PROFFITT'S, INC.
Midland Shopping Center
115 North Calderwood
Alcoa, Tennessee 37701
May 1, 1996
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of the
Shareholders to be held at 8:30 a.m. Eastern Daylight Time on
Wednesday, June 19, 1996, at Proffitt's West Town Mall Store, 7600
Kingston Pike, Knoxville, Tennessee 37919.
The notice of the meeting and proxy statement accompanying this
letter describe the specific business to be acted upon. Your vote
is very important, and your cooperation in completing, signing, and
returning your proxy promptly in the enclosed return envelope will
be appreciated.
At the meeting, there will be a report on the progress of the
Company and an opportunity to ask questions of general interest to
the shareholders.
Shareholders attending the meeting are invited to shop at our West
Town Mall Store and will be given a special discount on the day's
purchases.
I hope you will be able to join us, and I look forward to seeing
you.
Sincerely,
R. Brad Martin
Chairman of the Board and
Chief Executive Officer
PROFFITT'S, INC.
Midland Shopping Center
115 North Calderwood
Alcoa, Tennessee 37701
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Proffitt's, Inc.:
Notice is hereby given that the Annual Meeting of the Shareholders
of Proffitt's, Inc. (the "Company") will be held at 8:30 a.m.
Eastern Daylight Time on Wednesday, June 19, 1996, at Proffitt's
West Town Mall Store, 7600 Kingston Pike, Knoxville, Tennessee
37919, for the following purposes:
1. To elect fourteen Directors to hold office until the next
Annual Meeting of the Shareholders or until their respective
successors have been elected and qualified;
2. To consider and act upon a proposal to ratify the appointment
of the firm of Coopers & Lybrand as independent accountants for the
current fiscal year ending February 1, 1997; and
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Shareholders of record at the close of business on April 22, 1996
are entitled to notice of, and to vote at, the meeting.
Shareholders are cordially invited to attend the meeting in person.
By order of the Board of Directors,
Julia Bentley
Secretary
May 1, 1996
Whether or not you intend to be present at the meeting, you are
urged to mark, sign, and date the enclosed proxy and return it
promptly in the envelope provided.
PROFFITT'S, INC.
PROXY STATEMENT
Information Concerning the Solicitation
This proxy statement is furnished in connection with the
solicitation of proxies to be used at the Annual Meeting of the
Shareholders (the "Annual Meeting") of Proffitt's, Inc. (the
"Company"), a Tennessee corporation, to be held on June 19, 1996.
The solicitation of proxies in the enclosed form is made on behalf
of the Board of Directors of the Company.
The cost of preparing, assembling, and mailing the proxy material
and of reimbursing brokers, nominees, and fiduciaries for out-of-
pocket and clerical expenses of transmitting copies of the proxy
material to the beneficial owners of shares held of record by such
persons will be borne by the Company. The Company does not intend
to solicit proxies otherwise than by use of the mails, but certain
officers and regular employees of the Company, without additional
compensation, may use their personal efforts, by telephone or
otherwise, to obtain proxies. The proxy materials are first being
mailed to shareholders on May 1, 1996.
A shareholder signing and returning a proxy on the enclosed form
has the power to revoke it at any time before the shares subject to
it are voted by notifying the Secretary of the Company in writing.
Attendance at the Annual Meeting by a shareholder who has given a
proxy will not have the effect of revoking it unless he gives such
written notice of revocation to the Secretary before the proxy is
voted. Votes cast by proxy or in person at the Annual Meeting will
be tabulated by the election inspectors appointed for the meeting
and will determine whether or not a quorum is present. The election
inspectors will treat abstentions as shares that are present and
entitled to vote for purposes of determining the presence of a
quorum. If a broker indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present
and entitled to vote with respect to that matter. The nominees for
Director receiving a plurality of the votes cast at the meeting in
person or by proxy shall be elected. Abstentions and broker non-
votes have no affect on the plurality vote for the election of
Directors. All other matters will be approved if the votes cast
favoring the action exceed the votes opposing the action.
Outstanding Voting Securities
Only shareholders of record at the close of business on April 22,
1996 are entitled to vote at the Annual Meeting. On that day, there
were issued and outstanding 19,210,024 shares of Common Stock. Each
share has one vote.
Listed in the following table are the number of shares owned by
each Director, each nominee for Director, certain executive
officers, and all Directors and officers of the Company as a group
as of March 22, 1996. The table also includes the beneficial owners
as of March 22, 1996 of more than 5% of the Company's outstanding
Common Stock who are known to the Company.
