note Guarantee or otherwise.
Section 9.04. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article Nine, this Indenture, the Notes, if applicable, and/or the applicable
Note Guarantee shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture, the Notes, if applicable, and/or
the applicable Note Guarantee, as the case may be, for all purposes; and every
Holder of Notes theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 9.05. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article
Nine shall conform to the requirements of the Trust Indenture Act as then in
effect.
Section 9.06. Reference in Notes to Supplemental
Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the Board
of Directors of the Company, to any such supplemental indenture may be prepared
and executed by the Company and each Guarantor and authenticated and delivered
by the Trustee upon a Company Order in exchange for Outstanding Notes.
Section 9.07. Record Date.
The Company may, but shall not be obligated to, fix, a record
date for the purpose of determining the Holders entitled to consent to any
supplemental indenture, agreement or instrument or any waiver, and shall
promptly notify the Trustee of any such record date. If a record date is fixed
those persons who were Holders at such record date (or their duly designated
proxies), and only those persons, shall be entitled to consent to such
supplemental indenture, agreement or instrument or waiver or to revoke any
consent previously given, whether or not such persons continue to be Holders
after such record date. No such consent shall be valid or effective for more
than 90 days after such record date.
Section 9.08. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if a notation of the consent is not made on any
Note. However, any such Holder, or subsequent Holder, may revoke the consent as
to his Note or portion of a Note if the Trustee receives the notice of
revocation before the date the amendment or waiver becomes effective. An
amendment or waiver shall become effective in accordance with its terms and
thereafter bind every Holder.
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ARTICLE TEN
COVENANTS
Section 10.01. Payment of Principal, Premium and
Interest.
The Company will duly and punctually pay the principal of,
premium, if any, and interest on the Notes in accordance with the terms of the
Notes and this Indenture.
Section 10.02. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan in The
City of New York, State of New York, an office or agency where Notes may be
presented or surrendered for payment, where Notes may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Notes and this Indenture may be served. The office
of the Trustee at its Corporate Trust Office will be such office or agency of
the Company, unless the Company shall designate and maintain some other office
or agency for one or more of such purposes. The Company will give prompt written
notice to the Trustee of any change in the location of any such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside of The City of New York, State of New
York) where the Notes may be presented or surrendered for any or all such
purposes, and may from time to time rescind such designation; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in The City of New York, State
of New York for such purposes. The Company will give prompt written notice to
the Trustee of any such designation or rescission and any change in the location
of any such other office or agency.
Section 10.03. Money for Note Payments To Be Held
in Trust.
If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the principal of, premium, if any, or
interest on any of the Notes, segregate and hold in trust for the benefit of the
Holders entitled thereto a sum sufficient to pay the principal, premium, if any,
or interest so becoming due until such sums shall be paid to such persons or
otherwise disposed of as herein provided, and will promptly notify the Trustee
of its action or failure so to act.
If the Company is not acting as Paying Agent, the Company will,
on or before each due date of the principal of, premium, if any, or interest on,
any Notes, deposit with a Paying Agent a sum in same day funds sufficient to pay
the principal, premium, if any, or interest so becoming due, such sum to be held
in trust for the benefit of the Holders entitled to such
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principal, premium or interest, and (unless such Paying Agent is the Trustee)
the Company will promptly notify the Trustee of such action or any failure so to
act.
If the Company is not acting as Paying Agent, the Company will
cause each Paying Agent other than the Trustee to execute and deliver to the
Trustee an instrument in which such Paying Agent will agree with the Trustee,
subject to the provisions of this Section 10.03, that such Paying Agent will:
(A) hold all sums held by it for the payment of the principal
of, premium, if any, or interest on Notes in trust for the benefit of
the Holders entitled thereto until such sums shall be paid to such
Holders or otherwise disposed of as herein provided;
(B) give the Trustee notice of any Default by the Company or
any Guarantor (or any other obligor upon the Notes) in the making of
any payment of principal of, premium, if any, or interest on the Notes;
(C) at any time during the continuance of any such Default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent; and
(D) acknowledge, accept and agree to comply in all aspects with
the provisions of this Indenture relating to the duties, rights and
liabilities of such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent will be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
if any, or interest on any Note and remaining unclaimed for two years after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company upon receipt of a Company Request therefor, or (if then held by
the Company) will be discharged from such trust; and the Holder of such Note
will thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, will thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, at the option of the Company
in the New York Times or the Wall Street Journal (national edition), notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining shall be repaid to the Company.
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Section 10.04. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect the
corporate existence, rights (charter and statutory), licenses and franchises of
the Company and each of the Restricted Subsidiaries; provided, however, that
the Company will not be required to preserve any such right, license or
franchise if the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and the Restricted Subsidiaries as a whole and that the loss
thereof is not adverse in any material respect to the Holders; provided,
further, that the foregoing will not prohibit a sale, transfer or conveyance of
a Subsidiary of the Company or any of its assets in compliance with the
terms of this Indenture.
Section 10.05. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all material taxes,
assessments and governmental charges levied or imposed (i) upon the Company or
any of its Restricted Subsidiaries or (ii) upon the income, profits or property
of the Company or any of the Restricted Subsidiaries and (b) all material lawful
claims for labor, materials and supplies, which, if unpaid, could reasonably be
expected to become a Lien upon the property of the Company or any of the
Restricted Subsidiaries; provided, however, that the Company will not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim (x) whose amount, applicability or validity is being
contested in good faith by appropriate proceedings properly instituted and
diligently conducted or (y) if the failure to so pay, discharge or cause to be
paid or discharged could not reasonably be expected to have a Material Adverse
Effect (as defined in the Purchase Agreement).
Section 10.06. Maintenance of Properties.
The Company will cause all material properties owned by the
Company or any of the Restricted Subsidiaries or used or held for use in the
conduct of their respective businesses to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section 10.06 will prevent the Company from discontinuing the
maintenance of any of such properties if such discontinuance is, in the judgment
of the Company, desirable in the conduct of its business or the business of any
of the Restricted Subsidiaries and is not disadvantageous in any material
respect to the Holders.
Section 10.07. Insurance.
The Company will at all times keep all of its and the
Restricted Subsidiaries' properties which are of an insurable nature insured
with insurers, believed by the Company in good faith to be financially sound and
responsible, against loss or damage to the extent that property of similar
character is usually and customarily so insured by corporations similarly
situated and owning like properties.
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Section 10.08. Books and Records.
The Company will keep proper books of record and account, in
which full and correct entries will be made of all financial transactions and
the assets and business of the Company and each Restricted Subsidiary of the
Company in material compliance with GAAP.
Section 10.09. Note Guarantees.
Each of the Guarantors and the Company will, and the Company
will cause each of the Guarantors to, ensure at all times that, unless otherwise
permitted by this Indenture, each Note Guarantee will remain in full force and
effect and shall not be subordinated by written agreement in right of payment to
any Indebtedness or other obligations of the Guarantors, unless required by
applicable law.
Section 10.10. Provision of Financial Statements.
The Company will file with the Commission (so long as the
Commission will accept any such filings) the Trustee and the Initial Purchasers
the annual reports, quarterly reports and other documents required to be filed
with the Commission pursuant to Sections 13 and 15 of the Exchange Act, whether
or not the Company has a class of securities registered under the Exchange Act.
The Company will also comply with the other provisions of Section 314(a) of the
Trust Indenture Act.
Section 10.11. Change of Control Triggering Event.
In the event of a Change of Control Triggering Event (the date
of such occurrence, the "Change of Control Date"), the Company will notify the
Holders of Notes in writing of such occurrence and will make an offer to
purchase (the "Change of Control Offer") on a Business Day (the "Change of
Control Purchase Date") not more than 30 nor less than 20 Business Days
following the Change of Control Date all Notes then Outstanding at a purchase
price in cash equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the Change of Control Purchase Date. Failure to mail
the notice of a Change of Control Offer on the date specified below or to have
satisfied the foregoing condition precedent by the date that such notice is
required to be mailed will constitute a covenant Default under Section 5.01(c).
Notice of a Change of Control Offer shall be mailed by the
Company not more than 20 Business Days after the Change of Control Date to the
Holders of Notes at their last registered addresses with a copy to the Trustee
and the Paying Agent. The Change of Control Offer shall remain open from the
time of mailing for at least 20 Business Days and until 5:00 p.m., New York City
time, on the Change of Control Purchase Date. The notice, which shall govern the
terms of the Change of Control Offer, shall include such disclosures as are
required by law and shall state:
(A) that the Change of Control Offer is being made pursuant to
this Section 10.11 and that all Notes tendered into the Change of
Control Offer will be accepted for payment;
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(B) the purchase price (including the amount of accrued
interest, if any) for each Note, the Change of Control Purchase Date
and the date on which the Change of Control Offer expires;
(C) that any Note not tendered for payment will continue to
accrue interest in accordance with the terms thereof;
(D) that, unless the Company shall default in the payment of
the purchase price, any Note accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change
of Control Purchase Date;
(E) that Holders electing to have Notes purchased pursuant to a
Change of Control Offer will be required to surrender their Notes to
the Paying Agent at the address specified in the notice prior to 5:00
p.m., New York City time, on the Change of Control Purchase Date and
must complete any form letter of transmittal proposed by the Company
and acceptable to the Trustee and the Paying Agent;
(F) that Holders of Notes will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New
York City time, on the Change of Control Purchase Date, a facsimile
transmission or letter setting forth the name of the Holders, the
principal amount of Notes the Holders delivered for purchase, the Note
certificate number (if any) and a statement that such Holder is
withdrawing his election to have such Notes purchased;
(G) that Holders whose Notes are purchased only in part will be
issued Notes of like tenor equal in principal amount to the unpurchased
portion of the Notes surrendered;
(H) the instructions that Holders must follow in order to
tender their Notes; and
(I) information concerning the business of the Company, the
most recent annual and quarterly reports of the Company filed with the
Commission pursuant to the Exchange Act (or, if the Company is not
required to file any such reports with the Commission, the comparable
reports prepared pursuant to Section 10.10), a description of material
developments in the Company's business, information with respect to pro
forma historical financial information after giving effect to such
Change of Control and such other information concerning the
circumstances and relevant facts regarding such Change of Control and
Change of Control Offer as would, in the good faith judgment of the
Company, be material to a Holder of Notes in connection with the
decision of such Holder as to whether or not it should tender Notes
pursuant to the Change of Control Offer.
On the Change of Control Purchase Date, the Company will (i)
accept for payment Notes or portions thereof tendered pursuant to the Change of
Control Offer, (ii) deposit with the Paying Agent money, in immediately
available funds, sufficient to pay the purchase price of all Notes or portions
thereof so tendered and accepted and (iii) deliver to the Trustee the Notes so
accepted together with an Officers' Certificate setting forth the Notes or
portions thereof tendered to and accepted for payment by the Company. The Paying
Agent will promptly mail or deliver to
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the Holders of Notes so accepted payment in an amount equal to the purchase
price, and the Trustee shall promptly authenticate and mail or deliver to such
Holders a new Note of like tenor equal in principal amount to any unpurchased
portion of the Note surrendered. Any Notes not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company will
publicly announce the results of the Change of Control Offer not later than the
first Business Day following the Change of Control Purchase Date.
The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act, and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to a Change
of Control Offer. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this Section 10.11, the Company will
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 10.11 by virtue
thereof.
Section 10.12. Limitation on Indebtedness.
The Company will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, create, incur, assume,
issue, guarantee or in any manner become liable for or with respect to,
contingently or otherwise (in each case, to "incur"), the payment of any
Indebtedness (including any Acquired Indebtedness); provided, however, that (i)
the Company and any Guarantor may incur Indebtedness (including Acquired
Indebtedness) and (ii) any Restricted Subsidiary may incur Acquired
Indebtedness, if, in either case, immediately after giving pro forma effect
thereto, the Consolidated Fixed Charge Coverage Ratio of the Company is at least
equal to 2.00:1.
Notwithstanding the foregoing, the Company and, to the extent
specifically set forth below, the Restricted Subsidiaries may incur each and all
of the following (collectively, "Permitted Indebtedness"):
(I) Indebtedness of the Company and the Guarantors under the
Credit Facility in an aggregate principal amount at any one time
outstanding not to exceed the greater of (i) $350 million and (ii) 65%
of Eligible Inventory (as defined under the Credit Facility) of the
Company and the Restricted Subsidiaries (determined on a consolidated
basis);
(II) Indebtedness of the Company or any Guarantor under
the Indenture, the Notes and the Note Guarantees;
(III) Indebtedness of the Company or any Restricted Subsidiary
not otherwise referred to in this paragraph that is outstanding on the
Issue Date, except Indebtedness to be repaid as described under "Use of
Proceeds" in the Offering Memorandum (other than Indebtedness repaid
that is permitted to be reborrowed under clause (i) above);
(IV) Indebtedness of the Company or any Restricted Subsidiary
in respect of performance bonds, bankers' acceptances, trade letters of
credit of the Company or any Restricted Subsidiary and surety bonds
provided by the Company or any Restricted Subsidiary in the ordinary
course of business;
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(V) Indebtedness of any Restricted Subsidiary owed to and
held by the Company or any Subsidiary that is a Guarantor, and
Indebtedness of the Company owed to and held by any Subsidiary that is
a Guarantor which is unsecured and subordinated in right of payment to
the payment and performance of the Company's obligations under the
Indenture and the Notes; provided, however, that an incurrence of
Indebtedness that is not permitted by this clause (v) shall be deemed
to have occurred upon (a) any sale or other disposition of any
Indebtedness of the Company or any Restricted Subsidiary referred to in
this clause (v) to a Person (other than the Company or any Subsidiary
that is a Guarantor), (b) any sale or other disposition of Capital
Stock of any Restricted Subsidiary which holds Indebtedness of the
Company or another Restricted Subsidiary such that such Restricted
Subsidiary ceases to be a Restricted Subsidiary and (c) the designation
of a Restricted Subsidiary which holds Indebtedness of the Company or
any other Restricted Subsidiary as an Unrestricted Subsidiary;
(VI) any guarantees of Indebtedness by a Restricted
Subsidiary incurred in compliance with Section 10.18 hereof;
(VII) Interest Rate Protection Obligations of the Company or
any Restricted Subsidiary covering Indebtedness of the Company or any
Restricted Subsidiary (which Indebtedness is otherwise permitted to be
incurred under this covenant) to the extent the notional principal
amount of such Interest Rate Protection Obligations does not exceed the
principal amount of the Indebtedness to which such Interest Rate
Protection Obligations relate;
(VIII) Indebtedness of the Company or any Restricted Subsidiary
under Currency Agreements relating to (a) Indebtedness of the Company
or any Restricted Subsidiary and/or (b) obligations to purchase or sell
assets or properties, in each case, incurred in the ordinary course of
business of the Company or any Restricted Subsidiary; provided,
however, that such Currency Agreements do not increase the Indebtedness
or other obligations of the Company or any Restricted Subsidiary
outstanding other than as a result of fluctuations in foreign currency
exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(IX) Purchase Money Indebtedness (other than Indebtedness
incurred in connection with an Asset Acquisition) and Capitalized Lease
Obligations of the Company or any Restricted Subsidiary in an aggregate
amount not exceeding (i) $25.0 million incurred in any one year and
(ii) $50.0 million outstanding at any time;
(X) (a) Indebtedness of the Company or any Guarantor to the
extent the proceeds thereof are used to Refinance Indebtedness
of the Company or any Guarantor or any Restricted Subsidiary incurred
under the first paragraph of this covenant or Indebtedness referred to
under clause (ii) or (iii) above and (b) Indebtedness of any
Restricted Subsidiary that is not a Guarantor to the extent the
proceeds thereof are used to Refinance Indebtedness of any Restricted
Subsidiary that is not a Guarantor incurred under the first paragraph
of this covenant or Indebtedness referred to under clause (iii) above;
provided, however, that, in the case of either clause (a) or (b), the
principal amount
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of Indebtedness incurred pursuant to this clause (x) (or, if such
Indebtedness provides for an amount less than the principal amount
thereof to be due and payable upon a declaration of acceleration of
the maturity thereof, the original issue price of such Indebtedness)
shall not exceed the sum of the principal amount of Indebtedness so
refinanced (or, if such Indebtedness provides for an amount less than
the principal amount thereof to be due and payable upon a declaration
of acceleration of the maturity thereof, the original issue price of
such Indebtedness, plus any accreted value attributable thereto since
the original issuance of such Indebtedness), plus the amount of any
premium required to be paid in connection with such Refinancing
pursuant to the terms of such Indebtedness or the amount of any
premium reasonably determined by the Company or a Restricted
Subsidiary, as applicable, as necessary to accomplish such Refinancing
by means of a tender offer or privately negotiated purchase, plus
the amount of expenses in connection therewith; and
(XI) in addition to the items referred to in clauses (i)
through (x) above, additional Indebtedness of the Company and the
Restricted Subsidiaries not to exceed an aggregate principal amount at
any time outstanding of $50.0 million.
For purposes of determining compliance with this Section 10.12,
in the event that an item of Indebtedness meets the criteria of more than one of
the types of Indebtedness permitted by this covenant, the Company in its sole
discretion shall classify such item of Indebtedness and only be required to
include the amount of such Indebtedness as one of such types.
After the Notes have been assigned an Investment Grade Rating
by both Rating Agencies, and notwithstanding that the Notes may later cease to
have an Investment Grade Rating, the Company and the Restricted Subsidiaries
will not be subject to the provisions of this Section; provided, that no Default
has occurred and is continuing at the time the Notes have been assigned such
rating.
Section 10.13. Statement by Officers as to Default.
The Company will deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company ending after the date hereof, a
written statement signed by the chairman or a chief executive officer, the
principal financial officer or principal accounting officer of the Company,
stating (i) that a review of the activities of the Company during the preceding
fiscal year has been made under the supervision of the signing officers with a
view to determining whether the Company has kept, observed, performed and
fulfilled its obligations under this Indenture, and (ii) that, to the knowledge
of each officer signing such certificate, the Company has kept, observed,
performed and fulfilled each and every covenant and condition contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions, conditions and covenants hereof (or, if a Default shall have
occurred, describing all such Defaults of which such officers may have
knowledge, their status and what action the Company is taking or proposes to
take with respect thereto). When any Default has occurred and is continuing, or
if the Trustee or any Holder or the trustee for or the holder of any other
evidence of Indebtedness of the Company or any Restricted Subsidiary gives any
notice or takes any other action with respect to a claimed default (other than
with respect to Indebtedness (other than
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Indebtedness evidenced by the Notes) in the principal amount of less than
$10,000,000), the Company will promptly notify the Trustee of such Default,
notice or action and will deliver to the Trustee by registered or certified mail
or by telegram, or facsimile transmission followed by hard copy by registered or
certified mail an Officers' Certificate specifying such event, notice or other
action within five Business Days after the Company becomes aware of such
occurrence and what action the Company is taking or proposes to take with
respect thereto.
Section 10.14. Limitation on Restricted Payments.
(A) The Company will not, and will not cause or permit any of
the Restricted Subsidiaries to, directly or indirectly:
(I) declare or pay any dividend or make any other
distribution or payment on or in respect of Capital Stock of the
Company or any Restricted Subsidiary or any payment made to the
direct or indirect holders (in their capacities as such) of Capital
Stock of the Company or any Restricted Subsidiary (other than
dividends or distributions made to the Company or a Restricted
Subsidiary and dividends and distributions payable solely in Capital
Stock of the Company (other than Redeemable Capital Stock) or in
rights to purchase Capital Stock of the Company (other than Redeemable
Capital Stock) or dividends and distributions made by a Restricted
Subsidiary on a pro rata basis to all shareholders of such Restricted
Subsidiary); or
(II) purchase, redeem, defease or otherwise acquire or retire
for value any Capital Stock of the Company (other than any such Capital
Stock owned by the Company or a Restricted Subsidiary that is a
Guarantor); or
(III) make any principal payment on, or purchase, defease,
repurchase, redeem or otherwise acquire or retire for value, prior to
any scheduled maturity, scheduled repayment, scheduled sinking fund
payment or other Stated Maturity, any Subordinated Indebtedness (other
than any Subordinated Indebtedness owed to and held by the Company or a
Restricted Subsidiary that is a Guarantor); or
(IV) make any Investment (other than a Permitted Investment)
(such payments or Investments (other than an exception thereto)
described in the preceding clauses (i), (ii), (iii) and (iv) are
collectively referred to as "Restricted Payments"), unless, at the time
of and after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than in cash, shall be
the Fair Market Value of the asset(s) proposed to be transferred by the
Company or such Restricted Subsidiary, as the case may be, pursuant to
such Restricted Payment):
(A) no Default shall have occurred and be continuing;
(B) the aggregate amount of all Restricted Payments
declared or made from and after the Issue Date and all
Designation Amounts would not exceed the sum of (1) 50% of
cumulative Consolidated Net Income of the Company during
the period (treated as one accounting period) beginning on
the Issue Date and
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ending on the last day of the fiscal quarter of the Company
immediately preceding the date of such proposed Restricted
Payment for which consolidated financial information of the
Company is available (or, if such cumulative Consolidated Net
Income of the Company for such period shall be a deficit,
minus 100% of such deficit), plus (2) the aggregate net cash
proceeds received by the Company either (x) as capital
contributions to the Company increasing its common equity
after the Issue Date or (y) from the issuance or sale of
Capital Stock (excluding Redeemable Capital Stock but
including Capital Stock issued upon the conversion of
convertible Indebtedness, in exchange for outstanding
Indebtedness or from the exercise of options, warrants or
rights to purchase Capital Stock (other than Redeemable
Capital Stock)) of the Company to any Person (other than to a
Restricted Subsidiary of the Company) after the Issue Date
(excluding the net cash proceeds from any issuance and sale of
Capital Stock financed, directly or indirectly, using funds
borrowed from the Company or any Restricted Subsidiary until
and to the extent such borrowing is repaid), plus (3) without
duplication of any amounts included in clause (1) above, in
the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after the Issue Date,
an amount (to the extent not included in Consolidated Net
Income) equal to the lesser of the return of capital with
respect to such Investment and the initial amount of such
Investment which was treated as a Restricted Payment, in
either case, less the cost of the disposition of such
Investment and net of taxes, plus (4) without duplication of
any amounts included in clause (1) above so long as the
Designation thereof was treated as a Restricted Payment made
after the Issue Date, with respect to any Unrestricted
Subsidiary that has been redesignated as a Restricted
Subsidiary after the Issue Date in accordance with Section
10.21, the Fair Market Value of the Company's interest in such
Subsidiary; provided, however, that such amount shall not in
any case exceed the Designation Amount with respect to such
Restricted Subsidiary at the time of its Designation, plus (5)
$25.0 million, minus (6) the Designation Amount (measured as
of the date of Designation) with respect to any Subsidiary of
the Company which has been designated as an Unrestricted
Subsidiary after the Issue Date in accordance with Section
10.21; and
(C) the Company could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness)
under Section 10.12 above.
For purposes of the preceding clause (B)(2), upon the issuance
of Capital Stock either from the conversion of convertible Indebtedness or
exchange for outstanding Indebtedness or upon the exercise of options, warrants
or rights, the amount counted as net cash proceeds received will be the cash
amount received by the Company at the original issuance of the Indebtedness that
is so converted or exchanged or from the issuance of options, warrants or
rights, as the case may be, plus the incremental amount of cash received by the
Company, if any, upon the conversion, exchange or exercise thereof.
None of the foregoing provisions of this Section 10.14 will
prohibit or restrict (i) the payment of any dividend within 60 days after the
date of its declaration, if at the date of
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declaration such payment would be permitted by the provisions of the Indenture;
(ii) so long as no Default shall have occurred and be continuing or would arise
therefrom, the redemption, repurchase or other acquisition or retirement of any
shares of any class of Capital Stock of the Company in exchange for, or out of
the net cash proceeds of, a substantially concurrent issue and sale of other
shares of Capital Stock (other than Redeemable Capital Stock) of the Company to
any Person (other than to a Restricted Subsidiary); provided, however, that any
such net proceeds and the value of any Capital Stock issued in exchange for such
retired Capital Stock are excluded from clause (B)(2) of the preceding
paragraph; (iii) so long as no Default shall have occurred and be continuing or
would arise therefrom, any redemption, repurchase or other acquisition or
retirement of Subordinated Indebtedness made by exchange for, or out of the net
cash proceeds of, a substantially concurrent issue and sale of (A) Capital Stock
(other than Redeemable Capital Stock) of the Company to any Person (other than
to a Restricted Subsidiary); provided, however, that any such net cash proceeds
and the value of any Capital Stock issued in exchange for Subordinated
Indebtedness are excluded from clause (B)(2) of the preceding paragraph or (B)
Indebtedness of the Company or any Guarantor so long as such Indebtedness (1) is
subordinated to the Notes or the Note Guarantees of such Guarantor, as the case
may be, at least to the same extent as the Subordinated Indebtedness so
purchased, exchanged, redeemed, repurchased, acquired or retired and (2) does
not have a Stated Maturity earlier than the Stated Maturity for the Subordinated
Indebtedness being redeemed, repurchased or otherwise acquired or retired; (iv)
Investments constituting Restricted Payments made as a result of the receipt of
noncash consideration from any Asset Sale made pursuant to and in compliance
with Section 10.16; (v) so long as no Default shall have occurred and be
continuing, the Refinancing of the Parisian Notes; (vi) so long as no Default
shall have occurred and be continuing, any purchase, redemption or other
acquisition or retirement for value of any Capital Stock (including any option,
warrant or right to purchase Capital Stock) (other than Redeemable Capital
Stock) of the Company for purposes of making contributions of such Capital Stock
of the Company to employees of the Company or its Subsidiaries pursuant to any
qualified employee benefit or similar plan; (vii) a Restricted Payment to pay
for the repurchase, retirement or other acquisition or retirement for value of
Capital Stock (or warrants or options convertible into or exchangeable for such
Capital Stock) of the Company held by any future, present or former employee,
director or consultant of the Company or any Subsidiary pursuant to any
management equity plan or stock option plan or any other management or employee
benefit plan or agreement; provided, however, that the aggregate amount of
Restricted Payments made pursuant to this clause (vii) does not exceed in any
calendar year $2.5 million (with the unused amount in any calendar year being
carried over to succeeding calendar years subject to a maximum of $5.0 million
in any calendar year); (viii) payments or distributions to dissenting
stockholders pursuant to applicable law, pursuant to or in connection with an
Asset Sale or Asset Acquisition that complies with the provisions of the
Indenture; (ix) repurchases of Capital Stock (or warrants or options convertible
into or exchangeable for such Capital Stock) deemed to occur upon exercise of
stock options to the extent that shares of such Capital Stock (or warrants or
options convertible into or exchangeable for such Capital Stock) represents a
portion of the exercise price of such options; and (x) the repurchase or
retirement of Capital Stock of the Company in exchange for the cancellation of
Indebtedness owed to the Company or any Restricted Subsidiary; provided,
however, that the Fair Market Value of such Capital Stock is not less than the
outstanding principal balance of and accrued and unpaid interest on, the
Indebtedness so canceled. In computing the amount of
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Restricted Payments previously made for purposes of clause (B) of the preceding
paragraph, Restricted Payments under the immediately preceding clauses (i),
(iv), (vi), (vii) and (viii) shall be included.
After the Notes have been assigned an Investment Grade Rating
by both Rating Agencies, and notwithstanding that the Notes may later cease to
have an Investment Grade Rating, the Company and the Restricted Subsidiaries
will not be subject to the provisions of this Section; provided that no Default
has occurred and is continuing at the time the Notes have been assigned such
rating.
