Commission File Number 0-15907
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For Fiscal Year Ended: February 1, 1997 or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number: 0-15907
Exact name of registrant as specified in its charter:
PROFFITT'S, INC.
State of Incorporation: Tennessee
I.R.S. Employer Identification Number: 62-0331040
Address of principal executive offices (including zip code):
P.O. Box 20080, Jackson, Mississippi 39289
Registrant's telephone number, including area code: (601) 968-4400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.10 and Preferred Stock Purchase Rights
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.
Yes (X) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the Registrant's knowledge, in definitive
proxy or information statement incorporated by reference in Part II of
this Form 10-K or any amendment to this Form 10-K. ( )
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of March 21, 1997 was approximately $958,639,644.
As of March 21, 1997, the number of shares of the Registrant's Common
Stock outstanding was 28,128,846.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Proffitt's, Inc. Annual Report to Shareholders for
the Fiscal Year Ended February 1, 1997 are incorporated by
reference into Part II.
(2) Portions of the Proffitt's, Inc. Proxy Statement dated May 1, 1997
for the Annual Shareholders' Meeting to be held on June 19, 1997
are incorporated by reference into Part III.
The Exhibit Index is on page __________ of this document.
TABLE OF CONTENTS
Item Page
----- -----
Part I 1 Business. 3
2 Properties. 9
3 Legal Proceedings. 18
4 Submission of Matters to a Vote of Security
Holders. 18
Executive Officers of the Registrant. 18
Part II 5 Market for Registrant's Common Equity and Related
Stockholder Matters. 24
6 Selected Financial Data. 24
7 Management's Discussion and Analysis of Financial
Condition and Results of Operations. 24
8 Financial Statements and Supplementary Data. 24
9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. 24
Part III 10 Directors and Executive Officers of the
Registrant. 25
11 Executive Compensation. 25
12 Security Ownership of Certain Beneficial Owners
and Management. 25
13 Certain Relationships and Related Transactions. 25
Part IV 14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K. 26
Signatures 28
PART I
Item 1. Business.
General.
Founded in 1919, Proffitt's, Inc. ("Proffitt's" or the "Company") is a
leading regional department store company primarily offering moderate to
better brand name fashion apparel, shoes, accessories, cosmetics, and
decorative home furnishings. Proffitt's stores are principally anchor
stores in leading regional or community malls.
Proffitt's operates five store divisions. The Proffitt's Division,
headquartered in Knoxville, Tennessee, operates 19 stores in Tennessee
(12), Georgia (2), Kentucky (2), North Carolina (1), Virginia (1), and
West Virginia (1). The McRae's Division, headquartered in Jackson,
Mississippi, operates 29 stores in Alabama (14), Mississippi (12),
Florida (2), and Louisiana (1). The Younkers Division, headquartered in
Des Moines, Iowa, operates 48 stores in Iowa (18), Wisconsin (17),
Michigan (5), Nebraska (5), Illinois (1), Minnesota (1), and South
Dakota (1). The Parisian Division, headquartered in Birmingham,
Alabama, operates 40 stores in Alabama (15), Georgia (7), Florida (4),
Ohio (4), South Carolina (3), Tennessee (3), Indiana (2), Michigan (1),
and Mississippi (1). The Herberger's Division, headquartered in St.
Cloud, Minnesota, operates 39 stores in Minnesota (14), Montana (5),
Nebraska (5), Wisconsin (4), North Dakota (3), South Dakota (3), Iowa
(2), Colorado (1), Illinois (1), and Wyoming (1).
Proffitt's has experienced significant growth since 1992. During 1992
and 1993, Proffitt's purchased certain real and personal property and
assumed certain operating leases of eighteen store locations from Hess
Department Stores, Inc. and Crown American Corporation. The acquired
locations were in Tennessee, Virginia, Georgia, and Kentucky. These
stores were renovated and placed in service as Proffitt's Division
stores in 1992 and 1993. Seven of these stores, located in Virginia,
were subsequently sold to Dillard Department Stores, Inc. in April 1997.
In March 1994, Proffitt's acquired all of the outstanding Common Stock
of Macco Investments, Inc., a holding company for McRae's, Inc., a
privately-owed retail department store chain with 28 stores
headquartered in Jackson, Mississippi. The transaction was accounted
for as a purchase.
In April 1995, Proffitt's completed the purchase of Parks-Belk Company,
the owner/operator of four Parks-Belk stores located in northeastern
Tennessee. Three stores were renovated and opened as Proffitt's
Division stores during 1995; one store was permanently closed. The
transaction was accounted for as a purchase.
Effective February 3, 1996 (immediately preceding the Company's prior
fiscal year end), Proffitt's combined its business with Younkers, Inc.,
a 51 unit, publicly-owned retail department store chain headquartered in
Des Moines, Iowa. This combination was accounted for as a pooling of
interests. Each outstanding share of Younkers, Inc. Common Stock was
converted into ninety-eight one-hundredths (.98) shares of Proffitt's
Common Stock, with approximately 8.8 million shares issued in the
transaction. Outstanding options to purchase Younkers Common Stock were
converted into options to purchase approximately 677,000 shares of
Proffitt's Common Stock.
On October 11, 1996, Proffitt's acquired Parisian, Inc., a closely-held
38 unit specialty department store company headquartered in Birmingham,
Alabama. This business combination was accounted for as a purchase.
Proffitt's paid Parisian shareholders approximately $110 million in cash
and issued approximately 2.9 million shares of Common Stock.
Outstanding options to purchase Parisian Common Stock were converted
into options to purchase approximately 406,000 shares of Proffitt's
Common Stock.
Effective February 1, 1997 (immediately preceding the Company's current
fiscal year end), Proffitt's combined its business with G.R.
Herberger's, Inc., a 40 unit, employee-owned retail department store
chain headquartered in St. Cloud, Minnesota. This combination was
accounted for as a pooling of interests. Each outstanding share of G.R.
Herberger's, Inc. Common Stock was converted into approximately .4985
shares of Proffitt's Common Stock, with 4.0 million shares issued in the
transaction.
Proffitt's closed three unproductive units (one Proffitt's store and two
Younkers stores) in January 1996, an additional unproductive Younkers
unit in August 1996, and an unproductive Herberger's store in January
1997. Two additional Younkers stores were sold to a third party in
March 1996.
A new McRae's store in Selma, Alabama was opened in March 1996, a new
Proffitt's Division store was opened in Morgantown, West Virginia in
October 1996, and new Parisian stores were opened in Macon, Georgia and
Tupelo, Mississippi in February 1997 and April 1997, respectively.
Proffitt's has announced the planned openings of a new Proffitt's
Division store in Parkersburg, West Virginia in 1998; new McRae's stores
in Biloxi and Meridian, Mississippi and Baton Rouge, Louisiana in 1997;
new Younkers units in Grandville, Michigan and Iowa City, Iowa in 1998;
and new Parisian stores in Birmingham, Alabama and metropolitan Atlanta,
Georgia in 1997. Proffitt's is currently negotiating several other new
unit opportunities. In addition, several store renovations and
expansions are planned for 1997.
During 1995 and 1996, in order to improve efficiencies and reduce
overhead costs, Proffitt's centralized certain administrative and
support functions, such as accounting, information systems, credit, and
store planning, for the Proffitt's, McRae's, and Younkers Divisions.
Proffitt's is in the process of further consolidating these functions to
include the Parisian Division, with the majority of this restructuring
to be completed by fall 1997. Consolidation of these functions for the
Herberger's division will begin in 1997 and be completed in 1998.
Merchandising, stores, sales promotion/advertising, visual, and various
support functions for the Proffitt's, McRae's, Younkers, Parisian, and
Herberger's Divisions will remain headquartered in Knoxville, Jackson,
Des Moines, Birmingham, and St. Cloud, respectively.
Merchandising.
Proffitt'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. Proffitt'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,
Birkenstock, and Timberland. Proffitt's supplements its branded
assortments with high-quality private-label merchandise in selected
areas. Private label offerings are intended to provide national brand
quality at lower prices.
Proffitt's has developed a thorough knowledge of each of its regional
markets and customer bases. This market knowledge is gained through the
Company's regional merchandising structure in conjunction with store
visits by senior management and merchandising personnel and use of on-line
merchandise information. Proffitt's strives to tailor each store's
merchandise assortments to the unique characteristics of its markets.
The Company recently formed the Proffitt's Merchandising Group (the
"Group") headquartered in Birmingham, Alabama. The Group coordinates
merchandising planning and execution, as well as visual, marketing, and
advertising activities between the merchandising divisions.
Certain departments in Proffitt'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
Proffitt's direct participation in the business. The leased departments
vary by store to complement Proffitt's own merchandising departments.
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
Proffitt's total sales. Management regularly evaluates the performance
of the leased departments and requires compliance with established
customer service guidelines.
The shoe business was a leased operation at the Younkers Division until
August 1996, when it was converted to an owned operation. Management
believes this conversion has positive sales and gross margin
implications for the Company. The shoe departments at the other
Divisions are also owned.
For the year ended February 1, 1997, Proffitt's percentages of net sales
by major merchandise category (by division) were as follows:
<TABLE>
<CAPTION>
Category: Proffitt's McRae's Younkers Parisian Herberger's Total
- -------- ---------- --------- ---------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Women's 32.6% 25.9% 31.7% 27.5% 39.0% 31.3%
Men's 13.7 16.6 16.1 25.0 15.3 16.9
Home 11.1 15.3 15.6 2.1 9.4 12.1
Cosmetics 15.0 11.4 10.9 10.9 8.6 11.2
Children's 7.8 7.3 6.8 9.5 12.9 8.4
Accessories 6.7 7.1 6.2 8.2 5.6 6.6
Shoes 7.3 8.0 2.9 10.1 5.4 6.1
Lingerie 4.2 3.9 4.6 3.2 3.8 4.0
------ ------ ------ ------ ------ -----
Owned 98.4 95.5 94.8 96.5 100.0 96.6
Leased 1.6 4.5 5.2 3.5 0.0 3.4
------ ------ ------ ------ ------ -----
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
</TABLE>
Note: Percentages above represent the entire year even though the
Parisian Division was not owned by Proffitt's for the entire year.
Pricing
Proffitt's primary merchandise focus is on moderate to better-priced
nationally branded merchandise. 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
pricing structure that provides value to its customers, Proffitt's
business is somewhat promotional. Proffitt's runs various promotional
events throughout the year.
Proffitt's recognizes that competitors sometimes price merchandise below
Proffitt's prices. In such situations, it is Proffitt's policy to match
competitors' 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 market.
Purchasing and Distribution
Proffitt's purchases merchandise from numerous suppliers. Management
monitors Proffitt'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
Division is located in metropolitan Knoxville, Tennessee, and the
164,000 square foot distribution center for the McRae's Division is
located in Jackson, Mississippi. The Younkers Division is served by two
distribution facilities. An 182,000 square foot center in Green Bay,
Wisconsin serves the Division's northern stores, and an 120,000 square
foot facility in Ankeny, Iowa serves the Division's 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 distribution centers utilize the latest technology. Proffitt's
utilizes UPC barcode technology which is designed to move merchandise
onto the selling floor quicker and more 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. This technology, when fully
utilized, will create a nearly paperless environment for the
distribution function.
Management Information Systems
Proffitt's information systems provide information necessary for
management operating decisions, cost reduction programs, and customer
service enhancements. Individual data processing systems include
point-of-sale and sales reporting, purchase order management, receiving,
merchandise planning and control, payroll, human resources, general
ledger, credit, and accounts payable systems. Bar code ticketing is
used, and scanning is utilized at all point-of-sale terminals.
Information is made available on-line to merchandising staff and store
management on a timely basis, thereby reducing the need for paper
reports. Proffitt's uses electronic data interchange technology (EDI)
with many of its top vendors to facilitate timely merchandise
replenishment.
Proffitt's continually upgrades its information systems to improve
operations and support future growth.
Marketing
Proffitt's advertising and promotions are coordinated to reinforce its
market position as a fashion department store selling quality
merchandise at competitive prices. Advertising is balanced among
fashion advertising, price promotions, and special events.
Proffitt's uses a multi-media approach, including newspaper, television,
radio, and direct mail. The Company's advertising and special events
are produced by divisional in-house sales promotion staffs in
conjunction with outside advertising agencies, when needed. Proffitt's
utilizes data captured through the use of the Proffitt's, McRae's,
Younkers, and Parisian 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,
Proffitt's also sponsors fashion shows and in-store special events
highlighting Proffitt's key brands.
Proprietary Credit Cards
The Company issues proprietary credit cards for each of the Proffitt's,
McRae's, Younkers, and Parisian Divisions. Frequent use of the
Company's proprietary credit cards by customers is an important element
in the Company's marketing and growth strategies. 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 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. Also, customers who open accounts are
entitled to certain discounts on initial and subsequent purchases.
The Company has approximately 1.9 million credit accounts which have
been active within the prior six months.
The Herberger's Division does not currently issue a proprietary credit
card but will introduce such a card to its customer base beginning in
May 1997.
Customer Service
Proffitt's believes that personal customer attention builds loyalty and
that Proffitt's sales associates generally 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/productivity goals and through specific award and
recognition programs.
Seasonality
Proffitt's business, like that of most retailers, is subject to seasonal
influences, with a significant portion of its net sales and net income
realized during the fourth quarter of each year, which includes the
Christmas selling season. Generally, more than 30% of the Company's
sales and over 50% of its net income are generated during the fourth
quarter.
Competition
The retail department store business is highly competitive. Proffitt's
stores compete with several national and regional department stores,
specialty apparel stores, and other retail stores, some of which have
greater financial and other resources than Proffitt's. Management
believes that its knowledge of Proffitt's regional markets and customer
base, combined with providing superior customer service and a broad
selection of quality fashion merchandise at competitive prices in prime
store locations, provides a competitive advantage.
Associates
At March 31, 1997, the Company employed approximately 27,000
associates, of which approximately 13,000 were employed on a part-time
basis. Proffitt's hires additional temporary employees and increases
the hours of part-time employees during seasonal peak selling periods.
Approximately 20 associates in the Younkers Division are covered by a
collective bargaining agreement. Proffitt's considers its relations
with its employees to be good.
Item 2. Properties.
The Proffitt's Division's leased administrative offices are located in
metropolitan Knoxville, Tennessee and consist of approximately 44,000
square feet. The Division's owned distribution center is located in
metropolitan Knoxville and contains approximately 85,000 square feet.
The McRae's Division owns its administrative office building in Jackson,
Mississippi, which consists of 272,000 square feet of space. McRae's
164,000 square foot distribution center in metropolitan Jackson is
owned.
The Younkers Division's leased administrative office space is located
with the Downtown store in Des Moines, Iowa and consists of 127,000
square feet of space. The 120,000 and 182,000 square foot distribution
centers in Ankeny, Iowa and Green Bay, Wisconsin, respectively, are
owned.
The Parisian Division's owned administrative office building is located
in Birmingham, Alabama and consists of 125,000 square feet. The 125,000
square foot Parisian distribution facility in Birmingham is owned.
The Herberger's Division's owned administrative offices are located with
the St. Cloud, Minnesota store and consist of 58,000 square feet of
space. The 98,000 square foot distribution center in Sartell,
Minnesota, near St. Cloud, is owned.
The following table summarizes all owned and leased store locations.
Store leases generally require Proffitt's to pay the greater of a fixed
minimum rent or an amount based on a percentage of sales. Generally,
Proffitt's 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. Typically, Proffitt's contributes
to common mall promotion, maintenance, property tax, and insurance
expenses at its owned locations.
<TABLE>
<CAPTION>
APPROX. APPROX. YEAR RENOVATED
GROSS SELLING OWNED/ OPENED OR OR
STORE LOCATIONS FOOTAGE FOOTAGE LEASED ACQUIRED EXPANDED
_____________________________ _________ _________ _______ _________ _________
<S> <C> <C> <C> <C> <C>
PROFFITT'S DIVISION:
KNOXVILLE, TN METROPOLITAN MARKET:
College Square (Morristown, TN) 50,000 43,000 Owned 1993 -
East Towne 102,000 85,600 Owned 1984 1992
Foothills (Maryville, TN)* 145,000 121,000 Owned 1983 1993
Oak Ridge (Oak Ridge, TN)* 111,000 94,600 Leased 1974 1993
Proffitt's Plaza (Athens, TN) 54,000 48,200 Leased 1965 1992
West Town 161,800 141,000 Leased 1972 1995
CHATTANOOGA, TN METROPOLITAN MARKET:
Bradley Square (Cleveland, TN) 50,000 45,800 Leased 1992 1992
Hamilton Place* 245,000 202,300 Owned 1988 1993
Mt. Berry Square (Rome, GA) 65,000 56,300 Leased 1993 1993
Northgate 94,500 80,800 Owned 1989 1993
Walnut Square (Dalton, GA) 55,000 48,400 Owned 1988 1988
TRI-CITIES, TN/VA METROPOLITAN MARKET:
Bristol Mall (Bristol, VA) 46,000 39,300 Leased 1992 -
Fort Henry (Kingsport, TN)* 141,500 121,300 Leased 1992 1995
Greeneville Commons
(Greeneville, TN) 41,700 35,800 Leased 1995 -
Mall at Johnson City
(Johnson City, TN)* 152,000 127,700 Leased 1992 1995
ASHEVILLE, NC METROPOLITAN MARKET:
Biltmore Square Mall 80,000 71,100 Owned 1989 -
KENTUCKY:
Ashland Town Center (Ashland, KY) 65,000 56,600 Leased 1993 1993
Towne Mall (Elizabethtown, KY) 50,000 41,800 Leased 1993 1993
WEST VIRGINIA:
Morgantown (Morgantown, WV) 85,700 75,800 Leased 1996 1996
TOTAL PROFFITT'S DIVISION
(19 stores) 1,795,200 1,536,400
*Dual store operation.