Name of Beneficial Owner Total Shares Percentage of
(and Address if "Beneficial Beneficially Common Stock
Ownership" Exceeds 5%) Owned (1) Ownership
Director Nominees:
Bernard E. Bernstein 15,801 (2) *
Edmond D. Cicala 17,489 *
Ronald de Waal 1,000,113 5.21%
Terbekehofdreef 75
B-2610 Wilrijk, Belgium
Gerard K. Donnelly 4,449 *
Donald F. Dunn 8,350 *
W. Thomas Gould 392,434 (3) 2.01%
Michael S. Gross 1,600 (4) *
G. David Hurd 6,243 *
R. Brad Martin 1,270,899 (5) 6.56%
5810 Shelby Oaks Drive
Memphis, Tennessee
Richard D. McRae 57,007 *
C. Warren Neel 6,850 *
Harwell W. Proffitt 7,100 *
Marguerite W. Sallee 100 *
Gerald Tsai, Jr. 4,600 *
Named Executive Officers:
James A. Coggin 46,500 *
James E. Glasscock 29,500 *
Gary L. Howard 32,000 *
Frederick J. Mershad 22,000 *
All Directors and officers
as a group (28 persons) 3,254,082 16.26%
Other 5% Owners (6):
Apollo Specialty Retail
Partners, L.P. 1,421,801 (7) 6.89%
Two Manhattanville Road
Purchase, New York
Carson Pirie Scott & Co. 1,026,550 5.34%
331 W. Wisconsin Avenue
Milwaukee, Wisconsin
Fidelity Management and
Research Corporation 1,293,855 (8) 6.55%
82 Devonshire Street
Boston, Massachusetts
* Owns less than 1% of the total outstanding Common Stock
of the Company.
(1) Includes shares that the following persons have a right
to acquire within sixty days after March 22, 1996 through the
exercise of stock options: Bernstein (2,600), Cicala (1,600), de
Waal (1,600), Donnelly (1,470), Dunn (1,470), Gould (293,323),
Gross (600), Hurd (1,470), Martin (150,000), McRae (600), Neel
(2,600), Proffitt (2,600), Tsai (1,600), Coggin (42,000), Glasscock
(27,000), Howard (30,000), and Mershad (20,000).
(2) Includes 3,000 shares owned by the Bernard E. Bernstein
Defined Benefit Pension Plan.
(3) Includes 3,577 shares owned by Mr. Gould's wife as to
which he disclaims beneficial ownership. Also includes 17,512
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.
(4) Does not include shares held by Apollo Specialty Retail
Partners, L.P. ("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.
(5) Includes: (i) 2,000 shares held by Mr. Martin as
custodian for his minor children, (ii) 1,900 shares owned by RBM
Venture Company, a company of which Mr. Martin is sole shareholder,
(iii) 75,000 shares held by the R. Brad Martin 1994-1 and 1995-1
Qualified Annuity Trusts, and (iv) 2,750 shares owned by the R.
Brad and Jean L. Martin Family Foundation. Also includes 13,000
shares of restricted stock which will vest on February 12, 1997.
(6) Based solely on information provided by the beneficial
owner.
(7) Represents shares issuable upon conversion of the
Company's Series A Preferred Stock.
(8) Includes 552,173 shares issuable upon conversion of
Proffitt's 4.75% Convertible Debentures ($23.578 million face
value).
Election of Directors
(Proposal No. 1)
The Board of Directors proposes the election of fourteen Directors,
each to hold office until the next Annual Meeting of the
Shareholders or until a successor has been elected and qualified.
Unless otherwise instructed by the shareholder, the persons named
in the enclosed form of proxy intend to vote for the election of
the persons listed in this proxy statement. If any nominee becomes
unavailable for any reason or should a vacancy occur before the
election (which events are not anticipated), the proxies will be
voted for the election of a substitute nominee to be selected by
the persons named in the proxy.
Certain information is given below for each nominee for Director.
Name, Principal Occupation, Director
and Directorship Age Since
R. Brad Martin 44 1984
Chief Executive Officer of the
Company since July 1989,
Chairman of the Board of the
Company since February 1987,
and 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, Pilot
Corporation, and Sports &
Recreation, Inc.
Bernard E. Bernstein 65 1987
Partner in the Knoxville, Tennessee
law firm of Bernstein, Stair & McAdams.
Edmond D. Cicala 70 1987
President of Edmond Enterprises, Inc.
Retired Chairman and Chief Executive
Officer of the Goldsmith's Division
of Federated Department Stores.
Mr. Cicala is a Director of National
Commerce Bancorporation.
Gerard K. Donnelly (1) 62 1996
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 a director
of H. C. Prange Company, a
specialty retailer. H. C. Prange
filed a petition for reorganization
under the Bankruptcy Code in
September 1994. Mr. Donnelly serves
on the Board of Directors of Insight
Technologies Corporation, Princeton
Middletown Partners, Inc., and
Princeton Management & Logistics
Group, Inc.
Donald F. Dunn (1) 70 1996
Retired Senior Vice President and
director of Allied Stores Corporation.
Mr. Dunn serves on the Board of
Directors of Eckerd Corporation
and Tech Data Corporation.
Ronald de Waal 44 1985
Chairman of We International, B.V.,
a Netherlands corporation, which
operates more than 250 fashion
specialty stores in Belgium,
the Netherlands, Switzerland,
and Germany.