Section 10.15. Limitation on Transactions with
Affiliates.
Company will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, conduct any business or
enter into or suffer to exist any transaction or series of related transactions
with, or for the benefit of, any of their respective Affiliates or any
beneficial holder of 10% or more of any class of Voting Stock of the Company or
any officer or director of the Company or any Restricted Subsidiary (each, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that
are no less favorable to the Company or the Restricted Subsidiary, as the case
may be, than those which could have been obtained in a comparable transaction at
such time from Persons who do not have such a relationship and (ii) with respect
to any Affiliate Transaction or series of Affiliate Transactions involving
aggregate payments or value equal to or greater than $5.0 million, the Company
shall have delivered an Officers' Certificate to the Trustee certifying that
such Affiliate Transaction or series of related Affiliate Transactions complies
with the preceding clause (i) and, with respect to any Affiliate Transaction or
series of Affiliate Transactions involving aggregate payments or value equal to
or greater than $10.0 million, further certifying that such Affiliate
Transaction or series of Affiliate Transactions has been approved by a majority
of the Board of Directors of the Company, including a majority of the
disinterested directors of the Board of Directors of the Company.
Notwithstanding the foregoing, the restrictions set forth in
this covenant shall not apply to (i) transactions with or among the Company and
the Restricted Subsidiaries who are Guarantors; (ii) customary directors' fees,
indemnification and similar arrangements, consulting fees, employee salaries,
bonuses or employment agreements, compensation or employee benefit arrangements
and incentive arrangements with any officer, director or employee of the Company
or any Restricted Subsidiary entered into in the ordinary course of business
(including customary benefits thereunder) and payments under any indemnification
arrangements permitted by applicable law; (iii) the issue and sale by the
Company to its stockholders of Capital Stock (other than Redeemable Capital
Stock); (iv) any dividends made in compliance with Section 10.14 above; (v)
loans and advances to officers, directors, employees and consultants of the
Company or any Restricted Subsidiary for travel, entertainment, moving and other
relocation expenses, in each case made in the ordinary course of business; (vi)
transactions with or by any Accounts Receivable Subsidiary made in the ordinary
course of business and transactions related to any proprietary credit card
issued by or for the benefit of the Company or an Affiliate of the Company in
the ordinary course of business; (vii) any agreement or Affiliate Transactions
as in effect on the Issue Date and any transaction contemplated thereby; and
(viii) tax sharing agreements between the Company and any of its Subsidiaries
providing for the payment by such Subsidiary of an
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amount equal to the hypothetical United States tax liability of the Subsidiary
as if such Subsidiary had filed its own U.S. federal tax return for any given
taxable year.
After the Notes have been assigned an Investment Grade Rating
by both Rating Agencies, and notwithstanding that the Notes may later cease to
have an Investment Grade Rating, the Company and the Restricted Subsidiaries
will not be subject to the provisions of this Section; provided that no Default
has occurred and is continuing at the time the Notes have been assigned such
rating.
Section 10.16. Disposition of Proceeds of Asset
Sales.
The Company will not, and will not cause or permit any
Restricted Subsidiary to, directly or indirectly, make any Asset Sale, unless
(i) the Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets sold or otherwise disposed of and (ii) at least 75% of such
consideration consists of (A) cash or Cash Equivalents, (B) properties and
capital assets to be used in the same line of business being conducted by the
Company or any Restricted Subsidiary at such time or (C) Capital Stock in any
Person which thereby becomes a Wholly Owned Restricted Subsidiary whose assets
consist primarily of properties and capital assets used in the same line of
business being conducted by the Company or any Restricted Subsidiary at such
time. In lieu of the consideration described in clause (ii) above, the Company
or any Restricted Subsidiary may receive consideration from an Asset Sale or
Asset Sales consisting of obligations payable to the sellers of such asset or
assets in an aggregate amount not to exceed $25.0 million at any time
outstanding; provided, however, that all consideration received from an Asset
Sale or Asset Sales in excess of such $25.0 million shall be subject to the next
preceding sentence. The amount of any (i) Indebtedness of a Restricted
Subsidiary that is not a Guarantor that is actually assumed by the transferee in
such Asset Sale and from which the Company and the Restricted Subsidiaries are
fully released shall be deemed to be cash for purposes of determining the
percentage of cash consideration received by the Company or the Restricted
Subsidiaries (and excluding any liabilities that are incurred in connection with
or in anticipation of such Asset Sale) and (ii) notes or other similar
obligations received by the Company or any Restricted Subsidiary from such
transferee that are immediately converted, sold or exchanged (or are converted,
sold or exchanged within thirty days of the related Asset Sale) by the Company
or the Restricted Subsidiaries into cash shall be deemed to be cash, in an
amount equal to the net cash proceeds realized upon such conversion, sale or
exchange for purposes of determining the percentage of cash consideration
received by the Company or the Restricted Subsidiaries.
The Company or such Restricted Subsidiary, as the case may be,
may apply the Net Cash Proceeds of any Asset Sale within 365 days of receipt
thereof to (i) repay Indebtedness of the Company or any Guarantor which is
secured by a Lien on the assets or property of the Company or any Guarantor
which was the subject of such Asset Sale and permanently reduce any related
commitment, (ii) repay Indebtedness (other than Subordinated Indebtedness) of
any Restricted Subsidiary that is not a Guarantor in respect of which neither
the Company nor any Guarantor is liable and permanently reduce any related
commitment, (iii) repay any Indebtedness (other than Subordinated Indebtedness)
of the Company or any Guarantor not repaid pursuant to the preceding clause (i)
or (ii), or (iv) make Asset Acquisitions or acquire, construct or improve
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properties or capital assets, in each case, to be used in the same line of
business being conducted by the Company or any Restricted Subsidiary at such
time.
To the extent all or part of the Net Cash Proceeds of any Asset
Sale are not applied within 365 days of such Asset Sale as described in clause
(i), (ii), (iii) or (iv) of the immediately preceding paragraph (such Net Cash
Proceeds, the "Unutilized Net Cash Proceeds"), the Company shall, within 20 days
after such 365th day, make an offer to purchase (the "Asset Sale Offer") all
outstanding Notes up to a maximum principal amount (expressed as a multiple of
$1,000) of Notes equal to such Unutilized Net Cash Proceeds, at a purchase price
in cash equal to 100% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the Purchase Date; provided, however, that the
Asset Sale Offer may be deferred until there are aggregate Unutilized Net Cash
Proceeds equal to or in excess of $10.0 million, at which time the entire amount
of such Unutilized Net Cash Proceeds, and not just the amount in excess of $10.0
million, shall be applied as required pursuant to this paragraph.
Notwithstanding the foregoing, the Company may retain up to $20.0 million of Net
Cash Proceeds of Asset Sales without applying it as required by the foregoing.
With respect to any Asset Sale Offer effected pursuant to this
Section 10.16, among the Notes, to the extent the aggregate principal amount of
Notes tendered pursuant to such Asset Sale Offer exceeds the Unutilized Net Cash
Proceeds to be applied to the repurchase thereof, such Notes shall be purchased
pro rata based on the aggregate principal amount of such Notes tendered by each
Holder. To the extent the Unutilized Net Cash Proceeds exceed the aggregate
amount of Notes tendered by the Holders of the Notes pursuant to such Asset Sale
Offer, the Company may retain and utilize any portion of the Unutilized Net Cash
Proceeds not applied to repurchase the Notes for any purpose consistent with the
other terms of the Indenture.
Notice of an Asset Sale Offer shall be mailed by the Company
not more than 20 Business Days after the obligation to make such Asset Sale
Offer arises to the Holders of Notes at their last registered addresses with a
copy to the Trustee and the Paying Agent. The Asset Sale Offer shall remain open
from the time of mailing for at least 20 Business Days and until 5:00 p.m., New
York City time, on the date fixed for Purchase of Notes validly tendered and not
withdrawn, which date shall be not later than the 30th Business Day following
the mailing of such Asset Sale Offer (the "Asset Sale Offer Purchase Date"). The
notice, which shall govern the terms of the Asset Sale Offer, shall include such
disclosures as are required by law and shall state:
(A) that the Asset Sale Offer is being made pursuant to this
Section 10.16 and that all Notes tendered into the Asset Sale Offer
will be accepted for payment; provided, however, that if the aggregate
principal amount of Notes tendered in an Asset Sale Offer plus accrued
interest at the expiration of such offer exceeds the aggregate amount
of the Unutilized Net Cash Proceeds, the Company shall select the Notes
to be purchased on a pro rata basis (with such adjustments as may be
deemed appropriate by the Company so that only Notes in denominations
of $1,000 or multiples thereof shall be purchased) and that the Asset
Sale Offer shall remain open for a period of 20 Business Days or such
longer period as may be required by law;
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(B) the purchase price (including the amount of accrued
interest, if any) for each Note, the Asset Sale Offer Purchase Date and
the date on which the Asset Sale Offer expires;
(C) that any Note not tendered for payment will continue to
accrue interest in accordance with the terms thereof;
(D) that, unless the Company shall default in the payment of
the purchase price, any Note accepted for payment pursuant to the Asset
Sale Offer shall cease to accrue interest after the Asset Sale Offer
Purchase Date;
(E) that Holders electing to have Notes purchased pursuant to
an Asset Sale Offer will be required to surrender their Notes to the
Paying Agent at the address specified in the notice prior to 5:00 p.m.,
New York City time, on the Asset Sale Offer Purchase Date and must
complete any form letter of transmittal proposed by the Company and
acceptable to the Trustee and the Paying Agent;
(F) that Holders of Notes will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New
York City time, on the Asset Sale Offer Purchase Date, a facsimile
transmission or letter setting forth the name of the Holders, the
principal amount of Notes the Holders delivered for purchase, the Note
certificate number (if any) and a statement that such Holder is
withdrawing his election to have such Notes purchased;
(G) that Holders whose Notes are purchased only in part will be
issued Notes of like tenor equal in principal amount to the unpurchased
portion of the Notes surrendered;
(H) the instructions that Holders must follow in order to
tender their Notes; and
(I) information concerning the business of the Company, the
most recent annual and quarterly reports of the Company filed with the
Commission pursuant to the Exchange Act (or, if the Company is not
required to file any such reports with the Commission, the comparable
reports prepared pursuant to Section 10.10), a description of material
developments in the Company's business, information with respect to pro
forma historical financial information after giving effect to such
Asset Sale and such other information concerning the circumstances and
relevant facts regarding such Asset Sale and Asset Sale Offer as would,
in the good faith judgment of the Company, be material to a Holder of
Notes in connection with the decision of such Holder as to whether or
not it should tender Notes pursuant to the Asset Sale Offer.
On the Asset Sale Offer Purchase Date, the Company will (i)
accept for payment Notes or portions thereof tendered pursuant to the Asset Sale
Offer, (ii) deposit with the Paying Agent money, in immediately available funds,
sufficient to pay the purchase price of all Notes or portions thereof so
tendered and accepted and (iii) deliver to the Trustee the Notes so accepted
together with an Officers' Certificate setting forth the Notes or portions
thereof tendered to and accepted for payment by the Company. The Paying Agent
will promptly mail or deliver to the
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Holders of Notes so accepted payment in an amount equal to the purchase price,
and the Trustee shall promptly authenticate and mail or deliver to such Holders
a new Note of like tenor equal in principal amount to any unpurchased portion of
the Note surrendered. Any Notes not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company will publicly
announce the results of the Asset Sale Offer not later than the first Business
Day following the Asset Sale Offer Purchase Date.
In the event that the Company makes an Asset Sale Offer, the
Company shall comply, to the extent applicable, with the requirements of Section
14(e) of the Exchange Act, and any other applicable securities laws or
regulations and any applicable requirements of any securities exchange on which
the Notes are listed, and any violation of the provisions of the Indenture
relating to such Asset Sale Offer occurring as a result of such compliance shall
not be deemed a Default or an Event of Default.
After the Notes have been assigned an Investment Grade Rating
by both Rating Agencies, and notwithstanding that the Notes may later cease to
have an Investment Grade Rating, the Company and the Restricted Subsidiaries
will not be subject to the provisions of this Section; provided, that no Default
has occurred and is continuing at the time the Notes have been assigned such
rating.
Section 10.17. Limitation on Liens.
The Company will not, and will not cause or permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist any Lien of any kind (other than Permitted Liens), upon any of
its property or assets, whether now owned or acquired after the Issue Date, or
any proceeds therefrom, or assign or convey any right to receive income
therefrom to secure either (i) Subordinated Indebtedness, unless the Notes, in
the case of the Company, and the Note Guarantees, in the case of a Restricted
Subsidiary that is a Guarantor, are secured by a Lien on such property, assets
or proceeds that is senior in priority to the Liens securing such Subordinated
Indebtedness or (ii) any other Indebtedness, unless the Notes and the Note
Guarantees, in the case of a Restricted Subsidiary that is a Guarantor, are
equally and ratably secured thereby.
Section 10.18. Limitation on Guarantees by
Restricted Subsidiaries.
The Indenture will provide that the Company will not cause or
permit any of the Restricted Subsidiaries, directly or indirectly, to guarantee
the payment of any Indebtedness of the Company or any Restricted Subsidiary
("Other Indebtedness"), except for guarantees to suppliers, lessors, licensees,
contractors, franchises or customers incurred in the ordinary course of
business, unless such Subsidiary (A) is a Guarantor or (B) simultaneously
executes and delivers a supplemental indenture to the Indenture pursuant to
which it will become a Guarantor under the Indenture; provided, however, that if
such Other Indebtedness is (i) Indebtedness that is ranked pari passu in right
of payment with the Notes or the Note Guarantee of such Restricted Subsidiary,
as the case may be, the Note Guarantee of such Subsidiary shall be pari passu in
right of payment with the guarantee of the Other Indebtedness; or (ii)
Subordinated Indebtedness, the Note Guarantee of such Subsidiary shall be senior
in right of payment to the guarantee of the
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Other Indebtedness (which guarantee of such Subordinated Indebtedness shall
provide that such guarantee is subordinated to the Note Guarantees of such
Subsidiary to the same extent and in the same manner as the other Indebtedness
is subordinated to the Notes or the Note Guarantee of such Restricted
Subsidiary, as the case may be).
Section 10.19. Restrictions on Preferred Stock of
Restricted Subsidiaries.
The Company will not sell, and will not cause or permit any of
the Restricted Subsidiaries to issue, any Preferred Stock of any Restricted
Subsidiary (other than to the Company or to a Wholly-Owned Restricted
Subsidiary) or permit any Person (other than the Company or a Wholly-Owned
Restricted Subsidiary) to own any Preferred Stock of any Restricted Subsidiary.
After the Notes have been assigned an Investment Grade Rating
by both Rating Agencies, and notwithstanding that the Notes may later cease to
have an Investment Grade Rating, the Company and the Restricted Subsidiaries
will not be subject to the provisions of this Section; provided, that no Default
has occurred and is continuing at the time the Notes have been assigned such
rating.
Section 10.20. Limitation on Dividends and Other
Payment Restrictions Affecting
Restricted Subsidiaries.
The Company will not, and will not cause or permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist, or enter into any agreement with any Person that would cause to
become effective, any consensual encumbrance or restriction of any kind, on the
ability of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise,
or make any other distribution on or in respect of its Capital Stock or any
other interest or participation in, or measured by, its profits, to the Company
or any other Restricted Subsidiary, (b) pay any Indebtedness owed to the Company
or any other Restricted Subsidiary, (c) make loans or advances to, or guarantee
any Indebtedness or other obligations of, the Company or any other Restricted
Subsidiary or (d) transfer any of its property or assets to the Company or any
other Restricted Subsidiary, except any encumbrance or restriction (i) with
respect to a Restricted Subsidiary that is not a Restricted Subsidiary on the
Issue Date, in existence at the time such Person becomes a Restricted Subsidiary
(but not created in contemplation thereof); provided, however, that such
encumbrances and restrictions are not applicable to the Company or any
Restricted Subsidiary, or the properties or assets of the Company or any
Restricted Subsidiary, other than such Person; (ii) arising as a result of
customary non- assignment provisions in leases entered into in the ordinary
course of business; (iii) existing under any agreement governing the terms of or
otherwise arising as a result of Purchase Money Indebtedness (other than
Indebtedness incurred to finance an Asset Acquisition) for property acquired in
the ordinary course of business that only imposes encumbrances and restrictions
on the property so acquired; (iv) contained in any agreement for the sale or
disposition of the Capital Stock or assets of any Restricted Subsidiary;
provided, however, that such encumbrances and restrictions described in this
clause (iv) are only applicable to such Restricted Subsidiary or assets, as
applicable, and any such sale or disposition is made in compliance with Section
10.16 to the extent applicable thereto; or (v) existing under any agreement that
refinances or replaces the agreements containing the
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encumbrance or restrictions in the foregoing clause (i); provided, however, that
the terms and conditions of any such restrictions permitted under this clause
(v) are not materially less favorable to the holders of the Notes than those
under or pursuant to the agreement evidencing the Indebtedness refinanced.
After the Notes have been assigned an Investment Grade Rating
by both Rating Agencies, and notwithstanding that the Notes may later cease to
have an Investment Grade Rating, the Company and the Restricted Subsidiaries
will not be subject to the provisions of this Section; provided, that no Default
has occurred and is continuing at the time the Notes have been assigned such
rating.
Section 10.21. Limitation on Designations of
Unrestricted Subsidiaries.
The Company may designate after the Issue Date any Subsidiary
(other than a Guarantor) as an "Unrestricted Subsidiary" under the Indenture (a
"Designation") only if:
(A) no Default shall have occurred and be continuing at the
time of or after giving effect to such Designation;
(B) the Company would be permitted under this Indenture to
make an Investment (other than a Permitted Investment) at the time of
Designation (assuming the effectiveness of such Designation) pursuant
to the first paragraph of Section 10.14 in an amount (the "Designation
Amount") equal to the Fair Market Value of the Company's interest in
such Subsidiary on such date calculated in accordance with GAAP;
(C) if the Company is then subject to Section 10.12, the
Company would be permitted under this Indenture to incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to
the proviso of the first paragraph of Section 10.12 hereof at the time
of such Designation (assuming the effectiveness of such Designation).
In the event of any such Designation, the Company shall be
deemed to have made an Investment constituting a Restricted Payment pursuant to
the covenant described in Section 10.14 hereof for all purposes of the Indenture
in the Designation Amount.
The Company shall not and shall not cause or permit any
Restricted Subsidiary to at any time (x) provide credit support for, or subject
any of its property or assets (other than the Capital Stock of any Unrestricted
Subsidiary) to the satisfaction of, any Indebtedness of any Unrestricted
Subsidiary (including any undertaking, agreement or instrument evidencing such
Indebtedness) (other than Permitted Investments in Unrestricted Subsidiaries) or
(y) be directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary and (ii) no Unrestricted Subsidiary shall at any time guarantee or
otherwise provide credit support for any obligation of the Company or any
Restricted Subsidiary. For purposes of the foregoing, the Designation of a
Subsidiary of the Company as an Unrestricted Subsidiary shall be deemed to be
the Designation of all of the Subsidiaries of such Subsidiary.
The Company may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation") if:
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(D) no Default shall have occurred and be continuing at the
time of and after giving effect to such Revocation;
(E) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the
Indenture;
(F) if the Company is then subject to Section 10.12, unless
such redesignated Subsidiary shall not have any Indebtedness
outstanding (other than Indebtedness that would be Permitted
Indebtedness), immediately after giving effect to such proposed
Revocation, and the incurrence of any such additional Indebtedness, the
Company could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the covenant described in Section
10.12; and
(G) any transaction (or series of related transactions) between
such Subsidiary and any of its Affiliates that occurred while such
Subsidiary was an Unrestricted Subsidiary would be permitted by Section
10.15 as if such transaction (or series of related transactions) had
occurred at the time of such Revocation.
All Designations and Revocations must be evidenced by Board
Resolutions of the Company delivered to the Trustee certifying compliance with
the foregoing provisions.
Section 10.22. Compliance Certificates and
Opinions.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company, the
Guarantors and any other obligor on the Notes will furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture (including any covenants compliance with which constitutes
a condition precedent) relating to the proposed action have been complied with,
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that, in the case
of any such application or request as to which the furnishing of such documents,
certificates and/or opinions is specifically required by any provision of this
Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture will include:
(I) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(II) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
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(III) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether such covenant or
condition has been complied with; and
(IV) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 10.23. Application of Fall Away Covenants.
After the Notes have been assigned an Investment Grade Rating
by both Rating Agencies and the Company and the Guarantors shall no longer be
subject to the agreements and covenants contained in clause (iii) of the first
paragraph of Section 8.01, Sections 10.12, 10.14, 10.15, 10.16, 10.19, 10.20 and
clause (c) of the first and fourth paragraphs of 10.21 as therein provided, such
provisions shall no longer have application for any purpose of this Indenture
(including, without limitation, for purposes of Article Five, Article Eight,
Article Nine and Article Twelve hereof).
ARTICLE ELEVEN
SATISFACTION AND DISCHARGE
Section 11.01. Satisfaction and Discharge of
Indenture.
This Indenture shall cease to be of further effect (except as
to surviving rights or registration of transfer or exchange of Notes herein
expressly provided for) and the Trustee, on written demand of and at the expense
of the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when either
(A) all Notes theretofore authenticated and delivered (other
than (A) Notes which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 3.06 hereof and (B) Notes
for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust, as provided in Section
10.03) have been delivered to the Trustee for cancellation; or
(B) (I) all such Notes not theretofore delivered to the Trustee
for cancellation have become due and payable and the Company or any
Guarantor has irrevocably deposited or caused to be deposited with the
Trustee in trust an amount of money in dollars sufficient to pay and
discharge the entire Indebtedness on such Notes not theretofore
delivered to the Trustee for cancellation, for the principal of,
premium, if any, and interest to the date of such deposit;
(II) the Company or any Guarantor has paid or caused to be
paid all other sums payable hereunder by the Company and the Guarantor;
and
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(III) the Company and each of the Guarantors have delivered to
the Trustee (i) irrevocable instructions to apply the deposited money
toward payment of the Notes at the Stated Maturities and the Redemption
Dates thereof, and (ii) an Officers' Certificate and an Opinion of
Counsel each stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture have been
complied with; provided, that such Opinion of Counsel may rely, as to
matters of fact, upon an Officers' Certificate.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.07 and, if money shall
have been deposited with the Trustee pursuant to subclause (a)(ii) of this
Section 11.01, the obligations of the Trustee under Section 11.02 and the last
paragraph of Section 10.03 shall survive.
Section 11.02. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
10.03, all money deposited with the Trustee pursuant to Section 11.01 shall be
held in trust and applied by it, in accordance with the provisions of the Notes
and this Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the persons entitled thereto, of the principal of, premium, if
any, and interest on the Notes for whose payment such money has been deposited
with the Trustee.
ARTICLE TWELVE
GUARANTEE OF NOTES
Section 12.01. Unconditional Guarantee.
Each Guarantor hereby jointly and severally fully and
unconditionally guarantees to each Holder of a Note authenticated and delivered
by the Trustee and to the Trustee and its successors and assigns, irrespective
of the validity and enforceability of this Indenture, the Notes or the
obligations of the Company or any other Note Guarantor to the Holders or the
Trustee hereunder or thereunder, that: (a) the principal of, premium, if any,
and interest on the Notes will be duly and punctually paid in full when due,
whether at maturity, upon redemption, by acceleration or otherwise, and interest
on the overdue principal and (to the extent permitted by law) interest, if any,
on the Notes and all other obligations of the Company or the Guarantor to the
Holders or the Trustee hereunder or thereunder (including fees, expenses or
other) and all other Indenture Obligations will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Notes or any of such other
Indenture Obligations, the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
Stated Maturity, by acceleration or otherwise. Failing payment when due of any
amount so guaranteed, or failing performance of any other obligation of the
Company to the Holders, for whatever reason, each Guarantor shall be obligated
to pay, or to perform or cause the performance of, the
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same immediately. An Event of Default under this Indenture or the Notes shall
constitute an event of default under this Guarantee, and shall entitle the
Holders of Notes to accelerate the obligations of the Guarantor hereunder in the
same manner and to the same extent as the obligations of the Company.
Each Guarantor hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, any release of any other Guarantor, the
recovery of any judgment against the Company, any action to enforce the same,
whether or not a Note Guarantee is affixed to any particular Note, or any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a guarantor.
Each Guarantor hereby waives the benefit of diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever and covenants
that its Note Guarantee shall not be discharged except by complete performance
of the obligations contained in the Notes, this Indenture and this Note
Guarantee. This Note Guarantee is a guarantee of payment and not of collection.
If any Holder or the Trustee is required by any court or otherwise to return to
the Company or to any Guarantor, or any custodian, trustee, liquidator or other
similar official acting in relation to the Company or such Guarantor, any amount
paid by the Company or such Guarantor to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each Guarantor further agrees that, as between it, on the one
hand, and the Holders of Notes and the Trustee, on the other hand, (a) subject
to this Article Twelve, the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Five hereof for the purposes of this Note
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (b) in
the event of any acceleration of such obligations as provided in Article Five
hereof, such obligations (whether or not due and payable) shall forthwith become
due and payable by the Note Guarantor for the purpose of this Guarantee.
Section 12.02. Execution and Delivery of Note
Guarantee.
To further evidence the Note Guarantee set forth in Section
12.01, each Guarantor hereby agrees that a notation of such Note Guarantee shall
be endorsed on each Note authenticated and delivered by the Trustee and executed
by either manual or facsimile signature of an Officer of each Guarantor.
Each of the Guarantors hereby agrees that its Note Guarantee
set forth in Section 12.01 shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Note Guarantee.
If an Officer of a Guarantor whose signature is on this
Indenture or a Note Guarantee no longer holds that office at the time the
Trustee authenticates such Note or at any time thereafter, such Guarantor's Note
Guarantee of such Note shall be valid nevertheless.
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The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of any Note
Guarantee set forth in this Indenture on behalf of each Guarantor.
Section 12.03. Additional Guarantors.
Any person that was not a Guarantor on the date of this
Indenture may become a Guarantor by executing and delivering to the Trustee (a)
a supplemental indenture in form and substance satisfactory to the Trustee,
which subjects such person to the provisions (including the representations and
warranties) of this Indenture as a Guarantor, (b) in the event that as of the
date of such supplemental indenture any Registrable Securities are outstanding,
an instrument in form and substance satisfactory to the Trustee which subjects
such person to the provisions of the Registration Rights Agreement with respect
to such outstanding Registrable Securities, and (c) an Opinion of Counsel to the
effect that such supplemental indenture has been duly authorized and executed by
such person and constitutes the legal, valid and binding obligation of such
person (subject to such customary assumptions and exceptions as may be
acceptable to the Trustee in its reasonable discretion).
Section 12.04. Release of a Guarantor.