APPROX. APPROX. YEAR RENOVATED
GROSS SELLING OWNED/ OPENED OR OR
STORE LOCATIONS FOOTAGE FOOTAGE LEASED ACQUIRED EXPANDED
_____________________________ _________ _________ _______ _________ _________
MCRAE'S DIVISION:
JACKSON, MS METROPOLITAN MARKET:
Meadowbrook Mart 68,900 57,600 Leased 1955 1987
Metrocenter 231,400 188,000 Owned 1978 1992
Northpark (Ridgeland, MS) 207,200 176,100 Owned 1984 -
BIRMINGHAM, AL METROPOLITAN MARKET:
Brookwood Village 108,800 89,900 Leased 1975 1993
Century Plaza 125,100 109,900 Leased 1980 1991
Riverchase Galleria (Hoover, AL) 136,200 121,200 Leased 1986 -
Roebuck Plaza 65,600 55,800 Leased 1960 -
Western Hills (Fairfield, AL) 129,600 109,200 Leased 1980 1986
HUNTSVILLE, AL:
Madison Square 99,700 86,400 Leased 1984 -
Parkway City 75,700 60,800 Leased 1961 -
FLORIDA PANHANDLE:
Santa Rosa (Mary Ester, FL) 83,900 75,100 Owned 1986 -
University (Pensacola, FL) 145,300 114,000 Owned 1974 1986
MOBILE, AL:
Springdale 168,300 141,800 Owned 1984 -
OTHER MISSISSIPPI MARKETS:
Barnes Crossing (Tupelo, MS) 100,200 88,900 Owned 1976 1990
Greenville (Greenville, MS) 68,100 59,100 Leased 1973 -
Natchez (Natchez, MS) 67,300 57,100 Leased 1979 1993
Pemberton (Vicksburg, MS) 63,200 54,500 Owned 1970 1985
Sawmill Square (Laurel, MS) 65,800 58,500 Owned 1981 -
Singing River (Gautier, MS) 89,300 79,200 Owned 1980 -
TurtleCreek (Hattiesburg, MS) 129,000 110,400 Owned 1973 1995
University (Columbus, MS) 75,700 66,700 Owned 1983 -
Village Fair (Meridian, MS) 78,700 67,300 Leased 1972 -
OTHER ALABAMA MARKETS:
Eastdale (Montgomery, AL) 69,200 62,400 Leased 1977 -
Gadsden (Gadsden, AL) 80,500 69,400 Leased 1974 1994
Regency Square (Florence, AL) 41,000 35,200 Leased 1978 -
Selma (Selma, AL) 74,200 63,900 Leased 1996 -
University (Tuscaloosa, AL) 90,900 80,000 Leased 1980 -
Wiregrass Commons (Dothan, AL) 96,200 87,000 Leased 1986 -
LOUISIANA:
Pecanland (Monroe, LA) 106,500 94,800 Owned 1985 -
TOTAL MCRAE'S DIVISION
(29 stores) 2,941,500 2,520,200
APPROX. APPROX. YEAR RENOVATED
GROSS SELLING OWNED/ OPENED OR OR
STORE LOCATIONS FOOTAGE FOOTAGE LEASED ACQUIRED EXPANDED
_____________________________ _________ _________ _______ _________ _________
YOUNKERS DIVISION
DES MOINES, IA METROPOLITAN MARKET:
Downtown 113,800 104,100 Leased 1900 1994
Merle Hay 195,000 154,900 Leased 1959 1995
Southridge 105,000 91,200 Leased 1975 1994
Valley West 164,000 143,300 Leased 1972 1995
CEDAR RAPIDS, IA:
Lindale 100,000 89,200 Leased 1960 -
Westdale 100,000 79,000 Leased 1980 1995
SIOUX CITY, IA:
Sioux City Mall 90,000 77,000 Leased 1980 -
Town Square Downtown 60,000 47,300 Leased 1986 -
QUAD CITIES, IA/IL METROPOLITAN MARKET:
Duck Creek Plaza (Bettendorf, IA) 60,000 53,800 Leased 1960 -
Northpark (Davenport, IA) 100,000 86,100 Leased 1973 1994
Southpark (Moline, IL) 100,000 91,600 Leased 1974 1990
MILWAUKEE, WI:
Northridge 167,400 142,000 Leased 1992 -
Southridge 204,400 163,700 Leased 1992 1996
MADISON, WI:
East Towne 138,400 123,700 Leased 1992 1994
West Towne 139,600 126,100 Leased 1992 -
OMAHA, NE:
Crossroads 190,000 160,800 Leased 1987 -
Oakview 150,000 129,100 Leased 1991 -
Westroads 172,000 142,000 Leased 1968 1994
OTHER IOWA MARKETS:
College Square (Cedar Falls, IA) 83,500 75,800 Leased 1986 1986
Crossroads Center (Fort Dodge, IA) 54,200 48,800 Leased 1979 1994
Kennedy Center (Dubuque, IA) 126,300 107,000 Leased 1968 1993
Marshalltown Plaza
(Marshalltown, IA) 40,000 33,700 Leased 1992 1994
North Grand (Ames, IA) 50,000 43,600 Leased 1987 -
Old Capitol (Iowa City, IA) 60,000 50,800 Leased 1980 -
Southbridge (Mason City, IA) 59,500 51,600 Leased 1984 1994
Westland (West Burlington, IA) 47,000 42,600 Leased 1977 1994
APPROX. APPROX. YEAR RENOVATED
GROSS SELLING OWNED/ OPENED OR OR
STORE LOCATIONS FOOTAGE FOOTAGE LEASED ACQUIRED EXPANDED
_____________________________ _________ _________ _______ _________ _________
YOUNKERS DIVISION (cont.):
OTHER WICONSIN MARKETS:
Downtown (Sheboygan, WI) 136,900 98,800 Leased 1992 -
Downtown (Sturgeon Bay, WI) 57,100 42,000 Leased 1992 -
Edgewater Plaza (Manitowoc, WI) 44,300 40,300 Leased 1992 -
Forest (Fond du Lac, WI) 78,400 71,400 Leased 1992 -
Fox River (Appleton, WI) 113,000 102,600 Leased 1992 -
London Square (Eau Claire, WI) 98,800 91,900 Leased 1992 -
Mariner (Superior, WI) 43,300 40,300 Leased 1992 -
Northway (Marshfield, WI) 44,400 39,700 Leased 1992 -
Pine Tree (Marinette, WI) 43,300 40,200 Leased 1992 -
Port Plaza (Green Bay, WI) 255,000 167,900 Leased 1992 -
Rapids (Wisconsin Rapids, WI) 44,400 40,200 Leased 1992 -
Regency (Racine, WI) 113,600 85,600 Leased 1992 -
Wausau Center (Wausau, WI) 98,900 88,600 Leased 1992 -
MICHIGAN MARKETS:
Bay City (Bay City, MI) 67,700 60,500 Leased 1992 -
Birchwood (Port Huron, MI) 67,900 60,800 Leased 1992 -
Cherryland (Traverse City, MI) 48,800 45,500 Leased 1992 -
Marquette Plaza (Marquette, MI) 44,300 40,100 Leased 1992 -
West Shore (Holland, MI) 67,900 58,200 Leased 1992 -
MINNESOTA:
Oak Park (Austin, MN) 45,000 36,900 Leased 1975 1993
SOUTH DAKOTA:
The Empire Mall (Sioux Falls, SD) 105,000 95,500 Leased 1975 1989
NEBRASKA MARKETS:
Conestoga (Grand Island, NE) 60,000 51,500 Leased 1974 1993
Gateway (Lincoln, NE) 103,000 89,200 Leased 1987 1989
TOTAL YOUNKERS DIVISION
(48 stores) 4,651,100 3,946,500
APPROX. APPROX. YEAR RENOVATED
GROSS SELLING OWNED/ OPENED OR OR
STORE LOCATIONS FOOTAGE FOOTAGE LEASED ACQUIRED EXPANDED
_____________________________ _________ _________ _______ _________ _________
PARISIAN DIVISION:
BIRMINGHAM, AL METROPOLITAN MARKET:
AmSouth-Harbert Center 21,500 15,500 Leased 1933 1989
Eastwood 130,000 85,600 Leased 1969 1990
Five Points West 60,000 46,800 Leased 1963 1992
Riverchase Galleria (Hoover, AL) 200,000 149,200 Owned/ 1986 1995
leased
Vestavia Hills Shopping Center 52,500 41,100 Leased 1965 -
Wildwood Centre (clearance center) 50,000 25,000 Leased 1986 1991
HUNTSVILLE, AL METROPOLITAN MARKET:
Madison Square 115,000 76,700 Leased 1984 -
Parkway City 77,000 66,500 Leased 1976 1986
MONTGOMERY, AL METROPOLITAN MARKET:
Eastdale 59,000 52,300 Leased 1977 -
Montgomery 113,000 77,900 Owned 1988 -
OTHER ALABAMA MARKETS:
Bel Air (Mobile, AL) 122,500 100,300 Leased 1984 1996/97
Regency Square (Florence, AL) 50,000 42,000 Leased 1978 -
River Oaks (Decatur, AL) 90,300 57,300 Leased 1963 1988
University (Tuscaloosa, AL) 77,000 60,300 Leased 1981 1993/94
Wiregrass Commons (Dothan, AL) 65,000 55,100 Owned 1986 -
ATLANTA, GA METROPOLITAN MARKET:
Gwinnett Place 128,000 95,700 Leased 1993 -
Northlake 103,000 74,000 Leased 1994 -
Phipps Plaza 170,000 110,000 Leased 1992 -
Town Center at Cobb 131,000 91,000 Leased 1992 -
OTHER GEORGIA MARKETS:
Macon (Macon, GA) 105,000 78,800 Leased 1997 -
Peachtree (Columbus, GA) 87,600 78,100 Owned 1985 -
Savannah (Savannah, GA) 102,200 73,600 Leased 1991 -
FLORIDA:
Cordova (Pensacola, FL) 75,000 65,000 Owned 1987 -
Tallahassee (Tallahassee, FL) 115,000 80,200 Leased 1992 -
The Avenues (Jacksonville, FL) 116,300 85,700 Leased 1994 -
Seminole Towne Center
(Orlando, FL) 132,000 93,300 Leased 1995 -
APPROX. APPROX. YEAR RENOVATED
GROSS SELLING OWNED/ OPENED OR OR
STORE LOCATIONS FOOTAGE FOOTAGE LEASED ACQUIRED EXPANDED
_____________________________ _________ _________ _______ _________ _________
PARISIAN DIVISION (cont.):
INDIANAPOLIS, IN METROPOLITAN MARKET:
Circle Centre 143,000 91,200 Leased 1995 -
Keystone at the Crossings 128,000 92,700 Leased 1993 -
MICHIGAN:
Laurel Park Place (Livonia, MI) 148,800 106,800 Leased 1994 -
MISSISSIPPI:
Barnes Crossing (Tupelo, MS) 84,000 62,000 Owned 1997 -
CINCINNATI, OH METROPOLITAN MARKET:
Beechmont 133,000 86,400 Leased 1993 -
Forest Fair 144,700 103,000 Leased 1989 -
Kenwood Towne Centre 147,500 100,000 Leased 1993 -
OTHER OHIO MARKETS:
Fairfield Commons (Dayton, OH) 130,000 93,800 Leased 1993 -
COLUMBIA, SC METROPOLITAN MARKET:
Columbiana Centre 95,000 82,000 Leased 1996 -
Richland Fashion 100,000 65,100 Leased 1989 -
OTHER SOUTH CAROLINA MARKETS:
Greenville (Greenville, SC) 120,200 79,800 Leased 1995 -
TENNESSEE:
CoolSprings Galleria
(Nashville, TN) 132,600 95,800 Leased 1994 -
Hamilton Place (Chattanooga, TN) 92,500 63,600 Owned 1987 1996
West Town (Knoxville, TN) 143,300 96,900 Leased 1994 -
TOTAL PARISIAN DIVISION
(40 stores) 4,290,500 3,096,100
APPROX. APPROX. YEAR RENOVATED
GROSS SELLING OWNED/ OPENED OR OR
STORE LOCATIONS FOOTAGE FOOTAGE LEASED ACQUIRED EXPANDED
_____________________________ _________ _________ _______ _________ _________
HERBERGER'S DIVISION:
COLORADO:
Mesa (Grand Junction, CO) 72,300 66,100 Leased 1991 -
ILLINOIS:
Lincoln Square (Urbana, IL) 104,000 86,800 Leased 1994 -
IOWA:
Crossroads (Waterloo, IA) 86,800 73,500 Leased 1989 -
Quincy Place (Ottumwa, IA) 55,300 50,400 Leased 1989 -
MINNESOTA:
Apache Plaza (St. Anthony, MN) 43,100 39,300 Leased 1987 1988
Centre Square (St. Cloud, MN) 93,300 74,400 Owned 1927 1984
Kandi (Willmar, MN) 77,500 70,700 Leased 1981 1992
Marketplatz (New Ulm, MN) 47,300 39,300 Leased 1946 1992
Moorhead Center (Moorhead, MN) 106,200 92,200 Leased 1983 1992
Northbridge (Albert Lea, MN) 64,400 58,100 Leased 1967 1994
Paul Bunyan (Bemidji, MN) 56,400 50,400 Leased 1994 -
River Hills (Mankato, MN) 71,000 63,900 Leased 1991 -
Signal Hills (West St. Paul, MN) 66,000 50,800 Leased 1981 1991
St. Croix (Stillwater, MN) 67,300 55,400 Leased 1990 1994
Thunderbird (Virginia, MN) 66,600 61,900 Leased 1954 1991
Viking Plaza (Alexandria, MN) 70,300 63,600 Leased 1963 1993
Westgate (Brainerd, MN) 61,500 55,600 Leased 1985 1992
Westridge (Fergus Falls, MN) 39,500 35,700 Leased 1978 1992
MONTANA:
Butte Plaza (Butte, MT) 65,000 61,300 Leased 1994 -
Holiday Village (Great Falls, MT) 80,100 66,800 Leased 1976 1991
Holiday Village (Havre, MT) 35,200 32,600 Leased 1980 -
Kalispell Center (Kalispell, MT) 54,000 49,400 Leased 1986 1989
Rimrock (Billings, MT) 41,500 37,900 Leased 1976 -
NEBRASKA:
Hilltop (Kearney, NE) 40,700 36,000 Leased 1984 1987
Imperial (Hastings, NE) 53,000 46,400 Leased 1982 1992
Monument (Scottsbluff, NE) 72,700 66,200 Leased 1986 1993
Sunset Plaza (Norfolk, NE) 77,400 69,000 Leased 1982 1994
The Mall (North Platte, NE) 43,500 37,600 Leased 1982 1985
NORTH DAKOTA:
Dakota Square (Minot, ND) 52,500 47,600 Leased 1980 1988
Kirkwood (Bismarck, ND) 92,500 83,800 Leased 1971 1993
Prairie Hills (Dickinson, ND) 43,000 38,500 Leased 1979 1991
APPROX. APPROX. YEAR RENOVATED
GROSS SELLING OWNED/ OPENED OR OR
STORE LOCATIONS FOOTAGE FOOTAGE LEASED ACQUIRED EXPANDED
_____________________________ _________ _________ _______ _________ _________
HERBERGER'S DIVISION (cont.):
SOUTH DAKOTA:
Lakewood (Aberdeen, SD) 79,700 74,000 Leased 1990 1996
Rushmore (Rapid City, SD) 89,000 82,000 Leased 1978 1992
Watertown Mall (Watertown, SD) 40,300 36,400 Leased 1943 1978
WISCONSIN:
Beaver Dam Mall (Beaver Dam, WI) 35,400 31,000 Leased 1981 -
Cedar (Rice Lake, WI) 54,700 48,500 Leased 1945 1995
The Avenue (Appleton, WI) 120,000 102,600 Leased 1993 -
Valley View (LaCrosse, WI) 41,300 36,400 Leased 1965 1980
WYOMING:
White Mountain (Rock Springs, WY) 37,500 33,900 Leased 1979 -
TOTAL HERBERGER'S DIVISION
(39 stores) 2,497,800 2,206,000
TOTAL COMPANY (175 stores) 16,176,100 13,305,200
Item 3. Legal Proceedings.
The Company is involved in several legal proceedings arising from its
normal business activities, and reserves have been established where
appropriate. Management believes that none of these legal proceedings
will have a material adverse effect on the financial condition, results
of operations, or cash flows of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Executive Officers of the Registrant.
The name, age, and position held with the Company for each of the
executive officers of the Company are set forth below.
Name Age Position
- ----- ----- ---------
Proffitt's, Inc. Corporate Officers:
R. Brad Martin 45 Chairman of the Board of Directors and
Chief Executive Officer
James A. Coggin 54 President and Chief Operating Officer
Robert M. Mosco 47 President and Chief Executive Officer
of Proffitt's Merchandising Group
David W. Baker 60 Senior Vice President of Operations
Julia A. Bentley 38 Senior Vice President of Investor
Relations and Planning and Secretary
Douglas E. Coltharp 35 Executive Vice President and Chief
Financial Officer
Peggy Eskenasi 41 Senior Vice President of Private Label
and Brand Development
Fran U. Jose 36 Senior Vice President of Marketing and
Visual
Brian J. Martin 40 Senior Vice President of Human
Resources and Law and General Counsel
Michael R. Molitor 37 Senior Vice President of Merchandise
Planning and Analysis
James E. VanNoy 57 Senior Vice President of Management
Information Systems
John J. White 46 Senior Vice President of Profit
Improvement and Special Projects
Sharron Williams 47 Senior Vice President and Corporate
General Merchandise Manager of
Cosmetics
Donald E. Wright 39 Senior Vice President of Finance and
Accounting
Proffitt's Division Officers:
Position open -- President and Chief Executive Officer
A. Coleman Piper 50 Executive Vice President of Stores
McRae's Division Officers:
Gary L. Howard 54 President and Chief Executive Officer
Robert Oliver 62 Executive Vice President of Stores
Younkers Division Officers:
Position open -- President and Chief Executive Officer
Toni E. Browning 40 Senior Vice President of Stores
Parisian Division Officers:
Donald E. Hess 48 Division Chairman
William D. Cappiello 53 President and Chief Executive Officer
Howard Finkelstein 53 Executive Vice President of Merchandising
Jim W. Adams 53 Executive Vice President of Stores
Herberger's Division Officers:
Frank E. Kulp, III 53 President and Chief Executive Officer
John B. Brownson 44 Executive Vice President and Chief
Operating Officer
Gary L. Pralle 44 Vice President of Stores
Proffitt's, Inc. Corporate Officers:
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.
James A. Coggin was named President and Chief Operating Officer of
Proffitt's in March 1995 and served as Executive Vice President and
Chief Administrative Officer of Proffitt's from March 1994 to March
1995. From June 1978 to March 1994, Mr. Coggin served as Executive
Vice President and Chief Administrative Officer of McRae's, Inc. Mr.
Coggin joined McRae's, Inc. in 1971.
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 the Younkers Division of Proffitt's, Inc. Mr. Mosco served
as President and Chief Operating Officer of Younkers, Inc. between 1992
and January 1996. From 1989 to 1992, he held the position of Executive
Vice President of Merchandising and Marketing for Younkers, Inc. Mr.
Mosco joined Younkers, Inc. in 1987. Mr. Mosco began his retail career
with Gimbel's and later worked for Rich's.
David W. Baker was named Senior Vice President of Operations for
Proffitt's in March 1994. Mr. Baker joined McRae's, Inc. in February
1985 and served as Senior Vice President of Operations until March 1994.
Julia A. Bentley was named Senior Vice President of Investor Relations
and Planning and Secretary of Proffitt's 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 of the Company. Ms. Bentley
is a Certified Public Accountant and joined Proffitt's in 1987 after
several years with an international public accounting firm.
Douglas E. Coltharp joined Proffitt's 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.
Peggy Eskenasi joined Proffitt's in February 1997 as Senior Vice
President of Private Label and Brand Development. Ms. Eskenasi was with
Frederick Atkins, Inc., a buying cooperative based in New York, between
1980 and January 1997, where she held a variety of merchandising
positions, including Senior Vice President and General Merchandise
Manager of Accessories, Intimate Apparel, Children's, Cosmetics, and
Shoes.
Fran U. Jose was named Senior Vice President of Marketing and Visual in
February 1997. Mr. Jose served as Vice President of Merchandising
Strategies at the Younkers Division between June 1996 and January 1997.
Prior to that, he held various merchandising and financial positions
with Saks Fifth Avenue and May Department Stores Company.
Brian J. Martin was promoted to Senior Vice President of Human Resources
and Law and General Counsel in August 1995 and served as Senior Vice
President and General Counsel of Proffitt's from March 1995 to August
1995. He joined Proffitt's 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 and Thornburg. Mr. Martin
served as Assistant Solicitor General of the United States between
January 1988 and June 1990.
Michael R. Molitor was appointed Senior Vice President of Merchandise
Planning and Analysis in February 1996. Mr. Molitor served as Vice
President of Merchandise Strategies at Younkers, Inc. between March 1994
and January 1996. Mr. Molitor held various merchandising and financial
positions with Saks Fifth Avenue between September 1993 and February
1994 and with May Department Stores Company between January 1988 and
August 1993.
James E. VanNoy was named Senior Vice President of Management
Information Systems in February 1996. He served as Senior Vice
President and Chief Information Officer of Proffitt's from March 1994 to
February 1996. Mr. VanNoy joined McRae's, Inc. in February 1980 as
Director of Management Information Systems and was promoted to Vice
President of Management Information Systems in February 1982.
John J. White was named Senior Vice President of Profit Improvement and
Special Projects for Proffitt's in February 1996. Mr. White served as
Vice President and Controller of Younkers, Inc. from July 1995 to
January 1996. Prior to that, Mr. White served as Vice President and
Controller form January 1987 to December 1994 with Broadway Stores. Mr.
White obtained previous experience with Allied Stores and May Department
Stores Company.
Sharron Williams was promoted to Senior Vice President and Corporate
General Merchandise Manager of Cosmetics in February 1997. Ms. Williams
most recently held the position of Senior Vice President and General
Merchandise Manager of Cosmetics, Fashion Accessories, Intimate Apparel,
Children's, and Shoes for the McRae's Division of Proffitt's, Inc. She
joined McRae's in 1971.
Donald E. Wright was named to the post of Senior Vice President of
Finance and Accounting for the Company in April 1997. 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.
Proffitt's Division Officers:
A. Coleman Piper was named Executive Vice President of Stores for the
Proffitt's Division of Proffitt's, Inc. in March 1995. He served with
Proffitt's, Inc. as Executive Vice President of Human Resources and
Proffitt's Division Stores from September 1994 to March 1995 and
Executive Vice President of Operations and Real Estate from March 1994
to September 1994. He has been with Proffitt's since 1972 and
previously served as its Vice President of Operations.
McRae's Division Officers:
Gary L. Howard was promoted to President and Chief Executive Officer of
the McRae's Division of Proffitt's, Inc. in February 1996 and served as
President of the McRae's Division between March 1995 and January 1996.