W. Thomas Gould (1) 49 1996
Vice Chairman of the Company
and Chairman of the Younkers
Division of the Company since
February 1996. Mr. Gould served
as Chief Executive Officer of
Younkers, Inc. from 1987 to
February 1996 and as
Chairman of the Board of
Younkers, Inc. from 1992 to
February 1996. Mr. Gould serves
on the Board of Directors of
Sentry Insurance and on the
Executive Committee of the
National Retail Federation.
Michael S. Gross 34 1994
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 Shoe Company, and
Furniture Brands International,
Inc. and on the Supervisory Board
of Directors of Memorex Telex, N.V.
G. David Hurd (1) 66 1996
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 and serves on
the Board of Directors of The Principal
Financial Group.
Richard D. McRae 75 1994
Former Chairman, President, and
Chief Executive Officer
of McRae's, Inc.
C. Warren Neel 57 1987
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 78 1971
Former Chairman, President, and
Chief Executive Officer
of Proffitt's, Inc.
Marguerite W. Sallee 50 -
President and Chief Executive
Officer of Corporate Family
Solutions. Ms. Sallee serves
on the Board of Directors of
Corporate Family Solutions,
MagneTek, Inc., and
NationsBank of Tennessee
and Kentucky.
Gerald Tsai, Jr. 67 1993
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., and
Zenith National Insurance
Corporation.
The business association of the nominees as shown has been
continued for more than five years unless otherwise noted.
(1) Former Executive Committee member of the Board of Directors of
Younkers, Inc. Pursuant to the Company's February 3, 1996 business
combination with Younkers, Inc., the four members of the Younkers
Executive Committee were elected to the Proffitt's, Inc. Board of
Directors.
The Board recommends the shareholders vote "FOR" the election as
Directors the above listed nominees.
Further Information Concerning Directors
Directors' Fees
Directors who are not officers of the Company each receive an
annual fee of $15,000 and $1,000 for attendance at each board
meeting or meeting of a committee of which he is a member (or $750
for participation in a telephonic board or committee meeting).
Committee chairpersons each receive an additional annual fee
ranging from $1,500 to $2,500, depending upon the committee
chaired. Directors are reimbursed for expenses in connection with
their services as Directors of the Company. Directors not employed
by the Company may elect to participate in the Company's Deferred
Compensation Plan for Non-Employed Directors of Proffitt's, Inc.
and defer all such compensation in lieu of immediate cash payments.
The deferred compensation is tied to the value of the Company's
Common Stock.
Pursuant to the Company's 1994 Long-Term Incentive Plan (the
"Plan"), each non-employee Director of the Company annually is
granted a nonqualified stock option to purchase 1,000 shares of
Company Common Stock. Options are priced at fair market value at
the date of grant and vest in 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 date of grant. In addition,
pursuant to the Plan, each non-employee Director has been awarded
1,000 shares of restricted Common Stock which vest in one-tenth
installments commencing on the first anniversary of the award date.
Committees of the Board of Directors and Meeting Attendance The
Board met six times during the last fiscal year. The Board of
Directors has established Audit, Human Resources/Compensation,
Stock Option, and Nominating Committees.
The Audit Committee includes C. Warren Neel (Chairman), Donald F.
Dunn, Richard D. McRae, and Harwell W. Proffitt. The Committee met
twice during the last fiscal year. The Audit Committee recommends
engagement of the independent accountants, reviews the fee
arrangement and scope of the audit, reviews the financial
statements and the report of independent accountants, reviews the
activities and recommendations of the Company's internal auditors,
and considers comments made by the independent accountants with
respect to the Company's system of internal accounting control.
The Human Resources/Compensation Committee includes Bernard E.
Bernstein (Chairman), Edmond D. Cicala, Gerard K. Donnelly, and C.
Warren Neel. The Committee met four times during the last fiscal
year. The purpose of this Committee is to review compensation of
Company officers and employees and any other compensation related
plan, other than the stock option and long-term incentive plans.
The Stock Option Committee consists of Ronald de Waal (Chairman),
Edmond D. Cicala, and Michael S. Gross and administers the
Company's 1987 Stock Option Plan and the 1994 Long-Term Incentive
Plan. This Committee met three times during the last fiscal year.
The Nominating Committee includes Gerald Tsai, Jr. (Chairman),
Bernard E. Bernstein, G. David Hurd, and R. Brad Martin. The
functions of the Committee are to screen and recommend candidates
for the Company's Board of Directors. The Nominating Committee does
not consider nominees for Director recommended by shareholders.
No Director attended fewer than 75% of the aggregate number of
meetings of the Board of Directors and the committee(s) on which he
served. The overall average percentage for all Directors' meeting
attendance was 99%.
Executive Compensation
Summary Compensation Table
The following table sets forth, for the years ended February 3,
1996, January 28, 1995, and January 29, 1994, the cash compensation
paid by the Company, as well as other compensation paid or accrued
for these years, as to the Company's Chief Executive Officer and to
each of the other four highest compensated executive officers
("Named Officers").