(i) Upon the sale, exchange, transfer or other disposition (by
merger or otherwise), other than a lease, of a Subsidiary of the Company that is
a Guarantor of all of the Capital Stock of such Subsidiary or all, or
substantially all, the assets of such Subsidiary, to any person that is not an
Affiliate of the Company, and which sale or other disposition is otherwise in
compliance with the terms of this Indenture or (ii) at the request of the
Company, in the event that the lenders under the Credit Facility (or any other
revolving credit or term loan facility entitled to a guarantee from such
Guarantor) unconditionally release such Guarantor from its guarantee obligations
under such facility, if such Guarantor is not a Leveraged Subsidiary; provided,
however, that a release of a Guarantor that is a Leveraged Subsidiary may only
be obtained under the circumstances described in this clause (ii) if, after
giving effect to the release, either (x) such Guarantor would have been
permitted to incur all of its then outstanding Indebtedness under Section 10.12
or (y) Section 10.12 has been terminated pursuant to its terms. Such Guarantor
shall be deemed automatically and unconditionally released and discharged from
all obligations under this Article Twelve without any further action required on
the part of the Trustee or any Holder. The Trustee shall deliver an appropriate
instrument evidencing such release upon receipt of a request of the Company
accompanied by an Officers' Certificate certifying as to the compliance with
this Section and the Company's rights of redemption in accordance with the terms
of the Notes in this Section 12.04. Any Guarantor not so released will remain
liable for the full amount of principal of, premium, if any, and interest on the
Notes as provided in this Article Twelve.
Section 12.05. Waiver of Subrogation.
Until this Indenture is discharged and all of the Notes are
discharged and paid in full, each Guarantor hereby irrevocably waives and agrees
not to exercise any claim or other rights which it may now or hereafter acquire
against the Company that arise from the existence, payment, performance or
enforcement of the Company's obligations under the Notes or this
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Indenture and such Guarantor's obligations under this Note Guarantee and this
Indenture, in any such instance including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution, indemnification, and any
right to participate in any claim or remedy against the Company, whether or not
such claim, remedy or right arises in equity, or under contract, statute or
common law, including, without limitation, the right to take or receive from the
Company, directly or indirectly, in cash or other property or by set-off or in
any other manner, payment or security on account of such claim or other rights.
If any amount shall be paid to any Guarantor in violation of the preceding
sentence and any amounts owing to the Trustee or the Holders of Notes under the
Notes, this Indenture, or any other document or instrument delivered under or in
connection with such agreements or instruments, shall not have been paid in
full, such amount shall have been deemed to have been paid to such Guarantor for
the benefit of, and held in trust for the benefit of, the Holders of the Notes,
and shall forthwith be paid to the Trustee for the benefit of such Holders to be
credited and applied to the Notes, whether matured or unmatured, in accordance
with the terms of this Indenture. Each Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
12.05 is knowingly made in contemplation of such benefits.
Section 12.06. Reliance on Judicial Order or
Certificate of Liquidating Agent
Regarding Dissolution, etc. of
Guarantors.
Upon any payment or distribution of assets of any Guarantor
referred to in this Article Twelve, the Trustee, subject to the provisions of
Section 6.01, and the Holders, shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other person making such payment or distribution,
delivered to the Trustee or to the Holders, for the purpose of ascertaining the
persons entitled to participate in such payment or distribution, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article Twelve; provided,
however, that the foregoing shall apply only if such court has been fully
apprised of the provisions of this Article Twelve.
Section 12.07. Article Twelve Applicable to Paying
Agents.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article Twelve shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article Twelve in addition to or in place of the Trustee.
-86-
<PAGE> 95
Section 12.08. No Suspension of Remedies.
Nothing contained in this Article Twelve shall limit the right
of the Trustee or the Holders of Notes to take any action to accelerate the
maturity of the Notes pursuant to Article Five or to pursue any rights or
remedies hereunder or under applicable law.
Section 12.09. Limitation of Subsidiary Guarantor's
Liability.
Each Guarantor that is a Subsidiary of the Company, and by its
acceptance hereof each Holder, hereby confirms that it is the intention of all
such parties that the Note Guarantee by such Guarantor pursuant to its Note
Guarantee not constitute a fraudulent transfer or conveyance for purposes of the
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar Federal or state law. To effectuate the foregoing
intention, the Holders and such Guarantor hereby irrevocably agree that the
obligations of such Guarantor under this Note Guarantee shall be limited to the
maximum amount which, after giving effect to all other contingent and fixed
liabilities of such Guarantor, and after giving effect to any collections from
or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Note Guarantee or pursuant to its
contribution obligations under this Article Twelve, will result in the
obligations of such Guarantor under its Note Guarantee not constituting such
fraudulent transfer or conveyance.
Section 12.10. Contribution from Other Guarantors.
Each Guarantor that makes a payment or distribution under its
Note Guarantee shall be entitled to a contribution from each other Guarantor in
a pro rata amount based on the net assets of each Guarantor, determined in
accordance with GAAP.
Section 12.11. Obligations Reinstated.
The obligations of each Guarantor hereunder shall continue to
be effective or shall be reinstated, as the case may be, if at any time any
payment which would otherwise have reduced the obligations of any Guarantor
hereunder (whether such payment shall have been made by or on behalf of the
Company or by or on behalf of a Guarantor) is rescinded or reclaimed from any of
the Holders upon the insolvency, bankruptcy, liquidation or reorganization of
the Company or any Guarantor or otherwise, all as though such payment had not
been made. If demand for, or acceleration of the time for, payment by the
Company is stayed upon the insolvency, bankruptcy, liquidation or reorganization
of the Company, all such Indebtedness otherwise subject to demand for payment or
acceleration shall nonetheless be payable by each Guarantor as provided herein.
Section 12.12. No Obligation To Take Action Against
the Company.
Neither the Trustee nor any other Person shall have any
obligation to enforce or exhaust any rights or remedies or to take any other
steps under any security for the Indenture Obligations or against the Company or
any other Person or any property of the Company or any other Person before the
Trustee is entitled to demand payment and performance by any or all Guarantors
of their liabilities and obligations under their Note Guarantees or under this
Indenture.
-87-
<PAGE> 96
Section 12.13. Dealing with the Company and Others.
The Holders, without releasing, discharging, limiting or
otherwise affecting in whole or in part the obligations and liabilities of any
Guarantor hereunder and without the consent of or notice to any Guarantor, may
(A) grant time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to the Company or
any other Person;
(B) take or abstain from taking security or collateral from the
Company or from perfecting security or collateral of the Company;
(C) release, discharge, compromise, realize, enforce or
otherwise deal with or do any act or thing in respect of (with or
without consideration) any and all collateral, mortgages or other
security given by the Company or any third party with respect to the
obligations or matters contemplated by this Indenture or the Notes;
(D) accept compromises or arrangements from the Company;
(E) apply all monies at any time received from the Company or
from any security upon such part of the Indenture Obligations as the
Holders may see fit or change any such application in whole or in part
from time to time as the Holders may see fit; and
(F) otherwise deal with, or waive or modify their right to deal
with, the Company and all other Persons and any security as the Holders
or the Trustee may see fit.
[signatures on following pages]
-88-
<PAGE> 97
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above written.
PROFFITT'S, INC.
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
G.R. HERBERGER'S, INC.
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
PARISIAN, INC.
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
MCRAE'S, INC.
By:
------------------------------
Name:
Title:
-89-
<PAGE> 98
By:
------------------------------
Name:
Title:
MCRAE'S STORES PARTNERSHIP
By: McRae's, Inc., as managing
general partner By:
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
MCRAE'S OF ALABAMA, INC.
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO, as
Trustee
By:
------------------------------
Name:
Title:
-90-
<PAGE> 99
EXHIBIT A-1
[FORM OF NOTE]
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 903 OR 904 OF
REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO
YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE
SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST
DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY OR ANY PREDECESSOR OF THIS SECURITY AND (Y) SUCH LATER DATE, IF ANY, AS
MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"),
OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S.
PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF REGULATION S, (E) TO AN
ACCREDITED INVESTOR THAT IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT, OR FOR
THE ACCOUNT OF SUCH AN ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH
A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT (AND IF ACQUIRING THE SECURITIES FROM SUCH AN
ACCREDITED INVESTOR, IS ACQUIRING SECURITIES HAVING AN AGGREGATE PRINCIPAL
AMOUNT OF NOT LESS THAN $250,000), OR (F) PURSUANT
A-1-1
<PAGE> 100
TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND;
PROVIDED THAT THE COMPANY, THE TRUSTEE, THE TRANSFER AGENT AND THE REGISTRAR
SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO
CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN
EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE
FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE
RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
A-1-2
<PAGE> 101
PROFFITT'S, INC.
8 1/8% SENIOR NOTES DUE 2004
CUSIP No. __________
No. ___________ $
PROFFITT'S, INC., a corporation incorporated under the laws of
the State of Tennessee (herein called the "Company," which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to _______________ or registered assigns, the
principal sum of _______________ Dollars on May 15, 2004, at the office or
agency of the Company referred to below, and to pay interest thereon on May 15
and November 15 (each an "Interest Payment Date"), of each year, commencing on
November 15, 1997, accruing from the Issue Date or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, at the rate
of 8 1/8% per annum, until the principal hereof is paid or duly provided for.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months.
The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in the Indenture referred to
on the reverse hereof, be paid to the person in whose name this Note (or one or
more Predecessor Notes) is registered at the close of business on the May 1 and
November 1 (each a "Regular Record Date"), whether or not a Business Day, as the
case may be, next preceding such Interest Payment Date. Any such interest not so
punctually paid, or duly provided for, and interest on such defaulted interest
at the then applicable interest rate borne by the Notes, to the extent lawful,
shall forthwith cease to be payable to the Holder on such Regular Record Date,
and may be paid to the person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on a Special Record
Date for the payment of such defaulted interest to be fixed by the Trustee,
notice of which shall be given to Holders of Notes not less than 10 days prior
to such Special Record Date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in such Indenture.
Payment of the principal of, premium, if any, and interest on
this Note will be made at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan in The City of New York, State of New
York, or at such other office or agency of the Company as may be maintained for
such purpose, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the address of the person entitled thereto as such
address shall appear on the Note Register.
A-1-3
<PAGE> 102
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit under the Indenture, or be valid
or obligatory for any purpose.
[Remainder of Page Intentionally Left Blank]
A-1-4
<PAGE> 103
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.
Dated: PROFFITT'S, INC.
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 8 1/8% Senior Notes due 2004, Series A,
referred to in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF CHICAGO, as
Trustee
By:
------------------------------
Authorized Officer
A-1-5
<PAGE> 104
[REVERSE OF NOTE]
1. Indenture. This Note is one of a duly authorized issue
of Notes of the Company designated as its 8 1/8% Senior Notes due 2004, Series A
(herein called the "Initial Notes"). The Notes are limited (except as otherwise
provided in the Indenture referred to below) in aggregate principal amount to
$125,000,000, which may be issued under an indenture (herein called the
"Indenture") dated as of May 21, 1997, by and among the Company, each of the
Guarantors named in the Indenture (the "Guarantors") and The First National Bank
of Chicago, as trustee (herein called the "Trustee," which term includes any
successor Trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties, obligations and immunities thereunder of
the Company, the Trustee, the Guarantors and the Holders of the Notes, and of
the terms upon which the Notes are, and are to be, authenticated and delivered.
The Notes include the Initial Notes, the Private Exchange Securities and the
Unrestricted Notes (including the Exchange Notes referred to below), issued in
exchange for the Initial Notes pursuant to the Registration Rights Agreement.
The Initial Notes and the Unrestricted Notes are treated as a single class of
securities under the Indenture.
All capitalized terms used in this Note which are defined in
the Indenture and not otherwise defined herein shall have the meanings assigned
to them in the Indenture.
The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S.C. Section Section 77aaa-77bbbb) (the "TIA"), as in effect on the
date of the Indenture. Notwithstanding anything to the contrary herein, the
Notes are subject to all such terms, and Holders of Notes are referred to the
Indenture and the TIA for a statement of such terms.
No reference herein to the Indenture and no provisions of this
Note or of the Indenture shall alter or impair the obligation of the Company or
any Guarantor, which is absolute and unconditional, to pay the principal of,
premium, if any, and interest on this Note at the times, place, and rate, and in
the coin or currency, herein prescribed.
2. Note Guarantees. This Note is initially entitled to the
benefits of the certain senior Note Guarantees of the Guarantors and may
thereafter be entitled to certain other senior Note Guarantees made for the
benefit of the Holders. Reference is hereby made to Article Twelve of the
Indenture and to the Note Guarantees endorsed on this Note for a statement of
the respective rights, limitations of rights, duties and obligations thereunder
of the Guarantors, the Trustee and the Holders.
3. Registration Rights. Pursuant to the Registration
Rights Agreement by and among the Company, the Guarantors and the Initial
Purchasers, the Company and the Guarantors will be obligated to consummate an
exchange offer pursuant to which the Holder of this Note shall have the right to
exchange this Note together with the Note Guarantees hereof endorsed hereon for
8 1/8% Senior Notes due 2004, Series B, of the Company (herein called the
"Exchange Notes") and the Note Guarantees endorsed thereon, which have been
registered under the
A-1-6
<PAGE> 105
Securities Act, in like principal amount and having identical terms as the Notes
(other than as set forth in this paragraph) and the Note Guarantees endorsed
hereon, respectively. The Holders of Notes shall be entitled to receive certain
additional interest payments in the event such exchange offer is not consummated
and upon certain other conditions, all pursuant to and in accordance with the
terms of the Registration Rights Agreement.
4. Redemption. The Notes will not be subject to
redemption at the option of the Company at any time.
5. Offers to Purchase. Sections 10.11 and 10.16 of the
Indenture provide that upon the occurrence of a Change of Control Triggering
Event and following certain Asset Sales, and subject to certain conditions and
limitations contained therein, the Company shall make an offer to purchase all
or a portion of the Notes in accordance with the procedures set forth in the
Indenture.
6. Defaults and Remedies. If an Event of Default occurs
and is continuing, the principal of all of the Outstanding Notes, plus all
accrued and unpaid interest, if any, to and including the date the Notes are
paid, may be declared due and payable in the manner and with the effect
provided in the Indenture.
7. Defeasance. The Indenture contains provisions (which
provisions apply to this Note) for defeasance at any time of (a) the entire
indebtedness of the Company and the Guarantors on this Note and (b) certain
restrictive covenants and related Defaults and Events of Default, in each case
upon compliance by the Company with certain conditions set forth therein.
8. Amendments and Waivers. The Indenture permits, with
certain exceptions as provided therein, the amendment thereof and the
modification of the rights and obligations of the Company and the rights of the
Holders under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in aggregate principal amount
of the Notes at the time Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Notes at the time Outstanding, on behalf of the Holders of all the Notes, to
waive compliance by the Company with certain provisions of the Indenture and
certain past Defaults under the Indenture and this Note and their consequences.
Any such consent or waiver by or on behalf of the Holder of this Note shall be
conclusive and binding upon such Holder and upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof whether or not notation of such consent or waiver is
made upon this Note.
9. Denominations, Transfer and Exchange. The Notes are
issuable only in registered form without coupons in denominations of $1,000 and
any integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, the Notes are exchangeable for a like
aggregate principal amount of Notes of a different authorized denomination, as
requested by the Holder surrendering the same.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable on the Note Register
of the Company, upon surrender of this
A-1-7
<PAGE> 106
Note for registration of transfer at the office or agency of the Company
maintained for such purpose in the Borough of Manhattan in The City of New York,
State of New York, or at such other office or agency of the Company as may be
maintained for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Registrar
duly executed by, the Holder hereof or his attorney duly authorized in writing,
and thereupon one or more new Notes, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees.
No service charge shall be made for any registration of
transfer or exchange or redemption of Notes, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
10. Persons Deemed Owners. Prior to and at the time of due
presentment of this Note for registration of transfer, the Company, the Trustee
and any agent of the Company or the Trustee may treat the person in whose name
this Note is registered as the owner hereof for all purposes, whether or not
this Note shall be overdue, and neither the Company, the Trustee nor any agent
shall be affected by notice to the contrary.
11. Termination of Certain Covenants. After the Notes have
been assigned an Investment Grade Rating by both Rating Agencies, and
notwithstanding that the Notes may later cease to have an Investment Grade
Rating, the Company and the Restricted Subsidiaries will no longer be subject to
the provisions of Sections 10.12, 10.14, 10.15, 10.16, 10.19 and 10.20, clause
(c) of the first and fourth paragraphs of Section 10.21 and clause (iii) of
Section 8.01(a) of the Indenture; provided, that no Default has occurred and is
continuing at the time the Notes have been assigned such rating.
12. GOVERNING LAW. THE INDENTURE, THIS NOTE AND EACH
NOTE GUARANTEE SET FORTH BELOW SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture. Requests may be made to:
Proffitt's, Inc., 750 Lakeshore Parkway, Birmingham, Alabama 35211.
A-1-8
<PAGE> 107
ASSIGNMENT FORM
If you the holder want to assign this Note, fill in the form below and have your
signature guaranteed:
I or we assign and transfer this Note to
_______________________________________________________________________________
(Insert assignee's social security or tax ID number)___________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint
_______________________________________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for such agent.
In connection with any transfer of this Note occurring prior to
the date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), covering resales of this Note
(which effectiveness shall not have been suspended or terminated at the date of
the transfer) and (ii) the date two years (or such shorter period of time as
permitted by Rule 144 under the Securities Act or any successor provision
thereunder) after the later of the original issuance date appearing on the face
of this Note (or any Predecessor Note) or the last date on which the Company or
any Affiliate of the Company or any Guarantor was the owner of this Note (or any
Predecessor Note), the undersigned confirms that it has not utilized any general
solicitation or general advertising in connection with the transfer and that:
[Check One]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act provided
by Rule 144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance
with (a) above and documents, including (i) a transferee
certificate substantially in the form of Exhibit C to the
Indenture in the case of a transfer to non-QIB Accredited
Investors or (ii) a transferor certificate substantially in
the form of Exhibit D to the Indenture
A-1-9
<PAGE> 108
in the case of a transfer pursuant to Regulation S, are being
furnished which comply with the conditions of transfer set
forth in this Note and the Indenture.
If none of the foregoing boxes is checked and, in the case of (b) above, if the
appropriate document is not attached or otherwise furnished to the Trustee, the
Trustee or Registrar shall not be obligated to register this Note in the name of
any person other than the Holder hereof unless and until the conditions to any
such transfer of registration set forth herein and in Section 3.17 of the
Indenture shall have been satisfied.
_______________________________________________________________________________
Date: Your signature:
-------------- ----------------------------------------
(Sign exactly as your name appears on
the other side of this Note)
By:
------------------------------------
NOTICE: To be executed by
an executive officer
Signature Guarantee:
--------------------
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A (including the information
specified in Rule 144A(d)(4)) or has determined not to request such information
and that it is aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
Dated:
---------------------------- --------------------------
NOTICE: To be executed by
an executive officer
A-1-10
<PAGE> 109
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant
to Section 10.11 or 10.16 of the Indenture, check the appropriate box:
Section 10.11 [ ] Section 10.16 [ ]
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 10.11 or 10.16 of the Indenture, state the amount:
$
============
Date: Your signature:
-------------- ----------------------------------------
(Sign exactly as your name appears on
the other side of this Note)
By:
------------------------------------
NOTICE: To be executed by
an executive officer
Signature Guarantee:
--------------------
A-1-11
<PAGE> 110
EXHIBIT A-2
PROFFITT'S, INC.
----------------
8 1/8% SENIOR NOTES DUE 2004
CUSIP No. __________
No. ___________
$
PROFFITT'S, INC., a corporation incorporated under the laws of
the State of Tennessee (herein called the "Company," which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay to _______________ or registered assigns, the
principal sum of _______________ Dollars on May 15, 2004, at the office or
agency of the Company referred to below, and to pay interest thereon on May 15
and November 15 (each an "Interest Payment Date"), of each year, commencing on
November 15, 1997, accruing from the Issue Date or from the most recent Interest
Payment Date to which interest has been paid or duly provided for, at the rate
of [ ]% per annum, until the principal hereof is paid or duly provided for.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months.
The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in the Indenture referred to
on the reverse hereof, be paid to the person in whose name this Note (or one or
more Predecessor Notes) is registered at the close of business on the May 1 and
November 1 (each a "Regular Record Date"), whether or not a Business Day, as the
case may be, next preceding such Interest Payment Date. Any such interest not so
punctually paid, or duly provided for, and interest on such defaulted interest
at the then applicable interest rate borne by the Notes, to the extent lawful,
shall forthwith cease to be payable to the Holder on such Regular Record Date,
and may be paid to the person in whose name this Note (or one or more
Predecessor Notes) is registered at the close of business on a Special Record
Date for the payment of such defaulted interest to be fixed by the Trustee,
notice of which shall be given to Holders of Notes not less than 10 days prior
to such Special Record Date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Notes may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in such Indenture.
Payment of the principal of, premium, if any, and interest on
this Note will be made at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan in The City of New York, State of New
York, or at such other office or agency of the Company as may be maintained for
such purpose, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts;
provided,
A-2-1
<PAGE> 111
however, that payment of interest may be made at the option of the Company by
check mailed to the address of the person entitled thereto as such address shall
appear on the Note Register.
Reference is hereby made to the further provisions of this Note
set forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit under the Indenture, or be valid
or obligatory for any purpose.
[Remainder of Page Intentionally Left Blank]
A-2-2
<PAGE> 112
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed.
Dated: PROFFITT'S, INC.
By:
---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 8 1/8% Senior Notes due 2004, Series B,
referred to in the within-mentioned Indenture.
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee
By:
----------------------------
Authorized Officer
A-2-3
<PAGE> 113
[REVERSE OF NOTE]
1. Indenture. This Note is one of a duly authorized issue
of Notes of the Company designated as its 8 1/8% Senior Notes due 2004, Series B
(herein called the "Unrestricted Notes"). The Notes are limited (except as
otherwise provided in the Indenture referred to below) in aggregate principal
amount to $125,000,000, which may be issued under an indenture (herein called
the "Indenture") dated as of May 21, 1997, by and among the Company, each of the
Guarantors named in the Indenture (the "Guarantors") and The First National Bank
of Chicago, as trustee (herein called the "Trustee," which term includes any
successor Trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties, obligations and immunities thereunder of
the Company, the Trustee, the Guarantors and the Holders of the Notes, and of
the terms upon which the Notes are, and are to be, authenticated and delivered.
The Notes include the Initial Notes, the Private Exchange Securities and the
Unrestricted Notes (including the Exchange Notes), issued in exchange for the
Initial Notes pursuant to the Registration Rights Agreement. The Initial Notes
and the Unrestricted Notes are treated as a single class of securities under the
Indenture.
All capitalized terms used in this Note which are defined in
the Indenture and not otherwise defined herein shall have the meanings assigned
to them in the Indenture.
The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S.C. Section Section 77aaa-77bbb) (the "TIA"), as in effect on the
date of the Indenture. Notwithstanding anything to the contrary herein, the
Notes are subject to all such terms, and Holders of Notes are referred to the
Indenture and the TIA for a statement of such terms.
No reference herein to the Indenture and no provisions of this
Note or of the Indenture shall alter or impair the obligation of the Company or
any Guarantor, which is absolute and unconditional, to pay the principal of,
premium, if any, and interest on this Note at the times, place, and rate, and in
the coin or currency, herein prescribed.
2. Note Guarantees. This Note is initially entitled to the
benefits of the certain senior Note Guarantees of the Guarantors and may
thereafter be entitled to certain other senior Note Guarantees made for the
benefit of the Holders. Reference is hereby made to Article Twelve of the
Indenture and to the Note Guarantees endorsed on this Note for a statement of
the respective rights, limitations of rights, duties and obligations thereunder
of the Guarantors, the Trustee and the Holders.
3. Redemption. The Notes will not be subject to
redemption at the option of the Company at any time.
4. Offers to Purchase. Sections 10.11 and 10.16 of the
Indenture provide that upon the occurrence of a Change of Control Triggering
Event and following certain Asset Sales, and subject to certain conditions and
limitations contained therein, the Company shall make an
A-2-4
<PAGE> 114
offer to purchase all or a portion of the Notes in accordance with the
procedures set forth in the Indenture.
5. Defaults and Remedies. If an Event of Default occurs
and is continuing, the principal of all of the Outstanding Notes, plus all
accrued and unpaid interest, if any, to and including the date the Notes are
paid, may be declared due and payable in the manner and with the effect provided
in the Indenture.
6. Defeasance. The Indenture contains provisions (which
provisions apply to this Note) for defeasance at any time of (a) the entire
indebtedness of the Company and the Guarantors on this Note and (b) certain
restrictive covenants and related Defaults and Events of Default, in each case
upon compliance by the Company with certain conditions set forth therein.
7. Amendments and Waivers. The Indenture permits, with
certain exceptions as provided therein, the amendment thereof and the
modification of the rights and obligations of the Company and the rights of the
Holders under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in aggregate principal amount
of the Notes at the time Outstanding. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Notes at the time Outstanding, on behalf of the Holders of all the Notes, to
waive compliance by the Company with certain provisions of the Indenture and
certain past Defaults under the Indenture and this Note and their consequences.
Any such consent or waiver by or on behalf of the Holder of this Note shall be
conclusive and binding upon such Holder and upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof whether or not notation of such consent or waiver is
made upon this Note.
8. Denominations, Transfer and Exchange. The Notes are
issuable only in registered form without coupons in denominations of $1,000 and
any integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, the Notes are exchangeable for a like
aggregate principal amount of Notes of a different authorized denomination, as
requested by the Holder surrendering the same.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Note is registrable on the Note Register
of the Company, upon surrender of this Note for registration of transfer at the
office or agency of the Company maintained for such purpose in the Borough of
Manhattan in The City of New York, State of New York, or at such other office or
agency of the Company as may be maintained for such purpose, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar duly executed by, the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Notes, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
No service charge shall be made for any registration of
transfer or exchange or redemption of Notes, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection therewith.
A-2-5
<PAGE> 115
9. Persons Deemed Owners. Prior to and at the time of due
presentment of this Note for registration of transfer, the Company, the Trustee
and any agent of the Company or the Trustee may treat the person in whose name
this Note is registered as the owner hereof for all purposes, whether or not
this Note shall be overdue, and neither the Company, the Trustee nor any agent
shall be affected by notice to the contrary.
10. Termination of Certain Covenants. After the Notes have
been assigned an Investment Grade Rating by both Rating Agencies, and
notwithstanding that the Notes may later cease to have an Investment Grade
Rating, the Company and the Restricted Subsidiaries will no longer be subject to
the provisions of Sections 10.12, 10.14, 10.15, 10.16, 10.19 and 10.20, clause
(c) of the first and fourth paragraphs of Section 10.21 and clause (iii) of
Section 8.01(a) of the Indenture; provided, that no Default has occurred and is
continuing at the time the Notes have been assigned such rating.
11. GOVERNING LAW. THE INDENTURE, THIS NOTE AND EACH
NOTE GUARANTEE SET FORTH BELOW SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture. Requests may be made to:
Proffitt's, Inc., 750 Lakeshore Parkway, Birmingham, Alabama 35211.
A-2-6
<PAGE> 116
ASSIGNMENT FORM
If you the holder want to assign this Note, fill in the form below and have your
signature guaranteed:
I or we assign and transfer this Note to
_______________________________________________________________________________
(Insert assignee's social security or tax ID number)___________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint
_______________________________________________________________________________
agent to transfer this Note on the books of the Company. The agent may
substitute another to act for such agent.