Between March 1994 and March 1995, Mr. Howard served as Executive Vice
President for Merchandising and Marketing for the McRae's Division. Mr.
Howard joined McRae's, Inc. in November 1993 as Executive Vice President
of Merchandising and Marketing. Mr. Howard has over 30 years of prior
experience in the retail industry, including service as Senior Vice
President and General Merchandise Manager of Maas Brothers and Woodward
and Lothrop.
Robert Oliver was promoted to Executive Vice President of Stores for the
McRae's Division in March 1995. Mr. Oliver served as Vice President of
Stores for the McRae's Division from March 1994 to March 1995. He
joined McRae's, Inc. in 1991 as Vice President of Stores after gaining
33 years of merchandising and store management experience with Foley's.
Younkers Division Officers:
Toni E. Browning was named Senior Vice President of Stores in February
1996 for the Younkers Division of Proffitt's, Inc. She served as Senior
Vice President of Stores for Younkers, Inc. from February 1994 to
January 1996. She joined Younkers, Inc. in February 1993 as Vice
President, Regional Director of the Western Stores and was promoted to
Senior Vice President of Southern Stores that same year. Ms. Browning
was in store management with Dayton Hudson Department stores from 1989
to January 1993 and gained prior experience with Federated-Allied
Stores.
Parisian Division Officers:
Donald E. Hess was named Chairman of the Parisian Division of
Proffitt's, Inc. in April 1997 and became a Director of Proffitt's in
October 1996. He served as President and Chief Executive Officer of the
Parisian Division from October 1996 to April 1997. Mr. Hess served as
President of Parisian, Inc. between 1976 and October 1996 and as Chief
Executive Officer between 1986 and October 1996.
William D. Cappiello was named President and Chief Executive Officer of
the Parisian Division in April 1997. Mr. Cappiello held a variety of
management and executive positions in both the merchandising and stores
areas with R.H. Macy & Co. between 1971 and April 1997. Between June
1993 and April 1997, he served as President of Merchandising for Macy's
West, Inc., and between August 1985 and May 1993, he was Director of
Stores for Macy's West.
Howard Finkelstein was named Executive Vice President of Merchandising
for the Parisian Division in October 1996. Mr. Finkelstein served as
Senior Vice President of Merchandising for Parisian, Inc. from June 1994
to October 1996. From February 1992 until June 1994, he was Senior Vice
President and General Merchandise Manager, and from 1983 to February
1992, he was Vice President and General Merchandise Manager. He joined
Parisian, Inc. in 1983.
Jim W. Adams was named Executive Vice President of Stores for the
Parisian Division in October 1996. Between February 1992 and October
1996, Mr. Adams served as Senior Vice President of Stores for Parisian,
Inc. From February 1986 to February 1992, he was Vice President of
Stores and Sales Promotion. He joined Parisian, Inc. in 1977.
Herberger's Division Officers:
Frank E. Kulp, III was named President and Chief Executive Officer of
the Herberger's Division of Proffitt's, Inc. in March 1997. Between
November 1995 and March 1997, he was a Senior Vice President and General
Merchandise Manager for Younkers. Prior to that, Mr. Kulp held the post
of President and Chief Operating Officer of Lamonts, a department store
chain headquartered in Bellevue, Washington. He also held previous
merchandising management positions with Donaldson's and Lazarus.
John B. Brownson was named Executive Vice President and Chief Operating
Officer of the Herberger's Division in March 1997. Mr. Brownson joined
Herberger's in 1992 as Vice President of Finance and Operations and was
promoted to Executive Vice President and Chief Financial Officer in
1995. Prior to joining Herberger's, he held various financial and
operations management positions with Highland Superstores, Inc. and
Donaldson's.
Gary L. Pralle was named Senior Vice President of Stores for the
Herberger's Division in February 1997. He served as Senior Vice
President of Stores for Herberger's, Inc. between 1993 and January 1997,
and prior to that, held various other store positions. He joined
Herberger's in 1971.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
The information set forth under the caption "Market Information,"
appearing on page 34 of the Proffitt's, Inc. Annual Report to
Shareholders for the Fiscal Year Ended February 1, 1997 (the "Annual
Report"), is incorporated herein by reference.
Item 6. Selected Financial Data.
The information set forth under the caption "Five-Year Financial
Summary" appearing on page 7 of the Annual Report is incorporated herein
by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information set forth under the caption "Management's Discussion and
Analysis" appearing on pages 8 through 14 of the Annual Report is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The consolidated Financial Statements and the Report of Independent
Accountants appearing on pages 15 through 33 of the Annual Report are
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information set forth under the caption "Election of Directors"
contained on pages 8 through 10 of the Proffitt's, Inc. Proxy Statement
dated May 1, 1997 (the "Proxy Statement"), with respect to Directors of
the Company, is incorporated herein by reference.
The information required under this item with respect to the Company's
Executive Officers is incorporated by reference from Part I of this
report under "Executive Officers of the Registrant."
The information set forth under the caption "Section 16(a) of the
Securities Exchange Act of 1934" contained on page 17 of the Proxy
Statement, with respect to Director and Executive Officer compliance
with Section 16(a), is incorporated herein by reference.
Item 11. Executive Compensation.
The information set forth under the captions "Directors' Fees" and
"Executive Compensation" contained on pages 10 and 12 through 13,
respectively, of the Proxy Statement with respect to executive
compensation is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information set forth under the caption "Outstanding Voting
Securities" contained on pages 4 through 5 of the Proxy Statement with
respect to security ownership of certain beneficial owners and
management is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information set forth under the captions "Further Information
Concerning Directors" and "Certain Transactions" contained on pages 10
through 11 and 17, respectively, of the Proxy Statement with respect to
certain relationships and related transactions is incorporated herein by
reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.
(a) (1) and (2) - The response to this portion of Item 14 is submitted
as a separate section of this report.
(3) The response to this portion of Item 14 is submitted as a
separate section of this report.
(b) Reports on Form 8-K filed during the fourth quarter.
A report on Form 8-K was filed with the Commission on December 17,
1996 regarding the acquisition of Parisian, Inc. by Proffitt's,
Inc.
A report on Form 8-K was filed with the Commission on February 10,
1997 regarding the merger of G.R. Herberger's, Inc. and Proffitt's,
Inc.
A report on Form 8-K was filed with the Commission on April 1, 1997
regarding consolidated sales and net income for February 1997.
(c) Exhibits The response to this portion of Item 14 is submitted as
a separate section of this report.
(d) Financial statement schedules The response to this portion of
Item 14 is submitted as a separate section of this report.
FORM 10-K ITEM 14(a)(1) AND (2) AND (d)
PROFFITT'S, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as a part of this report:
(1) Consolidated Financial Statements
The following consolidated financial statements and Report of
Independent Accountants of Proffitt's, Inc. and subsidiaries,
included on pages 15 through 33 of the Proffitt's, Inc. Annual
Report to Shareholders for the Fiscal Year Ended February 1, 1997,
are incorporated by reference in Item 8:
Consolidated Balance Sheets as of February 1, 1997 and February 3,
1996
Consolidated Statements of Income for Fiscal Years Ended February
1, 1997, February 3, 1996, and January 28, 1995
Consolidated Statements of Shareholders' Equity for Fiscal Years
Ended February 1, 1997, February 3, 1996, and January 28, 1995
Consolidated Statements of Cash Flows for Fiscal Years Ended
February 1, 1997, February 3, 1996, and January 28, 1995
Notes to Consolidated Financial Statements
Reports of Independent Accountants
Note: The first paragraph of Note 1 to the Consolidated Financial
Statements as presented on page 19 of the Annual Report is amended
to read as follows:
ORGANIZATION
The Company is a retail organization operating
regional department store divisions under the store
names of Proffitt's, McRae's, Younkers, Parsian,
and Herberger's. The Company's fiscal year ends on
Saturday nearest January 31. Years 1996 and 1994
consisted of 52 weeks and ended 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.
Note: The first and second paragraphs of Note 4 to the
Consolidated Financial Statements as presented on page 23 of the
Annual Report are amended to read as follows:
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 program by selling a revolving
undivided ownership interest in its accounts
receivable. The agreement expires in 2000 and
provides for the sale 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.
(2)Schedules to Financial Statements
The following consolidated financial statement schedule of Proffitt's,
Inc. and subsidiaries and the related report of independent
accountants are included in item 14(d):
Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and
therefore have been omitted.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Proffitt's, Inc.
Date: April 28, 1997
/s/ Douglas E. Coltharp
-------------------------
Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities on the dates indicated.
/s/ R. Brad Martin
-------------------------
R. Brad Martin
Chairman of the Board and
Chief Executive Officer
/s/ James A. Coggin
-------------------------
James A. Coggin
President and Chief
Operating Officer
/s/ Bernard E. Bernstein
-------------------------
Bernard E. Bernstein
Director
/s/ Edmond D. Cicala
-------------------------
Edmond D. Cicala
Director
/s/ Ronald de Waal
-------------------------
Ronald de Waal
Director
/s/ Gerard K. Donnelly
-------------------------
Gerard K. Donnelly
Director
/s/ Donald F. Dunn
-------------------------
Donald F. Dunn
Director
/s/ W. Thomas Gould
-------------------------
W. Thomas Gould
Director
/s/ Michael S. Gross
-------------------------
Michael S. Gross
Director
/s/ Donald E. Hess
-------------------------
Donald E. Hess
Director
/s/ G. David Hurd
-------------------------
G. David Hurd
Director
/s/ Richard D. McRae
-------------------------
Richard D. McRae
Director
/s/ C. Warren Neel
-------------------------
C. Warren Neel
Director
/s/ Harwell W. Proffitt
-------------------------
Harwell W. Proffitt
Director
/s/ Marguerite W. Sallee
-------------------------
Marguerite W. Sallee
Director
/s/ Gerald Tsai, Jr.
-------------------------
Gerald Tsai, Jr.
Director
/s/ Julia A. Bentley
-------------------------
Julia A. Bentley
Senior Vice President
and Secretary
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.
Des Moines, Iowa
March 3, 1995
Report of Independent Accountants
To the Directors and Stockholders
Profitt's, Inc.
Jackson, Mississippi
Our report on the consolidated financial statements of Profitt's, Inc.
and Subsidiaries has been incorporated by reference in this Form 10-K
from page 33 of the 1996 Annual Report to Stockholders of Proffitt's,
Inc. In connection with our audits of such financial statements, we have
also audited the related financial statement schedule listed in the
index on page 34 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in the basic financial statements taken as a whole, presents
fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
March 20, 1997
PROFFITT'S, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
</TABLE>
<TABLE>
<CAPTION>
Balance
Balance at Charged to Charged to at end
beginning cost and other Deduct- of
Description of period expenses accounts ions(b) period
- ------------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Year ended February 1, 1997:
Allowance for
doubtful accounts 6,601,082 13,430,345 4,057,719 (c) (14,548,414) 9,540,732
Year ended February 3, 1996:
Allowance for doubtful
accounts 4,723,170 8,723,463 0 (6,845,551) 6,601,082
Year ended January 28, 1995:
Allowance for doubtful
accounts 3,255,043 4,956,351 1,431,988 (a) (4,920,212) 4,723,170
(a) Balance in account of company (McRae's, Inc.) acquired at March 31, 1994.
(b) Uncollectible accounts written off, net of recoveries.
(c) Balance in account of company (Parisian, Inc.) acquired at October 11, 1996.
</TABLE>
FORM 10-K -- ITEM 14(a)(3) AND 14(c)
PROFFITT'S, INC. AND SUBSIDIARIES
EXHIBITS
Exhibit
No. Description
------ --------------
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)
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)
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
10.8 * Transfer and Administration Agreement dated by and
between Enterprise Funding Corporation and Proffitt's
Credit Corporation dated January 15, 1997
10.9 * Amendment to Transfer and Administration Agreement by and
between Enterprise Funding Corporation and Proffitt's
Credit Corporation dated January 30, 1997
10.10 * Receivables Purchase Agreement between Proffitt's, Inc.
and Proffitt's Credit Corporation dated January 15, 1997
10.11 * Receivables Purchase Agreement between McRae's, Inc. and
Proffitt's Credit Corporation dated January 15, 1997
10.12 * Receivables Purchase Agreement between Parisian Services,
Inc. and Parisian, Inc. and Proffitt's Credit Corporation
dated January 15, 1997
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)
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
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)
MANAGEMENT CONTRACTS, COMPENSATORY PLANS, OR ARRANGEMENTS, ETC.
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
10.44 * Third Amendment and Restatement of The Parisian, Inc.
Stock Option Plan for Officers
10.45 * First Amendment and Restatement of The Parisian, Inc.
Management Incentive Plan
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
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)
10.58 * Form of Amendment to Employment Agreement by and between
Proffitt's, Inc. and W. Thomas Gould dated February 13,
1997
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
10.72 * Form of Employment Agreement by and between Proffitt's,
Inc. and Donald E. Wright dated April 1, 1997
10.73 * Form of Employment Agreement by and between Proffitt's,
Inc. and William D. Cappiello dated April 3, 1997
11.1 * Statement re: computation of earnings per share
13.1 * Annual Report to Shareholders for the fiscal year ended
February 1, 1997 (not to be deemed filed except for those
portions thereof which are incorporated herein by reference
in this filing)
21.1 * Subsidiaries of the registrant
23.1 * Consents of Independent Accountants
27.1 * Financial Data Schedule
__________________________________________________
* Previously unfiled documents are noted with an asterisk.
(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.
(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.
AMENDMENT NO. 1 TO CREDIT FACILITIES
AND REIMBURSEMENT AGREEMENT
THIS AMENDMENT NO. 1 TO CREDIT FACILITIES AND REIMBURSEMENT
AGREEMENT (this "Agreement") is made and entered into as of this 14th
day of January, 1997 among:
PROFFITT'S, INC., a Tennessee corporation having a principal place
of business in Alcoa, Tennessee (the "Borrower"); and
Each lender executing and delivering a signature page hereto
(hereinafter such lenders may be referred to individually as a "Lender"
or collectively as the "Lenders"); and
NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION, a national banking
association organized and existing under the laws of the United States
of America ("NationsBank"), in its capacity as agent for the Lenders (in
such capacity, the "Agent");
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders and the Agent have entered into
a Credit Facilities and Reimbursement Agreement dated as of October 11,
1996 (the "Credit Agreement"), pursuant to which the Lenders agreed to
make certain Advances to the Borrower;
WHEREAS, the Borrower has requested that the Credit Agreement be
amended in the manner set forth herein and the Agent and the Lenders are
willing to agree to such amendment;
NOW, THEREFORE, in consideration of the mutual covenants and the
fulfillment of the conditions set forth herein, the parties hereto do
hereby agree as follows:
1. Definitions. Any capitalized terms used herein without
definition shall have the meaning set forth in the Credit Agreement.
2. Amendment. Subject to the terms and conditions set forth
herein, and in accordance with Section 11.06 of the Credit Agreement,
the Credit Agreement is hereby amended as follows:
Section 8.09 is amended to add a new subsection (ix) thereto
which shall read in its entirety as follows:
"(ix) wholly owned Subsidiaries of the Borrower or
its Subsidiaries created and operating for the exclusive
purpose of conducting the accounts receivable securitization
of the Borrower and its Subsidiaries in the ordinary course of
business and consistent with past practice not to exceed
$30,000,000; provided further, investments made in such
Subsidiaries on or prior to the date hereof and the retained
earnings of such Subsidiaries as of the date hereof may be
transferred between such Subsidiaries or between the parent
and such Subsidiary without limitation."
3. Representations and Warranties. In order to induce the Agent
and the Lenders to enter into this Agreement, the Borrower represents
and warrants to the Agent and the Lenders as follows:
(a) The representations and warranties made by Borrower in
Article VI of the Credit Agreement are true and correct on and as
of the date hereof;
(b) There has been no material adverse change in the
condition, financial or otherwise, of the Borrower and its
Subsidiaries, taken as a whole, since the most recent financial
reports of the Borrower dated November 2, 1996 received by the
Agent and the Lenders under Section 7.01(b) of the Credit
Agreement, other than changes in the ordinary course of business;
(c) The business and properties of the Borrower and its
Subsidiaries, taken as a whole, are not, and since the most recent
financial report of the Borrower and its Subsidiaries dated
November 2, 1996 received by the Agent and the Lenders under
Section 7.01(b) of the Credit Agreement, have not been adversely
affected in any substantial way as the result of any fire,
explosion, earthquake, accident, strike, lockout, combination of
workers, flood, embargo, riot, activities of armed forces, war or
acts of God or the public enemy, or cancellation or loss of any
major contracts; and
(d) No event has occurred and is continuing which
constitutes, and no condition exists which upon the consummation of
the transaction contemplated hereby would constitute, a Default or
an Event of Default on the part of the Borrower under the Credit
Agreement.
4. Conditions Precedent. The effectiveness of this Agreement is
subject to the following:
(a) The Agent shall have received:
(i) eighteen (18) counterparts of this Agreement duly
executed by the Required Lenders; and
(ii) copies of all additional agreements, instruments
and documents which the Agent may reasonably request, such
documents, when appropriate, to be certified by appropriate
governmental authorities.
(b) All proceedings of the Borrower relating to the matters
provided for herein shall be satisfactory to the Lenders, the Agent
and their counsel.
5. Entire Agreement. This Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to the
subject matter hereof and supersedes any prior negotiations and
agreements among the parties relative to such subject matter. No
promise, condition, representation or warranty, express or implied, not
herein set forth shall bind any party hereto, and not one of them has
relied on any such promise, condition, representation or warranty. Each
of the parties hereto acknowledges that, except as in this Agreement
otherwise expressly stated, no representations, warranties or
commitments, express or implied, have been made by any party to the
other. None of the terms or conditions of this Agreement may be
changed, modified, waived or canceled orally or otherwise, except by
writing, signed by all the parties hereto, specifying such change,
modification, waiver or cancellation of such terms or conditions, or of
any proceeding or succeeding breach thereof.
6. Full Force and Effect of Agreement. Except as hereby
specifically amended, modified, waived or supplemented, the Credit
Agreement and all other Loan Documents are hereby confirmed and ratified
in all respects and shall remain in full force and effect according to
their respective terms.
7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument.
8. Governing Law. This Amendment Agreement shall in all respects
be governed by the laws and judicial decisions of the state of
Tennessee.
9. Enforceability. Should any one or more of the provisions of this
Agreement be determined to be illegal or unenforceable as to one or more
of the parties hereto, all other provisions nevertheless shall remain
effective and binding on the parties hereto.
10. Credit Agreement. All references in any of the Loan Documents
to the Credit Agreement shall mean the Credit Agreement as amended
hereby.
11. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of each of the Borrower, the Lenders and the Agent
and their respective successors, assigns and legal representatives;
provided, however, that the Borrower, without the prior consent of the
Agent, may not assign any rights, powers, duties or obligations
hereunder.
12. Consent of Guarantors. Each of the Guarantors by their execution
and delivery hereof (i) consent and agree to the amendments to the
Credit Agreement set forth herein and (ii) reaffirm their obligations
set forth in the Guaranty.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers, all as of the day
and year first above written.
PROFFITT'S, INC.
By: _______________________________
Title: Chief Financial Officer and
Executive Vice President
ATTEST:
- ------------------------
Asst. Secretary
(Seal)
Agent:
NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION,
as Agent for the Lenders
By: _________________________
Title: Vice President
<PAGE>
Lenders:
NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION
By: __________________________
Title: _______ Vice President
NATIONAL CITY BANK, KENTUCKY
By: __________________________
Title: __________ Vice President
SOUTHTRUST BANK OF ALABAMA, N.A.
By: __________________________
Title: ________________________
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
Cayman Islands Branch
By: __________________________
Title: ________________________
By: __________________________
Title: ________________________
DEPOSIT GUARANTY NATIONAL BANK
By: __________________________
Title: Senior Vice President
FIRST TENNESSEE BANK NATIONAL ASSOCIATION
By: __________________________
Title: Senior Vice President
THE BANK OF NOVA SCOTIA
By: __________________________
Title: Relationship Manager
AMSOUTH BANK OF ALABAMA
By: __________________________
Title: Vice President
BANK OF AMERICA ILLINOIS
By: __________________________
Title: Vice President
HIBERNIA NATIONAL BANK
By: __________________________
Title: National Accounts Representative
FIRST AMERICAN NATIONAL BANK
By: __________________________
Title: Vice President
NORWEST BANK IOWA, N.A.