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
Other Restricted Securities All
Annual Stock Underlying Other
Salary Bonus Compensation Award(s) Options Compensation
Name & Principal Position Year ($) ($) (1) ($) ($) Granted (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
R. Brad Martin 1995 445,833 233,250 (2) 27,700 (3) 312,000 (4) 20,000 7,140 (5)
Chairman of the Board 1994 383,334 293,438 (6) 27,700 (3) 95,000 7,140 (5)
and Chief Executive 1993 175,000 92,500 (7) 36,900 (3) 100,000
Officer
James A. Coggin 1995 358,333 108,600 (2) 20,000
President and Chief 1994(8) 270,833 208,125 (6) 60,000
Operating Officer
James E. Glasscock 1995 212,500 28,488 15,000
Executive Vice President, 1994(8) 166,667 98,750 23,000 (9) 35,000
Chief Financial Officer,
and Treasurer
Gary L. Howard 1995 306,667
President and 1994(8) 241,667 80,040 23,000 (9) 50,000
Chief Executive Officer,
McRae's Division
Frederick J. Mershad 1995 270,833 15,000
President and 1994(8) 173,077 75,000 23,000 (9) 35,000
Chief Executive Officer,
Proffitt's Division
(1) Amounts awarded under the Incentive Compensation Plan for the
respective fiscal years, even if deferred.
(2) Includes stock grants to Martin and Coggin of 5,000 and 1,500
shares of Proffitt's Common Stock, respectively, which was granted
at the market price of $32.25 as of the date of grant.
(3) 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 employment with the Company. Other Annual
Compensation represents imputed interest on that interest-free
loan.
(4) Represents a restricted stock award of 13,000 shares of
Proffitt's Common Stock which was granted at the market price of
$24.00 as of the date of grant. The award will fully vest one year
from the date of grant. This award represents Martin's total
restricted stock holdings.
(5) Economic benefit of split dollar life insurance policy.
(6) Includes stock grants to Martin and Coggin of 5,000 and 2,500
shares of Proffitt's Common Stock, respectively, which was granted
at the market price of $21.50 as of the date of grant.
(7) Represents a stock grant of 5,000 shares of Proffitt's Common
Stock which was granted at the market price of $18.50 as of the
date of grant. (8) The hire date for Coggin, Glasscock, and Howard
was April 1, 1994 and for Mershad was May 23, 1994.
(9) Represents a stock award of 1,000 shares of Proffitt's Common
Stock which was granted at the market price of $23.00 as of the
date of grant. These grants vest in equal one-third installments
with full vesting occurring on the second anniversary of the date
of grant. These awards represent the total restricted stock
holdings of the named individuals.
</TABLE>
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 term for Mr. Martin's agreement
ends March 28, 2000. The remainder of the Named Officers'
agreements are for terms ending March 28, 1998. Under the terms of
each agreement, each Named Officer 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 for the greater of the
remaining term of his agreement or twenty-four months. In such
event, the Company would be obligated to pay the following monthly
amounts (assuming no change in current salaries) to these
individuals: R. Brad Martin, $45,833; James A. Coggin, $38,750;
James E. Glasscock, $18,583; Gary L. Howard, $26,583; and Frederick
J. Mershad, $25,000. 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 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.
In conjunction with the Company's February 3, 1996 business
combination with Younkers, Inc., the Company entered into
employment agreements with two former Younkers executives, W.
Thomas Gould and Robert M. Mosco. February 3, 1996 is the effective
date of the agreements ("Effective Date").
Mr. Gould's Employment Agreement has a five year term and provides
that Mr. Gould will be paid a minimum annual base salary of
$750,000 and be eligible to participate, in the sole discretion of
Proffitt's Human Resources/Compensation Committee, in Proffitt's
bonus and other similar incentive plans for senior management of
Proffitt's. Each of Proffitt's 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. If
Mr. Gould's employment with Proffitt's terminates before expiration
of the Employment Agreement other than by Proffitt's upon a
conviction of Mr. Gould of certain felonies, Proffitt's 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 (the "Code"), he will receive a
reimbursement payment to offset such tax.
Mr. Mosco's Employment Agreement has a three year term and provides
that Mr. Mosco will be paid a minimum annual base salary of
$450,000 and be eligible to participate in Proffitt's bonus and
other similar incentive plans for senior management of Proffitt's.
Proffitt's may terminate Mr. Mosco's employment for Cause (as
defined in the Employment Agreement) or without Cause. If
Proffitt's terminates Mr. Mosco's employment other than for Cause
or as a result of his death or disability, or Mr. Mosco terminates
his employment for Good Reason (as defined in the Employment
Agreement), Proffitt's will pay Mr. Mosco a lump-sum severance
payment in an amount equal to (i) salary through the date of
termination and pro rata bonus for the then-current year (based
upon his three-year average bonus or 50% of his target bonus for
the then-current year), (ii) three times Mr. Mosco's highest annual
salary in effect during the 12-month period prior to termination
and three times the greater of Mr. Mosco's average bonus in respect
of the three immediately preceding fiscal years or 50% of target
bonus, (iii) any unvested benefit under Younkers' defined benefit
pension plan, and (iv) any unvested employer contributions under
Younkers' defined contribution plan. Proffitt's will also continue
to provide Mr. Mosco with medical and life insurance coverage for
a period of three years. Mr. Mosco's payments are limited to avoid
imposition of excise tax under Section 4999 of the Code.