Date: Your signature:
-------------- ----------------------------------------
(Sign exactly as your name appears on
the other side of this Note)
By:
------------------------------------
NOTICE: To be executed by
an executive officer
Signature Guarantee:
--------------------
A-2-7
<PAGE> 117
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant
to Section 10.11 or 10.16 of the Indenture, check the appropriate box:
Section 10.11 [ ] Section 10.16 [ ]
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 10.11 or 10.16 of the Indenture, state the amount:
$
============
Date: Your signature:
-------------- ----------------------------------------
(Sign exactly as your name appears on
the other side of this Note)
By:
-------------------------------------
NOTICE: To be executed by
an executive officer
Signature Guarantee:
--------------------
A-2-8
<PAGE> 118
EXHIBIT B
FORM OF LEGEND FOR BOOK-ENTRY SECURITIES
Any Global Note authenticated and delivered hereunder shall
bear a legend (which would be in addition to any other legends required in the
case of a Restricted Note) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS NOTE IS
NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON
OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE
(OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A
NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE
DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
B-1
<PAGE> 119
EXHIBIT C
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
Proffitt's, Inc.
750 Lakeshore Parkway
Birmingham, AL 35211
Ladies and Gentlemen:
In connection with our proposed purchase of $ aggregate
principal amount of the 8 1/8 % Senior Notes due 2004 (the "Notes" of Proffitt's
Inc. (the "Company"), we confirm that:
1. We understand that the Notes have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on
behalf of any investor account for which we are purchasing Notes to
offer, sell or otherwise transfer such Notes prior to (x) the date
which is two years (or such shorter period of time as permitted by Rule
144 under the Securities Act) after the later of the date of original
issue of the Notes and (y) such later date, if any, as may be required
by any subsequent change in applicable law (the "Resale Restriction
Termination Date") only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the
Securities Act, (c) so long as the Notes are eligible for resale
pursuant to Rule 144A under the Securities Act, to a person we
reasonably believe is a "qualified institutional buyer" under Rule 144A
(a "QIB") that purchases for its own account or for the account of a
QIB and to whom notice is given that the transfer is being made in
reliance on Rule 144A, (d) pursuant to offers and sales that occur
outside the United States to "foreign purchasers" (as defined below) in
offshore transactions meeting the requirements of Rule 904 of
Regulation S under the Securities Act, (e) to an institutional
"accredited investor" within the meaning of subparagraph (a)(1), (2),
(3) or (7) of Rule 501 under the Securities Act (an "Accredited
Investor") that is purchasing for its own account or for the account of
such an institutional "accredited investor," or (f) pursuant to any
other available exemption from the registration requirements of the
Securities Act, subject, in each of the foregoing cases, to any
requirement of law that the disposition of our property or the property
of such investor account or accounts be at all times within our or
their control and to compliance with any applicable state securities
laws. The foregoing restrictions on resale will not apply subsequent to
the Resale Restriction Termination Date. If any resale or other
transfer of the Notes is proposed to be made pursuant to clause (c)
above prior to the Resale Restriction Termination Date, the transferor
shall deliver a letter from the transferee substantially in the form of
this letter to
C-1
<PAGE> 120
the Trustee, which shall provide, among other things, that the
transferee is an Accredited Investor within the meaning of subparagraph
(a)(1), (2), (3) or (7) of Rule 501 under the Securities Act and that
it is acquiring such Notes for investment purposes and not for
distribution in violation of the Securities Act. Each purchaser
acknowledges that the Company, the Trustee and the Transfer Agent and
Registrar reserve the right prior to any offer, sale or other transfer
prior to the Resale Restriction Termination Date of the Notes pursuant
to clause (d), (e) or (f) above to require the delivery of an opinion
of counsel, certification and/or other information satisfactory to the
Company and the Trustee.
2. We are an Accredited Investor or a QIB purchasing Notes
for our own account or for the account of one or more Accredited
Investors, and we are acquiring the Notes for investment purposes and
not with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act or the securities laws
of any state of the United States and we have such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the Notes, and we
and any accounts for which we are acting are each able to bear the
economic risk of our or its investment in the Notes for an indefinite
period.
3. We are acquiring the Notes purchased by us for our own
account or for one or more accounts as to each of which we exercise
sole investment discretion and we and any such account are (a) a QIB,
aware that the sale is being made in reliance on Rule 144A under the
Securities Act, (b) an Accredited Investor, or (c) a person other than
a U.S. person ("foreign purchasers"), which term shall include dealers
or other professional fiduciaries in the United States acting on a
discretionary basis for foreign beneficial owners (other than an estate
or trust) in offshore transactions meeting the requirements of Rules
903 and 904 of Regulation S under the Securities Act.
4. We have received a copy of the Offering Memorandum and
acknowledge that we have had access to such financial and other
information, and have been afforded the opportunity to ask such
questions of representatives of the Company and receive answers
thereto, as we deem necessary in order to verify the information
contained in the Offering Memorandum.
5. We are not purchasing the Notes for or on behalf of,
and will not transfer the Notes to, any pension or welfare plan (as
defined in Section 3 of ERISA, except as may be permitted under ERISA
and as described under "Notice to Investors" in the Offering
Memorandum.
6. In the event that we purchase any Notes, we will
acquire Notes having an outstanding principal amount of at least
$250,000 for our own account and $250,000 for each account for which we
are acting.
We understand that the Trustee and the Transfer Agent will not be
required to accept for registration of transfer any Notes acquired by us, except
upon presentation of evidence satisfactory to the Company and the Trustee that
the foregoing restrictions on transfer have been complied with. We further
understand that the Notes purchased by us will be in the form of
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<PAGE> 121
definitive physical certificates and that such certificates will bear a legend
reflecting the substance of this paragraph. We further agree to provide to any
person acquiring any of the Notes from us a notice advising such person that
transfers of such Notes are restricted as stated herein and that certificates
representing such Notes will bear a legend to that effect.
We represent that you, the Company, the Trustee and others are
entitled to rely upon the truth and accuracy of our acknowledgements,
representations and agreements set forth herein, and we agree to notify you
promptly in writing if any of our acknowledgements, representations or
agreements herein cease to be accurate and complete. You are also irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.
We represent to you that we have full power to make the foregoing
acknowledgements, representations and agreements on our own behalf and on behalf
of any investor account for which we are acting as fiduciary agent.
As used herein, the terms "offshore transaction," "United States"
and "U.S. person" have the respective meanings given to them in Regulation S
under the Securities Act.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
Very truly yours,
(Name of Purchaser)
By:
---------------------------------
Date:
-------------------------------
Upon transfer, the Notes would be registered in the name of the
new beneficial owner as follows:
Name:
-------------------------------
Address:
----------------------------
C-3
<PAGE> 122
EXHIBIT D
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
______________, ____
The First National Bank of Chicago
One First National Plaza
Suite 1025
Chicago, Illinois 60670-0126
Attention: Corporate Trustee Administration
Re: Proffitt's, Inc.
(the "Company") 8 1/8% Senior Notes due 2004 (the
"Securities")
Ladies and Gentlemen:
In connection with our proposed sale of $ aggregate principal
amount of the Securities, we confirm that such sale has been effected pursuant
to and in accordance with Regulation S under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a person
in the United States;
(2) either (a) at the time the buy offer was originated,
the transferee was outside the United States or we and any person
acting on our behalf reasonably believed that the transferee was
outside the United States, or (b) the transaction was executed in, on
or through the facilities of a designated off-shore securities market
and neither we nor any person acting on our behalf knows that the
transaction has been pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the
United States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act;
(5) we have advised the transferee of the transfer
restrictions applicable to the Securities;
D-1
<PAGE> 123
(6) if the circumstances set forth in Rule 904(c) under the
Securities Act are applicable, we have complied with the additional
conditions therein, including (if applicable) sending a confirmation or
other notice stating that the Securities may be offered and sold during
the restricted period specified in Rule 903(c)(2) or (3), as
applicable, in accordance with the provisions of Regulation S; pursuant
to registration of the Securities under the Securities Act; or pursuant
to an available exemption from the registration requirements under the
Securities Act; and
(7) if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) are applicable thereto, we confirm that
such sale has been made in accordance with such provisions.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
--------------------------
Authorized Signature
D-2
<PAGE> 124
EXHIBIT E
FORM OF NOTE GUARANTEE
For value received, the undersigned hereby fully and
unconditionally guarantees to the Holder of this Note the cash payments in
United States dollars of principal of, premium, if any, and interest on this
Note in the amounts and at the time when due and interest on the overdue
principal, premium, if any, and interest, if any, on this Note, if lawful, and
the payment or performance of all other obligations of the Company under the
Indenture or the Notes, to the Holder of this Note and the Trustee, all in
accordance with and subject to the terms and limitations of this Note, Article
Twelve of the Indenture and this Note Guarantee. This Note Guarantee will become
effective in accordance with Article Twelve of the Indenture and its terms shall
be evidenced therein. The validity and enforceability of any Note Guarantee
shall not be affected by the fact that it is not affixed to any particular Note.
Capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Indenture dated as of May 21, 1997, by and among Proffitt's,
Inc., the undersigned and The First National Bank of Chicago, as Trustee, as
amended or supplemented (the "Indenture").
The obligations of the undersigned to the Holders of Notes and
to the Trustee pursuant to the Note Guarantee and the Indenture are expressly
set forth in Article Twelve of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Note Guarantee and all of the other
provisions of the Indenture to which this Note Guarantee relates.
THIS NOTE GUARANTEE WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW. THE SUBSIDIARY GUARANTOR HEREUNDER AGREES TO SUBMIT TO THE
NON- EXCLUSIVE JURISDICTION OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THE INDENTURE, THE NOTES OR THIS NOTE GUARANTEE.
This Note Guarantee is subject to release upon the terms set
forth in the Indenture.
E-1
<PAGE> 125
IN WITNESS WHEREOF, the undersigned Guarantor has caused this
Note Guarantee to be duly executed.
Dated:
[NAME OF GUARANTOR]
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
E-2
<PAGE> 1
EXHIBIT 4.5
==============================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of May 21, 1997
by and among
PROFFITT'S, INC.
and
THE SUBSIDIARY GUARANTORS
listed herein
and
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
GOLDMAN, SACHS & CO.
and
SMITH BARNEY INC.,
as Initial Purchasers
===============================================================================
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into as of May 21, 1997 by and among PROFFITT'S, INC., a Tennessee
corporation (the "Company"), the SUBSIDIARY GUARANTORS (together with the
Company, the "Issuers"), and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
("Merrill Lynch"), GOLDMAN, SACHS & CO. ("Goldman") and SMITH BARNEY INC.
("Smith Barney" and, together with Merrill Lynch and Goldman, the "Initial
Purchasers").
This Agreement is made pursuant to the Purchase Agreement
dated as of May 15, 1997 by and among the Company, the Subsidiary Guarantors
and the Initial Purchasers (the "Purchase Agreement"), which provides for,
among other things, the sale by the Company to the Initial Purchasers of an
aggregate of $125,000,000 principal amount of the Company's 8 1/8% Senior Notes
due 2004 (the "Notes") and the Guarantees thereof by the Subsidiary Guarantors
(the "Guarantees" and, together with the Notes, the "Securities"). In order to
induce the Initial Purchasers to enter into the Purchase Agreement, the Issuers
have agreed to provide to the Initial Purchasers and their direct and indirect
transferees the registration rights set forth in this Agreement. The execution
and delivery of this Agreement is a condition to the closing under the Purchase
Agreement.
In consideration of the foregoing, the parties hereto agree
as follows:
1. Definitions. As used in this Agreement, the following
capitalized defined terms shall have the following meanings:
"Additional Interest" shall have the meaning set forth in
Section 2(e) hereof.
"Advice" shall have the meaning set forth in the last
paragraph of Section 3 hereof.
"Applicable Period" shall have the meaning set forth in
Section 3(t) hereof.
"Business Day" shall mean a day that is not a Saturday, a
Sunday, or a day on which banking institutions in Charlotte, North
Carolina or New York, New York are required to be closed.
"Closing Time" shall mean the Closing Time as defined in the
Purchase Agreement.
"Company" shall have the meaning set forth in the preamble to
this Agreement and also includes the Company's successors and
permitted assigns.
"Depositary" shall mean The Depository Trust Company, or any
other depositary appointed by the Issuers; provided, however, that
such depositary must have an address in the Borough of Manhattan, in
The City of New York.
"Effectiveness Period" shall have the meaning set forth in
Section 2(b) hereof.
<PAGE> 3
"Effectiveness Target Date" shall have the meaning set forth
in Section 2(e) hereof.
"Event Date" shall have the meaning set forth in Section 2(e)
hereof.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Exchange Offer" shall mean the exchange offer by the Company
of Exchange Securities for Securities pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under
the Securities Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an
exchange offer registration statement on Form S-1, S-3 or S-4 (or, if
applicable, on another appropriate form), and all amendments and
supplements to such registration statement, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Exchange Period" shall have the meaning set forth in Section
2(a) hereof.
"Exchange Securities" shall mean the 8 1/8% Senior Notes due
2004, issued by the Company and guaranteed by the Subsidiary
Guarantors on a senior basis under the Indenture containing terms
identical to the Securities (except that (i) interest thereon shall
accrue from the last date on which interest was paid on the Securities
or, if no such interest has been paid, from May 21, 1997 (ii) the
transfer restrictions thereon and all registration rights in respect
thereof shall be eliminated and (iii) the provisions relating to
Additional Interest shall be eliminated) to be offered to Holders of
Securities in exchange for Securities pursuant to the Exchange Offer.
"Guarantees" shall have the meaning set forth in the preamble
to this Agreement.
"Holders" shall mean the Initial Purchasers, for so long as
they own any Registrable Securities, each of their direct and indirect
successors, assigns and transferees who become registered owners of
Registrable Securities under the Indenture and each Participating
Broker-Dealer that holds Exchange Securities for so long as such
Participating Broker-Dealer is required to deliver a prospectus
meeting the requirements of the Securities Act in connection with any
resale of such Exchange Securities.
"Indenture" shall mean the Indenture relating to the
Securities dated as of May 21, 1997 among the Issuers, the Subsidiary
Guarantors and The First National Bank of Chicago, as trustee, as the
same may be amended from time to time in accordance with the terms
thereof.
"Initial Purchasers" shall have the meaning set forth in the
preamble to this Agreement.
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<PAGE> 4
"Inspectors" shall have the meaning set forth in Section 3(n)
hereof.
"Issue Date" shall mean the date on which the Notes are
originally issued.
"Issuers" shall have the meaning set forth in the preamble to
this Agreement.
"Majority Holders" shall mean the Holders of a majority of
the aggregate principal amount of outstanding Registrable Securities.
"Notes" shall have the meaning set forth in the preamble of
this Agreement.
"Participating Broker-Dealer" shall have the meaning set
forth in Section 3(s) hereof.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"Private Exchange" shall have the meaning set forth in
Section 2(a) hereof.
"Private Exchange Securities" shall have the meaning set
forth in Section 2(a) hereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the
terms of the offering of any portion of the Registrable Securities
covered by a Shelf Registration Statement, and by all other amendments
and supplements to a prospectus, including post-effective amendments,
and in each case including all material incorporated by reference
therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble to this Agreement.
"Records" shall have the meaning set forth in Section 3(n)
hereof.
"Registrable Securities" shall mean each Security and, if
issued, each Private Exchange Security until (i) the date on which
such Security has been exchanged by a person other than a
Participating Broker-Dealer for an Exchange Security in the Exchange
Offer, (ii) following the exchange by a Participating Broker-Dealer in
the Exchange Offer of a Security for an Exchange Security, the date on
which such Exchange Security is sold to a purchaser who receives from
such broker-dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, as
amended or supplemented, (iii) the date on which such Security has
been effectively registered under the Securities Act and disposed of
in accordance with the Shelf Registration Statement, (iv) the date on
which such Security is distributed to the public pursuant to Rule 144
under the Securities Act (or any similar provision then in force, but
not Rule 144A under the Securities Act), (v) such Security shall have
been otherwise
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<PAGE> 5
transferred by the holder thereof and a new Security not bearing a
legend restricting further transfer shall have been delivered by the
Company and subsequent disposition of such Security shall not require
registration or qualification under the Securities Act or any similar
state law then in force or (vi) such Security ceases to be
outstanding.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Issuers with this
Agreement, including without limitation: (i) all applicable SEC, stock
exchange or National Association of Securities Dealers, Inc. (the
"NASD") registration and filing fees, (ii) all fees and expenses
incurred in connection with compliance with state securities or blue
sky laws (including reasonable fees and disbursements of one counsel
for Holders that are Initial Purchasers in connection with blue sky
qualification of any of the Exchange Securities or Registrable
Securities) and compliance with the rules of the NASD, (iii) all
applicable expenses incurred by the Issuers in preparing or assisting
in preparing, word processing, printing and distributing any
Registration Statement, any Prospectus and any amendments or
supplements thereto, and in preparing or assisting in preparing any
other documents relating to the performance of and compliance with
this Agreement, (iv) all rating agency fees, if any, (v) the fees and
disbursements of counsel for the Issuers, (vii) all fees and expenses
incurred in connection with the listing, if any, of any of the
Registrable Securities on any securities exchange or exchanges, if the
Issuer, in its discretion, elects to make any such listing; but
excluding fees of counsel to the Holders and underwriting discounts
and commissions and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities by a Holder.
"Registration Statement" shall mean any registration
statement (including, without limitation, the Exchange Offer
Registration Statement and the Shelf Registration Statement) of the
Issuers and the Subsidiary Guarantors which covers any of the Exchange
Securities or Registrable Securities pursuant to the provisions of
this Agreement, and all amendments and supplements to any such
Registration Statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall have the meaning set forth in the preamble
to this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Issuers pursuant to the provisions of
Section 2(b) hereof which covers all of the Registrable Securities or
all of the Private Exchange Securities, as the case may be, on an
appropriate form under Rule 415 under the Securities Act, or any
similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement,
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<PAGE> 6
including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Subsidiary Guarantors" shall mean each of the Company's
subsidiaries listed on the signature pages hereto and each of the
Company's future subsidiaries that has executed a supplemental
indenture pursuant to the Indenture guaranteeing the Notes.
"TIA" shall have the meaning set forth in Section 3(l) hereof.
"Trustee" shall mean the trustee with respect to the
Securities under the Indenture.
2. Registration Under the Securities Act.
(A) Exchange Offer. To the extent not prohibited by any
applicable law or applicable interpretation of the staff of the SEC, the
Issuers shall, for the benefit of the Holders, at the Issuers' cost, use their
best efforts to (i) cause to be filed with the SEC within 45 days after the
Closing Time an Exchange Offer Registration Statement on an appropriate form
under the Securities Act covering the offer by the Issuers to the Holders to
exchange all of the Registrable Securities (other than Private Exchange
Securities) for a like principal amount of Exchange Securities, (ii) have such
Exchange Offer Registration Statement declared effective under the Securities
Act by the SEC not later than the date which is 120 days after the Closing
Time, (iii) have such Registration Statement remain effective until the closing
of the Exchange Offer and (iv) cause the Exchange Offer to be consummated
following the effectiveness of the Exchange Offer Registration Statement and
use its best efforts to issue, on or prior to 30 Business Days after the date
on which the Exchange Offer Registration Statement was declared effective by
the SEC, Exchange Securities in exchange for all Securities properly tendered
prior thereto in the Exchange Offer. Upon the effectiveness of the Exchange
Offer Registration Statement, the Issuers shall promptly commence the Exchange
Offer, it being the objective of such Exchange Offer to enable each Holder
eligible and electing to exchange Registrable Securities for Exchange
Securities (assuming that such Holder is not an affiliate of the Issuers within
the meaning of Rule 405 under the Securities Act and is not a broker-dealer
tendering Registrable Securities acquired directly from the Issuers for its own
account, acquires the Exchange Securities in the ordinary course of such
Holder's business and has no arrangements or understandings with any Person to
participate in the Exchange Offer for the purpose of distributing (within the
meaning of the Securities Act) the Exchange Securities) and to transfer such
Exchange Securities from and after their receipt without any limitations or
restrictions under the Securities Act and under state securities or blue sky
laws.
In connection with the Exchange Offer, the Issuers shall:
(I) mail to each Holder a copy of the Prospectus forming
part of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
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<PAGE> 7
(II) keep the Exchange Offer open for acceptance for a period
of not less than 20 Business Days after the date notice thereof is
mailed to the Holders (or longer if required by applicable law) (such
period referred to herein as the "Exchange Period");
(III) utilize the services of the Depositary for the Exchange
Offer;
(IV) permit Holders to withdraw tendered Securities at any
time prior to the close of business, New York time, on the last
Business Day of the Exchange Period, by sending to the institution
specified in the notice, a telegram, telex, facsimile transmission or
letter setting forth the name of such Holder, the principal amount of
Securities delivered for exchange, and a statement that such Holder is
withdrawing his election to have such Securities exchanged; and
(V) otherwise comply in all material respects with all
applicable laws relating to the Exchange Offer.
If, prior to consummation of the Exchange Offer the Initial
Purchasers hold any Securities acquired by them and having the status of an
unsold allotment in the initial distribution, the Issuers upon the request of
any Initial Purchaser shall, simultaneously with the delivery of the Exchange
Securities in the Exchange Offer, issue and deliver to such Initial Purchaser
in exchange (the "Private Exchange") for the Securities held by such Initial
Purchaser, a like principal amount of debt securities of the Company,
Guaranteed by the Subsidiary Guarantors on a senior basis, that are identical
(except that such securities shall bear appropriate transfer restrictions) to
the Exchange Securities (the "Private Exchange Securities").
The Exchange Securities and the Private Exchange Securities
shall be issued under (i) the Indenture or (ii) an indenture identical to all
material respects to the Indenture and which, in either case, has been
qualified under the TIA or is exempt from such qualification and shall provide
that the Exchange Securities shall not be subject to the transfer restrictions
set forth in the Indenture. The Indenture or such indenture shall provide that
the Exchange Securities, the Private Exchange Securities and the Securities
shall vote and consent together on all matters as one class and that none of
the Exchange Securities, the Private Exchange Securities or the Securities will
have the right to vote or consent as a separate class on any matter. The
Private Exchange Securities shall be of the same series as and the Issuers
shall use all commercially reasonable efforts to have the Private Exchange
Securities bear the same CUSIP number as the Exchange Securities. Neither the
Company nor any of its Subsidiaries shall have any liability under this
Agreement solely as a result of such Private Exchange Securities not bearing
the same CUSIP number as the Exchange Securities.
The Exchange Offer and the Private Exchange shall not be
subject to any conditions, other than that (i) the Exchange Offer or Private
Exchange, as the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC (ii) no action or proceeding shall have
been instituted or threatened in any court or by any governmental agency which
might materially impair the ability of the Issuer to proceed with the Exchange
Offer or the Private Exchange, and no material adverse development shall have
occurred in any existing action or proceeding with respect to the Issuer and
(iii) all governmental approvals shall have been
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<PAGE> 8
obtained, which approvals the Issuer deems necessary for the consummation of
the Exchange Offer or Private Exchange. As soon as practicable after the close
of the Exchange Offer and/or the Private Exchange, as the case may be, the
Issuers shall:
(i) accept for exchange all Registrable Securities or
portions thereof properly tendered and not validly withdrawn pursuant
to the Exchange Offer in accordance with the terms of the Exchange
Offer Registration Statement and the letter of transmittal which is an
exhibit thereto;
(ii) accept for exchange all Securities properly tendered
pursuant to the Private Exchange; and
(iii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities or portions thereof so
accepted for exchange by the Issuers, and issue, and cause the Trustee
under the Indenture to promptly authenticate and deliver to each
Holder, a new Exchange Security or Private Exchange Security, as the
case may be, equal in principal amount to the principal amount of the
Registrable Securities surrendered by such Holder and accepted for
exchange.
To the extent not prohibited by any law or applicable
interpretation of the staff of the SEC, the Issuers shall use their best
efforts to complete the Exchange Offer as provided above, and shall comply with
the applicable requirements of the Securities Act, the Exchange Act and other
applicable laws in connection with the Exchange Offer. The Exchange Offer shall
not be subject to any conditions, other than those set forth in the immediately
preceding paragraph. Each Holder of Registrable Securities who wishes to
exchange such Registrable Securities for Exchange Securities in the Exchange
Offer will be required to make certain customary representations in connection
therewith, including representations that such Holder is not an affiliate of
the Issuers within the meaning of Rule 405 under the Securities Act, that any
Exchange Securities to be received by it will be acquired in the ordinary
course of business and that at the time of the commencement of the Exchange
Offer it has no arrangement with any Person to participate in the distribution
(within the meaning of the Securities Act) of the Exchange Securities. The
Issuers shall inform the Initial Purchasers of the names and addresses of the
Holders to whom the Exchange Offer is made, and the Initial Purchasers shall
have the right to contact such Holders and otherwise facilitate the tender of
Registrable Securities in the Exchange Offer.
Upon consummation of the Exchange Offer in accordance with
this Section 2(a), the provisions of this Agreement shall continue to apply,
mutatis mutandis, solely with respect to Registrable Securities that are
Private Exchange Securities and Exchange Securities held by Participating
Broker-Dealers, and the Issuers shall have no further obligation to register
Registrable Securities (other than Private Exchange Securities) pursuant to
Section 2(b) hereof.
(B) Shelf Registration. In the event that (i) the Company is
not permitted to file the Exchange Offer Registration Statement or to
consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy, (ii) the Exchange Offer is not for any
other reason consummated within 150 days after the Issue Date, (iii) any holder
of
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<PAGE> 9
Securities notifies the Company within 20 Business Days after the
commencement of the Exchange Offer that (a) due to a change in law or policy it
is not entitled to participate in the Exchange Offer, (b) due to a change in
law or policy it may not resell the Exchange Securities acquired by it in the
Exchange Offer to the public without delivering a prospectus and the prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such holder or (c) it is a broker-dealer and owns
Securities acquired directly from the Company or an affiliate of the Company or
(iv) the holders of a majority of the Securities may not resell the Exchange
Securities acquired by them in the Exchange Offer to the public without
restriction under the Securities Act (other than the delivery of the prospectus
included in the Exchange Offer Registration Statement, then the Issuers shall,
at their cost, use their best efforts to cause to be filed as promptly as
practicable after such determination or date, as the case may be, and, in any
event, prior to the later of (A) 150 days after the Issue Date or (B) 30 days
after such filing obligation arises and use its best efforts to cause the Shelf
Registration Statement to be declared effective by the SEC on or prior to 90
days after such obligation arises; provided, however, that if the Company has
not consummated the Exchange Offer within 150 days of the Issue Date, then the
Issuers will file the Shelf Registration Statement with the SEC on or prior to
the 165th day after the Issue Date, a Shelf Registration Statement providing
for the sale by the Holders of all of the Registrable Securities, and shall use
their best efforts to have such Shelf Registration Statement declared effective
by the SEC as soon as practicable. No Holder of Registrable Securities may
include any of its Registrable Securities in any Shelf Registration pursuant to
this Agreement unless and until such Holder furnishes to the Issuers in
writing, within 15 days after receipt of a request therefor, such information
as the Issuers may, after conferring with counsel with regard to information
relating to Holders that would be required by the SEC to be included in such
Shelf Registration Statement or Prospectus included therein, reasonably request
for inclusion in any Shelf Registration Statement or Prospectus included
therein. Each Holder as to which any Shelf Registration is being effected
agrees to furnish to the Issuers all information with respect to such Holder
necessary to make any information previously furnished to the Issuers by such
Holder not materially misleading.