By: __________________________
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: __________________________
Title: Managing Director
CREDIT LYONNAIS ATLANTA AGENCY
By: __________________________
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By:_______________________________
Title: Senior Vice President
Acknowledged, agreed and consented to, this the _____ day of January,
1996.
PROFFITT'S INVESTMENTS, INC.
PDS AGENCY, INC.
McRAE'S, INC.
McRAE'S OF ALABAMA, INC.
YOUNKERS, INC.
PARISIAN, INC.
PROFFITT'S OF TRI-CITIES, INC.
PARISIAN OF TENNESSEE, INC.
PARISIAN MANAGEMENT CO.
HESS SPECIALTY DEPARTMENT
STORE, LLC
By:
________________________
Name: Douglas E. Cotharp
Nations Bank
600 Peachtree Street, N.E.
21st Floor
Atlanta, GA 30308-2213
NATIONS BANK
February 24, 1997
Proffitt's, Inc.
3455 Highway 80 West
Jackson, Mississippi 39209
Attention: Mr. Douglas E. Coltharp
Re: $275,000,000 Credit Facilities and Reimbursement Agreement among
NationsBank of Texas, National Association, as Agent, the
Lenders party thereto and Proffitt's, Inc.
Dear Ladies and Gentlemen:
Reference is hereby made to that certain Credit Facilities and
Reimbursement Agreement dated as of October 11, 1996, as amended by that
certain Amendment No. 1 to Credit Facilities and Reimbursement Agreement
dated as of January 14, 1997 (the "Credit Agreement") by and among
Proffitt's, Inc. (the "Borrower"), NationsBank of Texas, National
Association, as Agent (the "Agent"), and the Lenders party thereto (the
"Lenders"). Capitalized terms not otherwise defined herein shall have
the meanings ascribed to such terms in the Credit Agreement.
As set forth in that certain request letter dated February 11, 1997 from
Mr. Douglas E. Coltharp (the "Request Letter"), a copy of which is
attached hereto, the Borrower is considering selling seven (7) Virginia
based Proffitt's division stores to Dillard Department Stores, Inc. The
proposed sale is only for the fixed assets of such stores. The Borrower
warrants that the representations set forth in the Request Letter are
true and accurate and further acknowledges that the Agent and Lenders
are each relying on such representations.
Section 2.09(b) of the Credit Agreement requires that Net Proceeds in
excess of $10,000,000 during any consecutive twelve (12) month period be
used to reduce permanently the Total Revolving Credit Commitment. The
Borrower estimates the excess Net Proceeds will be approximately
$7,950,000 and request that the Agent and Lenders to waive the
requirements of Section 2.09(b) as it pertains to the sale of the fixed
assets of the seven (7) Virginia stores and the application of excess
Net Proceeds as a permanent reduction to the Total Revolving Credit
Commitment.
Pursuant to the request of the Borrower as set forth in the Request
Letter and in accordance with Section 11.06 of the Credit Agreement, the
Agent and the Lenders hereby waive the requirements of Section 2.09(b)
of the Credit Agreement solely as it pertains to the application of
excess Net Proceeds from the sale of the fixed assets of the seven (7)
Virginia stores and further agree that none of the sale proceeds from
the sale of the fixed assets of the seven (7) Virginia stores shall
count against the $10,000,000 Net Proceeds threshold set forth in
Section 2.09(b) as measured during any twelve (12) month period which
includes the date on which such sale occurs; provided, however, nothing
contained herein shall be deemed a future waiver of Section 2.09(b) or
a waiver of any other term or provision of the Credit Agreement or any
other Loan Document.
The Borrower hereby acknowledges that the waivers contained in this
letter are granted by the Agent and the Lenders only for the limited
purpose set forth herein and each term and provision of the Credit
Agreement continues in full force and effect. The waivers are granted
only for the specific instance specified herein and in no manner creates
a course of dealing or otherwise impairs the further ability of the
Agent or the Lenders to declare a default under or otherwise enforce the
terms of the Credit Agreement.
None of the terms or conditions of this Letter Agreement may be changed,
modified, waived, or canceled, except by writing signed by all the
parties hereto, specifying such change, modification, waiver, or
cancellation. Except as otherwise specifically set forth herein, the
Credit Agreement and all the other Loan Documents are hereby confirmed
and ratified in all respects and shall remain in full force and effect
according to their respective terms.
This Letter Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original as against any party
whose signature appears thereon, and all of which shall together
constitute one instrument.
Sincerely yours,
Kathryn W. Robinson
Senior Vice President
CONSENT TO
this 28th day of February, 1997
Agent:
NATIONSBANK OF TEXAS, NATIONAL
ASSOCIATION, as Agent for the Lenders
By:
------------------------
Kathryn W. Robinson
Lenders:
NATIONSBANK OF TEXAS, NATIONAL
ASSOCIATION
By:
--------------------------
Title: Senior Vice President
NATIONAL CITY BANK, KENTUCKY
By:
---------------------------
Title: Vice President
SOUTHTRUST BANK OF ALABAMA, N.A.
By:
---------------------------
Title: Vice President
DG BANK DEUTSCHE GENOSSENSCHAFTBANK
Cayman Islands Branch
By:
----------------------------
Title: Senior Vice President
By:
----------------------------
Title: Assistant Vice President
DEPOSIT GUARANTY NATIONAL BANK
By:
----------------------------
Title: Senior Vice President
FIRST TENNESSEE BANK NATIONAL
ASSOCIATION
By:
----------------------------
Title: Senior Vice President
THE BANK OF NOVA SCOTIA
By:
----------------------------
Title: Relationship Manager
AMSOUTH BANK OF ALABAMA
By:
----------------------------
Title: Vice President
BANK OF AMERICA ILLINOIS
By:
----------------------------
Title: Vice President
HIBERNIA NATIONAL BANK
By:
----------------------------
Title: National Accounts Representative
FIRST AMERICAN NATIONAL BANK
By:
-----------------------------
Title: Vice President
NORWEST BANK IOWA, N.A.
By:
-----------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By:
----------------------------
Title: Managing Director
CREDIT LYONNAIS ATLANTA AGENCY
By:
----------------------------
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By:
----------------------------
Title: Senior Vice President
Acknowledged, agreed and consented to, this the 28th day of February,
1997.
Borrower:
PROFFITT'S, INC.
By:__________________________
Name:________________________
Title:_________________________
Guarantors:
McRAE'S, INC.
McRAE'S OF ALABAMA, INC.
YOUNKERS, INC.
PARISIAN, INC.
PROFFITT'S OF TRI-CITIES, INC.
McRAE'S STORES PARTNERSHIP
G.R. HERBEGERS, INC.
By: ________________________________
Name:________________________________
Title: ______________________________
AMENDMENT TO YOUNKERS, INC.
DEFERRED COMPENSATION AGREEMENT
It is agreed that the distribution provisions of each of the Deferred
Compensation Agreements between Younkers, Inc. ("Younkers") and W.
Thomas Gould (the "Employee"), dated June 10, 1985, January 1, 1987,
January 1, 1988 and December 28, 1988, as amended effective September
30, 1991 (the "1991 Amendment"), are hereby amended effective February
13, 1997, as follows:
1. The first sentence of Paragraph 2 (a) of the 1991 Amendment is
amended to read in its entirety as follows:
(a) Following termination of the services of the Employee with
Proffitt's, Inc. ("Proffitt's) for any reason (including but not
limited to death, total and limited disability, retirement and
voluntary termination as an employee), Proffitt's shall distribute to
Employee or his beneficiary(ies), pursuant to paragraph (b) below,
shares of Proffitt's stock represented by the units in said Stock
Account, together with any assets credited to the Cash Account
(including interest).
2. Paragraph 2 (b) of the 1991 Amendment is amended to read in its
entirety as follows:
(b) Upon the first to occur of the Employee's termination of
employment, death or total and permanent disability, all benefits
payable hereunder (including without limitation, all interest credits
thereof) shall be paid on the first business day in January of the
year immediately following such event.
IN WITNESS WHEREOF, the parties have execute this Amendment on the
date and year first above written.
PROFFITT'S, INC.
By: __________________________
R. Brad Martin
Chairman of the Board of
Directors and Chief
Executive Officer
EXECUTIVE
____________________________
W. Thomas Gould
X:\WPDATA\JAS\PROFFITT\SECURITI\10-K.497\EX-10-7.ASC
=====================================================================
TRANSFER AND ADMINISTRATION AGREEMENT
between
ENTERPRISE FUNDING CORPORATION,
as Company
and
PROFFITT'S CREDIT CORPORATION
as Transferor
and
McRAE'S, INC.
as Servicer
and
PROFFITT'S, INC.
as Servicer Guarantor
and
NATIONSBANK, N.A.
as Agent and Bank Investor
Dated as of January 15, 1997
======================================================================
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
SECTION 1.1. Certain Defined Terms . . . . . . . . . . . . . . . . .1
SECTION 1.2. Other Terms . . . . . . . . . . . . . . . . . . . . . 29
SECTION 1.3. Computation of Time Periods . . . . . . . . . . . . . 29
ARTICLE II
PURCHASES AND SETTLEMENTS. . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.1. Facility. . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 2.2. Transfers; Certificates; Eligible Receivables . . . . 30
SECTION 2.3. Fundings. . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.4. Carrying Costs, Fees and Other Costs and Expenses . . 38
SECTION 2.5. Allocations of Collections; Non-Liquidation
Settlement and Reinvestment Procedures; Servicer
Advances. . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 2.6. Liquidation Settlement Procedures. . . . . . . . . . . 42
SECTION 2.7. Fees. . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 2.8. Protection of Ownership Interest of the Company and
the Bank Investors. . . . . . . . . . . . . . . . . . 43
SECTION 2.9. Deemed Collections; Application of Payments . . . . . 45
SECTION 2.10. Payments and Computations, Etc. . . . . . . . . . . . 46
SECTION 2.11. Reports.. . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 2.12. Collection Account. . . . . . . . . . . . . . . . . . 47
SECTION 2.13. Sharing of Setoff . . . . . . . . . . . . . . . . . . 48
SECTION 2.14. Right of Setoff . . . . . . . . . . . . . . . . . . . 49
ARTICLE III
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 50
SECTION 3.1. Representations and Warranties of the Transferor. . . 50
SECTION 3.2. Representations and Warranties of the Servicer. . . . 55
SECTION 3.3. Reaffirmation of Representations and Warranties by
the Transferor and Servicer . . . . . . . . . . . . . 56
ARTICLE IV
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 4.1. Conditions to Closing.. . . . . . . . . . . . . . . . 58
ARTICLE V
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 5.1. Affirmative Covenants of Transferor . . . . . . . . . 62
SECTION 5.2. Negative Covenants of the Transferor. . . . . . . . . 69
SECTION 5.3. Minimum Net Worth of Transferor . . . . . . . . . . . 73
SECTION 5.4. Covenants of the Servicer . . . . . . . . . . . . . . 73
ARTICLE VI
ADMINISTRATION AND COLLECTIONS . . . . . . . . . . . . . . . . . . . 77
SECTION 6.1. Appointment of Servicer . . . . . . . . . . . . . . . 77
SECTION 6.2. Duties of Servicer. . . . . . . . . . . . . . . . . . 77
SECTION 6.3. Rights After Designation of New Servicer. . . . . . . 49
SECTION 6.4. Servicer Default. . . . . . . . . . . . . . . . . . . 80
SECTION 6.5. Responsibilities of the Transferor and the
Designated Sellers. . . . . . . . . . . . . . . . . . 82
ARTICLE VII
TERMINATION EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . 83
SECTION 7.1. Termination Events. . . . . . . . . . . . . . . . . . 83
SECTION 7.2. Termination . . . . . . . . . . . . . . . . . . . . . 85
ARTICLE VIII
INDEMNIFICATION; EXPENSES; RELATED MATTERS . . . . . . . . . . . . . 86
SECTION 8.1. Indemnities by the Transferor . . . . . . . . . . . . 86
SECTION 8.2. Indemnity for Taxes, Reserves and Expenses. . . . . . 90
SECTION 8.3. Taxes . . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 8.4. Other Costs, Expenses and Related Matters . . . . . . 94
SECTION 8.5. Reconveyance Under Certain Circumstances. . . . . . . 95
ARTICLE IX
SERVICER GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 9.1. Guaranty of Obligations . . . . . . . . . . . . . . . 96
SECTION 9.2. Validity of Obligations. Irrevocability . . . . . . . 96
SECTION 9.3. Rights of Set-Off . . . . . . . . . . . . . . . . . . 97
SECTION 9.4. Representations and Warranties. . . . . . . . . . . . 97
SECTION 9.5. Guarantor Default . . . . . . . . . . . . . . . . . . 99
ARTICLE X
THE AGENT; BANK COMMITMENT . . . . . . . . . . . . . . . . . . . . .100
SECTION 10.1. Authorization and Action. . . . . . . . . . . . . . .101
SECTION 10.2. Agent's Reliance, Etc.. . . . . . . . . . . . . . . .102
SECTION 10.3. Credit Decision . . . . . . . . . . . . . . . . . . .103
SECTION 10.4. Indemnification of the Agent. . . . . . . . . . . . .104
SECTION 10.5. Successor Agent . . . . . . . . . . . . . . . . . . .104
SECTION 10.6. Payments by the Agent . . . . . . . . . . . . . . . .105
ARTICLE XI
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . .111
SECTION 11.1. Term of Agreement . . . . . . . . . . . . . . . . . .111
SECTION 11.2. Waivers; Amendments . . . . . . . . . . . . . . . . .111
SECTION 11.3. Notices . . . . . . . . . . . . . . . . . . . . . . .111
SECTION 11.4. Governing Law; Submission to Jurisdiction;
Integration . . . . . . . . . . . . . . . . . . . . .114
SECTION 11.5. Severability; Counterparts. . . . . . . . . . . . . .115
SECTION 11.6. Successors and Assigns. . . . . . . . . . . . . . . .115
SECTION 11.7. Waiver of Confidentiality . . . . . . . . . . . . . .116
SECTION 11.8. Confidentiality Agreement . . . . . . . . . . . . . .116
SECTION 11.9. No Bankruptcy Petition Against the Company. . . . . .117
SECTION 11.10. No Recourse Against Stockholders, Officers or
Director. . . . . . . . . . . . . . . . . . . . . . .117
SECTION 11.11. Characterization of the Transactions Contemplated
by the Agreement. . . . . . . . . . . . . . . . . . .117
SCHEDULES
SCHEDULE A Account Schedule
EXHIBITS
EXHIBIT A Form of Account
EXHIBIT B Credit Guidelines
EXHIBIT C List of Lock-Box Banks and Accounts
EXHIBIT D Form of Lock-Box Agreement
EXHIBIT E Form of Investor Report
EXHIBIT F Form of Transfer Certificate
EXHIBIT G Form of Assignment and Assumption Agreement
EXHIBIT H List of Actions and Suits
EXHIBIT I Location of Records
EXHIBIT J List of Subsidiaries, Divisions and Tradenames
EXHIBIT K Form of Transferor's Counsel's Opinion
EXHIBIT L Forms of Secretary's Certificate
EXHIBIT M Form of Certificate
EXHIBIT N Financial Covenant Definitions
EXHIBIT O Financial Covenants and Ratios
EXHIBIT P Form of Cycle Certificate
TRANSFER AND ADMINISTRATION AGREEMENT
TRANSFER AND ADMINISTRATION AGREEMENT (this "Agreement"),
dated as of January 15, 1997, by and among PROFFITT'S CREDIT
CORPORATION, a Nevada corporation, as transferor (in such capacity, the
"Transferor"), PROFFITT'S, INC., a Tennessee corporation ("Proffitt's")
in its capacity as servicer guarantor ("Servicer Guarantor"), MCRAE'S,
INC., a Mississippi corporation, as servicer (the "Servicer" or
"McRae's"), ENTERPRISE FUNDING CORPORATION, a Delaware corporation (the
"Company") and NATIONSBANK, N.A., a national banking association
("NationsBank"), as agent for the Company and the Bank Investors (in
such capacity, the "Agent") and as a Bank Investor.
PRELIMINARY STATEMENTS
WHEREAS, the Transferor may desire to convey, transfer and
assign, from time to time, undivided percentage interests in certain
accounts receivable, and the Company may desire to, and the Bank
Investors, if requested, shall, accept such conveyance, transfer and as-
signment of such undivided percentage interests, subject to the terms
and conditions of this Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms. As used in this Agree-
ment, the following terms shall have the following meanings:
"Account" shall mean each credit account established pursuant
to an Account Agreement between a Designated Seller and an Obligor as of
the Cut-Off Date and on any day thereafter, which is identified by
account number and by the Outstanding Principal Balance as of the Cut-Off
Date and referred to in the Account Schedule delivered to the Agent
on the Closing Date pursuant to Section 2.8, including any Related
Account, and any such Account established after the Cut-Off Date shall
be identified on the Account Schedule as such schedule may be amended
from time to time pursuant to Section 2.8.
"Account Agreement" shall mean the agreements and Federal
Truth in Lending Statement for Accounts, in substantially the form
attached as Exhibit A to this Agreement, as such agreements or statement
may be amended, modified or otherwise changed from time to time.
"Account Schedule" shall mean the schedule of Accounts (which
schedule may be in the form of a computer file or microfiche) of the
Transferor attached as Schedule A to this Agreement, as amended or
modified from time to time pursuant to the terms of this Agreement.
"Accrued Interest Component" means, for any Collection Period,
that portion of the Interest Component of all Related Commercial Paper
outstanding at any time during such Collection Period which has accrued
from the first day through the last day of such Collection Period wheth-
er or not such Related Commercial Paper matures during such Collection
Period, based on the actual number of days in such Collection Period
that such Related Commercial Paper was outstanding.
"Adjusted LIBOR Rate" means, with respect to any period during
which the return to any Bank Investor or the Liquidity Provider is to be
calculated by reference to the London interbank offered rate, a rate
which is 0.875% in excess of a rate per annum equal to the sum (rounded
upwards, if necessary, to the next higher 1/100 of 1%) of (A) the rate
obtained by dividing (i) the applicable LIBOR Rate by (ii) a percentage
equal to 100% minus the reserve percentage used for determining the
maximum reserve requirement as specified in Regulation D (including,
without limitation, any marginal, emergency, supplemental, special or
other reserves) that is applicable to the Agent during such period in
respect of eurocurrency or eurodollar funding, lending or liabilities
(or, if more than one percentage shall be so applicable, the daily
average of such percentage for those days in such period during which
any such percentage shall be applicable) plus (B) the then daily net
annual assessment rate (rounded upwards, if necessary, to the nearest
1/100 of 1%) as estimated by the Agent for determining the current
annual assessment payable by the Agent to the Federal Deposit Insurance
Corporation in respect of eurocurrency or eurodollar funding, lending or
liabilities.
"Administrative Agent" means NationsBank, N.A., as administra-
tive agent.
"Administrative Fee" means the fee payable by the Transferor
to the Company pursuant to Section 2.7 hereof, the terms of which are
set forth in the Fee Letter.
"Adverse Claim" means a lien, security interest, charge or
encumbrance, or other right or claim in, of or on any Person's assets or
properties in favor of any other Person (including any UCC financing
statement or any similar instrument filed against such Person's assets
or properties), provided, however, that an Adverse Claim shall not be
considered to exist with respect to a Receivable solely as a result of
an interest in such Receivable existing in favor of either (x) the con-
signor of the merchandise sold in connection with the creation of such
Receivable or (y) the owner of a leased department which sold the
merchandise the sale of which resulted in the creation of such Receiv-
able.
"Affected Assets" means, collectively, the Receivables and the
Related Security, Collections and Proceeds relating thereto.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under
direct or indirect common control with, such Person. A Person shall be
deemed to control another Person if the controlling Person possesses,
directly or indirectly, the power to direct or cause the direction of
the management or policies of the controlled Person, whether through
ownership of voting stock, by contract or otherwise.
"Agent" means NationsBank, N.A., in its capacity as agent for
the Company and the Bank Investors, and any successor thereto appointed
pursuant to Article X.
"Aggregate Interest Component" means aggregate sum of the
Interest Components of all issued and outstanding Related Commercial
Paper.