Stock Options
The following table contains information concerning the grant of
stock options under the Proffitt's, Inc. 1994 Long-Term Incentive
Plan ("Plan") to the Named Officers as of fiscal year end.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term (4)
% of Total Options Exercise or
Options Granted Granted to Employees Base Price Expiration
Name (#) (1) (2) in Fiscal Year ($/share)(3) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
R. Brad Martin 20,000 5.9 25.375 3/28/05 319,164 808,824
James A. Coggin 20,000 5.9 25.375 3/28/05 319,164 808,824
James E.
Glasscock 15,000 4.4 25.375 3/28/05 239,373 606,618
Gary L. Howard - - - - - -
Frederick J.
Mershad 15,000 4.4 25.375 3/28/05 239,373 606,618
(1) All options granted in 1995 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.
(2) 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.
(3) All options were granted at $25.375, which was the market
closing price on the date of grant. No incentive stock options were
granted. The exercise price and tax withholding obligations related
to exercise may be paid by delivery of already owned shares,
subject to certain conditions.
(4) Potential gains are reported net of the option exercise price
but before taxes associated with exercise. These amounts represent
certain assumed rates of appreciation only. Actual gains, if any,
on stock option exercises are dependent on the future performance
of the Common Stock of the Company and overall stock conditions, as
well as the optionholder's continued employment through the vesting
period. The amounts reflected in this table may not necessarily be
achieved.
</TABLE>
Option Exercises and Holdings
The following table sets forth information with respect to the
Named Officers concerning the exercise of options during 1995 and
unexercised options held at fiscal year end.
Aggregated Option Exercises in Last Fiscal Year End and
Fiscal Year End Option Values
<TABLE>
<CAPTION>
Unexercised Value of Unexercised
Shares Options Held at In-the-Money Options at
Acquired on Value Fiscal Year End (# ) Fiscal Year End ($) (1)
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
R. Brad Martin 0 0 107,000/113,000 124,500/28,000
James A. Coggin 0 0 28,000/52,000 0/0
James E. Glasscock 0 0 17,000/33,000 0/0
Gary L. Howard 0 0 20,000/30,000 0/0
Frederick J.
Mershad 0 0 17,000/33,000 0/0
(1) Represents the difference between the closing price of the
Company's Common Stock on February 3, 1996 and the exercise price
of the options.
Comparison of Five Year Cumulative Total Return*
Among Proffitt's, Inc., the NASDAQ Stock Market--US Index and
the NASDAQ Retail Index
2/1/91 2/1/92 1/30/93 1/29/94 1/28/95 2/3/96
Proffitt's, Inc. 100 238 424 374 443 467
NASDAQ Stock
Market-US 100 152 172 195 188 274
NASDAQ Retail 100 172 155 166 149 167
*$100 invested on 2/1/91 in stock of index--including reinvestment
of dividends.
These comparisons are not intended to forecast or be indicative of
possible future performance of the Company's stock.
Human Resources/Compensation Committee
Report of the Human Resources/Compensation Committee of
the Board of Directors on Executive Compensation
The Human Resources/Compensation Committee of the Board of
Directors (the "Committee") is composed of four independent
Directors who are not employees of the Company: Mr. Bernstein,
Chairman of the Committee; Mr. Donnelly; Mr. Cicala; and Dr. Neel.
Messrs. Bernstein, Cicala, and Neel were members of the Committee
throughout 1995; Mr. Donnelly was appointed to the Committee in
March 1996. The Committee makes recommendations to the Board of
Directors as to the amount and form of officer compensation. The
Committee at least annually evaluates the Company's performance and
executive officers' compensation compared with results of the
Company. The Committee reviews the key performance standards of the
executives of the corporation and measures individual and corporate
achievement of these standards. The Committee also annually meets
to evaluate the performance of the Chief Executive Officer.
The compensation programs of the Company are designed to align
compensation with business objectives and performance and to enable
the corporation to attract, retain, and reward executives who
contribute to the long-term success of the Company. The Board of
Directors believes that executive pay should be linked to level of
responsibility and performance. Therefore, the Company provides an
executive compensation program which includes base pay, cash
bonuses, and long-term incentive opportunities through the use of
stock options and stock grants. Individual executive performance is
evaluated by reviewing organization and management development
progress against the established objectives. Consistent with the
compensation philosophy of the corporation, salaries for executives
are established at levels for comparable positions in the
department store and specialty retailing industry. Generally,
executive cash bonus programs provide the opportunity for
executives to earn from 30% to 50% of annual base compensation.
Bonuses are earned as the result of the achievement of specific
corporate and/or division objectives and individual objectives.
Long-term incentives are provided through grants of stock options
and stock grants to the named executives and other key employees
pursuant to the Proffitt's, Inc. 1994 Long-Term Incentive Plan
("Plan"). This component is intended to provide added incentive to
secure, retain, and reward those responsible for the successful
leadership of the Company. Stock options are granted at or above
the prevailing market value and will only have value if the
Company's stock price increases. Currently, options vest in five
equal installments, and executives must be employed by the Company
at the time of vesting in order to exercise the option grants. The
Stock Option Committee of the Board of Directors administers the
Plan.