The Issuers agree to use their best efforts to keep the Shelf
Registration Statement continuously effective for a period of two years from
the Issue Date (subject to extension pursuant to the last paragraph of Section
3 hereof) (or such shorter period that will terminate when all of the
Registrable Securities covered by such Shelf Registration Statement have been
sold pursuant thereto) or cease to be outstanding (the "Effectiveness Period");
provided, however, that the Effectiveness Period in respect of the Shelf
Registration Statement shall be extended to the extent required to permit
dealers to comply with the applicable prospectus delivery requirements of Rule
174 under the Securities Act and as otherwise provided herein; provided,
further, however, that if such Shelf Registration Statement has been filed
solely at the request of any Initial Purchaser pursuant to clause (iv) above,
the Issuers shall only be required to use their best efforts to keep such Shelf
Registration Statement continuously effective for a period of one year from the
Issue Date (subject to extension pursuant to the last paragraph of Section 3
hereof) or for such shorter period which will terminate when all of the
Registrable Securities covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement or cease to be outstanding.
The Issuers shall not permit any securities other than Registrable Securities
to be included in the Shelf Registration. The Issuers further agree, if
necessary, to
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<PAGE> 10
supplement or amend the Shelf Registration Statement, if required
by the rules, regulations or instructions applicable to the registration form
used by the Issuers for such Shelf Registration Statement or by the Securities
Act or by any other rules and regulations thereunder for shelf registrations,
and the Issuers agree to furnish to the Holders of Registrable Securities
copies of any such supplement or amendment promptly after its being used or
filed with the SEC.
(C) Expenses. The Issuers shall pay all Registration Expenses
in connection with the registration pursuant to Section 2(a) or 2(b) hereof and
the reasonable fees and expenses of one counsel, if any, designated in writing
by the Majority Holders to act as counsel for the Holders of the Registrable
Securities in connection with a Shelf Registration Statement. Except as
provided in the preceding sentence, each Holder shall pay all expenses of its
counsel, underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement.
(D) Effective Registration Statement. An Exchange Offer
Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration
Statement pursuant to Section 2(b) hereof will not be deemed to have become
effective unless it has been declared effective by the SEC; provided, however,
that if, after it has been declared effective, the offering of Registrable
Securities pursuant to a Shelf Registration Statement is interfered with by any
stop order, injunction or other order or requirement of the SEC or any other
governmental agency or court, such Registration Statement will be deemed not to
have been effective during the period of such interference, until the offering
of Registrable Securities may legally resume. The Issuers will be deemed not to
have used their best efforts to cause the Exchange Offer Registration Statement
or the Shelf Registration Statement, as the case may be, to become, or to
remain, effective during the requisite period if they voluntarily take any
action that would result in any such Registration Statement not being declared
effective or in the Holders of Registrable Securities covered thereby not being
able to exchange or offer and sell such Registrable Securities during that
period, unless such action is required by applicable law and except as
otherwise provided in the second paragraph of Section 2(e) below.
(E) Additional Interest. In the event that (i) the applicable
Registration Statement is not filed with the SEC on or prior to the date
specified herein for such filing, (ii) the applicable Registration Statement is
not declared effective on or prior to the date specified herein for such
effectiveness after such obligation arises (the "Effectiveness Target Date"),
(iii) if the Exchange Offer is required to be consummated hereunder, the
Company fails to consummate the Exchange Offer within 30 Business Days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) the applicable Registration Statement is filed and declared
effective during the period effectiveness is required by Section 2(e) and 3(a)
but shall thereafter cease to be effective or usable without being succeeded
immediately by an additional Registration Statement covering the Registrable
Securities which has been filed and declared effective (each such event
referred to in clauses (i) through (iv), a "Registration Default"), then the
interest rate on the Registrable Securities as to which such Registration
Default relates will increase ("Additional Interest"), with respect to the
first 90-day period (or portion thereof) while a Registration Default is
continuing immediately following the occurrence of such Registration Default in
an amount equal to 0.25% per annum of the principal amount of the Securities.
The rate of additional Interest will increase by an additional 0.25% per annum
of the principal amount
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<PAGE> 11
of the Securities for each subsequent 90-day period (or
portion thereof) while a Registration Default is continuing until all
Registration Defaults have been cured, up to a maximum amount of 1.00% of the
principal amount of the Securities. Additional Interest shall be computed based
on the actual number of days elapsed during which any such Registration
Defaults exist. Following the cure of a Registration Default, the accrual of
Additional Interest with respect to such Registration Default will cease.
If the Company issues a notice that the Shelf Registration
Statement is unusable due to the pendency of an announcement of a material
corporate transaction, or such notice is required under applicable securities
laws to be issued by the Company, and the aggregate number of days in any
consecutive twelve-month period for which the Shelf Registration Statement
shall not be usable due to all such notices issued or required to be issued
exceeds 30 days in the aggregate, then the interest rate borne by the
Securities will be increased by 0.25% per annum of the principal amount of the
Securities for the first 90-day period (or portion thereof) beginning on the
31st such date that such Shelf Registration Statement ceases to be usable,
which rate shall be increased by an additional 0.25% per annum of the principal
amount of the Securities at the beginning of each subsequent 90-day period, up
to a maximum amount of 1.00% of the principal amount of the Securities. Upon
the Shelf Registration Statement once again becoming usable, the interest rate
borne by the Securities will be reduced to the original interest rate if the
Company is otherwise in compliance with this Agreement at such time. Additional
Interest shall be computed based on the actual number of days elapsed in each
90-day period in which the Shelf Registration Statement is unusable.
The Issuers shall notify the Trustee within three Business
Days after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Additional
Interest shall be paid by depositing with the Trustee, in trust, for the
benefit of the Holders of Registrable Securities, on or before the applicable
semiannual interest payment date, immediately available funds in sums
sufficient to pay the Additional Interest then due. The Additional Interest due
shall be payable on each interest payment date to the record Holder of
Securities entitled to receive the interest payment to be paid on such date as
set forth in the Indenture. Each obligation to pay Additional Interest shall be
deemed to accrue from and including the day following the applicable Event
Date.
(F) Specific Enforcement. Without limiting the remedies
available to the Initial Purchasers and the Holders, the Issuers acknowledge
that any failure by the Issuers to comply with their obligations under Section
2(a) and Section 2(b) hereof may result in material irreparable injury to the
Initial Purchasers or the Holders for which there is no adequate remedy at law,
that it would not be possible to measure damages for such injuries precisely
and that, in the event of any such failure, the Initial Purchasers or any
Holder may obtain such relief as may be required to specifically enforce the
Issuers' obligations under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures. In connection with the obligations of the
Issuers with respect to the Registration Statements pursuant to Sections 2(a)
and 2(b) hereof, the Issuers shall:
(A) prepare and file with the SEC a Registration Statement or
Registration Statements as prescribed by Sections 2(a) and 2(b) hereof within
the relevant time period
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<PAGE> 12
specified in Section 2 hereof on the appropriate form under the Securities Act,
which form (i) shall be selected by the Issuers, (ii) shall, in the case of a
Shelf Registration, be available for the sale of the Registrable Securities by
the selling Holders thereof and (iii) shall comply as to form in all material
respects with the requirements of the applicable form and include all financial
statements required by the SEC to be filed therewith; and use their best
efforts to cause such Registration Statement to become effective and remain
effective in accordance with Section 2 hereof. The Issuers shall not file any
Registration Statement or Prospectus or any amendments or supplements thereto
in respect of which the Holders must provide information for inclusion therein
without being afforded an opportunity to review such documentation a reasonable
time prior to the filing of such document if the Majority Holders or such
Participating Broker-Dealer, as the case may be, their counsel or the managing
underwriters, if any, shall reasonably object;
(B) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary to keep such Registration Statement effective for the
Effectiveness Period or the Applicable Period, as the case may be; and
cause each Prospectus to be supplemented by any required prospectus
supplement and as so supplemented to be filed pursuant to Rule 424 (or
any similar provision then in force) under the Securities Act, and
comply with the provisions of the Securities Act, the Exchange Act and
the rules and regulations promulgated thereunder applicable to it with
respect to the disposition of all securities covered by each
Registration Statement during the Effectiveness Period or the
Applicable Period, as the case may be, in accordance with the intended
method or methods of distribution by the selling Holders thereof
described in this Agreement (including sales by any Participating
Broker-Dealer);
(C) in the case of a Shelf Registration, (i) notify each
Holder of Registrable Securities, at least three Business Days prior
to filing, that a Shelf Registration Statement with respect to the
Registrable Securities is being filed and advising such Holder that
the distribution of Registrable Securities will be made in accordance
with the method selected by the Majority Holders; and (ii) furnish to
each Holder of Registrable Securities, without charge, as many copies
of each Prospectus, and any amendment or supplement thereto and such
other documents as such Holder may reasonably request, in order to
facilitate the disposition of the Registrable Securities; and (iii)
subject to the last paragraph of Section 3 hereof, hereby consent to
the use of the Prospectus or any amendment or supplement thereto by
each of the selling Holders of Registrable Securities in connection
with the offering and sale of the Registrable Securities covered by
such Prospectus or any amendment or supplement thereto subject to the
limitations on the use thereof provided in Sections 2(b) and 2(c);
(D) in the case of a Shelf Registration, use their best
efforts to register or qualify, as may be required by applicable law,
the Registrable Securities under all applicable state securities or
"blue sky" laws of such jurisdictions by the time the applicable
Registration Statement is declared effective by the SEC as any Holder
of Registrable Securities covered by a Registration Statement shall
reasonably request in advance of such date of effectiveness, and do
any and all other acts and things which may
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<PAGE> 13
be reasonably necessary or advisable to enable such Holder to
consummate the disposition in each such jurisdiction of such
Registrable Securities owned by such Holder; provided, however, that
the Issuers shall not be required to (i) qualify as a foreign
corporation or as a broker or dealer in securities in any jurisdiction
where it would not otherwise be required to qualify but for this
Section 3(d), (ii) file any general consent to service of process or
(iii) subject itself to taxation in any such jurisdiction if it is not
so subject;
(E) in the case of (1) a Shelf Registration or (2)
Participating Broker-Dealers who have notified the Issuers that they
will be utilizing the Prospectus contained in the Exchange Offer
Registration Statement as provided in Section 3(t) hereof, notify each
Holder of Registrable Securities, or such Participating
Broker-Dealers, as the case may be, their counsel, if any, promptly
and confirm such notice in writing (i) when a Registration Statement
has become effective and when any post-effective amendments and
supplements thereto become effective, (ii) of any request by the SEC
or any state securities authority for amendments and supplements to a
Registration Statement or Prospectus or for additional information
after the Registration Statement has become effective, (iii) of the
issuance by the SEC or any state securities authority of any stop
order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) if the Issuers
receive any notification with respect to the suspension of the
qualification of the Registrable Securities or the Exchange Securities
to be sold by any Participating Broker-Dealer for offer or sale in any
jurisdiction or the initiation of any proceeding for such purpose, (v)
of the happening of any event or the failure of any event to occur or
the discovery of any facts or otherwise, during the period a Shelf
Registration Statement is effective which makes any statement made in
such Registration Statement or the related Prospectus untrue in any
material respect or which causes such Registration Statement or
Prospectus to omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading and (vi) the Company's reasonable
determination that a post-effective amendment to the Registration
Statement would be appropriate;
(F) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of a Registration Statement
as soon as practicable;
(G) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, without charge, at least one
conformed copy of each Registration Statement relating to such Shelf
Registration and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto,
unless requested);
(H) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely
preparation and delivery of certificates not bearing any restrictive
legends representing Securities covered by such Shelf Registration to
be sold and relating to the subsequent transfer of such Securities;
and cause such Registrable Securities to be in such denominations
(consistent with the provisions of the Indenture) and registered in
such names as the selling Holders may reasonably request at least two
Business Days prior to the closing of any sale of Registrable
Securities;
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<PAGE> 14
(I) in the case of a Shelf Registration or an Exchange
Offer Registration, upon the occurrence of any circumstance
contemplated by Section 3(e)(ii), 3(e)(iii), 3(e)(iv), 3(e)(v) or
3(e)(vi) hereof, use their best efforts to prepare a supplement or
post-effective amendment to a Registration Statement or the related
Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, such Prospectus will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and
to notify each Holder to suspend use of the Prospectus as promptly as
practicable after the occurrence of such an event, and each Holder
hereby agrees to suspend use of the Prospectus until the Issuers have
amended or supplemented the Prospectus to correct such misstatement or
omission;
(J) obtain a CUSIP number for all Exchange Securities or
Registrable Securities, as the case may be, not later than the
effective date of a Registration Statement, and provide the Trustee
with certificates for the Exchange Securities or the Registrable
Securities, as the case may be, in a form eligible for deposit with
the Depositary;
(K) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended, (the "TIA") in connection with the
registration of the Exchange Securities or Registrable Securities, as
the case may be, cooperate with the Trustee and the Holders to effect
such changes to the Indenture as may be required for the Indenture to
be so qualified in accordance with the terms of the TIA and execute,
and use their best efforts to cause the Trustee to execute, all
documents as may be required to effect such changes, and all other
forms and documents required to be filed with the SEC to enable the
Indenture to be so qualified in a timely manner;
(L) in the case of a Shelf Registration, enter into such
agreements and take all such other appropriate actions as are
reasonably requested in order to expedite or facilitate the
registration or the disposition of such Registrable Securities, and in
such connection, (i) make such representations and warranties to
Holders of such Registrable Securities with respect to the business of
the Issuers and their subsidiaries as then conducted and the
Registration Statement, Prospectus and documents, if any, incorporated
or deemed to be incorporated by reference therein, in each case, as
are customarily made by issuers to underwriters in underwritten
offerings, and confirm the same if and when requested; (ii) obtain
opinions of counsel to the Issuers and updates thereof in form and
substance reasonably satisfactory to the Holders of a majority in
principal amount of the Registrable Securities being sold, addressed
to each selling Holder covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as
may be reasonably requested by such Holders; (iii) obtain "cold
comfort" letters and updates thereof from the independent certified
public accountants of the Issuers (and, if necessary, any other
independent certified public accountants of any subsidiary of the
Issuers or of any business acquired by the Issuers for which financial
statements and financial data are, or are required to be, included in
the Registration Statement but excluding any statements of the Issuers
audited by Deloitte & Touche LLP prior to the date hereof), addressed
to the selling Holders of Registrable Securities (other than
Participating Broker-Dealers,
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<PAGE> 15
unless such Participating Broker-Dealers would be deemed to be
"underwriters" as a result of the sale of Securities covered by such
Shelf Registration Statement), such letters to be in customary form
and covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings and such other
matters as reasonably requested by such selling Holders; and (iv) if
an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable than those
set forth in Section 4 hereof (or such other provisions and procedures
acceptable to the Issuers and the Holders of a majority in aggregate
principal amount of Registrable Securities covered by such
Registration with respect to all parties to be indemnified pursuant to
said Section (including, without limitation, such selling Holders).
The above shall be done at each closing in respect of the sale of
Registrable Securities, or as and to the extent required thereunder;
(M) if (1) a Shelf Registration is filed pursuant to
Section 2(b) or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2(a) is required to
be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Securities during the
applicable period, make available for inspection by each such person
who would be an "underwriter" as a result of either (i) the sale by
such person of Securities covered by such Shelf Registration Statement
or (ii) the sale during the Applicable Period by a Participating
Broker-Dealer of Exchange Securities (provided that a Participating
Broker-Dealer shall not be deemed to be an underwriter solely as a
result of it being required to deliver a prospectus in connection with
any resale of Exchange Securities) and any attorney, accountant or
other agent retained by any such person (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and properties of the Issuers and their subsidiaries
(collectively, the "Records") as shall be reasonably necessary to
enable them to exercise any applicable due diligence responsibilities,
and cause the officers, directors and employees of the Issuers and
their subsidiaries to supply all information in each case reasonably
requested by any such Inspector in connection with such Registration
Statement. Records which the Issuers determine, in good faith, to be
confidential and any Records which they notify the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a material
misstatement or omission in such Registration Statement, (ii) the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction or (iii) the information
in such Records has been made generally available to the public. Each
selling Holder of such Registrable Securities and each such
Participating Broker-Dealer will be required to agree that information
obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Issuers unless and until such is
made generally available to the public. Each selling Holder of such
Registrable Securities and each such Participating Broker-Dealer will
be required to further agree that it will, upon learning that
disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Issuers and allow the Issuers at
their expense to undertake appropriate action to prevent disclosure of
the Records deemed confidential;
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<PAGE> 16
(N) comply with all applicable rules and regulations of the
SEC and make generally available to their securityholders earnings
statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after the
end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of
any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Issuers
after the effective date of a Registration Statement, which statements
shall cover said 12-month periods;
(O) upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Issuers addressed to the
Trustee for the benefit of all Holders of Registrable Securities
participating in the Exchange Offer or the Private Exchange, as the
case may be, and which includes an opinion that (i) the Issuers have
duly authorized, executed and delivered the Exchange Securities and
Private Exchange Securities, and (ii) each of the Exchange Securities
or the Private Exchange Securities, as the case may be, constitute a
legal, valid and binding obligation of the Issuers, enforceable
against the Issuers in accordance with its respective terms (in each
case, with customary exceptions);
(P) if an Exchange Offer or a Private Exchange is to be
consummated, upon proper delivery of the Registrable Securities by
Holders to the Issuers (or to such other Person as directed by the
Issuers) in exchange for the Exchange Securities or the Private
Exchange Securities, as the case may be, the Issuers shall mark, or
cause to be marked, on such Registrable Securities and on the books of
the Trustee, the Transfer Agent, the Registrar and the Depositary
delivered by such Holders that such Registrable Securities are being
canceled in exchange for the Exchange Securities or the Private
Exchange Securities, as the case may be; but in no event shall such
Registrable Securities be marked as paid or otherwise satisfied solely
as a result of being exchanged for Exchange Securities or Private
Exchange Securities in the Exchange Offer or the Private Exchange, as
the case may be;
(Q) cooperate with each seller of Registrable Securities
covered by any Registration Statement participating in the disposition
of such Registrable Securities and one counsel acting on behalf of all
such sellers in connection with the filings, if any, required to be
made with the NASD;
(R) use their best efforts to take all other steps
necessary to effect the registration of the Registrable Securities
covered by a Registration Statement contemplated hereby; and
(S) (A) in the case of the Exchange Offer Registration
Statement (i) include in the Exchange Offer Registration Statement a
section entitled "Plan of Distribution," which section shall be
reasonably acceptable to Merrill Lynch, as representative of the
Initial Purchasers, and which shall contain a summary statement of the
positions taken or policies made by the staff of the SEC with respect
to the potential "underwriter" status of any
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<PAGE> 17
broker-dealer (a "Participating Broker-Dealer") that holds Registrable
Securities acquired for its own account as a result of market-making
activities or other trading activities and that will be the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Securities to be received by such broker-dealer in the Exchange Offer,
whether such positions or policies have been publicly disseminated by
the staff of the SEC or such positions or policies, in the reasonable
judgment of Merrill Lynch, as representative of the Initial Purchasers
or such other representative, represent the prevailing views of the
staff of the SEC, including a statement that any such broker-dealer
who receives Exchange Securities for Registrable Securities pursuant
to the Exchange Offer may be deemed a statutory underwriter and must
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Securities, (ii) furnish
to each Participating Broker-Dealer who has delivered to the Issuers
the notice referred to in Section 3(e), without charge, as many copies
of each Prospectus included in the Exchange Offer Registration
Statement, and any amendment or supplement thereto, as such
Participating Broker-Dealer may reasonably request; (iii) hereby
consent to the use of the Prospectus forming part of the Exchange
Offer Registration Statement or any amendment or supplement thereto,
by any Person subject to the prospectus delivery requirements of the
SEC, including all Participating Broker-Dealers, in connection with
the sale or transfer of the Exchange Securities covered by the
Prospectus or any amendment or supplement thereto, (iv) use their best
efforts to keep the Exchange Offer Registration Statement effective
and to amend and supplement the Prospectus contained therein in order
to permit such Prospectus to be lawfully delivered by all Persons
subject to the prospectus delivery requirements of the Securities Act
for such period of time as such Persons must comply with such
requirements in order to resell the Exchange Securities; provided,
however, that such period shall not be required to exceed 90 days (or
such longer period if extended pursuant to the last sentence of
Section 3 hereof) (the "Applicable Period"), and (iv) include in the
transmittal letter or similar documentation to be executed by an
exchange offeree in order to participate in the Exchange Offer (x) the
following provision:
"If the exchange offeree is a broker-dealer holding
Registrable Securities acquired for its own account as a
result of market-making activities or other trading
activities, it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any
resale of Exchange Securities received in respect of such
Registrable Securities pursuant to the Exchange Offer";
and (y) a statement to the effect that by a broker-dealer making the
acknowledgment described in clause (x) and by delivering a Prospectus
in connection with the exchange of Registrable Securities, such
broker-dealer will not be deemed to admit that it is an underwriter
within the meaning of the Securities Act; and
(B) in the case of any Exchange Offer Registration Statement, the
Issuers agree to deliver, upon request, to the Trustee or to
Participating Broker-Dealers upon consummation of the Exchange Offer
(i) an opinion of counsel substantially in the form attached hereto as
Exhibit A, and (ii) an officers' certificate containing certifications
substantially similar to those set forth in Section 7(c) of the
Purchase Agreement.
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<PAGE> 18
The Issuers may require each seller of Registrable Securities
as to which any registration is being effected to furnish to the Issuers such
information regarding such seller and the proposed distribution of such
Registrable Securities, as the Issuers may from time to time reasonably request
in writing. The Issuers may exclude from such registration the Registrable
Securities of any seller who fails to furnish such information within a
reasonable time (not to exceed 10 Business Days) after receiving such request
and shall be under no obligation to compensate any such seller for any lost
income, interest or other opportunity forgone, or any liability incurred, as a
result of the Issuers' decision to exclude such seller.
In the case of (1) a Shelf Registration Statement or (2)
Participating Broker-Dealers who have notified the Issuers that they will be
utilizing the Prospectus contained in the Exchange Offer Registration Statement
as provided in Section 3(t) hereof, that are seeking to sell Exchange
Securities and are required to deliver Prospectuses, each Holder agrees that,
upon receipt of any notice from the Issuers of the happening of any event of
the kind described in Section 3(e)(ii), 3(e)(iii), 3(e)(v), 3(e)(vi) or
3(e)(vii) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(i) hereof or until it is advised in writing (the "Advice") by the
Issuers that the use of the applicable Prospectus may be resumed, and, if so
directed by the Issuers, such Holder will deliver to the Issuers (at the
Issuers' expense) all copies in such Holder's possession, other than permanent
file copies then in such Holder's possession, of the Prospectus covering such
Registrable Securities or Exchange Securities, as the case may be, current at
the time of receipt of such notice. If the Issuers shall give any such notice
to suspend the disposition of Registrable Securities or Exchange Securities, as
the case may be, pursuant to a Registration Statement, the Issuers shall use
their best efforts to file and have declared effective (if an amendment) as
soon as practicable an amendment or supplement to the Registration Statement
and, in the case of an amendment, have such amendment declared effective as
soon as practicable and shall extend the period during which such Registration
Statement shall be maintained effective pursuant to this Agreement by the
number of days in the period from and including the date of the giving of such
notice to and including the date when the Issuers shall have made available to
the Holders (x) copies of the supplemented or amended Prospectus necessary to
resume such dispositions or (y) the Advice.
4. Indemnification and Contribution. (A) The Issuers shall,
jointly and severally, indemnify and hold harmless each Initial Purchaser, each
Holder, each Participating Broker-Dealer, each underwriter who participates in
an offering of Registrable Securities, their respective affiliates, each
Person, if any, who controls any of such parties within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, as follows:
(I) against any and all loss, liability, claim, damage and
expense whatsoever, joint or several, as incurred, arising out of any
untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment or
supplement thereto), covering Registrable Securities or Exchange
Securities, including all documents incorporated therein by reference,
or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or
alleged untrue
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<PAGE> 19
statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(II) against any and all loss, liability, claim, damage and
expense whatsoever, joint or several, as incurred, to the extent of
the aggregate amount paid in settlement of any litigation, or any
investigation or proceeding by any court or governmental agency or
body, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue
statement or omission; provided that (subject to Sections 4(c) and
4(d) below) any such settlement is effected with the prior written
consent of the Company; and
(III) against any and all expenses whatsoever, as incurred
(including reasonable fees and disbursements of one counsel (in
addition to any local counsel) chosen by Merrill Lynch, such Holder,
such Participating Broker-Dealer or any underwriter (except to the
extent otherwise expressly provided in Section 4(c) hereof)),
reasonably incurred in investigating, preparing or defending against
any litigation, or any investigation or proceeding by any court or
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) of this Section
4(a);
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission (i) made in reliance upon and
in conformity with written information furnished in writing to the Issuers by
or on behalf of such Initial Purchaser, such Holder, such Participating
Broker-Dealer or any underwriter with respect to such Initial Purchaser,
Holder, Participating Broker-Dealer or underwriter, as the case may be,
expressly for use in the Registration Statement (or any amendment or supplement
thereto) or any Prospectus (or any amendment or supplement thereto) or (ii)
contained in any preliminary prospectus if such Initial Purchaser, such Holder,
such Participating Broker-Dealer or such underwriter failed to send or deliver
a copy of the Prospectus (in the form it was first provided to such parties for
confirmation of sales) to the Person asserting such losses, claims, damages or
liabilities on or prior to the delivery of written confirmation of any sale of
securities covered thereby to such Person in any case where the Issuers shall
have previously furnished copies thereof to such Initial Purchaser, such
Holder, such Participating Broker-Dealer or such underwriter, as the case may
be, in accordance with this Agreement, at or prior to the written confirmation
of the sale of such Securities to such Person and the untrue statement
contained in or the omission from the preliminary prospectus was corrected in
the Final Prospectus (or any amendment or supplement thereto). Any amounts
advanced by the Issuers to an indemnified party pursuant to this Section 4 as a
result of such losses shall be returned to the Issuers if it shall be finally
determined by a court of competent jurisdiction in a judgment not subject to
appeal or final review that such indemnified party was not entitled to
indemnification by the Issuers.
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<PAGE> 20
(B) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Issuers, each Initial Purchaser, each
underwriter who participates in an offering of registrable Securities and the
other selling Holders and each of their respective directors and each Person,
if any, who controls any of the Issuers, any Initial Purchaser, any underwriter
or any other selling Holder within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, against any and all loss, liability, claim,
damage and expense whatsoever described in the indemnity contained in Section
4(a) hereof, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment or supplement thereto) or any Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Issuers by or on behalf of such selling
Holder with respect to such Holder expressly for use in the Registration
Statement (or any supplement thereto), or any such Prospectus (or any amendment
thereto); provided, however, that, in the case of the Shelf Registration
Statement, no such Holder shall be liable for any claims hereunder in excess of
the amount of net proceeds received by such Holder from the sale of Registrable
Securities pursuant to the Shelf Registration Statement; provided, further,
however, that for purposes of Section 4(a)(iii), such counsel shall (subject to
Section 4(c) hereof) be chosen by the Company.
(C) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure
to so notify an indemnifying party shall not relieve such indemnifying party
from any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which
it may have otherwise than on account of this indemnity agreement. In the case
of parties indemnified pursuant to Section 4(a) above, one counsel to all the
indemnified parties shall be selected by Merrill Lynch, and, in the case of
parties indemnified pursuant to Section 4(b) above, counsel to all the
indemnified parties shall be selected by the Issuers. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party.