"Aggregate Unpaids" means, at any time, an amount equal to the
sum of (i) the aggregate accrued and unpaid Carrying Costs at such time,
(ii) all amounts of the type included in the definition of "Carrying
Costs" which may accrue after such time, (iii) the Net Investment at
such time, and (iv) all other amounts owed (whether due or accrued)
hereunder by the Transferor to the Company, the Agent or any Bank
Investor at such time.
"Arrangement Fee" means the fee payable by the Transferor to
the Administrative Agent pursuant to Section 2.7 hereof, the terms of
which are set forth in the Fee Letter.
"Assignment Amount" with respect to a Bank Investor shall mean
at any time an amount equal to the lesser of (i) such Bank Investor's
Pro Rata Share of the Net Investment at such time and (ii) such Bank
Investor's unused Commitment.
"Assignment and Assumption Agreement" means an Assignment and
Assumption Agreement substantially in the form of Exhibit G attached
hereto.
"Bank Investors" shall mean NationsBank, N.A. and each other
financial institution that becomes a Bank Investor pursuant to an
Assignment and Assumption Agreement and the respective successors and
permitted assigns of any of the foregoing.
"Bankruptcy Code" means Title 11 of the United States Code, as
amended and modified from time to time.
"Base Rate" means, a rate per annum equal to the greater of
(i) the prime rate of interest announced by the Liquidity Provider (or
if more than one Liquidity Provider, then by NationsBank) from time to
time, changing when and as said prime rate changes (such rate not neces-
sarily being the lowest or best rate charged by the Liquidity Provider
(or if more than one Liquidity Provider, by NationsBank)) and (ii) the
sum of (a) 1.50% and (b) the rate equal to the weighted average of the
rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published
for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the
average of the quotations for such day for such transactions received by
the Liquidity Provider (or, if more than one Liquidity Provider, then by
NationsBank) from three Federal funds brokers of recognized standing se-
lected by it.
"Benefit Plan" means any employee benefit plan as defined in
Section 3(3) of ERISA in respect of which the Transferor, any Designated
Seller or any ERISA Affiliate of the Transferor, or a Designated Seller
is, or at any time during the immediately preceding six years was, an
"employer" as defined in Section 3(5) of ERISA.
"Business Day" means any day excluding Saturday, Sunday and
any day on which banks in New York, New York, Charlotte, North Carolina,
Memphis, Tennessee, Birmingham, Alabama or Jackson, Mississippi are
authorized or required by law to close, and, when used with respect to
the determination of any Eurodollar Rate or any notice with respect
thereto, any such day which is also a day for trading by and between
banks in United States dollar deposits in the London interbank market.
"Buyers' Percentage Factor" shall mean the percentage computed
in accordance with Section 2.2(e) as follows:
NI/NRB
Where:
NI = the Net Investment at the time of such computation.
NRB = the Net Receivables Balance at the time of such computation.
Notwithstanding the foregoing computation, (i) the Buyers'
Percentage Factor shall not exceed 100%, and (ii) the Buyers' Percentage
Factor with respect to Principal Collections at any time on and after
the Termination Date shall be the percentage equivalent of a fraction
the numerator of which is the Net Investment as of the Termination Date
and the denominator of which is the lesser of (x) the Net Receivables
Balance on the last day of the Collection Period immediately prior to
the Termination Date or (y) the Net Receivables Balance on the last day
of the immediately preceding Collection Period.
"Capitalized Leases" shall mean capital leases and subleases,
as defined in the Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 13, dated November 1976, as amended.
"Carrying Costs" shall mean for a Collection Period the sum of
(i) the sum of the dollar amount of the Company's obligations for such
Collection Period determined on an accrual basis in accordance with GAAP
consistently applied (a) to pay interest with respect to Purchased
Interests pursuant to the provisions of the Liquidity Provider Agreement
(such interest to be calculated based on the Adjusted LIBOR Rate, pro-
vided that if a Termination Event shall have occurred, such interest
shall be calculated at the Base Rate plus 2.00%) outstanding at any time
during such Collection Period accrued from the first day through the
last day of such Collection Period whether or not such interest is
payable during such Collection Period and to pay interest with respect
to amounts disbursed by a Credit Support Provider pursuant to the Credit
Support Agreement outstanding at any time during such Collection Period
accrued from the first day through the last day of such Collection
Period whether or not such interest is payable during such Collection
Period, (b) to pay the Accrued Interest Component of Related Commercial
Paper with respect to any Collection Period (and, for purposes of this
clause (b), Related Commercial Paper shall include Commercial Paper
issued to fund the Net Investment even if such Commercial Paper is
issued in an amount in excess of the Net Investment), (c) to pay the
Dealer Fee with respect to Related Commercial Paper issued during such
Collection Period, (d) to pay any past due interest not paid in clause
(a) and (b) with respect to prior Collection Periods, and (e) to pay the
costs of the Company with respect to the operation of Sections 8.1, 8.2,
8.3 and 8.4, and (ii) the Program Fee, the Administrative Fee and the
Facility Fee accrued from the first day through the last day of such
Collection Period whether or not such amount is payable during such
Collection Period, and all interest amounts due the Bank Investors in
accordance with Section 2.3(c), (d) and (e).
"Certificate" means the certificate issued to the Agent for
the benefit of the Company and the Bank Investors pursuant to Section
2.2(d) hereof.
"Closing Date" means January 16, 1997.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agent" means NationsBank, N.A., as collateral
agent for any Liquidity Provider, any Credit Support Provider, the
holders of Commercial Paper and certain other parties.
"Collection Account" means the account, established by the
Agent, for the benefit of the Company and the Bank Investors, pursuant
to Section 2.12.
"Collection Period" shall mean each calendar month; provided,
that the first Collection Period shall begin on the Closing Date and
shall end on the last day of the calendar month containing the Closing
Date.
"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including,
without limitation, all Recoveries and Finance Charges, if any, and cash
proceeds of Related Security with respect to such Receivable.
"Commercial Paper" means the promissory notes of the Company
issued by the Company in the commercial paper market.
"Commitment" means, (i) with respect to each Bank Investor
party hereto, the commitment of such Bank Investor to make acquisitions
from the Transferor or the Company in accordance herewith in an amount
not to exceed the dollar amount set forth opposite such Bank Investor's
signature on the signature page hereto under the heading "Commitment",
minus the dollar amount of any Commitment or portion thereof assigned
pursuant to an Assignment and Assumption Agreement plus the dollar
amount of any increase to such Bank Investor's Commitment consented to
by such Bank Investor prior to the time of determination, (ii) with re-
spect to any assignee of a Bank Investor party hereto taking pursuant to
an Assignment and Assumption Agreement, the commitment of such assignee
to make acquisitions from the Transferor or the Company not to exceed
the amount set forth in such Assignment and Assumption Agreement minus
the dollar amount of any Commitment or portion thereof assigned pursuant
to an Assignment and Assumption Agreement prior to such time of
determination and (iii) with respect to any assignee of an assignee re-
ferred to in clause (ii), the commitment of such assignee of such as-
signee to make acquisitions from the Transferor or the Company not to
exceed the amount set forth in an Assignment and Assumption Agreement
between such assignee and its assign.
"Commitment Termination Date" means January 14, 1998, or such
later date to which the Commitment Termination Date may be extended by
Transferor, the Agent and the Bank Investors not later than 30 days
prior to the then current Commitment Termination Date.
"Company" means Enterprise Funding Corporation, and its
successors and assigns.
"Credit Guidelines" shall mean the Designated Sellers' credit
and collection policy or policies and practices, relating to Accounts
and Receivables existing on the date hereof and referred to in Exhibit
B attached hereto, as modified and as supplemented from time to time in
compliance with Section 5.2(c).
"Credit Support Agreement" means the agreement between the
Company and the Credit Support Provider evidencing the obligation of the
Credit Support Provider to provide credit support to the Company in
connection with the issuance by the Company of Commercial Paper.
"Credit Support Provider" means the Person or Persons who
provides credit support to the Company in connection with the issuance
by the Company of Commercial Paper.
"Cut-Off Date" shall mean January 14, 1997.
"Cycle Certificate" shall mean the certificate of the Servicer
in the form of Exhibit P hereto.
"Date of Processing" shall mean, with respect to any
transaction giving rise to a Receivable, the date on which such
transaction is first recorded on the Servicer's computer master file of
Accounts (without regard to the effective date of such recordation).
"Dealer Fee" shall have the meaning assigned in the Fee
Letter.
"Deemed Collections" means any Collections on any Receivable
deemed to have been received pursuant to Section 2.9(a) or (b) hereof.
"Default Ratio" means, with respect to any Collection Period,
the ratio (expressed as a percentage) computed as of the last day of
each Collection Period by dividing (i) the product of (x) 12 and (y) the
aggregate amount of Receivables which became Defaulted Receivables
during such Collection Period by (ii) the aggregate amount of all Re-
ceivables (other than Defaulted Receivables) as of the last day of the
prior Collection Period.
"Defaulted Receivable" means a Receivable: (i) as to which
any payment, or part thereof, remains unpaid for 181 days or more from
the original due date for such Receivable; (ii) as to which an Event of
Bankruptcy has occurred and is continuing with respect to the Obligor
thereof; (iii) which has been identified by the Transferor, the
Designated Seller or the Servicer as uncollectible; or (iv) which,
consistent with the Credit Guidelines, should be written off as uncol-
lectible.
"Delinquency Ratio" means, the ratio (expressed as a
percentage) computed as of the last day of each Collection Period by
dividing (i) the aggregate amount of all Delinquent Receivables as of
such date by (ii) the aggregate amount of all Receivables (other than
Defaulted Receivables) as of such date.
"Delinquent Receivable" means a Receivable: (i) as to which
any payment, or part thereof, remains unpaid for more than 30 days from
the original due date for such Receivable and (ii) which is not a
Defaulted Receivable.
"Designated Seller" means (i) Proffitt's, Inc., a Tennessee
corporation, (ii) McRae's, Inc. a Mississippi corporation, and (iii) any
other Person designated with the written consent of the Agent as the
"seller" under any Receivables Purchase Agreement, and in each case such
Person's successors and permitted assigns.
"Determination Date" shall mean with respect to any Collection
Period, the twelfth day of the succeeding calendar month or, if such
twelfth day is not a Business Day, the Business Day next succeeding such
twelfth day.
"Dilution Ratio" shall mean the ratio (expressed as a
percentage) computed as of the last day of each Collection Period by
dividing (i) the aggregate amount by which Receivables are reduced or
cancelled as a result of any defective, rejected or returned merchandise
or services and all credits, rebates, discounts, disputes, warranty
claims, repossessed or returned goods, chargebacks, allowances, or any
other downward adjustments to the balance of such Receivable without
receiving Collections therefor and prior to such Receivable becoming a
Defaulted Receivable, (whether effected through the granting of credits
against the applicable Receivables or by the issuance of a check or
other payment in respect of (and as payment for) such reduction) by a
Designated Seller, the Transferor or the Servicer, provided to Obligors
in respect of Receivables during such month by (ii) the aggregate
Outstanding Principal Balance of all Receivables as of the last day of
the preceding Collection Period.
"Discount Percentage" shall mean the percentage designated by
the Transferor pursuant to Section 2.5(e).
"Discount Receivables" shall have the meaning specified in
Section 2.5(e).
"Discount Receivable Collections" shall mean, for any day, the
product of (a) a fraction the numerator of which is the amount of Dis-
count Receivables and the denominator of which is the sum of the
Principal Receivables and the Discount Receivables, in each case at the
end of the prior Collection Period and (b) Principal Collections
(without giving effect to Discount Receivables Collections) on such day.
"Early Collection Fee" means, for any funding period during
which the portion of the Net Investment that was allocated to such
funding period is reduced for any reason whatsoever, the excess, if any,
of (i) the additional interest that would have accrued during such
funding period if such reductions had not occurred, minus (ii) the
income, if any, received by the recipient of such reductions from
investing the proceeds of such reductions.
"Eligible Account" shall mean, as of the Cut-Off Date (or,
with respect to Accounts arising after the Cut-Off Date, as of the date
of creation), each Account in existence and owned by a Designated
Seller:
(a) which is payable in United States Dollars;
(b) the credit card or cards related thereto have not
been reported lost or stolen or designated fraudulent;
(c) the Obligor on which has provided, as its most
recent billing address, an address located in the United States or its
territories or possessions, or Canada, or which is a United States
military address;
(d) which is not an Account as to which any of the
Receivables existing thereunder are Defaulted Receivables;
(e) which has been created by a Designated Seller (or
another entity which sells Receivables to a Designated Seller as
permitted by a Receivables Purchase Agreement) in the ordinary course of
its business in accordance with, or under standards no less stringent
than, the Credit Guidelines;
(f) with respect to which the applicable Designated
Seller has good title thereto, free and clear of all Adverse Claims; and
(g) the Obligor on which has not been identified by
the Servicer or the Transferor, as applicable, in its computer files as
having (i) died, (ii) commenced, or had commenced in respect of such
Obligor, a case, action or proceeding under any law of any jurisdiction
relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking relief with respect to such Obligor's debts, or seeking to have
such Obligor adjudicated bankrupt or insolvent, or to have a receiver,
trustee, custodian or other similar official appointed for such Obligor
or for all or any substantial part of such Obligor's assets or (iii)
made a general assignment of such Obligor's assets for the benefit of
such Obligor's creditors, which assignment is then in full force and
effect.
"Eligible Investments" means any of the following (a) negotia-
ble instruments or securities represented by instruments in bearer or
registered or in book-entry form which evidence (i) obligations fully
guaranteed by the United States of America; (ii) time deposits in, or
bankers acceptances issued by, any depositary institution or trust
company incorporated under the laws of the United States of America or
any state thereof and subject to supervision and examination by Federal
or state banking or depositary institution authorities; provided,
however, that at the time of investment or contractual commitment to
invest therein, the certificates of deposit or short-term deposits, if
any, or long-term unsecured debt obligations (other than such obligation
whose rating is based on collateral or on the credit of a Person other
than such institution or trust company) of such depositary institution
or trust company shall have a credit rating from Moody's and S&P of at
least "P-1" and "A-1", respectively, in the case of the certificates of
deposit or short-term deposits, or a rating not lower than one of the
two highest investment categories granted by Moody's and by S&P; (iii)
certificates of deposit having, at the time of investment or contractual
commitment to invest therein, a rating from Moody's and S&P of at least
"P-1" and "A-1", respectively; or (iv) investments in money market funds
rated in the highest investment category or otherwise approved in
writing by the applicable rating agencies; (b) demand deposits in any
depositary institution or trust company referred to in (a)(ii) above;
(c) commercial paper (having original or remaining maturities of no more
than 30 days) having, at the time of investment or contractual
commitment to invest therein, a credit rating from Moody's and S&P of at
least "P-1" and "A-1", respectively; (d) Eurodollar time deposits having
a credit rating from Moody's and S&P of at least "P-1" and "A-1",
respectively; and (e) repurchase agreements involving any of the
Eligible Investments described in clauses (a)(i), (a)(iii) and (d)
hereof so long as the other party to the repurchase agreement has at the
time of investment therein, a rating from Moody's and S&P of at least
"P-1" and "A-1", respectively.
"Eligible Receivable" means, at any time, any Receivable:
(a) with respect to which, the related Account is an
Eligible Account;
(b) which has been originated by a Designated Seller
(or another entity which sells Receivables to a Designated Seller as
permitted by a Receivables Purchase Agreement) in the ordinary course of
its business, sold to the Transferor pursuant to (and in accordance
with) the Receivables Purchase Agreement and to which the Transferor has
good title thereto, free and clear of all Adverse Claims;
(c) which (together with the Collections and Related
Security related thereto) has been the subject of either a valid trans-
fer and assignment from the Transferor to the Agent, on behalf of the
Company and the Bank Investors, of all of the Transferor's right, title
and interest therein or the grant of a first priority perfected security
interest therein (and in the Collections and Related Security related
thereto), effective until the termination of this Agreement;
(d) which arises pursuant to an Account with respect
to which each of the applicable Designated Seller (or another entity
which sells Receivables to a Designated Seller as permitted by a Receiv-
ables Purchase Agreement) and the Transferor has performed all obliga-
tions required to be performed by it thereunder, including without
limitation shipment of the merchandise and/or the performance of the
services purchased thereunder;
(e) a purchase of which with the proceeds of Com-
mercial Paper would constitute a "current transaction" within the
meaning of Section 3(a)(3) of the Securities Act of 1933, as amended;
(f) which is an "account" or a "general intangible" or
"chattel paper" within the meaning of Article 9 of the UCC of all appli-
cable jurisdictions;
(g) which arises under an Account that, together with
such Receivable, is in full force and effect and constitutes the legal,
valid and binding obligation of the related Obligor enforceable against
such Obligor in accordance with its terms and is not subject to any
litigation, right of rescission, dispute, offset, counterclaim or other
defense;
(h) which was created in compliance, in all material
respects, with all laws, rules or regulations applicable thereto (in-
cluding, without limitation, laws, rules and regulations relating to
truth in lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and privacy) and
pursuant to an Account Agreement which complies, in all material re-
spects, with all such laws, rules and regulations;
(i) which (A) satisfies all applicable requirements of
the Credit Guidelines, (B) has not been waived or modified except in
accordance with the Credit Guidelines, and (C) is assignable without the
consent of, or notice to, the Obligor thereunder;
(j) the Obligor of which has been directed to make all
payments to a specified account of the Servicer with respect to which
there shall be a Lock-Box Agreement in effect;
(k) with respect to which all material consents,
licenses, approvals or authorizations of, or registrations or
declarations with, any Governmental Authority required to be obtained,
effected or given by the Transferor or by the applicable Designated
Seller (or another entity which sells Receivables to a Designated Seller
as permitted by a Receivables Purchase Agreement) in connection with the
creation of such Receivable or the execution, delivery, creation and
performance by the Transferor or by the applicable Designated Seller (or
another entity which sells Receivables to a Designated Seller as
permitted by a Receivables Purchase Agreement) of the Account Agreement
pursuant to which such Receivable was created, have been duly obtained,
effected or given and are in full force and effect;
(l) the assignment of which under the Receivables Pur-
chase Agreement by the applicable Designated Seller and hereunder by the
Transferor (and, if applicable, the assignment by the entity which
originated such Receivable to a Designated Seller as permitted by a Re-
ceivables Purchase Agreement) does not violate, conflict or contravene
any applicable laws, rules, regulations, orders or writs or any contrac-
tual or other restriction, limitation or encumbrance; and
(m) as to which the Obligor has not exceeded its
credit limit by an amount in excess of the greater of (i) $300 or (ii)
10% of such credit limit as determined as of each cycle closing date,
except for exceptions which are immaterial in the aggregate.
"ERISA" means the U.S. Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated
and rulings issued thereunder.
"ERISA Affiliate" means, with respect to any Person, (i) any
corporation which is a member of the same controlled group of
corporations (within the meaning of Section 414(b) of the Code (as in
effect from time to time, the "Code")) as such Person; (ii) a trade or
business (whether or not incorporated) under common control (within the
meaning of Section 414(c) of the Code) with such Person; or (iii) a
member of the same affiliated service group (within the meaning of Sec-
tion 414(n) of the Code) as such Person, any corporation described in
clause (i) above or any trade or business described in clause (ii)
above.
"Event of Bankruptcy" means, with respect to any Person, (i)
that such Person (a) shall generally not pay its debts as such debts
become due or (b) shall admit in writing its inability to pay its debts
generally or (c) shall make a general assignment for the benefit of
creditors; (ii) any proceeding shall be instituted by or against such
Person seeking to adjudicate it as bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debt-
ors, or seeking the entry of an order for relief or the appointment of
a receiver, trustee or other similar official for it or any substantial
part of its property or (iii) if such Person is a corporation, such
Person or any Subsidiary shall take any corporate action to authorize
any of the actions set forth in the preceding clauses (i) or (ii).
"Excluded Taxes" shall have the meaning specified in Section
8.3 hereof.
"Facility Fee" means the fee payable by the Transferor to the
Agent for distribution to the Bank Investors pursuant to Section 2.7(a)
hereof, the terms of which are set forth in the Fee Letter.
"Facility Limit" means $175,000,000; provided that such amount
may not at any time exceed the aggregate Commitments at any time in
effect; provided, further, that from and after the Termination Date the
Facility Limit shall at all times equal the Net Investment plus the
Aggregate Interest Component.
"Fee Letter" means, collectively, the letter agreement or
agreements dated the date hereof (i) between the Transferor and the
Company and (ii) between the Transferor and the Agent on behalf of the
Bank Investors, in each case with respect to the fees to be paid by the
Transferor hereunder, as amended, modified or supplemented from time to
time.