R. Brad Martin has served as Chairman and Chief Executive Officer
of the corporation since July 1989. While serving in this capacity,
the Company's revenues have grown from $94.8 million for the year
ended February 3, 1990 ("1989") to $1.3 billion for the year ended
February 3, 1996 ("1995"). Net income (before non-recurring and
special charges) has increased from $.8 million in 1989 to $31.4
million in 1995. Shareholders' equity has grown from $20.2 million
in 1989 to $356.9 million in 1995. The price of the Company's
Common Stock has increased from $6.00 at February 3, 1990 to $32.25
at March 21, 1996.
The compensation of the Chairman and Chief Executive Officer of the
corporation is set forth in an Employment Agreement ("Agreement")
dated March 28, 1995, approved by the Committee and the Board of
Directors. The terms of this Agreement provide for an annual base
salary of not less than $450,000. The Chief Executive Officer may
earn an annual cash bonus of up to 50% of base salary based upon
the achievement of specific annual objectives. For 1995, 60% of the
potential bonus award was based on achievement of targeted earnings
per share of the corporation; 40% of the potential bonus award was
based upon the achievement by the Chief Executive Officer of
certain objectives in his personal plan. These objectives included
specified goals in such areas as corporate growth, human resources,
merchandising, financing, and shareholder relations. For 1995, Mr.
Martin was awarded 32% of his total bonus potential of $225,000.
Mr. Martin earned none of his total bonus potential for the
achievement of the targeted earnings per share, but he was awarded
80% of his bonus potential for the achievement of the specified
objectives within his personal plan. For 1995, Mr. Martin's cash
compensation totaled $517,833 which was comprised of $445,833 in
base salary and $72,000 in bonus.
Pursuant to the terms of the Agreement, the Chief Executive Officer
is also eligible for an annual award of up to 5,000 shares of
Company Common Stock, based upon the achievement of annual targeted
growth in intrinsic value of the corporation. For 1995, Mr. Martin
was awarded 5,000 shares of Common Stock of the corporation
pursuant to this provision, valued at $161,250 on the March 21,
1996 grant date.
Concurrent with the business combination with Younkers, Inc. on
February 3, 1996, the Chief Executive Officer was granted 13,000
restricted shares of Company Common Stock under the 1994 Long-Term
Incentive Plan. These shares were valued at $312,000 on the
February 12, 1996 grant date. These shares fully vest one year from
the date of grant.
In 1993, the Internal Revenue Code was amended to limit the
deductibility of certain compensation expenses in excess of $1
million. This was not applicable to Proffitt's, Inc. for the fiscal
year ended February 3, 1996. However, the Company and the Committee
intend to monitor executive compensation levels and adopt policies,
as necessary, to obtain maximum deductibility of executive
compensation while providing motivational and competitive
performance-based compensation. The Committee will continue to
monitor the tax regulations to determine if any executive
compensation program changes are necessary.
Human Resources/Compensation Committee
Bernard E. Bernstein, Chairman
Edmond D. Cicala
Gerard K. Donnelly
Dr. C. Warren Neel
March 27, 1996
Certain Transactions
On March 31, 1994, the Company acquired in a business combination
(the "Business Combination") all of the outstanding Common Stock of
Macco Investments, Inc., the holding company of McRae's, a retail
department store company. Prior to its acquisition by Proffitt's,
Inc., McRae's was a private company owned and operated by members
of the McRae family: Richard D. McRae and his children, Richard D.
McRae, Jr., Susan McRae Shanor, and Vaughan W. McRae. Richard D.
McRae has served on the Board of Directors of Proffitt's, Inc.
since the Business Combination.
A portion of the consideration paid in the Business Combination was
in the form of the Company's 7.5% Junior Subordinated Debentures
due March 31, 2004 in the aggregate principal amount of $17.5
million ("Junior Debentures"). Richard D. McRae received $1.6
million of the Junior Debentures, and Richard D. McRae, Jr., Susan
McRae Shanor, and Vaughan W. McRae each received $5.3 million of
the Junior Debentures. Interest on the Junior Debentures paid to
Richard D. McRae totaled approximately $123,000 for the year ended
February 3, 1996. Interest paid to Richard D. McRae, Jr., Susan
McRae Shanor, and Vaughan W. McRae totaled approximately $395,000
each for the same period.
In conjunction with the Business Combination, the Company purchased
four regional mall stores owned by McRae family partnerships
(collectively, the "Stores") for approximately $18.5 million.
On April 1, 1994, the Company purchased the McRae's store in the
Singing River Mall, Gautier, Mississippi, from Arvey Real Estate
Company ("Arvey"), a general partnership comprised of Richard D.