Notwithstanding the foregoing, if it so elects within a reasonable time after
receipt of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume the defense of such
action with counsel chosen by it and approved by the indemnified parties
defendant in such action (which approval shall not be unreasonably withheld),
unless such indemnified parties reasonably object to such assumption on the
ground that there may be legal defenses available to them which are different
from or in addition to those available to such indemnifying party. If an
indemnifying party assumes the defense of such action, the indemnifying parties
shall not be liable for any fees and expenses of counsel for the indemnified
parties incurred thereafter in connection with such action. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions arising out of the same general allegations or
circumstances. No indemnifying party shall, without the prior written consent
of the indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under
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<PAGE> 21
this Section 4 (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or consent (i)
includes a full and unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim
and the offer and sale of any Securities and (ii) does not include a statement
as to or an admission of fault, culpability or a failure to act by or on behalf
of any indemnified party.
(D) If at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for reasonable fees
and expenses of counsel pursuant to Section 4(a)(iii) above, then such
indemnifying party agrees that it shall liable for any settlement of the nature
contemplated by Section 4(a)(ii) effected without its written consent if (i)
such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
(E) In order to provide for just and equitable contribution
in circumstances under which any of the indemnity provisions set forth in this
Section 4 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Issuers, the Initial
Purchasers and the Holders, as applicable, shall contribute to the aggregate
losses, liabilities, claims, damages and expenses of the nature contemplated by
such indemnity agreement incurred by the Issuers, the Initial Purchasers and
the Holders; provided, however, that no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person that was not guilty of such
fraudulent misrepresentation. As between the Issuers and the Initial Purchasers
and the Holders, such parties shall contribute to such aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity agreement in such proportion as shall be appropriate to reflect the
relative fault of the Issuers on the one hand and of the Holder of Registrable
Securities, the Participating Broker-Dealer or Initial Purchaser, as the case
may be, on the other hand in connection with the statements or omissions which
resulted in such losses, liabilities, claims, damages or expenses, as well as
any other relevant equitable considerations.
The relative fault of the Issuers on the one hand and the
Holder of Registrable Securities, the Participating Broker-Dealer or the
Initial Purchasers, as the case may be, on the other hand shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Issuers, or by the Holder
of Registrable Securities, the Participating Broker-Dealer or the Initial
Purchasers, as the case may be, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Issuers and the Holders of the Registrable Securities and
the Initial Purchasers agree that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 4.
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<PAGE> 22
For purposes of this Section 4, each affiliate of any Person,
if any, who controls a Holder of Registrable Securities, a Initial Purchaser or
a Participating Broker-Dealer within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such other Person, and each director of the Issuers, each
affiliate of the Issuers, each executive officer of the Issuers who signed the
Registration Statement, and each Person, if any, who controls any Issuer within
the meaning of Section 15 of the Securities act or Section 20 of the Exchange
Act shall have the same rights to contribution as the Issuers.
5. [Intentionally Omitted]
6. [Intentionally Omitted]
7. Miscellaneous.
(A) Rule 144 and Rule 144A. For so long as the Issuers are
subject to the reporting requirements of Section 13 or 15 of the Exchange Act
and any Registrable Securities remain outstanding, the Issuers covenant that
they will file the reports required to be filed by them under the Securities
Act and Section 13(a) or 15(d) of the Exchange Act and the rules and
regulations adopted by the SEC thereunder, that if they cease to be so required
to file such reports, they will upon the request of any Holder of Registrable
Securities (a) make publicly available such information as is necessary to
permit sales pursuant to Rule 144 under the Securities Act, (b) deliver such
information to a prospective purchaser as is necessary to permit sales pursuant
to Rule 144A under the Securities Act and they will take such further action as
any Holder of Registrable Securities may reasonably request, and (c) take such
further action, if any, that is reasonable in the circumstances, in each case,
to the extent required from time to time to enable such Holder to sell its
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities Act,
as such rule may be amended from time to time, (ii) Rule 144A under the
Securities Act, as such rule may be amended from time to time, or (iii) any
similar rules or regulations hereafter adopted by the SEC. Upon the reasonable
request of any Holder of Registrable Securities, the Issuers will deliver to
such Holder a written statement as to whether they have complied with such
requirements.
(B) No Inconsistent Agreements. The rights granted to the
Holders hereunder do not, and will not for the term of this Agreement in any
way conflict with and are not, and will not during the term of this Agreement
be inconsistent with the rights granted to the holders of the Issuers' other
issued and outstanding securities under any other agreements entered into by
any of the Issuers.
(C) Amendments and Waivers. The provisions of this Agreement,
including provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of the Issuers
and the Majority Holders; provided, however, that no amendment, modification,
or supplement or waiver or consent to the departure with respect to the
provisions of Section 4 hereof shall be effective as against any Holder of
Registrable Securities or any Issuer
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<PAGE> 23
unless consented to in writing by such Holder of Registrable Securities or any
Issuer, as the case may be.
(D) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, telex, telecopier, or any courier guaranteeing
overnight delivery (i) if to a Holder, at the most current address given by
such Holder to the Issuers by means of a notice given in accordance with the
provisions of this Section 7(d), which address initially is, with respect to
the Initial Purchasers, the address set forth in the Purchase Agreement; and
(ii) if to the Issuers, initially at the Issuers' address set forth in the
Purchase Agreement and thereafter at such other address, notice of which is
given in accordance with the provisions of this Section 7(d).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied;
and on the next Business Day, if timely delivered to an air courier
guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the Person giving the same to the Trustee,
at the address specified in the Indenture.
(E) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of the
Initial Purchasers, including, without limitation and without the need for an
express assignment, subsequent Holders; provided, however, that nothing herein
shall be deemed to permit any assignment, transfer or other disposition of
Registrable Securities in violation of the terms of the Purchase Agreement or
the Indenture. If any transferee of any Holder shall acquire Registrable
Securities, in any manner, whether by operation of law or otherwise, such
Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities, such Person
shall be conclusively deemed to have agreed to be bound by and to perform all
of the terms and provisions of this Agreement and such Person shall be entitled
to receive the benefits hereof.
(F) Third Party Beneficiary. Each of the Initial Purchasers
and each Holder shall be a third party beneficiary of the agreements made
hereunder between the Issuers, on the one hand, and the Initial Purchasers, on
the other hand, and shall have the right to enforce such agreements directly to
the extent it deems such enforcement necessary or advisable to protect its
rights or the rights of Holders hereunder.
(G) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
-22-
<PAGE> 24
(H) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(I) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS. Specified
times of day refer to New York City time.
(J) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(K) Securities Held by the Issuers or any of their
Affiliates. Whenever the consent or approval of Holders of a specified
percentage of Registrable Securities is required hereunder, Registrable
Securities held by the Issuers or any of their affiliates (as such term is
defined in Rule 405 under the Securities Act) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
[Remainder of Page Intentionally Left Blank]
-23-
<PAGE> 25
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
PROFFITT'S, INC.
By:
----------------------------
Name:
Title:
G.R. HERBERGER'S, INC.
By:
----------------------------
Name:
Title:
PARISIAN, INC.
By:
----------------------------
Name:
Title:
MCRAE'S, INC.
By:
----------------------------
Name:
Title:
MCRAE'S STORES PARTNERSHIP
By:McRae's, Inc., as managing general partner
By:
----------------------------
Name:
Title:
-24-
<PAGE> 26
MCRAE'S OF ALABAMA, INC.
By:
----------------------------
Name:
Title:
Confirmed and accepted as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
-----------------------
Name:
Title:
GOLDMAN, SACHS & CO.
By:
-----------------------
(Goldman, Sachs & Co)
SMITH BARNEY INC.
By:
-----------------------
Name:
Title:
-25-
<PAGE> 27
Exhibit A
Form of Opinion of Counsel
1. Each of the Exchange Offer Registration Statement and the
Prospectus (other than the financial statements, notes or schedules thereto and
other financial and statistical information and supplemental schedules included
or referred to therein or omitted therefrom and the Form T-1, as to which such
counsel need express no opinion), complies as to form in all material respects
with the applicable requirements of the Securities Act and the applicable rules
and regulations promulgated under the Securities Act.
2. In the course of such counsel's review and discussion of
the contents of the Exchange Offer Registration Statement and the Prospectus
with certain officers and other representatives of the Issuers and
representatives of the independent certified public accountants of the Issuers,
but without independent check or verification or responsibility for the
accuracy, completeness or fairness of the statements contained therein, on the
basis of the foregoing (relying as to materiality to a large extent upon
representations and opinions of officers and other representatives of the
Issuers), no facts have come to such counsel's attention which cause such
counsel to believe that the Exchange Offer Registration Statement (other than
the financial statements, notes and schedules thereto and other financial and
statistical information contained or referred to therein and the Form T-1, as
to which such counsel need express no belief), at the time the Exchange Offer
Registration Statement became effective and at the time of the consummation of
the Exchange Offer, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements contained therein not misleading, or that the Prospectus (other than
the financial statements, notes and schedules thereto and other financial and
statistical information contained or referred to therein, as to which such
counsel need express no belief) contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained therein, in the light of the circumstances under which they were
made, not misleading.
<PAGE> 1
EXHIBIT 5.1
June 20, 1997
Proffitt's, Inc.
3455 Highway 80 West
Jackson, Mississippi 39209
Re: Proffitt's, Inc. -- Registration Statement on Form S-1 with respect to
$125,000,000 8 1/8% Series B Notes due 2004
Gentlemen:
We have acted as counsel to Proffitt's, Inc., a Tennessee corporation (the
"Company"), in connection with the registration under the Securities Act of
1933, as amended, of $125,000,000 aggregate principal amount of 8 1/8% Series B
Notes due 2004 (the "Exchange Notes"), pursuant to a Registration Statement on
Form S-1 (the "Registration Statement"). The Exchange Notes will be issued
pursuant to the terms of the Indenture, dated May 21, 1997, between the Company,
the Subsidiary Guarantors named therein, and The First National Bank of Chicago,
as trustee (the "Indenture"), in exchange for the identical principal amount of
any and all of the Company's outstanding 8 1/8% Series A Notes due 2004 (the
"Series A Notes"). In connection with the foregoing, we have examined the
Company's Articles of Incorporation and Bylaws, the Registration Statement, and
the corporate proceedings taken by the Company to authorize the offering, sale,
exchange and issuance of the Series A Notes and the Exchange Notes. We have also
examined the Indenture (including the form of the Exchange Notes) and the
executed and authenticated Notes (as such term is defined in the Indenture)
containing the executed Guarantees of each Subsidiary Guarantor (such Indenture
and Notes referred to collectively herein as the "Operative Documents"). We also
have examined and relied upon such other records, documents and other
instruments in our judgment are necessary or appropriate in order to express the
opinions hereinafter set forth, including certificates of public officials and
opinions of local counsel.
In making the examinations described above and in rendering the opinions
expressed below, we have assumed (a) the genuineness of all signatures, (b) the
capacity of natural persons, (c) the authenticity of all documents submitted to
us as originals, the conformity to original documents of all documents submitted
to us as certified or photostatic copies and the authenticity of the originals
of such documents, and (d) the due authorization, execution and delivery of the
Operative Documents by all parties thereto (other than the Company).
Based upon the foregoing, and subject to all of the qualifications and
assumptions set forth herein, we are of the opinion that the Exchange Notes have
been duly authorized and, when issued and exchanged for the Series A Notes in
accordance with the terms of the Exchange Offer described in the Prospectus
included in the Registration Statement, will be legally issued, fully paid,
non-assessable and binding obligations of the Company. The Guarantees have been
duly authorized by each Subsidiary Guarantor and are legally issued and binding
obligations of each Subsidiary Guarantor.
The opinions expressed above are subject to (a) applicable bankruptcy,
receivership, conservatorship, fraudulent conveyance, insolvency, moratorium,
reorganization and similar laws affecting the enforcement of creditors' rights
and remedies generally, (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law), and (c)
certain other limitations that exist relating to the rights of set-off,
indemnity and contribution and by virtue of public policy.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Sincerely,
ALSTON & BIRD
By: /s/ RALPH F. MACDONALD, III
------------------------------------
A Partner
<PAGE> 1
EXHIBIT 5.2
[SOMMER & BARNARD
ATTORNEYS AT LAW -PC LETTERHEAD]
June 11, 1997
Proffitt's, Inc.
3455 Highway 80 West
Jackson, Mississippi 39209
Ladies and Gentlemen:
You have requested our opinion in connection with the preparation and
filing by Proffitt's Inc. (the "Company") and certain of its subsidiaries
(collectively, the "Guarantors") with the Securities and Exchange Commission of
a Registration Statement on Form S-1 (the "Registration Statement), pursuant to
the Securities Act of 1933, as amended, with respect to up to $125,000,000
aggregate principal amount of the Company's 8-1/8% Senior Notes due 2004, Series
B (the "Exchange Notes") to be issued in exchange for the Company's issued and
outstanding 8-1/8% Senior Notes due 2004, and the guarantees of the Exchange
Notes by the Guarantors (the "Guarantees"), all as described in the Registration
Statement.
In rendering this opinion, we have examined and relied upon originals
or copies, certified or otherwise identified to our satisfaction of such
records, documents, certificates and other instruments, and have made such
investigation of law, as in our judgment is necessary or appropriate to enable
us to render the opinion expressed below.
Based on and subject to the foregoing, we are of the opinion that the
Exchange Notes, when issued, authenticated and delivered, and the Guarantees,
when issued and delivered, in accordance with the terms of the Indenture entered
into by the Company, the Guarantors and The First National Bank of Chicago and
dated as of May 21, 1997, and as contemplated by the Registration Statement,
will be the legally valid and binding obligations of the Company and the
Guarantors respectively, enforceable against the Company or the Guarantors as
the case may be, in accordance with their terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability to general principles of equity including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforecement is sought in a proceeding at law or in equity), and expect to the
extent that a waiver of rights under any usury law may be unenforceable,
<PAGE> 2
Proffitt's, Inc.
June 11, 1997
Page 2
We hereby consent to the filing of this opinion as Exhibit 5.2 to the
Registration Statement and the reference to this firm under the caption "Legal
Matters" in the Prospectus included therein.
Very truly yours,
/s/ Sommer & Barnard, PC
--------------------------------
SOMMER & BARNARD, PC
<PAGE> 1
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF HISTORICAL EARNINGS PER COMMON SHARE
PROFFITT'S, INC. AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended
-----------------------------------
2/1/97 2/3/96 1/28/95
------- ------- -------
<S> <C> <C> <C>
PRIMARY:
Average shares outstanding 24,741 22,780 22,699
Net effect of dilutive stock
options - based on the
treasury stock method using
average market price 822 377 347
------- ------- -------
Primary weighted average common
shares 25,564 23,157 23,046
======= ======= =======
Income before extraordinary
loss $37,399 $ 641 $37,488
Less preferred dividends (796) (1,950) (1,694)
Less payment for early
conversion of preferred stock (3,032)
------- ------- -------
Income (loss) available to
common shareholders before
extraordinary loss 33,571 (1,309) 35,754
Extraordinary loss (2,060)
------- ------- -------
Net income (loss) available to
common shareholders $ 33,571 $ (3,369) $(35,754)
======= ======= =======
Earnings (loss) per common share
before extraordinary loss $ 1.31 $ (0.06) 1.55
Extraordinary Loss (0.09)
------- ------- -------
Primary earnings (loss) per share $ 1.31 $ (0.15) $ 1.55
======= ======= =======
</TABLE>
On June 28, 1996, the Company converted 600 shares of Series A Preferred Stock
("preferred stock") into 1,422 shares of Proffitt's, Inc. common stock. In order
to complete this early conversion of the preferred stock, the Company paid
$3,032 to the holder of the preferred stock.
Primary earnings per share are based on earnings available to common
shareholders (net income reduced by preferred stock dividends and payment for
early conversion) and the weighted average number of common shares and
equivalents (stock options) outstanding. Common stock issued on June 28, 1996
for the conversion of preferred stock has been included in the weighted average
number of shares outstanding subsequent to that date.
<PAGE> 2
<TABLE>
<CAPTION>
Year Ended
----------------------------------
2/1/97 2/3/96 1/28/95
------ ------ -------
<S> <C> <C> <C>
FULLY DILUTED:
Average shares outstanding 24,741 22,780 22,699
Net effect of dilutive stock
options - based on the treasury
stock method using year-end
market price if higher than
average price 876 386 347
Assumed conversion of 4.75%
subordinated debenture 2,020 2,020
Assumed conversion of preferred
stock 567 1,235
-------- -------- --------
Fully diluted weighted average
common shares 28,204 23,166 26,301
Income before interest
adjustments and extraordinary
loss $ 37,399 $ 641 37,448
Less preferred dividends (1,950)
Add 4.75% convertible sub-
ordinated debenture interest,
net of federal income tax
effect 2,500 2,500
-------- -------- --------
Adjusted net income (loss)
before extraordinary loss
and cumulative affect of
changes in accounting methods 39,899 (1,309) 39,948
Extraordinary loss (2,060)
-------- -------- --------
Adjusted net income (loss) $ 39,899 $ (3,369) $ 39,948
======== ======== ========
Fully diluted earnings (loss)
per common share before
extraordinary loss $ 1.41 $ (0.06) $ 1.52
Extraordinary loss (0.09)
-------- -------- --------
Fully diluted earnings (loss)
per share $ 1.41 $ (0.15) $ 1.52
======== ======== ========
</TABLE>
As a result of the June 28, 1996 preferred stock conversion and as required by
generally accepted accounting principles, fully diluted earnings per share have
been presented for the periods shown based upon an "as if the 1,422 shares
issued in the conversion were outstanding from the beginning of the period"
basis.
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report, dated March 20, 1997, on our audits of the consolidated financial
statements of Proffitt's, Inc. as of February 1, 1997 and February 3, 1996, and
for each of the three years in the period ended February 1, 1997. We also
consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
June 20, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report, dated March 22, 1996, on our audits of the consolidated financial
statements of Parisian, Inc. as of January 28, 1995 and February 3, 1996, and
for the years ended January 29, 1994, January 28, 1995, and February 3, 1996. We
also consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
June 20, 1997
<PAGE> 1
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Proffitt's, Inc. on Form S-1 of our report dated March 3, 1995, with respect
to the consolidated financial statements of Younkers, Inc., and subsidiary for
the year ended January 28, 1995 not separately presented, incorporated by
reference in the Annual Report on Form 10-K of Proffitt's, Inc. for the year
ended February 1, 1997 and to the reference to us under the heading "Experts" in
the Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
Des Moines, Iowa
June 20, 1997
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
--------------------------
PROFFITT'S, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
TENNESSEE 82-0331040
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
116 NORTH CALDERWOOD
ALOOS, TENNESSEE 37701
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
DEBT SECURITIES
(TITLE OF INDENTURE SECURITIES)
1
<PAGE> 2
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C., Federal Deposit
Insurance Corporation, Washington, D.C., The Board of
Governors of the Federal Reserve System, Washington D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
2
<PAGE> 3
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this Statement of Eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Chicago and the State of Illinois, on this 7th day of May, 1997.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
By /s/ John R. Prendiville
John R. Prendiville
Vice President
* EXHIBIT 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
25, 1996 (REGISTRATION NO. 333-14201).
3
<PAGE> 4
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
May 7, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of an indenture between
Proffitt's, Inc. and The First National Bank of Chicago, the undersigned, in
accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended,
hereby consents that the reports of examinations of the undersigned, made by
Federal or State authorities authorized to make such examinations, may be
furnished by such authorities to the Securities and Exchange Commission upon
its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ John R. Prendiville
John R. Prendiville
Vice President
4
<PAGE> 5
EXHIBIT 7
<TABLE>
<S> <C> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 12/31/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No. 0/3/6/1/8
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN C400 <-
THOUSANDS RCFD BIL MIL THOU -----
----------------- ---- ------------ -----
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1)................... 0081 4,586,399 1.a.
b. Interest-bearing balances(2)............................................ 0071 5,224,838 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A) 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)............ 1773 3,335,304 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold...................................................... 0276 4,157,626 3.a.
b. Securities purchased under agreements to resell......................... 0277 96,125 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C)..................................................... RCFD 2122 23,448,929 4.a.
b. LESS: Allowance for loan and lease losses.............. RCFD 3123 419,373 4.b.
c. LESS: Allocated transfer risk reserve.................. RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c)................... 2125 23,029,556 4.d.
5. Assets held in trading accounts........................... 3545 7,888,514 5.
6. Premises and fixed assets (including capitalized leases).. 2145 701,700 6.
7. Other real estate owned (from Schedule RC-M)..... 2150 11,061 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M)............................ 2130 62,681 8.
9. Customers' liability to this bank on acceptances outstanding 2155 480,933 9.
10. Intangible assets (from Schedule RC-M).................... 2143 303,014 10.
11. Other assets (from Schedule RC-F)......................... 2160 1,745,155 11.
12. Total assets (sum of items 1 through 11).................. 2170 51,622,906 12.
</TABLE>
- -------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
5
<PAGE> 6
<TABLE>
<S> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 09/30/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN
Thousands BIL MIL THOU
------------------ ------------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1)................................. RCON 2200 22,032,796 13.a.
(1) Noninterest-bearing(1).................................. RCON 6631 9,190,670 13.a.(1)
(2) Interest-bearing........................................ RCON 6636 12,842,126 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II).......................... RCFN 2200 10,861,857 13.b.
(1) Noninterest bearing..................................... RCFN 6631 285,745 13.b.(1)
(2) Interest-bearing........................................ RCFN 6636 10,576,382 13.b.(2)
14. Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased..................................... RCFD 0278 2,639,255 14.a.
b. Securities sold under agreements to repurchase.............. RCFD 0279 66,564 14.b.
15. a. Demand notes issued to the U.S. Treasury.................... RCON 2840 121,352 15.a.
b. Trading Liabilities......................................... RCFD 3548 5,793,742 15b.
16. Other borrowed money:
a. With original maturity of one year or less.................. RCFD 2332 2,665,232 16.a.
b. With original maturity of more than one year............... RCFD 2333 58,105 16b.
17. Mortgage indebtedness and obligations under capitalized
leases......................................................... RCFD 2910 285,671 17.
18. Bank's liability on acceptance executed and outstanding........ RCFD 2920 480,933 18.
19. Subordinated notes and debentures.............................. RCFD 3200 1,400,000 19.
20. Other liabilities (from Schedule RC-G)......................... RCFD 2930 1,199,147 20.
21. Total liabilities (sum of items 13 through 20)................. RCFD 2948 47,604,654 21.
22. Limited-Life preferred stock and related surplus............... RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus.................. RCFD 3838 0 23.
24. Common stock................................................... RCFD 3230 200,858 24.
25. Surplus (exclude all surplus related to preferred stock)....... RCFD 3839 2,934,523 25.
26. a. Undivided profits and capital reserves...................... RCFD 3632 865,652 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities.................................................. RCFD 8434 18,441 26.b.
27. Cumulative foreign currency translation adjustments............ RCFD 3284 (1,222) 27.
28. Total equity capital (sum of items 23 through 27).............. RCFD 3210 4,018,252 28.
29. Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28).......................... RCFD 3300 51,622,906 29.
</TABLE>
<TABLE>
<CAPTION>
Memorandum
To be reported only with the March Report of Condition.
<S> <C>
1. Indicate in the box at the right the number of the statement below
that best describes the most comprehensive level of auditing work Number
performed for the bank by independent external Number auditors as of
any date during 1995................................................... RCFD 6724 N/A M.1.
</TABLE>
<TABLE>
<S> <C>
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed by other
external auditors (may be required by state
2 = Independent audit of the bank's parent holding company chartering authority)
conducted in accordance with generally accepted
auditing standards by a certified public accounting 5 = Review of the bank's financial statements by external
firm which submits a report on the consolidated holding auditors
company (but not on the bank separately) 6 = Compilation of the bank's financial statements by
external auditors
3 = Directors' examination of the bank conducted in 7 = Other audit procedures (excluding tax preparation work)
accordance with generally accepted auditting standards
by a certified public accounting firm (may be required 8 = No external audit work
by state chartering authority)
</TABLE>
- ----------------
(1) Includes total demand deposits and noninterest-bearing time and
savings deposits.
6
<PAGE> 7
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------------
G.R. HERBERGER'S, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
MINNESOTA 41-0635374
STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
600 MALL GERMAIN
ST. CLOUD, MINNESOTA 56301
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
GUARANTEE OF DEBT SECURITIES
OF PROFFITT'S, INC.
(TITLE OF INDENTURE SECURITIES)
<PAGE> 8
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C., Federal Deposit
Insurance Corporation, Washington, D.C., The Board of
Governors of the Federal Reserve System, Washington D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
2
<PAGE> 9
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this Statement of Eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Chicago and the State of Illinois, on this 7th day of May, 1997.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
By /s/ John R. Prendiville
John R. Prendiville
Vice President
* EXHIBIT 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
25, 1996 (REGISTRATION NO. 333-14201).
3
<PAGE> 10
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
May 7, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of a guarantee agreement between
G.R. Herberger's, Inc. and The First National Bank of Chicago, the undersigned,
in accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, hereby consents that the reports of examinations of the undersigned,
made by Federal or State authorities authorized to make such examinations, may
be furnished by such authorities to the Securities and Exchange Commission upon
its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ John R. Prendiville
John R. Prendiville
Vice President
4
<PAGE> 11
EXHIBIT 7
<TABLE>
<S> <C>
Legal Title of Bank: The First National Bank of ChicCall Date: 12/31/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No.0/3/6/1/8
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
C400 <-
DOLLAR AMOUNTS IN ----- ---------
THOUSANDS RCFD BIL MIL THOU
----------------- ---- ------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1)........... 0081 4,586,399 1.a.
b. Interest-bearing balances(2).................................... 0071 5,224,838 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A)....... 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D).... 1773 3,335,304 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold.............................................. 0276 4,157,626 3.a.
b. Securities purchased under agreements to resell................. 0277 96,125 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C).............................................................. RCFD 2122 23,448,929 4.a.
b. LESS: Allowance for loan and lease losses....................... RCFD 3123 419,373 4.b.
c. LESS: Allocated transfer risk reserve........................... RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c)............................ 2125 23,029,556 4.d.
5. Assets held in trading accounts.................................... 3545 7,888,514 5.
6. Premises and fixed assets (including capitalized leases)........... 2145 701,700 6.
7. Other real estate owned (from Schedule RC-M)....................... 2150 11,061 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M)..................................... 2130 62,681 8.
9. Customers' liability to this bank on acceptances outstanding 2155 480,933 9.
10. Intangible assets (from Schedule RC-M)............................. 2143 303,014 10.
11. Other assets (from Schedule RC-F).................................. 2160 1,745,155 11.
12. Total assets (sum of items 1 through 11)........................... 2170 51,622,906 12.
</TABLE>
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
5
<PAGE> 12
<TABLE>
<S> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 09/30/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
</TABLE>
SCHEDULE RC-CONTINUED
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN
Thousands BIL MIL THOU
------------------ ------------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1)................................. RCON 2200 22,032,796 13.a.
(1) Noninterest-bearing(1).................................. RCON 6631 9,190,670 13.a.(1)
(2) Interest-bearing........................................ RCON 6636 12,842,126 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II).......................... RCFN 2200 10,861,857 13.b.
(1) Noninterest bearing..................................... RCFN 6631 285,745 13.b.(1)
(2) Interest-bearing........................................ RCFN 6636 10,576,382 13.b.(2)
14. Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased..................................... RCFD 0278 2,639,255 14.a.
b. Securities sold under agreements to repurchase.............. RCFD 0279 66,564 14.b.
15. a. Demand notes issued to the U.S. Treasury RCON 2840 121,352 15.a.
b. Trading Liabilities......................................... RCFD 3548 5,793,742 15b.
16. Other borrowed money:
a. With original maturity of one year or less.................. RCFD 2332 2,665,232 16.a.
b. With original maturity of more than one year............... RCFD 2333 58,105 16b.