"Finance Charge Collections" shall mean that portion of the
Collections with respect to the Receivables which are properly
designated in the Accounts as Finance Charges, together with (i) any
Recoveries (net of liquidation expenses, if any) in respect of Defaulted
Receivables and Related Security with respect thereto and (ii) all Dis-
count Receivable Collections.
"Finance Charges" means, with respect to an Account, any
periodic finance charges, late fees, returned check or NSF charges or
similar charges owing by an Obligor pursuant to such Account.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards
Board or in such other statements by such accounting profession, which
are in effect as of the date of this Agreement.
"Governmental Authority" shall mean the United States of
America, any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guarantor Default" shall have the meaning specified in
Section 9.5 hereof.
"Guaranty" means, with respect to any Person any agreement by
which such Person assumes, guarantees, endorses, contingently agrees to
purchase or provide funds for the payment of, or otherwise becomes
liable upon, the obligation of any other Person, or agrees to maintain
the net worth or working capital or other financial condition of any
other Person or otherwise assures any other creditor of such other
Person against loss, including, without limitation, any comfort letter,
operating agreement or take-or-pay contract and shall include, without
limitation, the contingent liability of such Person in connection with
any application for a letter of credit.
"Incremental Transfer" means a Transfer which is made pursuant
to Section 2.2(a) hereof.
"Indebtedness" means, with respect to any Person, without
duplication, such Person's (i) obligations for borrowed money evidenced
by a promissory note, bond or similar written obligation, including,
without limitation, conditional sales or similar title retention
agreements, (ii) obligations representing the deferred purchase price of
property other than accounts payable arising in the ordinary course of
such Person's business on terms customary in the trade, (iii) obliga-
tions, whether or not assumed, secured by liens or payable out of the
proceeds or production from property now or hereafter owned or acquired
by such Person, (iv) obligations which are evidenced by notes, acceptan-
ces, or other instruments, and all liabilities of such Person by way of
endorsements (other than for collection or deposit in the ordinary
course of business), (v) Capitalized Lease obligations, (vi) obligations
for which such Person is obligated pursuant to a Guaranty, (vii) all
Contingent Obligations (as defined in Exhibit N hereto), (viii) all
obligations arising in connection with such Person's interest rate
hedging activities, but excluding all accounts payable and accruals, in
each case in the ordinary course of business and only so long as payment
therefor is due within one year; provided, that in no event shall the
term Indebtedness include surplus and retained earnings, minority
interest in Subsidiaries, lease obligations (other than pursuant to
Capitalized Lease obligations), reserves for deferred income taxes and
investment credits, other deferred credits and reserves, and deferred
compensation obligations.
"Indemnified Amounts" has the meaning specified in Section 8.1
hereof.
"Indemnified Parties" has the meaning specified in Section 8.1
hereof.
"Interest Component" shall mean, (i) with respect to any
Commercial Paper issued on an interest-bearing basis, the interest
payable on such Commercial Paper at its maturity and (ii) with respect
to any Commercial Paper issued on a discount basis, the portion of the
face amount of such Commercial Paper representing the discount incurred
in respect thereof (including any dealer commissions to the extent
included as part of such discount).
"Investor Report" means a report, in substantially the form
attached hereto as Exhibit E or in such other form as is mutually agreed
to by the Transferor and the Agent, furnished by the Servicer pursuant
to Section 2.11 hereof.
"Law" means any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ,
decree or award of any Official Body.
"LIBOR Rate" means, with respect to any Collection Period, the
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of
1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in U.S. dollars at ap-
proximately 11:00 a.m. (London time) two London Business Days prior to
the first day of such Collection Period for a term of one month. If for
any reason such rate is not available, the term "LIBOR Rate" shall mean,
for any Collection Period, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO
Page as the London interbank offered rate for deposits in dollars at ap-
proximately 11:00 a.m. (London time) two London Business Days prior to
the first day of such Collection Period for a term of one month;
provided, however, if more than one rate is specified on the Reuters
Screen LIBO Page, the applicable rate shall be the arithmetic mean of
all such rates.
"Liquidity Provider" means the Person or Persons who will
provide liquidity support to the Company in connection with the issuance
by the Company of Commercial Paper.
"Liquidity Provider Agreement" means the agreement between the
Company and the Liquidity Provider evidencing the obligation of the
Liquidity Provider to provide liquidity support to the Company in
connection with the issuance by the Company of Commercial Paper.
"Lock-Box Account" means an account maintained by the Servicer
at a Lock-Box Bank for the purpose of receiving Collections from Receiv-
ables.
"Lock-Box Agreement" means an agreement between the Servicer
and a Lock-Box Bank in substantially the form of Exhibit D hereto.
"Lock-Box Bank" means each of the banks set forth in Exhibit
C hereto and such banks as may be added thereto or deleted therefrom
pursuant to Section 2.8 hereof.
"Majority Investors" shall have the meaning specified in
Section 10.1(a) hereof.
"Material Adverse Effect" means any event or condition which
would have a material adverse effect on (i) the collectibility of the
Receivables, (ii) the condition (financial or otherwise), businesses or
properties of the Transferor or any Designated Seller, (iii) the ability
of the Transferor or any Designated Seller to perform its respective
obligations under the Transaction Documents to which it is a party and
(iv) the interests of the Agent, the Company or the Bank Investors under
the Transaction Documents.
"Maximum Buyers' Percentage Factor" means 82%.
"McRae's" shall mean McRae's, Inc., a Mississippi corporation.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA which is or was at any time during the
current year or the immediately preceding five years contributed to by
the Transferor, the Designated Seller or any ERISA Affiliate of the
Transferor or the Designated Seller on behalf of its employees.
"Net Asset Test" means, in connection with any assignment by
the Company to the Bank Investors of an interest in the Net Investment
pursuant to Section 10.7 hereof, that on the day immediately prior to
the day on which such assignment is to take effect, the Net Receivables
Balance shall be greater than or equal to the Net Investment.
"Net Investment" means the sum of the initial Transfer Price
plus the sum of the cash amounts paid to the Transferor for each
Incremental Transfer less the aggregate amount of Collections received
and applied by the Agent to reduce such Net Investment pursuant to
Section 2.5, 2.6 or 2.9 hereof; provided that the Net Investment shall
be restored and reinstated in the amount of any Collections so received
and applied if at any time the distribution of such Collections is
rescinded or must otherwise be returned for any reason; and provided
further that the Net Investment may be increased by the amount described
in Section 10.7(d) as described therein.
"Net Portfolio Yield" shall mean, with respect to any
Collection Period, the annualized percentage equivalent of a fraction
the numerator of which is Finance Charge Collections less the Carrying
Costs for such Collection Period less the aggregate outstanding balance
of all Receivables which became Defaulted Receivables during such
Collection Period less the Servicing Fee with respect to such Collection
Period and the denominator of which is the daily average aggregate
Outstanding Principal Balance of all Receivables during such Collection
Period.
"Net Receivables Balance" at any time shall mean the aggregate
Outstanding Principal Balance of all Eligible Receivables, excluding (i)
the aggregate balance of any Discount Receivables at such time and (ii)
the amount by which the aggregate Outstanding Principal Balance of all
Eligible Receivables the Obligor of which is an employee of the
Transferor, any Designated Seller or any of their Affiliates exceeds
5.0% of the aggregate Outstanding Principal Balance of all Eligible
Receivables and (iii) all amounts owing at such time by any Designated
Seller (and any other entity which sells Receivables to a Designated
Seller as permitted by a Receivables Purchase Agreement) to (x) any con-
signor of merchandise the sale of which may result in the creation of a
Receivable or (y) any owner of a leased department which sells merchan-
dise the sale of which may result in the creation of a Receivable.
"Net Worth" means, with respect to the Transferor and at any
time, an amount equal to the aggregate Outstanding Principal Balance of
all Eligible Receivables at such time minus the amount of the Net
Investment at such time minus the outstanding principal amount at such
time of the subordinated note issued by the Transferor in connection
with the Receivables Purchase Agreement entered into with any Designated
Seller minus any other liabilities of the Transferor plus, if all of the
subordinated notes of the Transferor have zero balances outstanding, all
cash of the Transferor.
"Obligor" means any Person obligated to make payments under an
Account, including any guarantor thereunder.
"Obligations" shall have the meaning specified in Section 9.1
hereof.
"Official Body" means any government or political subdivision
or any agency, authority, bureau, central bank, commission, department
or instrumentality of any such government or political subdivision, or
any court, tribunal, grand jury or arbitrator, in each case whether
foreign or domestic.
"Other Transferor" means any Person other than the Transferor
that has entered into a receivables purchase agreement or transfer and
administration agreement with the Company.
"Outstanding Principal Balance" means, with respect to any Re-
ceivable at any time, the then outstanding principal amount thereof
excluding any accrued and outstanding Finance Charges related thereto
and giving effect to the amount of any credit balances and other adjust-
ments existing with respect to such Receivable on such day. The out-
standing principal amount of any Defaulted Receivables shall be
considered to be zero for the purposes of any determination hereunder of
the aggregate Outstanding Principal Balance of the Receivables or the
aggregate Outstanding Principal Balance of Eligible Receivables.
"Payment Rate" shall mean, for any Collection Period, the
percentage equivalent of a fraction, the numerator of which is equal to
the amount of all Principal Collections during such Collection Period
and the denominator of which is equal to the aggregate Outstanding
Principal Balance of all Receivables as of the last day of the prior
Collection Period.
"Person" means any corporation, limited liability company,
natural person, firm, joint venture, partnership, trust, unincorporated
organization, enterprise, government or any department or agency of any
government.
"Potential Termination Event" means an event which but for the
passage of time or the giving of notice, or both, would constitute a
Termination Event.
"Principal Collections" shall mean with respect to any
Collection Period, all Collections received during such period other
than Finance Charge Collections.
"Pro Rata Share" means, for a Bank Investor, the Commitment of
such Bank Investor divided by the sum of the Commitments of all Bank
Investors.
"Proceeds" means "proceeds" as defined in Section 9-306(1) of
the UCC.
"Proffitt's" shall mean Proffitt's, Inc., a Tennessee
corporation.
"Program Fee" means the fee payable by the Transferor to the
Company pursuant to Section 2.7 hereof, the terms of which are set forth
in the Fee Letter.
"Purchased Interest" means the interest in the Receivables
acquired by a Liquidity Provider through purchase pursuant to the terms
of the Liquidity Provider Agreement.
"Purchase Termination Date" means the date upon which the
Transferor shall cease, for any reason whatsoever, to make purchases of
Receivables from the Designated Seller under the Receivables Purchase
Agreement or the Receivables Purchase Agreement shall terminate for any
reason whatsoever.
"Receivable" means the indebtedness owed to a Designated
Seller by any Obligor (without giving effect to any purchase under the
Receivables Purchase Agreement by the Transferor at any time) under an
Account and sold by such Designated Seller to the Transferor pursuant to
the Receivables Purchase Agreement, whether constituting an account,
chattel paper, instrument, investment property or general intangible,
arising in connection with the sale or lease of merchandise or the
rendering of services, and includes the right to payment of any Finance
Charges and other obligations of such Obligor with respect thereto. A
Receivable shall be deemed to have been created or the amount thereof
increased as of the end of the day on the Date of Processing of such
Receivable or such increase to the amount thereof.
"Receivables Purchase Agreement" means, collectively, (i) the
Receivables Purchase Agreement dated as of January 15, 1997 by and
between Proffitt's, as seller, the Transferor, as purchaser, and
McRae's, as servicer (ii) the Receivables Purchase Agreement dated as of
January 15, 1997 by and between McRae's, as seller and servicer, and the
Transferor, as purchaser, and (iii) any other receivables purchase
agreement entered into by the Transferor, with the prior written consent
of the Agent, between the person designated as the 'seller' thereunder
with the Transferor, as purchaser, in each case as such agreement may be
amended, modified or supplemented and in effect from time to time.
"Records" means all Account Agreements and other documents,
books, records and other information (including, without limitation,
computer programs, tapes, discs, punch cards, data processing software
and related property and rights) maintained with respect to Receivables
and the related Obligors.
"Recoveries" shall mean all amounts received or collected by
the Servicer with respect to Defaulted Receivables.
"Reinvestment Termination Date" means the second Business Day
after the delivery by the Company to the Transferor of written notice
that the Company elects to commence the amortization of its interest in
the Net Investment pursuant to Section 2.6 or otherwise liquidate its
interest in the Transferred Interest.
"Related Account" shall mean an Account having the following
characteristics: (i) such Related Account was originated in accordance
with the Credit Guidelines; (ii) the Obligor or Obligors with respect to
such Related Account is the same Person or Persons as the Obligor or
Obligors of an Account; (iii) such Related Account is originated as a
result of the credit card with respect thereto being lost or stolen; and
(iv) such Related Account can be traced or identified as a successor ac-
count to an Account by reference to or by way of the computer or other
records of the Servicer or the Transferor.
"Related Commercial Paper" shall mean Commercial Paper issued
by the Company the proceeds of which were used to acquire, or refinance
the acquisition of, an interest in Receivables with respect to the
Transferor.
"Related Security" means with respect to any Receivable, all
of the Transferor's rights, title and interest in, to and under:
(i) all of the Transferor's interest, if any, in the
merchandise (including returned or repossessed merchandise), if
any, the sale of which gave rise to such Receivable;
(ii) all other security interests or liens and property
subject thereto from time to time, if any, purporting to secure
payment of such Receivable, whether pursuant to the Account related
to such Receivable or otherwise, together with all financing state-
ments signed by an Obligor describing any collateral securing such
Receivable;
(iii) all guarantees, indemnities, warranties, insurance
(and proceeds and premium refunds thereof) or other agreements or
arrangements of any kind from time to time supporting or securing
payment of such Receivable whether pursuant to the Account related
to such Receivable or otherwise;
(iv) all Records related to such Receivable;
(v) all rights and remedies of the Transferor under the
Receivables Purchase Agreement, together with all financing state-
ments filed by the Transferor against a Designated Seller in
connection therewith; and
(vi) all rights and remedies of the Transferor under the
Receivables Purchase Agreement against any entity which sells Re-
ceivables to a Designated Seller as permitted by a Receivables Pur-
chase Agreement, together with all rights of the Transferor in all
financing statements filed by the Transferor or a Designated seller
against such an entity in connection therewith; and
(vii) all Proceeds of any of the foregoing.
"Remittance Date" shall mean the sixteenth day of each month
of the Transferor beginning January 16, 1997, or, if such day is not a
Business Day, the Business Day next succeeding such sixteenth day.
"Requirements of Law" for any Person shall mean the
certificate of incorporation or articles of association and by-laws or
other organizational or governing documents of such Person, and any law,
treaty, rule or regulation, or determination of an arbitrator or Govern-
mental Authority, in each case applicable to or binding upon such Person
or to which such Person is subject, whether Federal, state or local
(including, without limitation, usury laws, the Federal Truth in Lending
Act and Regulation Z and Regulation B of the Board of Governors of the
Federal Reserve System).
"Section 8.2 Costs" has the meaning specified in Section
8.2(d) hereof.
"Servicer" means at any time the Person then authorized
pursuant to Section 6.1 to service, administer and collect Receivables.
"Servicer Advance" shall have the meaning specified in Section
2.5(d).
"Servicer Default" has the meaning specified in Section 6.4
hereof.
"Servicing Fee" means the fees payable by the Company or the
Bank Investors to the Servicer in an amount equal to 2.0% per annum
(calculated on the basis of actual days elapsed divided by a year
consisting of 360 days) on the average daily amount of the Net Invest-
ment. Such fee shall accrue from the date of the initial purchase of an
interest in the Receivables to the date on which the Buyers' Percentage
Factor is reduced to zero. Such fee shall be payable only from Collec-
tions pursuant to, and subject to the priority of payments set forth in,
Section 2.5 hereof.
"Standard & Poor's" or "S&P" means Standard & Poor's Ratings
Services, a division of McGraw-Hill Companies, Inc.
"Subordinated Note" shall have the meaning specified in the
Receivables Purchase Agreement.
"Subsidiary" of a Person means any Person more than 50% of the
outstanding voting interests of which shall at any time be owned or con-
trolled, directly or indirectly, by such Person or by one or more Sub-
sidiaries of such Person or any similar business organization which is
so owned or controlled.
"Taxes" shall have the meaning specified in Section 8.3
hereof.
"Telerate Page 3750" shall mean the British Bankers
Association Libor Rates (determined at 11:00 a.m. London time) that are
published by Dow Jones Telerate, Inc.
"Termination Date" means the earliest of (i) the Business Day
designated by the Transferor to the Company as the Termination Date at
any time following 60 days' written notice to the Company, (ii) the date
of termination of the commitment of the Liquidity Provider under the
Liquidity Provider Agreement, (iii) the date of termination of the
commitment of the Credit Support Provider under the Credit Support
Agreement, (iv) the day upon which a Termination Date is declared or
automatically occurs pursuant to Section 7.2(a) hereof, (v) two Business
Days prior to the Commitment Termination Date, (vi) the day on which a
Reinvestment Termination Date shall occur unless the Transferred
Interest shall have been assigned (or is concurrently so assigned) to
the Bank Investors pursuant to Section 10.7 hereof, (vii) the Purchase
Termination Date, or (viii) January 14, 1998.
"Termination Event" means an event described in Section 7.1
hereof.
"Transaction Costs" has the meaning specified in Section
8.4(a) hereof.
"Transaction Documents" means, collectively, this Agreement,
the Receivables Purchase Agreement, the Fee Letter, the Lock-Box
Agreements, the Certificate, the Transfer Certificates and all of the
other instruments, documents and other agreements executed and delivered
by the Designated Seller or the Transferor in connection with any of the
foregoing, in each case, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"Transfer" means a conveyance, transfer and assignment by the
Transferor to the Company or the Bank Investors of an undivided per-
centage ownership interest in Receivables hereunder (including, without
limitation, as a result of any reinvestment of Collections in Trans-
ferred Interests pursuant to Section 2.2(b) and 2.5).
"Transfer Certificate" has the meaning specified in Section
2.2(a) hereof.
"Transfer Date" means, with respect to each Transfer, the
Business Day on which such Transfer is made.
"Transfer Price" means with respect to any Incremental
Transfer, the amount paid to the Transferor by the Company or the Bank
Investors as described in the applicable Transfer Certificate.
"Transferor" means Proffitt's Credit Corporation, a Nevada
corporation, and its successors and permitted assigns.
"Transferor's Percentage Factor" means at any time 1 minus the
Buyers' Percentage Factor.
"Transferred Interest" means, at any time of determination, an
undivided percentage ownership interest in (i) each and every then
outstanding Receivable, (ii) all Related Security with respect to each
such Receivable, (iii) all Collections with respect thereto, and (iv)
other Proceeds of the foregoing, which undivided ownership interest
shall be equal to the Buyers' Percentage Factor at such time, and only
at such time (without regard to prior calculations). The Transferred
Interest in each Receivable, together with Related Security, Collections
and Proceeds with respect thereto, shall at all times be equal to the
Transferred Interest in each other Receivable, together with Related
Security, Collections and Proceeds with respect thereto. To the extent
that the Transferred Interest shall decrease as a result of a recalcu-
lation of the Buyers' Percentage Factor, the Company or the Bank
Investors, as applicable, shall be considered to have reconveyed to the
Transferor an undivided percentage ownership interest in each Receiv-
able, together with Related Security, Collections and Proceeds with
respect thereto, in an amount equal to such decrease such that in each
case the Transferred Interest in each Receivable shall be equal to the
Transferred Interest in each other Receivable.
"UCC" means, with respect to any state, the Uniform Commercial
Code as from time to time in effect in such state.
"U.S." or "United States" means the United States of America.
SECTION 1.2. Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with GAAP.
All terms used in Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such Article
9.
SECTION 1.3. Computation of Time Periods. Unless otherwise
stated in this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means "from
and including", the words "to" and "until" each means "to but
excluding", and the word "within" means "from and excluding a specified
date and to and including a later specified date".