McRae, Richard D. McRae, Jr., and Vaughan W. McRae, for a purchase
price of approximately $2.6 million. A portion of the consideration
paid by the Company was the issuance of a promissory note (the
"Gautier Note") in the principal amount of approximately $600,000,
bearing interest at an annual rate of 6.5%. The Gautier Note is
payable in five installments, the first four of which are equal to
10% of the original principal amount, plus accrued interest. The
first installment was due April 1, 1995, and subsequent
installments are due April 1, 1996, April 1, 1997, and April 1,
1998, with the final installment of the remaining principal and
interest due April 1, 1999. The Gautier Note is secured by a second
deed of trust on the Gautier store. The principal amount
outstanding under the Gautier Note at February 3, 1996 was
approximately $501,000. Interest paid on this note totaled
approximately $36,000 for the year.
On April 1, 1994, the Company purchased the McRae's store in the
Barnes Crossing Mall, Tupelo, Mississippi, from Green's Crossing
Real Estate Company ("Green's Crossing"), a general partnership
comprised of a trust for Richard D. McRae, Jr.'s children, a trust
for Vaughan W. McRae's children, and Ms. Shanor, for a purchase
price of approximately $4.3 million. A portion of the consideration
paid was the issuance of a promissory note (the "Tupelo Note") in
the principal amount of approximately $1.5 million, bearing
interest at an annual rate of 6.5%. The terms of the Tupelo Note
are identical to the terms of the Gautier Note, and the Tupelo Note
is secured by a second deed of trust on the Tupelo store. The
principal amount outstanding under the Tupelo Note at February 3,
1996 was approximately $1,339,000. Interest paid on this note
totaled approximately $97,000 for the year.
On April 1, 1994, the Company purchased the leasehold interest in
the McRae's store in the Sawmill Square Shopping Center, Laurel,
Mississippi, from Arvey for a purchase price of approximately $2.9
million. A portion of the consideration paid was the issuance of a
McRae's promissory note (the "Laurel Note") in the principal amount
of $1.8 million, bearing interest at an annual rate of 6.5%. The
terms of the Laurel Note are identical to the terms of the Gautier
Note, and the Laurel Note is secured by a second leasehold deed of
trust on the Laurel store. The principal amount outstanding under
the Laurel Note at February 3, 1996 was approximately $1,601,000.
Interest paid on this note totaled approximately $116,000 for the
year.
On April 1, 1994, the Company purchased the McRae's store in the
Northpark Mall, Ridgeland, Mississippi, from Park Real Estate
Company ("Park"), a general partnership comprised of Richard D.
McRae, Richard D. McRae, Jr., Susan McRae Shanor, and Vaughan W.
McRae, for a purchase price of approximately $8.6 million. A
portion of the consideration paid was the issuance of a McRae's
promissory note (the "Northpark Note") in the principal amount of
approximately $3.9 million, bearing interest at an annual rate of
6.5%. The terms of the Northpark Note are identical to the terms of
the Gautier Note, and the Northpark Note is secured by a second
deed of trust on the Ridgeland store. The principal amount
outstanding under the Northpark Note at February 3, 1996 was
approximately $3,516,000. Interest paid on this note totaled
approximately $254,000 for the year.
The Stores were purchased by the Company as part of the Business
Combination. The Company believes that the terms of the purchases
of the Stores were fair, reasonable, and consistent with the terms
that would have been available to the Company if purchased from
unaffiliated parties.
The Company leases an office building (the "Heritage Building") in
downtown Jackson, Mississippi pursuant to an eighteen year lease
agreement dated December 23, 1981 (the "Heritage Building Lease")
from Richard D. McRae, Jr., Susan McRae Shanor, and Vaughan W.
McRae (collectively, the "Lessors"). Under the terms of the
Heritage Building Lease, the Company must pay all maintenance,
repairs, insurance, utilities, taxes, improvements, and
modifications to the building. During the fiscal year ended
February 3, 1996, the Company paid the Lessors approximately
$325,000 under the Heritage Building Lease. The Company subleases
office space in the Heritage Building to unrelated tenants. During
the fiscal year ended February 3, 1996, the Company received rents
from sublessees of approximately $967,000.
The Company has purchased executive life insurance policies
insuring the lives of Richard D. McRae ($1.5 million and $8.5
million) and Vaughan W. McRae ($1.5 million). Each of Messrs. McRae
has the right to purchase said policies from the Company for a
purchase price equal to the policy's cash value.
In connection with the redemption of McRae's Common Stock owned by
Richard D. McRae's spouse on January 25, 1983, McRae's issued its
promissory note (the "McRae's Note") in the principal amount of
approximately $1.3 million, bearing 13% interest annually. Interest
only on the McRae's Note was payable through January 1, 1993, and
beginning February 1, 1993, principal and interest was payable in
60 monthly installments of $30,635. The final installment on the
McRae's Note is due January 1, 1998, and the Company has no
prepayment rights thereunder. The principal amount outstanding
under the McRae's Note at February 3, 1996 was approximately
$621,000. Interest paid on this note totaled approximately $100,000
for the year.