17. Mortgage indebtedness and obligations under capitalized
leases......................................................... RCFD 2910 285,671 17.
18. Bank's liability on acceptance executed and outstanding RCFD 2920 480,933 18.
19. Subordinated notes and debentures.............................. RCFD 3200 1,400,000 19.
20. Other liabilities (from Schedule RC-G)......................... RCFD 2930 1,199,147 20.
21. Total liabilities (sum of items 13 through 20)................. RCFD 2948 47,604,654 21.
22. Limited-Life preferred stock and related surplus............... RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus.................. RCFD 3838 0 23.
24. Common stock................................................... RCFD 3230 200,858 24.
25. Surplus (exclude all surplus related to preferred stock)....... RCFD 3839 2,934,523 25.
26. a. Undivided profits and capital reserves...................... RCFD 3632 865,652 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities.................................................. RCFD 8434 18,441 26.b.
27. Cumulative foreign currency translation adjustments............ RCFD 3284 (1,222) 27.
28. Total equity capital (sum of items 23 through 27).............. RCFD 3210 4,018,252 28.
29. Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28).......................... RCFD 3300 51,622,906 29.
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
<TABLE>
<CAPTION>
<S> <C> <C>
1. Indicate in the box at the right the number of the statement below that best describes
the most comprehensive level of auditing work performed for the bank by independent
external Number
auditors as of any date during 1995.........................................................RCFD 6724 N/A M.1.
</TABLE>
<TABLE>
<S> <C>
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed by
with generally accepted auditing standards by a certified other external auditors (may be required by
state chartering public accounting firm which submits a authority)
report on the bank
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit
work accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
6
<PAGE> 13
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)___
----------------------------
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
--------------------------
MCCRAE'S, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
MISSISSIPPI 64-0202140
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
3455 HIGHWAY 80 WEST
JACKSON, MISSISSIPPI 39209
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
GUARANTEE OF DEBT SECURITIES
OF PROFFITT'S, INC.
(TITLE OF INDENTURE SECURITIES)
<PAGE> 14
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C., Federal Deposit
Insurance Corporation, Washington, D.C., The Board of
Governors of the Federal Reserve System, Washington D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
2
<PAGE> 15
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this Statement of Eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Chicago and the State of Illinois, on this 7th day of May, 1997.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
By /s/ John R. Prendiville
John R. Prendiville
Vice President
* EXHIBIT 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
25, 1996 (REGISTRATION NO. 333-14201).
3
<PAGE> 16
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
May 7, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of a guarantee agreement between
McCrae's, Inc. and The First National Bank of Chicago, the undersigned, in
accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended,
hereby consents that the reports of examinations of the undersigned, made by
Federal or State authorities authorized to make such examinations, may be
furnished by such authorities to the Securities and Exchange Commission upon
its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ John R. Prendiville
John R. Prendiville
Vice President
4
<PAGE> 17
EXHIBIT 7
<TABLE>
<S> <C>
Legal Title of Bank: The First National Bank of ChicCall Date: 12/31/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No.0/3/6/1/8
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN C400 <-
THOUSANDS RCFD BIL MIL THOU
----------------- ---- ------------ ------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1).. 0081 4,586,399 1.a.
b. Interest-bearing balances(2).................................... 0071 5,224,838 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A) 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D).... 1773 3,335,304 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold.............................................. 0276 4,157,626 3.a.
b. Securities purchased under agreements to resell................. 0277 96,125 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C).............................................................. RCFD 2122 23,448,929 4.a.
b. LESS: Allowance for loan and lease losses....................... RCFD 3123 419,373 4.b.
c. LESS: Allocated transfer risk reserve........................... RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c)............................ 2125 23,029,556 4.d.
5. Assets held in trading accounts.................................... 3545 7,888,514 5.
6. Premises and fixed assets (including capitalized leases)........... 2145 701,700 6.
7. Other real estate owned (from Schedule RC-M)....................... 2150 11,061 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M)..................................... 2130 62,681 8.
9. Customers' liability to this bank on acceptances outstanding 2155 480,933 9.
10. Intangible assets (from Schedule RC-M)............................. 2143 303,014 10.
11. Other assets (from Schedule RC-F).................................. 2160 1,745,155 11.
12. Total assets (sum of items 1 through 11)........................... 2170 51,622,906 12.
- ---------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>
5
<PAGE> 18
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 09/30/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN
Thousands BIL MIL THOU
----------------- ------------
<S> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1)..................................... RCON 2200 22,032,796 13.a.
(1) Noninterest-bearing(1)...................................... RCON 6631 9,190,670 13.a.(1)
(2) Interest-bearing............................................ RCON 6636 12,842,126 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II)... RCFN 2200 10,861,857 13.b.
(1) Noninterest bearing......................................... RCFN 6631 285,745 13.b.(1)
(2) Interest-bearing............................................ RCFN 6636 10,576,382 13.b.(2)
14. Federal funds purchased and securities sold under agreements to
purrchase in domestic offices of the bank and of its Edge and
Agreement subsidiaries, and in IBFs:
a. Federal funds purchased......................................... RCFD 0278 2,639,255 14.a.
b. Securities sold under agreements to repurchase RCFD 0279 66,564 14.b.
15. a. Demand notes issued to the U.S. Treasury RCON 2840 121,352 15.a.
b. Trading Liabilities............................................. RCFD 3548 5,793,742 15b.
16. Other borrowed money:
a. With original maturity of one year or less...................... RCFD 2332 2,665,232 16.a.
b. With original maturity of more than one year. RCFD 2333 58,105 16b.
17. Mortgage indebtedness and obligations under capitalized
leases............................................................. RCFD 2910 285,671 17.
18. Bank's liability on acceptance executed and outstanding RCFD 2920 480,933 18.
19. Subordinated notes and debentures.................................. RCFD 3200 1,400,000 19.
20. Other liabilities (from Schedule RC-G)............................. RCFD 2930 1,199,147 20.
21. Total liabilities (sum of items 13 through 20)..................... RCFD 2948 47,604,654 21.
22. Limited-Life preferred stock and related surplus................... RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus...................... RCFD 3838 0 23.
24. Common stock....................................................... RCFD 3230 200,858 24.
25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 2,934,523 25.
26. a. Undivided profits and capital reserves.......................... RCFD 3632 865,652 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities...................................................... RCFD 8434 18,441 26.b.
27. Cumulative foreign currency translation adjustments RCFD 3284 (1,222) 27.
28. Total equity capital (sum of items 23 through 27) RCFD 3210 4,018,252 28.
29. Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28).............................. RCFD 3300 51,622,906 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the most
comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . ....RCFM.1. .... N/A
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company external auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in accordance 8 = No external audit work
with generally accepted auditing standards by a certified
public accounting firm (may be required by state chartering
authority)
- --------------------
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
</TABLE>
6
<PAGE> 19
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)____
----------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED in ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------------------------------
MCCRAE'S STORES PARTNERSHIP
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
ALABAMA 72-1360263
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
3455 HIGHWAY 80 WEST
JACKSON, MISSISSIPPI 39209
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
GUARANTEE OF DEBT SECURITIES
OF PROFFITT'S, INC.
(TITLE OF INDENTURE SECURITIES)
1
<PAGE> 20
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C., Federal Deposit
Insurance Corporation, Washington, D.C., The Board of
Governors of the Federal Reserve System, Washington D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
2
<PAGE> 21
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this Statement of Eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Chicago and the State of Illinois, on this 7th day of May, 1997.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
By /s/ John R. Prendiville
John R. Prendiville
Vice President
* EXHIBIT 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
25, 1996 (REGISTRATION NO. 333-14201).
3
<PAGE> 22
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
May 7, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of a guarantee agreement between
McCrae's Stores Partnership and The First National Bank of Chicago, the
undersigned, in accordance with Section 321(b) of the Trust Indenture Act of
1939, as amended, hereby consents that the reports of examinations of the
undersigned, made by Federal or State authorities authorized to make such
examinations, may be furnished by such authorities to the Securities and
Exchange Commission upon its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ John R. Prendiville
John R. Prendiville
Vice President
4
<PAGE> 23
EXHIBIT 7
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Legal Title of Bank: The First National Bank of ChicCall Date: 12/31/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No.0/3/6/1/8
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.
</TABLE>
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN C400 <-
THOUSANDS RCFD BIL MIL THOU
----------------- ----- ------------ ------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1).............. 0081 4,586,399 1.a.
b. Interest-bearing balances(2)....................................... 0071 5,224,838 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A) 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)....... 1773 3,335,304 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold................................................. 0276 4,157,626 3.a.
b. Securities purchased under agreements to resell.................... 0277 96,125 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C)................................................................. RCFD 2122 23,448,929 4.a.
b. LESS: Allowance for loan and lease losses.......................... RCFD 3123 419,373 4.b.
c. LESS: Allocated transfer risk reserve.............................. RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c)............................... 2125 23,029,556 4.d.
5. Assets held in trading accounts....................................... 3545 7,888,514 5.
6. Premises and fixed assets (including capitalized leases).............. 2145 701,700 6.
7. Other real estate owned (from Schedule RC-M).......................... 2150 11,061 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M)........................................ 2130 62,681 8.
9. Customers' liability to this bank on acceptances outstanding 2155 480,933 9.
10. Intangible assets (from Schedule RC-M)................................ 2143 303,014 10.
11. Other assets (from Schedule RC-F)..................................... 2160 1,745,155 11.
12. Total assets (sum of items 1 through 11).............................. 2170 51,622,906 12.
- --------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>
5
<PAGE> 24
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 09/30/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
</TABLE>
SCHEDULE RC-CONTINUED
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN
Thousands BIL MIL THOU
----------------- -----------
<S> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1)................................... RCON 2200 22,032,796 13.a.
(1) Noninterest-bearing(1).................................... RCON 6631 9,190,670 13.a.(1)
(2) Interest-bearing.......................................... RCON 6636 12,842,126 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II)............................ RCFN 2200 10,861,857 13.b.
(1) Noninterest bearing....................................... RCFN 6631 285,745 13.b.(1)
(2) Interest-bearing.......................................... RCFN 6636 10,576,382 13.b.(2)
14. Federal funds purchased and securities sold under agreements
to repurchasein domestic offices of the bank and of its Edge
and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased....................................... RCFD 0278 2,639,255 14.a.
b. Securities sold under agreements to repurchase RCFD 0279 66,564 14.b.
15. a. Demand notes issued to the U.S. Treasury RCON 2840 121,352 15.a.
b. Trading Liabilities........................................... RCON 3548 5,793,742 15b.
16. Other borrowed money:
a. With original maturity of one year or less.................... RCFD 2332 2,665,232 16.a.
b. With original maturity of more than one year................. RCFD 2333 58,105 16b.
17. Mortgage indebtedness and obligations under capitalized
leases........................................................... RCFD 2910 285,671 17.
18. Bank's liability on acceptance executed and outstanding RCFD 2920 480,933 18.
19. Subordinated notes and debentures................................ RCFD 3200 1,400,000 19.
20. Other liabilities (from Schedule RC-G)........................... RCFD 2930 1,199,147 20.
21. Total liabilities (sum of items 13 through 20)................... RCFD 2948 47,604,654 21.
22. Limited-Life preferred stock and related surplus................. RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus.................... RCFD 3838 0 23.
24. Common stock..................................................... RCFD 3230 200,858 24.
25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 2,934,523 25.
26. a. Undivided profits and capital reserves........................ RCFD 3632 865,652 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities.................................................... RCFD 8434 18,441 26.b.
27. Cumulative foreign currency translation adjustments RCFD 3284 (1,222) 27.
28. Total equity capital (sum of items 23 through 27) RCFD 3210 4,018,252 28.
29. Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28)............................ RCFD 3300 51,622,906 29.
</TABLE>
<TABLE>
<CAPTION>
Memorandum
To be reported only with the March Report of Condition.
<S> <C>
1. Indicate in the box at the right the number of the statement below that best describes the most
comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1995 . . . . . . . . . . . . . . . . . . . . . . . RCFM.1. .... N/A
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required
by state chartering authority)
- ------------------
(1) Includes total demand deposits and noninterest-bearing time and
savings deposits.
</TABLE>
6
<PAGE> 25
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
---------------------------
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
---------------------------
MCCRAE'S OF ALABAMA, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
ALABAMA 63-0165960
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
3455 HIGHWAY 80 WEST
JACKSON, MISSISSIPPI 39209
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
GUARANTEE OF DEBT SECURITIES
OF PROFFITT'S, INC.
(TITLE OF INDENTURE SECURITIES)
1
<PAGE> 26
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C., Federal Deposit
Insurance Corporation, Washington, D.C., The Board of
Governors of the Federal Reserve System, Washington D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
2
<PAGE> 27
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this Statement of Eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Chicago and the State of Illinois, on this 7th day of May, 1997.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
By /s/ John R. Prendiville
John R. Prendiville
Vice President
* EXHIBIT 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
25, 1996 (REGISTRATION NO. 333-14201).
3
<PAGE> 28
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
May 7, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of a guarantee agreement between
McCrae's of Alabama, Inc. and The First National Bank of Chicago, the
undersigned, in accordance with Section 321(b) of the Trust Indenture Act of
1939, as amended, hereby consents that the reports of examinations of the
undersigned, made by Federal or State authorities authorized to make such
examinations, may be furnished by such authorities to the Securities and
Exchange Commission upon its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ John R. Prendiville
John R. Prendiville
Vice President
4
<PAGE> 29
EXHIBIT 7
<TABLE>
<S> <C>
Legal Title of Bank: The First National Bank of ChicCall Date: 12/31/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No. 0/3/6/1/8
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
C400 <-
DOLLAR AMOUNTS IN ---------- -------
THOUSANDS RCFD BIL MIL THOU
----------------- ---- ------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1).. 0081 4,586,399 1.a.
b. Interest-bearing balances(2)............................... 0071 5,224,838 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A) 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)... 1773 3,335,304 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold.......................................... 0276 4,157,626 3.a.
b. Securities purchased under agreements to resell............. 0277 96,125 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C).......................................................... RCFD 2122 23,448,929 4.a.
b. LESS: Allowance for loan and lease losses................... RCFD 3123 419,373 4.b.
c. LESS: Allocated transfer risk reserve....................... RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c)........................ 2125 23,029,556 4.d.
5. Assets held in trading accounts................................ 3545 7,888,514 5 .
6. Premises and fixed assets (including capitalized leases)....... 2145 701,700 6.
7. Other real estate owned (from Schedule RC-M)................... 2150 11,061 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M)................................. 2130 62,681 8.
9. Customers' liability to this bank on acceptances outstanding 2155 480,933 9.
10. Intangible assets (from Schedule RC-M)......................... 2143 303,014 10.
11. Other assets (from Schedule RC-F).............................. 2160 1,745,155 11.
12. Total assets (sum of items 1 through 11)....................... 2170 51,622,906 12.
</TABLE>
- -----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
5
<PAGE> 30
<TABLE>
<S> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 09/30/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
</TABLE>
SCHEDULE RC-CONTINUED
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN
Thousands BIL MIL THOU
----------------- -----------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1)................................ RCON 2200 22,032,796 13.a.
(1) Noninterest-bearing(1)................................. RCON 6631 9,190,670 13.a.(1)
(2) Interest-bearing....................................... RCON 6636 12,842,126 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II)......................... RCFN 2200 10,861,857 13.b.
(1) Noninterest bearing.................................... RCFN 6631 285,745 13.b.(1)
(2) Interest-bearing....................................... RCFN 6636 10,576,382 13.b.(2)
14. Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal funds purchased.................................... RCFD 0278 2,639,255 14.a.
b. Securities sold under agreements to repurchase RCFD 0279 66,564 14.b.
15. a. Demand notes issued to the U.S. Treasury RCON 2840 121,352 15.a.
b. Trading Liabilities........................................ RCFD 3548 5,793,742 15b.
16. Other borrowed money:
a. With original maturity of one year or less................. RCFD 2332 2,665,232 16.a.
b. With original maturity of more than one year. RCFD 2333 58,105 16b.
17. Mortgage indebtedness and obligations under capitalized
leases........................................................ RCFD 2910 285,671 17.
18. Bank's liability on acceptance executed and outstanding RCFD 2920 480,933 18.
19. Subordinated notes and debentures............................. RCFD 3200 1,400,000 19.
20. Other liabilities (from Schedule RC-G)........................ RCFD 2930 1,199,147 20.
21. Total liabilities (sum of items 13 through 20)................ RCFD 2948 47,604,654 21.
22. Limited-Life preferred stock and related surplus.............. RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus................. RCFD 3838 0 23.
24. Common stock.................................................. RCFD 3230 200,858 24.
25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 2,934,523 25.
26. a. Undivided profits and capital reserves..................... RCFD 3632 865,652 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities................................................. RCFD 8434 18,441 26.b.
27. Cumulative foreign currency translation adjustments RCFD 3284 (1,222) 27.
28. Total equity capital (sum of items 23 through 27) RCFD 3210 4,018,252 28.
29. Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28)......................... RCFD 3300 51,622,906 29.
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
<TABLE>
<S> <C>
1. Indicate in the box at the right the number of the statement below
that best describes the most comprehensive level of auditing work
performed for the bank by independent external auditors as of Number
any date during 1995................................................ RCFD 6724 N/A M.1
</TABLE>
<TABLE>
<S> <C>
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed by
with generally accepted auditing standards by a certified other external auditors (may be required by
public accounting firm which submits a report on the bank state chartering authority.
G = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by
conducted in accordance with generally accepted auditing external auditors
standards by a certified public accounting firm which
submits a report on the consolidated holding company 6 = Compilation of the bank's financial statements by
(but not on the bank separately) external auditors
7 = Other audit procedures (excluding tax preparation work)
3= Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required
by state chartering authority)
</TABLE>
- -----------------
(1) Includes total demand deposits and noninterest-bearing time and
savings deposits.
6
<PAGE> 31
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
--------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
--------------------------
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
----------------------------
PARISIAN, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
ALABAMA 63-0880839
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
750 LAKESHORE PARKWAY
BIRMINGHAM, ALABAMA 35211
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
GUARANTEE OF DEBT SECURITIES
OF PROFFITT'S, INC.
(TITLE OF INDENTURE SECURITIES)
<PAGE> 32
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C., Federal Deposit
Insurance Corporation, Washington, D.C., The Board of
Governors of the Federal Reserve System, Washington D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL
EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
2
<PAGE> 33
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this Statement of Eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Chicago and the State of Illinois, on this 7th day of May, 1997.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE
By /s/ John R. Prendiville
John R. Prendiville
Vice President
* EXHIBIT 1, 2, 3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS
BEARING IDENTICAL NUMBERS IN ITEM 16 OF THE FORM T-1 OF THE FIRST NATIONAL BANK
OF CHICAGO, FILED AS EXHIBIT 25.1 TO THE REGISTRATION STATEMENT ON FORM S-3 OF
SUNAMERICA, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
25, 1996 (REGISTRATION NO. 333-14201).
3
<PAGE> 34
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
May 7, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of a guarantee agreement between
Parisian, Inc. and The First National Bank of Chicago, the undersigned, in
accordance with Section 321(b) of the Trust Indenture Act of 1939, as amended,
hereby consents that the reports of examinations of the undersigned, made by
Federal or State authorities authorized to make such examinations, may be
furnished by such authorities to the Securities and Exchange Commission upon
its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ John R. Prendiville
John R. Prendiville
Vice President
4
<PAGE> 35
EXHIBIT 7
<TABLE>
<S> <C> <C>
Legal Title of Bank: The First National Bank of Chic Call Date: 12/31/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-1
City, State Zip: Chicago, IL 60670
FDIC Certificate No. 0/3/6/1/8
</TABLE>
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN C400 <-
THOUSANDS RCFD BIL MIL THOU
----------------- ---- ------------ ------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1)........... 0081 4,586,399 1.a.
b. Interest-bearing balances(2).................................... 0071 5,224,838 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A)....... 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D).... 1773 3,335,304 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold.............................................. 0276 4,157,626 3.a.
b. Securities purchased under agreements to resell................. 0277 96,125 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C)............................................................. RCFD 2122 23,448,929 4.a.
b. LESS: Allowance for loan and lease losses...................... RCFD 3123 419,373 4.b.
c. LESS: Allocated transfer risk reserve.......................... RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c)........................... 2125 23,029,556 4.d.
5. Assets held in trading accounts................................... 3545 7,888,514 5.
6. Premises and fixed assets (including capitalized leases).......... 2145 701,700 6.
7. Other real estate owned (from Schedule RC-M)...................... 2150 11,061 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M).................................... 2130 62,681 8.
9. Customers' liability to this bank on acceptances outstanding...... 2155 480,933 9.
10. Intangible assets (from Schedule RC-M)............................ 2143 303,014 10.
11. Other assets (from Schedule RC-F)................................. 2160 1,745,155 11.
12. Total assets (sum of items 1 through 11).......................... 2170 51,622,906 12.
</TABLE>
- ------------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
5
<PAGE> 36
<TABLE>
<S> <C> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 09/30/96 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Ste 0460 Page RC-2
City, State Zip: Chicago, IL 60670
FDIC Certificate No.: 0/3/6/1/8
</TABLE>
SCHEDULE RC-CONTINUED
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN
Thousands BIL MIL THOU
----------------- ------------
<S> <C> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1).................................. RCON 2200 22,032,796 13.a.
(1) Noninterest-bearing(1)................................... RCON 6631 9,190,670 13.a.(1)
(2) Interest-bearing......................................... RCON 6636 12,842,126 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II)........................... RCFN 2200 10,861,857 13.b.
(1) Noninterest bearing...................................... RCFN 6631 285,745 13.b.(1)
(2) Interest-bearing......................................... RCFN 6636 10,576,382 13.b.(2)
14. Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased...................................... RCFD 0278 2,639,255 14.a.
b. Securities sold under agreements to repurchase............... RCFD 0279 66,564 14.b.
15. a. Demand notes issued to the U.S. Treasury..................... RCON 2840 121,352 15.a.
b. Trading Liabilities.......................................... RCFD 3548 5,793,742 15b.
16. Other borrowed money:
a. With original maturity of one year or less................... RCFD 2332 2,665,232 16.a.
b. With original maturity of more than one year................ RCFD 2333 58,105 16b.
17. Mortgage indebtedness and obligations under capitalized
leases.......................................................... RCFD 2910 285,671 17.
18. Bank's liability on acceptance executed and outstanding......... RCFD 2920 480,933 18.
19. Subordinated notes and debentures............................... RCFD 3200 1,400,000 19.
20. Other liabilities (from Schedule RC-G).......................... RCFD 2930 1,199,147 20.
21. Total liabilities (sum of items 13 through 20).................. RCFD 2948 47,604,654 21.
22. Limited-Life preferred stock and related surplus................ RCFD 3282 0 22.
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus................... RCFD 3838 0 23.
24. Common stock.................................................... RCFD 3230 200,858 24.
25. Surplus (exclude all surplus related to preferred stock) RCFD 3839 2,934,523 25.
26. a. Undivided profits and capital reserves....................... RCFD 3632 865,652 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities................................................... RCFD 8434 18,441 26.b.
27. Cumulative foreign currency translation adjustments............. RCFD 3284 (1,222) 27.
28. Total equity capital (sum of items 23 through 27)............... RCFD 3210 4,018,252 28.
29. Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28)........................... RCFD 3300 51,622,906 29.
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
<TABLE>
<S> <C> <C>
1. Indicate in the box at the right the number of the statement below that best describes the most
comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1995........................................................ RCFM.1 N/A M.1.
</TABLE>
<TABLE>
<S> <C>
1 = Independent audit of the bank conducted in accordance 4. = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by
submits a report on the consolidated holding company external auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit
work accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>
- -------------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27.1
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PROFFITT'S INC. FOR THE TWELVE MONTHS ENDED
FEBRUARY 1, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK>0000812900
<NAME> PROFFITT'S INC
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> FEB-01-1997
<CASH> 3,382,000
<SECURITIES> 0
<RECEIVABLES> 85,400,000
<ALLOWANCES> 0
<INVENTORY> 447,164,000
<CURRENT-ASSETS> 595,963,000
<PP&E> 510,502,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,403,796,000
<CURRENT-LIABILITIES> 251,553,000
<BONDS> 612,345,000
0
0
<COMMON> 2,802,000
<OTHER-SE> 537,096,000
<TOTAL-LIABILITY-AND-EQUITY> 1,403,796,000
<SALES> 1,889,779,000
<TOTAL-REVENUES> 1,924,750,000
<CGS> 1,230,454,000
<TOTAL-COSTS> 1,230,454,000
<OTHER-EXPENSES> 158,053,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,756,000
<INCOME-PRETAX> 68,985,000
<INCOME-TAX> 31,586,000
<INCOME-CONTINUING> 37,399,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,399,000
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.41
</TABLE>
<PAGE> 1
EXHIBIT 99.1
PROFFITT'S, INC.
FORM OF LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
8 1/8% SENIOR NOTES DUE 2004, SERIES B
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933
FOR ANY AND ALL OUTSTANDING
8 1/8% SENIOR NOTES DUE 2004, SERIES A
PURSUANT TO THE PROSPECTUS DATED JUNE __, 1997
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN TIME,
__________, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal should be
completed, signed, and submitted timely to the Exchange Agent:
TO: THE FIRST NATIONAL BANK OF CHICAGO, EXCHANGE AGENT
By Hand, Overnight Delivery or
Registered or Certified Mail:
The First National Bank of Chicago
c/o First Chicago Trust Company of New York
8th Floor, Window 2
New York, NY 10005
By Facsimile Transmission
(Eligible Institutions Only)
(212) 240-8938
To Confirm by Telephone
or for Information Call:
(312) 240-8801
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT
(312) 240-8801.
The undersigned hereby acknowledges receipt of the Prospectus dated
June 20, 1997 (the "Prospectus") of Proffitt's, Inc., a Tennessee corporation
(the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"),
that together constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 in principal amount of its 8-1/8% Senior Notes due 2004, Series B (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"),
<PAGE> 2
pursuant to an effective Registration Statement filed with the Securities and
Exchange Commission ("SEC"), for each $1,000 in principal amount of its
outstanding 8-1/8% Senior Notes due 2004, Series A (the "Series A Notes," and
together with the Exchange Notes, the "Notes"), of which $125,000,000 aggregate
principal amount is outstanding. Capitalized terms used but not defined herein
have the meanings ascribed to them in the Prospectus.
The undersigned hereby tenders the Series A Notes described in Box 1
below (the "Tendered Notes") upon the terms, and subject to the conditions,
described in the Prospectus and this Letter of Transmittal. The undersigned is
the registered owner of all the Tendered Notes and the undersigned represents
that it has received from each beneficial owner of the Tendered Notes
("Beneficial Owners") a duly completed and executed form of "Instruction to
Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" accompanying this Letter of Transmittal, instructing the
undersigned to take the action described in this Letter of Transmittal.
This Letter of Transmittal is to be completed either if (a)
certificates are to be forwarded herewith or (b) tenders are to be made
pursuant to the procedures for tender by book-entry transfer set forth under
"The Exchange Offer -- Procedures for Tendering Series A Notes" in the
Prospectus and an Agent's Message (as defined below) is not delivered.