ARTICLE II
PURCHASES AND SETTLEMENTS
SECTION 2.1. Facility. Upon the terms and subject to the
conditions herein set forth at any time prior to the Termination Date
(x) the Transferor may, at its option, convey, transfer and assign to
the Company or the Bank Investors, as applicable, and (y) the Company
may, at its option, or the Bank Investors shall, if so requested, accept
such conveyance, transfer and assignment from the Transferor of, without
recourse except as provided herein, undivided percentage ownership
interests in the Receivables, together with Related Security, Collec-
tions and Proceeds with respect thereto, from time to time. By
accepting any conveyance, transfer and assignment hereunder, neither the
Company, any Bank Investor nor the Agent assumes or shall have any
obligations or liability under any of the Accounts, all of which shall
remain the obligations and liabilities of the Transferor and the
Designated Seller.
SECTION 2.2. Transfers; Certificates; Eligible Receivables
(a) Incremental Transfers. Upon the terms and subject to the conditions
herein set forth the Transferor may, at its option, convey, transfer and
assign to the Company or the Bank Investors, as applicable, and from
time to time prior to the occurrence of the Termination Date the Company
may, at its option, or the Bank Investors, shall, if so requested by the
Transferor, accept such conveyance, transfer and assignment from the
Transferor, without recourse except as provided herein, of undivided
percentage ownership interests in the Receivables, together with Related
Security, Collections and Proceeds with respect thereto (each, an
"Incremental Transfer"); provided that after giving effect to the issu-
ance of Related Commercial Paper to fund the Transfer Price of any
Incremental Transfer and the payment to the Transferor of such Transfer
Price the sum of the Net Investment plus the Interest Component of all
outstanding Related Commercial Paper would not exceed the Facility
Limit; and, provided further, that, after giving effect to such Incre-
mental Transfer, the Transferor's Percentage Factor, as of the latest
cycle closing date reported in any Cycle Certificate delivered by the
Servicer to the Agent pursuant to Section 2.11(b), shall not be less
than the decimal equivalent of 1.00 minus the Maximum Buyers' Percentage
Factor and provided further however, that the representations and
warranties set forth in Sections 3.1 and 3.2 shall be true and correct
both immediately before and immediately after giving effect to any such
Incremental Transfer and the payment to the Transferor of the Transfer
Price related thereto and a Cycle Certificate shall have been delivered
with respect to such Incremental Transfer as required by Section 3.3
hereof.
The Transferor shall, by notice to the Agent given by
telecopy, offer to convey, transfer and assign to the Company or the
Bank Investors, as applicable, undivided percentage ownership interests
in the Receivables and the other Affected Assets relating thereto at
least two (2) Business Days prior to the proposed date of any Incre-
mental Transfer. Each such notice shall specify (w) whether such
request is made to the Company or the Bank Investors (it being
understood and agreed that once the Bank Investors acquire any
Transferred Interest hereunder, the Bank Investors shall be required to
purchase all Transferred Interests held by the Company in accordance
with Section 10.7 and thereafter the Company shall no longer accept any
additional Incremental Transfers hereunder), (x) the desired Transfer
Price (which shall be at least $1,000,000 or integral multiples of
$100,000 in excess thereof) or, to the extent that the then available
unused portion of the Facility Limit is less than such amount, such
lesser amount equal to such available portion of the Facility Limit),
and (y) the desired date of such Incremental Transfer. The Agent will
promptly notify the Company or each of the Bank Investors, as the case
may be, of the Agent's receipt of any request for an Incremental Trans-
fer to be made to such Person. To the extent that any such Incremental
Transfer is requested of the Company, the Company shall accept or reject
such offer by notice given to the Transferor and the Agent by telephone
or telecopy by no later than the close of its business on the Business
Day following its receipt of any such request. Each notice of proposed
Transfer shall be irrevocable and binding on the Transferor and the
Transferor shall indemnify the Company and each Bank Investor against
any loss or expense incurred by the Company or any Bank Investor, either
directly or indirectly (including, in the case of the Company, through
the Liquidity Provider Agreement) as a result of any failure by the
Transferor to complete such Incremental Transfer including, without
limitation, any loss or expense incurred by the Company or any Bank
Investor, either directly or indirectly (including, in the case of the
Company, pursuant to the Liquidity Provider Agreement) by reason of the
liquidation or reemployment of funds acquired by the Company (or the
Liquidity Provider) or any Bank Investor (including, without limitation,
funds obtained by issuing commercial paper or promissory notes or ob-
taining deposits as loans from third parties) for the Company or any
Bank Investor to fund such Incremental Transfer.
On the date of the initial Incremental Transfer, the Agent, on
behalf of the Company or the Bank Investors, as applicable, shall deliv-
er written confirmation to the Transferor of the Transfer Price and the
Transferor shall deliver to the Agent the Transfer Certificate in the
form of Exhibit F hereto (the "Transfer Certificate"). The Agent shall
indicate the amount of the initial Incremental Transfer together with
the date thereof on the grid attached to the Transfer Certificate. On
the date of each subsequent Incremental Transfer, the Agent shall send
written confirmation to the Transferor of the Transfer Price applicable
to such Incremental Transfer. The Agent shall indicate the amount of
the Incremental Transfer together with the date thereof as well as any
decrease in the Net Investment on the grid attached to the Transfer
Certificate. The Transfer Certificate shall evidence the Incremental
Transfers. Following each Incremental Transfer, the Company shall
deposit to the Transferor's account at the location indicated in Section
11.3 hereof, in immediately available funds, an amount equal to the
Transfer Price for such Incremental Transfer made to the Company and the
Bank Investors, respectively.
By no later than 11:00 a.m. (New York time) on any Transfer
Date, the Company or each Bank Investor, as the case may be, shall remit
its share (which, in the case of an Incremental Transfer to the Bank
Investors, shall be equal to such Bank Investor's Pro Rata Share) of the
aggregate Transfer Price for such Transfer to the account of the Agent
specified therefor from time to time by the Agent by notice to such
Persons. The obligation of each Bank Investor to remit its Pro Rata
Share of any such Transfer Price shall be several from that of each
other Bank Investor, and the failure of any Bank Investor to so make
such amount available to the Agent shall not relieve any other Bank
Investor of its obligation hereunder. Following each Incremental
Transfer and the Agent's receipt of funds from the Company or the Bank
Investors as aforesaid, the Agent shall remit the Transfer Price to the
Transferor's account at the location indicated in Section 11.3 hereof,
in immediately available funds. Unless the Agent shall have received
notice from the Company or any Bank Investor, as applicable, that such
Person will not make its share of any Transfer Price relating to any
Incremental Transfer available on the applicable Transfer Date therefor,
the Agent may (but shall have no obligation to) make the Company's or
any such Bank Investor's share of any such Transfer Price available to
the Transferor in anticipation of the receipt by the Agent of such
amount from the Company or such Bank Investor. To the extent the
Company or any such Bank Investor fails to remit any such amount to the
Agent after any such advance by the Agent on such Transfer Date, the
Company or such Bank Investor, on the one hand, and the Transferor, on
the other hand, shall be required to pay such amount, together with
interest thereon at a per annum rate equal to the Federal funds rate (as
determined in accordance with clause (ii) of the definition of "Base
Rate"), in the case of the Company or any such Bank Investor, or the
Base Rate, in the case of the Transferor, to the Agent upon its demand
therefor (provided that the Company shall have no obligation to pay such
interest amounts except to the extent that it shall have sufficient
funds to pay the face amount of its Commercial Paper in full). Until
such amount shall be repaid, such amount shall be deemed to be Net
Investment paid by the Agent and the Agent shall be deemed to be the
owner of a Transferred Interest hereunder. Upon the payment of such
amount to the Agent (x) by the Transferor, the amount of the aggregate
Net Investment shall be reduced by such amount or (y) by the Company or
such Bank Investor, such payment shall constitute such Person's payment
of its share of the applicable Transfer Price for such Transfer.
(b) Reinvestment Transfers. On each Business Day occur-
ring after the initial Incremental Transfer hereunder and prior to the
Termination Date the Transferor hereby agrees to convey, transfer and
assign to the Company or the Bank Investors then owning any Transferred
Interests, and in consideration of Transferor's agreement to maintain at
all times prior to the Termination Date a Net Receivables Balance in an
amount at least sufficient to maintain the Buyers' Percentage Factor at
an amount not greater than the Maximum Buyers' Percentage Factor, the
Company may, and the Bank Investors shall (in either case, to the extent
such Persons then own any Transferred Interest), agree to purchase from
the Transferor undivided percentage ownership interests in each and
every Receivable, together with Related Security, Collections and
Proceeds with respect thereto, to the extent that Collections are
available for such Transfer in accordance with Section 2.5 hereof, such
that after giving effect to such Transfer, (i) the amount of the Net
Investment at the close of business on such Business Day shall be equal
to the amount of the Company's Net Investment at the close of the
business on the Business Day immediately preceding such Business Day
plus the Transfer Price of any Incremental Transfer made on such day, if
any, and (ii) the Transferred Interest in each Receivable, together with
Related Security, Collections and Proceeds with respect thereto, shall
be equal to the Transferred Interest in each other Receivable, together
with Related Security, Collections and Proceeds with respect thereto.
(c) All Transfers. Each Transfer shall constitute a
purchase of undivided percentage ownership interests in each and every
Receivable, together with Related Security, Collections and Proceeds
with respect thereto, then existing, as well as in each and every
Receivable, together with Related Security, Collections and Proceeds
with respect thereto, which arises at any time after the date of such
Transfer. The Company's or the Bank Investors', as applicable,
aggregate undivided percentage ownership interest in the Receivables,
together with the Related Security, Collections and Proceeds with
respect thereto, shall equal the Buyers' Percentage Factor in effect
from time to time. So long as either the Company, on the one hand, or
the Bank Investors, on the other hand, own all of the Transferred
Interests at such time, each of the Company's and each Bank Investor's
undivided percentage ownership interest in the Affected Assets shall
equal such Person's ratable share (determined on the basis of the
relationship that such Person's Net Investment bears to the aggregate
Net Investment of the Company and all of the Bank Investors at such
time) of the Buyers' Percentage Factor at such time.
(d) Certificate. The Transferor shall issue to the
Agent the Certificate, in the form of Exhibit M, on or prior to the date
hereof.
(e) Buyers' Percentage Factor. The Buyers' Percentage
Factor shall be initially computed as of the opening of business of the
Servicer on the date of the initial Incremental Transfer hereunder.
Thereafter until the Termination Date the Buyers' Percentage Factor
shall be automatically recomputed as of the close of business of the
Servicer on each day (other than a day after the Termination Date). The
Buyers' Percentage Factor shall remain constant from the time as of
which any such computation or recomputation is made until the time as of
which the next such recomputation, if any, shall be made.
SECTION 2.3. Fundings.
(a) Prior to the Termination Date; Transferred Interest
Held by Company. At all times hereafter, but prior to the Termination
Date and not with respect to any portion of the Transferred Interest
held by the Bank Investors (or any of them), the Transferor may, subject
to the Company's approval and the limitations described below, request
that the Net Investment be allocated among one or more funding periods,
so that the aggregate amounts so allocated at all times shall equal the
Net Investment held by the Company. The Transferor shall give the
Company irrevocable notice by telephone of the new requested funding
period(s) at least two (2) Business Days prior to the expiration of any
then existing funding period; provided, however, that the Company may
select, in its sole discretion, any such new funding period if (i) the
Transferor fails to provide such notice on a timely basis or (ii) the
Company determines, in its sole discretion, that the funding period re-
quested by the Transferor is unavailable or for any reason commercially
undesirable. The Company confirms that it is its intention to fund all
or substantially all of the Net Investment held by it by issuing Related
Commercial Paper; provided that the Company may determine, from time to
time, in its sole discretion, that funding such Net Investment by means
of related Commercial Paper is not possible or is not desirable for any
reason. If the Liquidity Provider acquires from the Company a Purchased
Interest with respect to the Receivables pursuant to the terms of the
Liquidity Provider Agreement, NationsBank, on behalf of the Liquidity
Provider, may exercise the right of selection granted to the Company
hereby. The initial funding period applicable to any such Purchased
Interest shall be a period of not greater than 14 days and shall accrue
Carrying Costs on the basis of the Base Rate. Thereafter, provided that
the Termination Date shall not have occurred, Carrying Costs shall
accrue on the basis of either the Base Rate or the Adjusted LIBOR Rate,
as determined by NationsBank. In the case of any funding period out-
standing upon the Termination Date, such funding period shall end on
such date.
(b) After the Termination Date; Transferred Interest
Held by Company. At all times on and after the Termination Date, with
respect to any portion of the Transferred Interest which shall not have
been transferred to the Bank Investors (or any of them), the Company or
NationsBank, as applicable, shall select all funding periods and rates
applicable thereto.
(c) Prior to the Termination Date; Transferred Interest
Held by Bank Investor. At all times with respect to any portion of the
Transferred Interest transferred to the Bank Investors (or any of them)
pursuant to Section 10.7, but prior to the Termination Date, the initial
funding period applicable to such portion of the Net Investment alloca-
ble thereto shall be a period of not greater than 14 days and shall
accrue Carrying Costs on the basis of the Base Rate. Thereafter, with
respect to such portion, and with respect to any other portion of the
Transferred Interest held by the Bank Investors (or any of them),
provided that the Termination Date shall not have occurred, Carrying
Costs shall accrue with respect thereto at either the Base Rate or the
Adjusted LIBOR Rate, at the Transferor's option. The Transferor shall
give the Agent irrevocable notice by telephone of the new requested
funding period at least two (2) Business Days prior to the expiration of
any then existing funding period. In the case of any funding period
outstanding upon the occurrence of the Termination Date, such funding
period shall end on the date of such occurrence.
(d) After the Termination Date; Transferred Interest
Held by Bank Investor. At all times on and after the Termination Date,
with respect to any portion of the Transferred Interest which shall have
been owned or transferred to the Bank Investors (or any of them), the
Agent shall select all funding periods and rates applicable thereto.
(e) Eurodollar Rate Protection; Illegality. (i) If the
Agent is unable to obtain on a timely basis the information necessary to
determine the LIBOR Rate for any proposed funding period, then
(A) the Agent shall forthwith notify the Company or Bank
Investors, as applicable and the Transferor that the Adjusted LIBOR
Rate cannot be determined for such funding period, and
(B) while such circumstances exist, neither the Company, the
Bank Investors or the Agent shall allocate the Net Investment of
any additional Transferred Interests purchased during such period
or reallocate the Net Investment allocated to any then existing
funding period ending during such period, to a funding period which
accrues Carrying Costs on the basis of the Adjusted LIBOR Rate.
(ii) If, with respect to any outstanding funding period which
accrues Carrying Costs on the basis of the Adjusted LIBOR Rate, the
Company or any of the Bank Investors owning any Transferred Interest
therein notifies the Agent that it is unable to obtain matching deposits
in the London interbank market to fund its purchase or maintenance of
such Transferred Interest or that the Adjusted LIBOR Rate applicable to
such Transferred Interest will not adequately reflect the cost to the
Person of funding or maintaining its respective Transferred Interest for
such funding period then the Agent shall forthwith so notify the
Transferor, whereupon neither the Agent nor the Company or the Bank
Investors, as applicable, shall, while such circumstances exist, allo-
cate any Net Investment of any additional Transferred Interest purchased
during such period or reallocate the Net Interest allocated to any
funding period ending during such period, to a funding period which
accrues Carrying Costs on the basis of the Adjusted LIBOR Rate.
(iii) Notwithstanding any other provision of this Agreement,
if the Company or any of the Bank Investors, as applicable, shall notify
the Agent that such Person has determined (or has been notified by any
Liquidity Provider) that the introduction of or any change in or in the
interpretation of any law or regulation makes it unlawful (either for
the Company, such Bank Investor, or such Liquidity Provider, as
applicable), or any central bank or other governmental authority asserts
that it is unlawful, for the Company, such Bank Investor or such
Liquidity Provider, as applicable, to fund the purchases or maintenance
of Transferred Interests at the Adjusted LIBOR Rate, then (x) as of the
effective date of such notice from such Person to the Agent, the obliga-
tion or ability of the Company or such Bank Investor, as applicable, to
fund its purchase or maintenance of Transferred Interests at the
Adjusted LIBOR Rate shall be suspended until such Person notifies the
Agent that the circumstances causing such suspension no longer exist and
(y) the Net Investment allocated to each funding period which accrues
Carrying Costs on the basis of the Adjusted LIBOR Rate in which such
Person owns an interest shall either (1) if such Person may lawfully
continue to maintain such Transferred Interest at the Adjusted LIBOR
Rate until the last day of the applicable funding period, be reallocated
on the last day of such funding period to another funding period in
respect of which the Net Investment allocated thereto accrues Carrying
Costs on a basis other than the Adjusted LIBOR Rate or (2) if such
Person shall determine that it may not lawfully continue to maintain
such Transferred Interest at the Adjusted LIBOR Rate until the end of
the applicable funding period, such Person's share of the Net Investment
allocated to such funding period shall be deemed to accrue Carrying
Costs on the basis of the Base Rate from the effective date of such
notice until the end of such funding period.
SECTION 2.4. Carrying Costs, Fees and Other Costs and Expens-
es. Notwithstanding the limitation on recourse under Section 2.1
hereof, the Transferor shall pay, as and when due in accordance with
this Agreement, all fees hereunder, including any Early Collection Fee,
Carrying Costs, all amounts payable pursuant to Article VIII hereof, if
any, and the Servicing Fees. On each Remittance Date, the Transferor
shall pay to the Agent, on behalf of the Company or the Bank Investors,
as applicable, an amount equal to the accrued and unpaid Carrying Costs
for the related Collection Period. The Transferor shall pay to the
Agent, on behalf of the Company, on each day on which Related Commercial
Paper is issued by the Company, the Dealer Fee with respect to such
Related Commercial Paper. Nothing in this Agreement shall limit in any
way the obligations of the Transferor to pay the amounts set forth in
this Section 2.4.
SECTION 2.5. Allocations of Collections; Non-Liquidation Set-
tlement and Reinvestment Procedures; Servicer Advances. (a) On each
Determination Date, the Servicer shall allocate all Collections received
during the preceding Collection Period as Finance Charge Collections or
Principal Collections. Principal Collections shall be applied by the
Servicer as described in subsection (b) below. On each Remittance Date,
the product of (A) the daily average of the Buyers' Percentage Factor
over the preceding Collection Period and (B) the aggregate Finance
Charge Collections for such preceding Collection Period shall be ap-
plied, without duplication, by the Servicer as follows:
(i) first, to the retention by the Servicer of any
Servicer Advances made by the Servicer for costs accrued with
respect to such Collection Period and;
(ii) second, to the payment to the Agent of any accrued
and unpaid Carrying Costs for such Collection Period;
(iii) third, if Proffitt's, Inc. or an Affiliate is not
the Servicer, to the payment to the Servicer of any Servicing Fee
due and owing;
(iv) fourth, to the payment of all amounts due and
unpaid from the Transferor under Section 2.9(a) as a result of
dilutive items and the Buyers Percentage Factor being greater than
the Maximum Percentage Factor, which payment shall be treated as a
portion of Principal Collections allocable to the Company and ap-
plied pursuant to Section 2.5(b) below;
(v) fifth, with respect to any Remittance Date occurring
on or after the Termination Date, to the payment of the Buyers'
Percentage Factor of the outstanding balance of Receivables which
have become Defaulted Receivables during such Collection Period,
which payment shall be treated as a portion of Principal
Collections allocable to the Company and applied pursuant to
Section 2.5(b) below;
(vi) sixth, if Proffitt's, Inc. or an Affiliate is the
Servicer, to the retention by the Servicer of any Servicing Fee due
and owing;
(vii) seventh, to the extent any Finance Charge Co-
llections remain after application in accordance with clauses (i)
through (vi) above, (A) if prior to the Termination Date such ex-
cess amounts shall be paid to the Transferor and (B) if on or after
the Termination Date such excess amounts shall be paid to the Agent
in reduction of the Net Investment.
On each Remittance Date, subject to Section 2.5(c), the
product of (A) the daily average of the Transferor's Percentage Factor
over the preceding Collection Period and (B) the aggregate Finance
Charge Collections for the preceding Collection Period shall be remitted
to the Transferor.
(b) On each Remittance Date prior to the Termination
Date, (i) the Servicer shall allocate to the Company and/or the Bank
Investors the Buyers' Percentage Factor of Principal Collections re-
ceived during the related Collection Period and not previously applied
or accounted for and, at the Transferor's option, (A) pay such amount to
the Transferor, for the benefit of the Company and/or the Bank Inves-
tors, and the Transferor shall apply such amount toward the purchase of
additional undivided percentage interests in each Receivable pursuant to
Section 2.2(b), or (B) pay such amount to the Agent in reduction of the
Net Investment and (ii) the Servicer shall pay to the Transferor the
portion of such Principal Collections not allocated to the Transferred
Interest and remaining after any reallocations pursuant to Section
2.5(c) below.