McRae's and Richard D. McRae entered into a Retirement Income
Agreement dated July 23, 1982 which provided for annual retirement
payments of $200,000 to Mr. McRae. Upon the death of Mr. McRae,
payments of $175,000 are to be made to Mr. McRae's spouse, should
she survive him, and terminate at her death. The payments are
reduced by any payments made to Mr. or Mrs. McRae pursuant to the
McRae's Pension Plan and are adjusted annually based on the
Consumer Price Index. During the fiscal year ended February 3,
1996, McRae's paid Mr. McRae approximately $167,000 under this
Agreement.
Transaction with Michael S. Gross.
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. Proffitt's paid Apollo
Specialty $1.95 million in dividends for the fiscal year ended
February 3, 1996.
Human Resources/Compensation Committee Interlocks and Insider
Participation.
Mr. 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.
Ratification of Appointment of Independent Accountants
(Proposal No. 2)
Subject to ratification by the shareholders, the Board of Directors
has reappointed Coopers & Lybrand as independent accountants to
audit the financial statements of the Company for the fiscal year
ending February 1, 1997. Coopers & Lybrand has examined the
financial statements of the Company since 1991.
Representatives of Coopers & Lybrand will be present at the Annual
Meeting and will have an opportunity to make a statement, if they
so desire, and will be available to respond to appropriate
questions.
THE AUDIT COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND THE
SHAREHOLDERS VOTE "FOR" SUCH RATIFICATION.
Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Directors, executive officers, and persons who own more
than 10% of the Company's Common Stock to file with the Securities
and Exchange Commission initial reports of ownership and reports of
changes in ownership of stock of the Company.
To the Company's knowledge, based solely on a review of copies of
reports provided by such individuals to the Company and written
representations of such individuals that no other reports were
required, during the fiscal year ended February 3, 1996, all
Section 16(a) filing requirements applicable to its officers,
Directors, and 10% or greater beneficial owners were satisfied.
Other Matters
The Board of Directors of the Company knows of no other matters
that may come before the meeting. However, if any other matters
should properly come before the meeting or any adjournment thereof,
it is the intention of the persons named in the proxy to vote the
proxy in accordance with their best judgement.
Shareholders' Proposals for 1997 Annual Meeting
Proposals for shareholder action which eligible shareholders wish
to have included in the Company's proxy mailed to shareholders in
connection with the Company's 1997 Annual Meeting must be received
by the Company at its corporate headquarters on or before January
3, 1997.
Listing of Shareholders
A complete list of the shareholders entitled to vote at the Annual
Meeting of the Shareholders, to be held on June 19, 1996, will be
available for inspection during normal business hours at the
principal office of the Company for a period of at least 10 days
prior to the meeting, upon written request to the Company by a
shareholder, and at all times during the Annual Meeting at the
place of the meeting.
Annual Report
The Company's annual report for the year ended February 3, 1996 is
being mailed with this proxy statement but is not to be considered
as a part hereof.
A copy of the Company's annual report on Form 10-K, including the
financial statements and schedules thereto, required to be filed
with the Securities and Exchange Commission, may be obtained
without charge by any shareholder whose proxy is solicited upon
written request to:
Senior Vice President of Investor Relations
Proffitt's, Inc.
P.O. Box 9388
Alcoa, Tennessee 37701-9388
By order of the Board of Directors,
Julia Bentley
Secretary
Alcoa, Tennessee
May 1, 1996
PROFFITT'S, INC.
P.O. Box 9388
Alcoa, Tennessee 37701
This proxy is solicited on behalf of the Board of Directors. The
undersigned hereby appoints R. Brad Martin, James A. Coggin, and
Julia A. Bentley as Proxies, each with the power to appoint his or
her substitute, and hereby authorizes them to represent and vote as
designated below, all the shares of Common Stock of Proffitt's,
Inc. held of record by the undersigned on April 22, 1996 at the
Annual Meeting of the Shareholders to be held on June 19, 1996 or
any adjournment thereof.
1. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY
(Except as marked to the contrary to vote for all
below) [] nominees listed below []
(INSTRUCTIONS: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name on the list
below.)
Bernard E. Bernstein
W. Thomas Gould
C. Warren Neel
Edmond D. Cicala
Michael S. Gross
Harwell W. Proffitt
Ronald de Waal
G. David Hurd
Marguerite W. Sallee
Gerard K. Donnelly
R. Brad Martin
Gerald Tsai, Jr.
Donald F. Dunn
Richard D. McRae
(continued, and to be signed on other side)
(continued from other side)
2. PROPOSAL TO RATIFY THE APPOINTMENT OF COOPERS & LYBRAND as
independent accountants of the Company
[] FOR [] AGAINST [] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon
such other busines as may properly come before th emeeting.
This proxy, when property executed, will be voted in the manner
directed herein by the undersigned stockholder. IF NO ELECTION IS
MADE, THE PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
Please sign exactly as name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee, or guardian, please give full
title as such. If a corporation, please sign full corporate name
by President or other authorized officer. If a partnership, please
sign in partnership name by authorized person.
DATED:____________________, 1996 ___________________________
Signature
PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY CARD PROMPTLY ___________________________
USING THE ENCLOSED ENVELOPE. Signature if held jointly
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