Certificates, or book-entry confirmation of a book-entry transfer of such
Series A Notes into the Exchange Agent's account at The Depository Trust
Company ("DTC"), as well as this Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
and any other documents required by this Letter of Transmittal, must be
received by the Exchange Agent at its address set forth herein on or prior to
the Expiration Date. Tenders by book-entry transfer may also be made by
delivering an Agent's Message in lieu of this Letter of Transmittal. The term
"book-entry confirmation" means a confirmation of a book-entry transfer of Old
Capital Securities into the Exchange Agent's account at DTC. The term "Agent's
Message" means a message, transmitted by DTC to and received by the Exchange
Agent and forming a part of a book-entry confirmation, which states that DTC
has received an express acknowledgement from the tendering participant, which
acknowledgment states that such participant has received and agrees to be bound
by this Letter of Transmittal and that the Company may enforce this Letter of
Transmittal against such participant.
Holders (as defined below) of Series A Notes whose certificates (the
"Certificates") for such Series A Notes are not immediately available or who
cannot deliver their Certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date (as defined in the
Prospectus) or who cannot complete the procedures for book-entry transfer on a
timely basis, must tender their Series A Notes according to the guaranteed
delivery procedures set forth in "The Exchange Offer -- Procedures for
Tendering Old Capital Securities" in the Prospectus.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY OF THE EXCHANGE AGENT.
Subject to, and effective upon, the acceptance for exchange by the
Company of the Tendered Notes, the undersigned hereby exchanges, assigns,
transfers and conveys to, or upon the order of, the Company, all right, title,
and interest in, to and under the Tendered Notes.
Please issue the Exchange Notes in exchange for Tendered Notes in the
name(s) of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions" below (Box 3), please send or cause to be sent the
certificate(s) for the Exchange Notes (and accompanying documents, as
appropriate) to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as the true and lawful agent and attorney in fact of the
undersigned with respect to the Tendered Notes, with full power of substitution
(such power of attorney being an irrevocable power coupled with an interest), to
(i) deliver the Tendered Notes to the Company or cause ownership of the Tendered
Notes to be transferred to, or upon the order of, the Company, on the books of
the transfer agent and registrar for the Series A Notes and deliver all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company upon receipt by the Exchange Agent, as the undersigned's agent, of
the Exchange Notes to which the undersigned is entitled upon acceptance by the
Company of the Tendered Notes pursuant to the Exchange Offer, and (ii) receive
as agent of the Company all benefits and otherwise exercise all rights of
beneficial ownership of the Tendered Notes, all in accordance with the terms of
the Exchange Offer.
The undersigned understands that tenders of Series A Notes pursuant to
the procedures described under the caption "The Exchange Offer" in the
Prospectus and in the instructions hereto will constitute a binding agreement
between the undersigned and the Company upon the terms and subject to the
conditions of the Exchange Offer, subject only to withdrawal of such tenders on
the terms set forth in the Prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders." All authority herein conferred or agreed to be
conferred shall survive the death or incapacity of the undersigned and any
Beneficial Owner(s), and every representation, warranty, covenant and obligation
of the undersigned or any Beneficial Owner(s) hereunder shall be binding upon
the heirs, representatives, successors and assigns of the undersigned and such
Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has
full power, authority and capacity to tender, exchange, assign and transfer the
Tendered Notes and that the Company will acquire good and unencumbered title to
the Tendered Notes free and clear of all liens, pledges, restrictions, charges,
encumbrances, and adverse claims of any kind whatsoever. The undersigned and
each Beneficial Owner
-2-
<PAGE> 3
will, upon receipt, execute and deliver any additional documents or instruments
reasonably requested by the Company or the Exchange Agent as necessary or
desirable to complete and give effect to the transactions contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct. By accepting the Exchange Offer, the
undersigned hereby further represents and warrants that (i) the Exchange Notes
to be acquired by the undersigned and any Beneficial Owner(s) in connection with
the Exchange Offer are being acquired by the undersigned and any Beneficial
Owner(s) in the ordinary course of business of the undersigned and any
Beneficial Owner(s), (ii) neither the undersigned nor any Beneficial Owner on
behalf of which the undersigned is acting has any arrangement or understanding
with any person to participate in the distribution of such Exchange Notes,
and/or any intention to participate in any distribution of the Exchange Notes
(iii) neither the undersigned nor any Beneficial Owner is an "affiliate" (as
defined in Rule 405 under the Securities Act), of the Company, and (iv) the
undersigned and each such Beneficial Owner acknowledge and agree that any person
with the intention of distributing the Exchange Notes is not eligible to
participate in the Exchange Offer and, in the event any such person holds
Exchange Notes, such person must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale of the Exchange Notes acquired by such person and cannot rely on the
position of the Staff of the SEC set forth in the no-action letters that are
discussed in the section of the Prospectus entitled "The Exchange Offer."
In addition, by accepting the Exchange Offer, the undersigned hereby
(i) represents and warrants that, if the undersigned or any Beneficial Owner of
the Series A Notes is a broker-dealer, such broker-dealer holds the Series A
Notes for its own account as a result of market-making activities or other
trading activities and (ii) acknowledges that, by receiving Exchange Notes for
its own account in exchange for Series A Notes, where such Series A Notes were
acquired as a result of market-making activities or other trading activities,
such broker-dealer may be a statutory underwriter and will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such Exchange Notes. By so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
ANY HOLDER WHO IS PROHIBITED BY APPLICABLE LAW OR SEC POLICY FROM
PARTICIPATING IN THE EXCHANGE OFFER, INCLUDING ANY HOLDER WHO IS AN AFFILIATE OF
THE COMPANY OR A BROKER-DEALER WHO HOLDS SERIES A NOTES ACQUIRED DIRECTLY FROM
THE COMPANY OR ONE OF ITS AFFILIATES, AND ANY PERSON WHO INTENDS TO, OR IS
PARTICIPATING IN, OR HAS ANY ARRANGEMENT OR UNDERSTANDING TO PARTICIPATE IN, A
DISTRIBUTION OF THE EXCHANGE NOTES, SHOULD CONTACT THE COMPANY WITHIN 20
BUSINESS DAYS OF THE EXCHANGE OFFER IN ORDER TO PRESERVE ITS REGISTRATION RIGHTS
THAT ARE DISCUSSED IN THE SECTION OF THE PROSPECTUS ENTITLED "THE EXCHANGE OFFER
- - REGISTRATION RIGHTS AND EFFECT OF EXCHANGE OFFER."
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND
COMPLETE "Use of Guaranteed Delivery" BELOW (Box 4).
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE "Use of Book-Entry Transfer"
BELOW (Box 5).
-3-
<PAGE> 4
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: PROFFITT'S, INC.*
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Name (if joint names, list first and circle the name of the person or entity whose
number you enter in Part 1 below. See instructions if your name has changed.)
-----------------------------------------------------------------------------------
Address
-----------------------------------------------------------------------------------
SUBSTITUTE City, State and ZIP Code
-----------------------------------------------------------------------------------
Form W-9 List account number(s) here (optional)
-----------------------------------------------------------------------------------
Department of the PART 1--PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION Social Security Number
Treasury NUMBER ("TIN") IN THE BOX AT RIGHT AND CERTIFY BY or TIN
Internal Revenue Service SIGNING AND DATING BELOW
-----------------------------------------------------------------------------------
PART 2--Check the box if you are NOT subject to backup withholding under the
provisions of section 3406(a)(I)(C) of the Internal Revenue Code because (1)
you have not been notified that you are subject to backup withholding as a
result of failure to report all interest or dividends or (2) the Internal
Revenue Service has notified you that you are no longer subject to backup
withholding. [ ]
- --------------------------------------------------------------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OR PERJURY, I CERTIFY THAT THE INFORMATION
PROVIDED ON THIS FORM IS TRUE, CORRECT AND
COMPLETE. Awaiting TIN [ ]
SIGNATURE DATE , 1997
------------------------------------------ -----------------------------------
- --------------------------------------------------------------------------------------------------------------------
*See Instruction 8.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
BOX 1*
DESCRIPTION OF NOTES TENDERED**
(Attach additional signed pages, if necessary)
- ------------------------------------------------------------------------------------------------------------------
Aggregate
Principal Aggregate
Name(s) and Address(es) of Registered Note Holder(s), Certificate Amount Principal
exactly as name(s) appear(s) on Note Certificate(s) Number(s) Represented by Amount
(Please fill in, if blank) of Notes Certificate(s) Tendered
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Series A Notes. All other tenders must be
in integral multiples of $1,000 of principal amount. Unless otherwise indicated in this column, the
principal amount of all Note Certificates identified in this Box 1 or delivered to the Exchange Agent
herewith shall be deemed tendered. See Instruction 4.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
-4-
<PAGE> 5
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
BOX 2
BENEFICIAL OWNER(S)
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
State of Principal Residence of Each Principal Amount of Tendered Notes
Beneficial Owner of Tendered Notes Held for Account of Beneficial Owner
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 5, 6 and 7)
<S><C>
TO BE COMPLETED ONLY IF EXCHANGE NOTES ARE TO BE EXCHANGED FOR SERIES A NOTES AND UNTENDERED SERIES A NOTES ARE TO
BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Note(s) and any untendered Series A Notes to:
Name(s):
- ------------------------------------------------------------------------------------------------------------------
(please print)
Address:
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
(Include Zip Code)
Tax Identification or
Social Security No.:
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
BOX 4
USE OF GUARANTEED DELIVERY
(See Instruction 2)
<S><C>
TO BE COMPLETED ONLY IF SERIES A NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
- ------------------------------------------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
---------------------------------------------------------------
Name of Institution which Guaranteed Delivery:
--------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
-5-
<PAGE> 6
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
BOX 5
USE OF BOOK-ENTRY TRANSFER
(See Instruction 1)
<S><C>
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-ENTRY TRANSFER.
Name of Tendering Institution:
------------------------------------------------------------------------------------
Account Number::
--------------------------------------------------------------------------------------------------
Transaction Code Number:
------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
BOX 6
TENDERING HOLDER SIGNATURE
(See Instruction 1 and 5)
IN ADDITION, SUBSTITUTE FORM W-9 MUST BE COMPLETED AND SIGNED
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
X Signature Guarantee
------------------------------------------------------ (If required by Instruction 5)
X
------------------------------------------------------
(Signature of Registered Holder(s) or
Authorized Signatory) Authorized Signature
NOTE: The above lines must be signed by the registered
holder(s)of Series A Notes as their name(s) appear(s) X
on the Series A Notes or by person(s) authorized to -------------------------------------------------------
become registered holder(s)(evidence of such Name: Name:
authorization must be transmitted with this Letter of ---------------------------------------------------
Transmittal). If signature is by a trustee, executor, (please print)
administrator, guardian, attorney-in-fact, officer, or Title:
other person acting in a fiduciary or representative --------------------------------------------------
capacity, such person must set forth his or her full Name of Firm:
title below. See Instruction 5. -------------------------------------------
(Must be an Eligible Institution as
defined in Instruction 2)
Name(s): Address:
----------------------------------------------- ------------------------------------------------
----------------------------------------------- ------------------------------------------------
Capacity: ------------------------------------------------
----------------------------------------------
----------------------------------------------
Street Address: Area Code and Telephone Number:
----------------------------------------
---------------------------------------- ------------------------------------------------
(include Zip Code)
Area Code and Telephone Number: Dated:
------------------------------------------------
----------------------------------------
Tax Identification or Social Security Number:
-----------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
BOX 7
BROKER-DEALER STATUS
- ------------------------------------------------------------------------------------------------------------------
<S> <C>
[ ] Check this box if the Beneficial Owner of the Series A Notes is a
broker-dealer and such broker-dealer acquired the Series A Notes for
its own account as a result of market-making activities or other
trading activities.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 7
PROFFITT'S, INC.
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND SERIES A NOTES. A
properly completed and duly executed copy of this Letter of Transmittal,
including Substitute Form W-9, and any other documents required by this Letter
of Transmittal must be received by the Exchange Agent at its address set forth
herein, and either certificates for Tendered Notes must be received by the
Exchange Agent at its address set forth herein or such Tendered Notes must be
transferred pursuant to the procedures for book-entry transfer described in the
Prospectus under the caption "Exchange Offer--Procedures for Tendering" (and a
confirmation of such transfer received by the Exchange Agent), in each case
prior to 5:00 P.M., Eastern Standard Time, on the Expiration Date. Tenders by
book-entry may also be made by delivering an Agent's Message in liens of this
letter of transmittal. The method of delivery of certificates for Tendered
Notes, this Letter of Transmittal and all other required documents to the
Exchange Agent is at the election and risk of the tendering holder and the
delivery will be deemed made only when actually received by the Exchange Agent.
If delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. Instead of delivery by mail, it is recommended that
the holder use an overnight or hand delivery service. In all cases, sufficient
time should be allowed to assure timely delivery. No Letter of Transmittal or
Series A Notes should be sent to the Company. Neither the Company nor the
registrar or transfer agent is under any obligation to notify any tendering
holder of the Company's acceptance of Tendered Notes prior to the closing of
the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their
Series A Notes but whose Series A Notes are not immediately available, and who
cannot deliver their Series A Notes, this Letter of Transmittal or any other
documents required hereby to the Exchange Agent prior to the Expiration Date
must tender their Series A Notes according to the guaranteed delivery procedures
set forth below, including completion of Box 4. Pursuant to such procedures: (i)
such tender must be made by an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended,
and which is a member of a recognized signature guarantee program i.e.
Securities Transfer Agents Medallion Program, Stock Exchange Medallion Program
or New York Stock Exchange Medallion Signature Program (an "Eligible
Institution") and the Notice of Guaranteed Delivery must be signed by the
holder; (ii) prior to the Expiration Date, the Exchange Agent must have received
from the holder and the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by mail, hand delivery or facsimile
transmission) setting forth the name and address of the holder, the certificate
number(s) of the Tendered Notes and the principal amount of Tendered Notes,
stating that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date, this Letter of
Transmittal together with the certificate(s) representing the Series A Notes and
any other required documents will be deposited by the Eligible Institution with
the Exchange Agent; and (iii) such properly completed and executed Letter of
Transmittal, as well as all other documents required by this Letter of
Transmittal and the certificate(s) representing all Tendered Notes in proper
form for transfer, must be received by the Exchange Agent within five New York
Stock Exchange trading days after the Expiration Date. Any holder who wishes to
tender Series A Notes pursuant to the guaranteed delivery procedures described
above must ensure that the Exchange Agent receives the Notice of Guaranteed
Delivery relating to such Series A Notes prior to 5:00 P.M.., Eastern Standard
Time, on the Expiration Date.
<PAGE> 8
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder
in whose name Tendered Notes are registered on the books of the registrar (or
the legal representative or attorney-in-fact of such registered holder or any
participant in DTC whose name appears on a security position listing as the
owner of the Series A Notes) may execute and deliver this Letter of
Transmittal. Any Beneficial Owner of Tendered Notes who is not the registered
holder must arrange promptly with the registered holder to execute and deliver
this Letter of Transmittal on his or her behalf through the execution and
delivery to the registered holder of the Instructions to Registered Holder
and/or Book-Entry Transfer Facility Participant from Beneficial Owner form
accompanying this Letter of Transmittal. The Company, the Exchange Agent, and
the transfer agent and registrar for Series A Notes shall be entitled to rely
upon all representations, warranties, covenants and instructions given by such
registered holder as have been duly authorized and true with respect to, and
binding upon, the Beneficial Owner.
4. PARTIAL TENDERS. Tenders of Series A Notes will be accepted only in
integral multiples of $1,000 in principal amount. If less than the entire
principal amount of Series A Notes held by the holder is tendered, the tendering
holder should fill in the principal amount tendered in the column labeled
"Aggregate Principal Amount Tendered" of the box entitled "Description of Notes
Tendered" (Box 1) above. The entire principal amount of Series A Notes delivered
to the Exchange Agent will be deemed to have been tendered unless otherwise
indicated. If the entire principal amount of all Series A Notes held by the
holder is not tendered, then Series A Notes for the principal amount of Series A
Notes not tendered and Exchange Notes issued in exchange for any Series A Notes
tendered and accepted will be sent to the registered holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, as soon as practicable following the
Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered holder(s) of the Tendered Notes, the signature must correspond
with the name(s) as written on the fact of the Tendered Notes without
alteration, enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be issued
(and any untendered principal amount of Series A Notes is to be reissued) in the
name of the registered holder(s), then such registered holder(s) need not and
should not endorse any Tendered Notes, nor provide a separate bond power. In any
other case, such registered holder(s) must either properly endorse the Tendered
Notes or transmit a properly completed separate bond power with this Letter of
Transmittal, with the signature(s) on the endorsement or bond power guaranteed
by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be endorsed
or accompanied by appropriate bond powers, in each case, signed as the name(s)
of the registered holder(s) appear(s) on the Tendered Notes, with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by a trustee, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such person should so indicate when signing and, unless
-2-
<PAGE> 9
waived by the Company, evidence satisfactory to the Company of their authority
to so act must be submitted with this Letter of Transmittal.
Endorsements on Tendered Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution unless the Tendered Notes are tendered (i) by a registered
holder who has not completed the box set forth herein entitled "Special Delivery
Instructions" (Box 3) or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in
the applicable box (Box 3), the name and address to which the Exchange Notes
and/or substitute Series A Notes for principal amounts are tendered or not
accepted for exchange, respectively are to be sent, if different from the name
and address of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Tendered Notes pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the transfer and
exchange of Tendered Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or on any
other person) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with this
Letter of Transmittal, the amount of such transfer taxes will be billed directly
to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter of
Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any Tendered Notes which are accepted for exchange must provide the
Company (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual, is his or her social
security number. If the Company is not provided with the correct, TIN, the
holder may be subject to backup withholding and a $50 penalty imposed by the
Internal Revenue Service. (If withholding results in an over-payment of taxes, a
refund may be obtained.) Certain holders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. See the enclosed "guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional instructions.
To prevent backup withholding, each holder of Tendered Notes must
provide such holder's correct TIN by completing the Substitute Form W-9 set
forth herein, certifying that the TIN provided is correct (or that such holder
is awaiting a TIN), and that (i) the holder has not been notified by the
Internal Revenue Service that such holder is subject to backup withholding as a
result of failure to report all interest or dividends or (ii) the Internal
Revenue Service has notified the holder that such holder is no longer subject to
backup withholding. If the Tendered Notes are registered in more than one name
or are not in the name of the actual owner, consult the "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
information on which TIN to report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligations regarding backup
withholding.
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<PAGE> 10
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of Tendered
Notes will be determined by the Company in its sole discretion, and whose
determination will be final and binding. The Company reserves the right to
reject any and all Series A Notes not validly tendered or any Series A Notes the
Company's acceptance of which would, in the opinion of the Company or its
counsel, be unlawful. The Company also reserves the right to waive any
conditions of the Exchange Offer or defects or irregularities in tenders of
Series A Notes as to any ineligibility of any holder who seeks to tender Series
A Notes in the Exchange Offer. The interpretation of the terms and conditions of
the Exchange Offer (including this Letter of Transmittal and the instructions
hereto) by the Company shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Series A Notes must
be cured within such time as the Company shall determine. Neither the Company,
the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Series A
Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Series A Notes will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any Series A
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holder, unless otherwise
provided in this Letter of Transmittal, as soon as practicable following the
Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive or modify any of the conditions in the Exchange Offer in the case
of any Tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Series A Notes or transmittal of this Letter of Transmittal
will be accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering holder
whose Series A Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated herein for further
instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance and requests for additional copies of the Prospectus or
this Letter of Transmittal may be directed to the Exchange Agent at the address
indicated herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered Series A Notes as soon as
practicable after the Expiration Date and will issue Exchange Notes therefor as
soon as practicable thereafter. For purposes of the Exchange Offer, the Company
shall be deemed to have accepted tendered Series A Notes when, as and if the
Company has given written or oral notice (immediately followed in writing)
thereof to the Exchange Agent. If any Tendered Notes are not exchanged pursuant
to the Exchange Offer for any reason, such unexchanged Series A Notes will be
returned, without expense, to the undersigned at the address shown in Box 1 or
at a different address as may be indicated herein under "Special Delivery
Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the
procedures set forth in the Prospectus under the caption "The Exchange Offer."
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<PAGE> 11
PROFFITT'S, INC.
FORM OF NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
8 1/8% SENIOR NOTES DUE 2004, SERIES B
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
TO BE EXCHANGED FOR ANY AND ALL OUTSTANDING
8 1/8% SENIOR NOTES DUE 2004, SERIES A
This form must be used by a holder of the 8-1/8% Senior Notes due 2004,
Series A (the "Series A Notes") of Proffitt's, Inc. (the "Company") who wishes
to tender Series A Notes to the Exchange Agent pursuant to the guaranteed
delivery procedures described in "The Exchange Offer -- Guaranteed Delivery
Procedures" of the Prospectus dated June __, 1997 (the "Prospectus") and
Instruction 2 to the Letter of Transmittal. Any holder who wishes to tender
Series A Notes pursuant to such guaranteed delivery procedures must ensure that
the Exchange Agent receives this Notice of Guaranteed Delivery prior to the
Expiration Date of the Exchange Offer. Capitalized terms not defined herein have
the meanings ascribed to them in the Prospectus or the Letter of Transmittal.
TO: THE FIRST NATIONAL BANK OF CHICAGO, EXCHANGE AGENT
By Registered or Certified Mail: By Hand
By Facsimile Transmission By Overnight Courier
Telephone Number:
( ) -
--- --- ----
Attention:
------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Proffitt's, Inc., upon the terms and
subject to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Series A Notes specified below pursuant to the guaranteed delivery procedures
set forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Series A Notes listed below:
<PAGE> 12
<TABLE>
<CAPTION>
===========================================================================================================
Certificate Number(s) (if known)
of Series A Notes Aggregate Principal Aggregate Principal
or Account Number at the Book-Entry Facility Amount Represented Amount Tendered
<S> <C> <C>
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- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
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===========================================================================================================
</TABLE>
SIGN HERE
Name of Registered Holder:
------------------------------------------------------
Signature(s):
-------------------------------------------------------------------
Name(s) Please print):
----------------------------------------------------------
Address:
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Telephone number:
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Date:
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GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a savings institution, commercial bank or trust company having an office
or correspondent in the United States, or is otherwise an "eligible guarantor
institution: within the meaning of Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended, and which is a member of a recognized signature
guarantee program i.e., Securities Transfer Agents Medallion Program, Stock
Exchange Medallion Program or New York Stock Exchange Medallion Signature
Program, guarantees deposit with the Exchange Agent of the Letter of Transmittal
(or facsimile thereof), together with the Series A Notes tendered hereby in
proper form for transfer (or confirmation of the book-entry transfer of such
Series A Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility described in the Prospectus under the caption "The Exchange Offer --
Guaranteed Delivery Procedures" and in the Letter of Transmittal) and any other
required documents, all by 5:00 P.M., Eastern Standard Time, on the fifth New
York Stock Exchange trading day following the Expiration Date.
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<PAGE> 13
SIGN HERE
Name of firm:
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Authorized signature:
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Name (please print):
------------------------------------------------------------
Address:
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Telephone number:
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Date:
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DO NOT SEND SERIES A NOTES WITH THIS FORM. ACTUAL SURRENDER OF
SERIES A NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY,
AN EXECUTED LETTER OF TRANSMITTAL.
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<PAGE> 14
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date. The
method of delivery of this Notice of Guaranteed Delivery and any other required
documents or instruments to the Exchange Agent is at the election and risk of
the holder, and the delivery will be deemed made only when actually received by
the Exchange Agent. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. Instead of delivery by mail, it is
recommended that the holders use an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Series A Notes
referred to herein., the signature must correspond with the name(s) written on
the face of the Series A Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of Series A Notes, the signature must correspond with the
name shown on the security position listing as the owner of the Series A Notes.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any Series A Notes listed or a participant of the
Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the registered
holder(s) appears on the Series A Notes or signed as the name of the participant
shown on the Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee,
executors, administrator, guardian, attorney-in-fact, officer of a corporation,
or other person acting in a fiduciary or representative capacity, such person
should so indicate when signing, and unless waived by the Company, submit with
the Letter of Transmittal evidence satisfactory to the Company of such person's
authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional, copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
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<PAGE> 15
PROFFITT'S, INC.
INSTRUCTION TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM OWNER OF
8 1/8% SENIOR NOTES DUE 2004, SERIES B WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
TO BE EXCHANGED FOR ANY AND ALL OUTSTANDING
8 1/8% SENIOR NOTES DUE 2004, SERIES A
To: Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated June __,
1997 (the "Prospectus") of Proffitt's, Inc., a Tennessee corporation (the
"Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer"). Capitalized terms used but nor defined herein have the meanings
ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry
transfer facility participant, as to the action to be taken by you relating to
the Exchange Offer with respect to the 8-1/8% Senior Notes due 2004, Series A
(the "Series A Notes") held by you for the account of the undersigned.
The aggregate face of the Series A Notes held by you for the account of
the undersigned is (fill in amount): $_______________ of the 8-1/8%
Senior Notes due 2004, Series A.
With respect to the Exchange Offer, the undersigned hereby instructs
you (check appropriate box):
[ ] TO TENDER the following Series A Notes held by you for the
account of the undersigned (insert principal amount of Series
A Notes to be tendered, if any): $_________ of the 8-1/8%
Senior Notes due 2004, Series A.
[ ] NOT TO TENDER any Series A Notes held by you for the account
of the undersigned.
If the undersigned instructs you to tender the Series A Notes held by
you for the account of the undersigned, it is understood that you are authorized
(a) to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you, the representations, warranties and covenants
contained in the Letter of Transmittal that are to be made with respect to the
undersigned as a beneficial owner, including but not limited to the
representations that (i) the Exchange Notes to be acquired by the beneficial
owner(s) of the Series A Notes ("Beneficial Owner(s)") in connection with the
Exchange Offer are being acquired by the Beneficial Owner(s) for its own account
in the ordinary course of business of the Beneficial Owner(s); (ii) the
Beneficial Owner(s) are not participating, do not intend to participate, and
have no arrangement or understanding with any person to participate in a
distribution of the Exchange Notes; (iii) the
<PAGE> 16
Beneficial Owner(s) acknowledge and agree that any person with the intent to
distribute the Exchange Notes is not eligible to participate in the Exchange
Offer and, in the event any such person holds Exchange Notes, such person must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction with respect to
the Exchange Notes acquired by such person and cannot rely on the position of
the staff of the Securities and Exchange Commission set forth in no action
letters that are discussed in the section of the Prospectus entitled "The
Exchange Offer -- Resale of the Exchange Notes"; (iv) the Beneficial Owner(s)
are not an "affiliate," as defined under Rule 405 of the Securities Act, of the
Company; (v) the Beneficial Owner(s) understand that secondary resale
transactions described in clause (iii) above should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 of Regulation S-K of the Commission; (vi) that, if the
Beneficial Owner(s) of the Series A Notes is a broker-dealer, (x) such
broker-dealer holds the Series A Notes for its own account as a result of
market-making activities or other trading activities; and (y) acknowledges that,
by receiving Exchange Notes for its own account in exchange for Series A Notes,
where such Series A Notes were acquired as a result of market-making activities
or other trading activities, such broker-dealer may be a statutory underwriter
and will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes; (b) to agree, on behalf of
the undersigned as set forth in the Letter of Transmittal; and (c) to take such
other action as necessary under the Prospectus or the Letter of Transmittal to
effect the valid tender of such Series A Notes consistent with the Offer.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SIGN HERE
<S><C>
Name of beneficial owner(s):
----------------------------------------------------
Signature(s):
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Name (please print);
------------------------------------------------------------
Address:
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-----------------------------------------------------------------
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Telephone number:
---------------------------------------------------------------
Taxpayer Identification or Social Security Number:
------------------------------
Date:
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</TABLE>
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