On each Remittance Date on or subsequent to the Termination
Date, the Servicer shall allocate to the Company or the Bank Investors,
as applicable, the Buyers' Percentage Factor of all Principal
Collections received during the related Collection Period and not
previously applied or accounted for and pay such amount to the Agent in
reduction of the Net Investment. In the event the Termination Date
occurred as a result of a Termination Event, the portion of such
Principal Collections not allocated to the Transferred Interest and
remaining after any reallocations pursuant to Section 2.5(c) below shall
be distributed to the Agent in reduction of the Net Investment and, in
the case of any other Termination Date, the portion of such Principal
Collections not allocated to the Transferred Interest and remaining
after any allocations pursuant to Section 2.5(c) below shall be distrib-
uted to the Transferor.
(c) If on any Remittance Date, after giving effect to
clauses (i) through (v) of Section 2.5(a), an insufficiency exists with
respect to the Buyers' Percentage Factor of Finance Charge Collections,
then, in such event, on such Remittance Date the amount of Finance
Charge Collections distributable or allocable to the Transferor, and to
the extent any such insufficiency continues to remain, the amounts dis-
tributable to the Transferor, pursuant to Section 2.5(b), shall be re-
duced by the amount of such insufficiency, and such amount(s) shall be
applied as Finance Charge Collections allocable to the Transferred
Interest and shall be applied and distributed in accordance with the
priority set forth in clauses (i) through (v) of Section 2.5(a).
(d) In the event that, on any date, the Company does not
have sufficient funds to pay the Interest Component of matured or
maturing Related Commercial Paper or any Dealer Fee due and payable on
such day, the Servicer, acting upon written notice from the Adminis-
trative Agent, shall make an advance in an amount equal to such costs
and any Dealer Fee due and payable on such day (a "Servicer Advance")
and pay to the Agent, for the account of the Company, the amount of such
advance.
(e) The Transferor shall have the option to designate a
fixed or variable percentage (the "Discount Percentage") of up to 4% of
all Receivables other than Finance Charges, late fees, overlimit fees,
return check fees and all other fees and charges and Receivables in De-
faulted Accounts created on and after any date of determination to be
treated as finance charge receivables ("Discount Receivables") in
accordance with the provisions of this Section 2.5(e), which percentage
shall remain fixed and in effect until such time as the Transferor has
provided a subsequent designation to the Agent. The Transferor shall
have the option to increase the Discount Percentage to a percentage not
greater than 4% or to reduce the Discount Percentage, provided, that no
such designation shall become effective that would cause a Termination
Event to occur.
SECTION 2.6. Liquidation Settlement Procedures. If, on the
Termination Date the Buyers' Percentage Factor is greater than the
Maximum Buyers' Percentage Factor, then the Transferor shall immediately
pay to the Agent, for the benefit of the Company or the Bank Investors,
as applicable, from previously received Principal Collections, an amount
equal to the amount that, when applied in reduction of the Net Invest-
ment, will result in a Buyers' Percentage Factor less than or equal to
the Maximum Buyers' Percentage Factor. Such amount shall be applied by
the Agent to the reduction of the Net Investment. On each Remittance
Date occurring on and following the Termination Date, Principal
Collections shall be applied in accordance with Section 2.5(b).
Following the date on which the Net Investment shall be
reduced to zero and all other Aggregate Unpaids have been paid in full,
(i) the Servicer shall recompute the Buyers' Percentage Factor as zero,
(ii) the Agent, on behalf of the Company and the Bank Investors, shall
be considered to have reconveyed to the Transferor all of the Company's
and the Bank Investors' right, title and interest in and to the Affected
Assets (including the Transferred Interest), (iii) the Servicer shall
pay to the Transferor any remaining Collections set aside and held by
the Servicer and (iv) the Agent, on behalf of the Company and the Bank
Investors, shall execute and deliver to the Transferor, at the
Transferor's expense, such documents or instruments as are necessary to
terminate the Company's and the Bank Investors' respective interests in
the Affected Assets. Any such documents shall be prepared by or on
behalf of the Transferor.
SECTION 2.7. Fees. Notwithstanding any limitation on
recourse contained in this Agreement, the Transferor shall pay the
following non-refundable fees:
(a) On each Remittance Date, to the Company solely for
its own account, the Program Fee and the Administrative Fee, and to the
Agent for distribution to the Bank Investors, the Facility Fee.
(b) On the date of execution hereof, to the Administra-
tive Agent solely for its own account, the Arrangement Fee.
SECTION 2.8. Protection of Ownership Interest of the Company
and the Bank Investors. (a) The Transferor agrees that it will, and
will cause each Designated Seller to, from time to time, at its expense,
promptly execute and deliver all instruments and documents and take all
actions as may be necessary or as the Agent may reasonably request in
order to perfect or protect the Transferred Interest or to enable the
Agent, the Company or the Bank Investors to exercise or enforce any of
their respective rights hereunder. Without limiting the foregoing, the
Transferor will, and will cause each Designated Seller to, upon the re-
quest of the Agent, the Company or any of the Bank Investors, in order
to accurately reflect this purchase and sale transaction, execute and
file such financing or continuation statements or amendments thereto or
assignments thereof (as permitted pursuant to Section 10.7 hereof) as
may be requested by the Agent, the Company or any of the Bank Investors.
The Transferor shall, and will cause each Designated Seller to, upon re-
quest of the Agent, the Company or any of the Bank Investors, obtain
such additional search reports as the Agent, the Company or any of the
Bank Investors shall request. To the fullest extent permitted by appli-
cable law, the Agent shall be permitted to sign and file continuation
statements and amendments thereto and assignments thereof without the
Transferor's or any Designated Seller's signature. Carbon, photographic
or other reproduction of this Agreement or any financing statement shall
be sufficient as a financing statement.
The Transferor agrees that it will, and will cause each
Designated Seller to, at its expense, on or prior to the Closing Date
indicate clearly and unambiguously in its master data processing records
and on any storage containers containing Records that the Receivables
created in connection with the Accounts have been conveyed to the Trans-
feror (in the case of a Designated Seller), and transferred to the
Agent, for the benefit of the Company and the Bank Investors, pursuant
to this Agreement by affixing thereon the following legend: "THE
RECEIVABLES IN THESE FILES HAVE BEEN ACQUIRED BY AND CONVEYED TO
PROFFITT'S CREDIT CORPORATION AND AN INTEREST THEREIN HAS BEEN ASSIGNED
TO NATIONSBANK, N.A., AS AGENT, FOR THE BENEFIT OF ENTERPRISE FUNDING
CORPORATION AND THOSE CERTAIN BANK INVESTORS PURSUANT TO THE TRANSFER
AND ADMINISTRATION AGREEMENT DATED AS OF JANUARY 15, 1997, AS AMENDED
FROM TIME TO TIME, AMONG PROFFITT'S CREDIT CORPORATION, NATIONSBANK,
N.A., ENTERPRISE FUNDING CORPORATION AND THE OTHER SIGNATORIES NAMED
THEREIN." The Transferor further agrees to deliver or to cause the
Servicer to deliver to the Agent a computer file or microfiche list con-
taining a true and complete list of all such Accounts, identified by
account number and by Receivable balance as of the Cut-Off Date. Such
file or list shall be marked as the Account Schedule and Schedule A to
this Agreement, delivered to the Agent as confidential and proprietary,
and is hereby incorporated into and made a part of this Agreement. The
Transferor agrees to deliver or to cause the Servicer to deliver to the
Agent within five (5) Business Days of the request therefor by the Agent
either (i) a computer file or microfiche list containing a true and
complete list of all Accounts, including all Accounts created on or
after the Cut-Off Date, in existence as of the last day of the prior
Collection Period, identified by account number and by Receivable
balance as of the last day of the prior Collection Period or (ii) a
computer file or microfiche list containing a true and complete list of
all Accounts in existence as of the last day of the prior Collection
Period, identified by account number and by Receivable balance as of the
last day of the prior Collection Period. Such file or list shall be
marked as the Account Schedule and Schedule A to this Agreement,
delivered to the Agent as confidential and proprietary, shall replace
the previously delivered Account Schedule and Schedule A, and shall be
incorporated into and made a part of this Agreement. The Servicer
agrees, on behalf of the Transferor, at its own expense, by the end of
each Collection Period in which any Accounts or Related Accounts have
been originated to indicate clearly and unambiguously in its master data
processing records and any storage containers containing Records that
the Receivables created in connection with such Accounts or the Related
Accounts have been conveyed to the Transferor and transferred to the
Agent, for the benefit of the Company and the Bank Investors, pursuant
to this Agreement.
The Transferor shall not, and shall not permit any Designated
Seller to, change its respective name, identity or corporate structure
(within the meaning of Section 9-402(7) of the UCC as in effect in the
States of New York, Nevada and Mississippi) nor relocate its respective
chief executive office or any office where Records are kept unless it
shall have: (i) given the Agent at least thirty (30) days prior notice
thereof and (ii) prepared at Transferor's expense and delivered to the
Agent all financing statements, instruments and other documents
necessary to preserve and protect the Transferred Interest or reasonably
requested by the Agent in connection with such change or relocation.
Any filings under the UCC or otherwise that are occasioned by such
change in name or location shall be made at the expense of the Trans-
feror.
(b) The Servicer shall instruct all Obligors to cause all
Collections to be deposited directly in a Lock-Box Account maintained
with a Lock-Box Bank. Any Lock-Box Account maintained by a Lock-Box
Bank pursuant to the related Lock-Box Agreement shall be under the
exclusive ownership and control of the Agent which is hereby granted to
the Agent by the Designated Sellers and the Transferor. The Servicer
shall be permitted to give instructions to the Lock-Box Banks for so
long as neither a Servicer Default nor any other Termination Event has
occurred hereunder. The Servicer shall not add any bank as a Lock-Box
Bank to those listed on Exhibit C attached hereto unless such bank has
entered into a Lock-Box Agreement. The Servicer shall not terminate any
bank as a Lock-Box Bank unless the Agent shall have received fifteen
(15) days' prior notice of such termination. If the Transferor, a
Designated Seller or the Servicer receives any Collections, the Trans-
feror, such Designated Seller or the Servicer, as applicable, shall
immediately, but in any event within forty-eight (48) hours of receipt,
remit such Collections to a Lock-Box Account.
SECTION 2.9. Deemed Collections; Application of Payments.
(a) If on any day the Outstanding Principal Balance of a Receivable is
either (x) reduced as a result of any defective, rejected or returned
merchandise or services, any discount, credit, rebate, dispute, warranty
claim, repossessed or returned goods, chargeback, allowance or any
billing adjustment, or (y) reduced or canceled as a result of a setoff
or offset in respect of any claim by any Person (whether such claim
arises out of the same or a related transaction or an unrelated transac-
tion) or (z) any other downward adjustments to the balance of such
Receivable without receiving Collections therefor and prior to such
Receivable becoming a Defaulted Receivable, the amount of such cancella-
tion, reduction or adjustment shall thereafter be deducted from the
aggregate Outstanding Principal Balance of the Receivables and the Net
Receivables Balance. If such reduction would result in a Buyers'
Percentage Factor greater than the Maximum Buyers' Percentage Factor,
the Transferor shall pay (or direct the Servicer to pay from Collections
otherwise distributable to the Transferor) to the Agent an amount equal
to the amount that, when applied in reduction of the Net Investment,
will result in a Buyers' Percentage Factor less than or equal to the
Maximum Buyers' Percentage Factor. Such amount shall be applied by the
Agent to the reduction of the Net Investment.
(b) If on any day any of the representations or warran-
ties in Article III was or becomes untrue with respect to a Receivable
(whether on or after the date of any transfer of an interest therein to
the Agent, the Company or the Bank Investors as contemplated hereunder),
such Receivable shall thereafter not be included in any calculation of
the aggregate Outstanding Principal Balance of the Receivables or the
Net Receivables Balance. If such reduction would result in a Buyers'
Percentage Factor greater than the Maximum Buyers' Percentage Factor,
the Transferor shall pay (or direct the Servicer to pay from Collections
otherwise distributable to the Transferor) to the Agent an amount equal
to the amount that, when applied in reduction of the Net Investment,
will result in a Buyers' Percentage Factor less than or equal to the
Maximum Buyers' Percentage Factor. Such amount shall be applied by the
Agent to the reduction of the Net Investment.
SECTION 2.10. Payments and Computations, Etc. All amounts to
be paid or deposited by the Transferor or the Servicer hereunder shall
be paid or deposited in accordance with the terms hereof no later than
11:00 a.m. (New York City time) on the day when due in immediately
available funds; if such amounts are payable to the Company or any Bank
Investor they shall be paid or deposited in the account indicated in
Section 11.3 hereof, until otherwise notified by the Agent. The Trans-
feror shall, to the extent permitted by law, pay to the Agent, for the
benefit of the Company and the Bank Investors upon demand, interest on
all amounts not paid or deposited when due hereunder at a rate equal to
2% per annum plus the Base Rate. All computations of interest and all
per annum fees hereunder shall be made on the basis of a year of 360
days for the actual number of days (including the first but excluding
the last day) elapsed. Any computations by the Agent of amounts payable
by the Transferor hereunder shall be binding upon the Transferor absent
manifest error.
SECTION 2.11. Reports. (a) On each Determination Date, the
Servicer shall prepare and forward to the Agent and the Administrative
Agent (i) an Investor Report as of the end of the last day of the
immediately preceding Collection Period, and (ii) such other information
as the Agent or the Administrative Agent may reasonably request.
(b) On or before the close of business on Tuesday of each
calendar week (or if such day is not a Business Day, the next preceding
Business Day), the Servicer will deliver to the Agent and the Admin-
istrative Agent a Cycle Certificate which shall report (x) on Collec-
tions processed during the time period from the date of the latest cycle
closing date reported on in the previous Cycle Certificate through and
including the date of the latest cycle closing date reported on in the
current Cycle Certificate and (y) the Maximum Buyers' Percentage Factor
and the Buyers' Percentage Factor as of the latest cycle closing date
reported on in the current Cycle Certificate, and (z) the certain other
information concerning the Receivables as of the most recent cycle
closing date reported on in the current Cycle Certificate. The Servicer
shall report information on the Cycle Certificate with respect to each
cycle closing date not later than ten days after such cycle closing
date.
SECTION 2.12. Collection Account. There shall be established
on the day of the initial Incremental Transfer hereunder and maintained,
for the benefit of the Company and the Bank Investors, with the Agent,
a segregated account (the "Collection Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the
benefit of the Company and the Bank Investors. On and after the
occurrence of (i) a Servicer Default, (ii) a Guarantor Default or (iii)
a Termination Event, and from and after such time as the Guaranty pro-
vided by Article IX herein fails to remain in effect and enforceable,
the Servicer shall remit daily and prior to the close of business on the
second Business Day following receipt to the Collection Account all Col-
lections received with respect to any Receivables. Funds on deposit in
the Collection Account (other than investment earnings) shall be invest-
ed by the Agent in Eligible Investments that will mature so that such
funds will be available prior to the Remittance Date following such
investment. On each Remittance Date, all interest and earnings (net of
losses and investment expenses) on funds on deposit in the Collection
Account shall be retained in the Collection Account and be available to
make any distributions required to be made pursuant to Section 2.5(a).
On the date on which the Net Investment and all other Aggregate Unpaids
have been paid in full, any funds remaining on deposit in the Collection
Account shall be paid to the Transferor.
SECTION 2.13. Sharing of Payments, Etc. If the Company or
any Bank Investor (for purposes of this Section only, being a
"Recipient") shall obtain any payment (whether voluntary, involuntary,
through the exercise of any right of setoff, or otherwise) on account of
Transferred Interest owned by it (other than pursuant to Section 2.7, or
Article VIII and other than as a result of the differences in the timing
of the applications of Collections pursuant to Section 2.5 or 2.6) in
excess of its ratable share of payments on account of Transferred
Interest obtained by the Company and/or the Bank Investors entitled
thereto, such Recipient shall forthwith purchase from the Company and/or
the Bank Investors entitled to a share of such amount participations in
the Transferred Interests owned by such Persons as shall be necessary to
cause such Recipient to share the excess payment ratably with each such
other Person entitled thereto; provided, however, that if all or any
portion of such excess payment is thereafter recovered from such
Recipient, such purchase from each such other Person shall be rescinded
and each such other Person shall repay to the Recipient the purchase
price paid by such Recipient for such participation to the extent of
such recovery, together with an amount equal to such other Person's rat-
able share (according to the proportion of (a) the amount of such other
Person's required payment to (b) the total amount so recovered from the
Recipient) of any interest or other amount paid or payable by the
Recipient in respect of the total amount so recovered.
SECTION 2.14. Right of Setoff. Without in any way limiting
the provisions of Section 2.13, each of the Company and the Bank
Investors is hereby authorized (in addition to any other rights it may
have) at any time after the occurrence of the Termination Date or during
the continuance of a Potential Termination Event to set-off, appropriate
and apply (without presentment, demand, protest or other notice which
are hereby expressly waived) any deposits and any other indebtedness
held or owing by the Company or such Bank Investor to, or for the
account of, the Transferor against the amount of the Aggregate Unpaids
owing by the Transferor to such Person (even if contingent or
unmatured).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the
Transferor. The Transferor represents and warrants to the Agent, the
Company and the Bank Investors that:
(a) Corporate Existence and Power. The Transferor is a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has all corporate
power and all material governmental licenses, authorizations, consents
and approvals required to carry on its business in each jurisdiction in
which its business is now conducted. The Transferor is duly qualified
to do business in, and is in good standing in, every other jurisdiction
in which the nature of its business requires it to be so qualified,
except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect.
(b) Corporate and Governmental Authorization; Contraven-
tion. The execution, delivery and performance by the Transferor of this
Agreement, the Receivables Purchase Agreement, the Fee Letter, the Cer-
tificate, the Transfer Certificate and the other Transaction Documents
to which the Transferor is a party are within the Transferor's corporate
powers, have been duly authorized by all necessary corporate action, re-
quire no action by or in respect of, or filing with, any Official Body
or official thereof (except as contemplated by Section 2.8 hereof), and
do not contravene, or constitute a default under, any provision of
applicable law, rule or regulation or of the Certificate of Incorpora-
tion or Bylaws of the Transferor or of any agreement, judgment,
injunction, order, writ, decree or other instrument binding upon the
Transferor or result in the creation or imposition of any Adverse Claim
on the assets of the Transferor or any of its Subsidiaries (except as
contemplated by Section 2.8 hereof).
(c) Binding Effect. Each of this Agreement, the
Receivables Purchase Agreement, the Fee Letter, the Certificate and the
other Transaction Documents to which the Transferor is a party consti-
tutes and the Transfer Certificate upon payment of the Transfer Price
set forth therein will constitute the legal, valid and binding
obligation of the Transferor, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws affecting the rights of creditors generally.
(d) Perfection. Immediately preceding each Transfer
hereunder, the Transferor shall be the owner of all of the Receivables,
free and clear of all Adverse Claims. On or prior to each Transfer and
each recomputation of the Transferred Interest, all financing statements
and other documents required to be recorded or filed in order to perfect
and protect the Transferred Interest against all creditors of and
purchasers from the Transferor and the applicable Designated Seller will
have been duly filed in each filing office necessary for such purpose
and all filing fees and taxes, if any, payable in connection with such
filings shall have been paid in full.
(e) Accuracy of Information. All information heretofore
furnished by the Transferor (including without limitation, the Investor
Reports, any reports delivered pursuant to Section 2.11 hereof and the
financial statements delivered pursuant to Section 5.1) to the Company,
any Bank Investors, the Agent or the Administrative Agent for purposes
of or in connection with this Agreement or any transaction contemplated
hereby is, and all such information hereafter furnished by the Transfer-
or to the Company, any Bank Investors, the Agent or the Administrative
Agent will be, true and accurate in every material respect, on the date
such information is stated or certified.
(f) Tax Status. The Transferor has filed all tax
returns (federal, state and local) required to be filed and has paid or
made adequate provision for the payment of all taxes, assessments and
other governmental charges.
(g) Action, Suits. Except as set forth in Exhibit H
hereof, there are no actions, suits or proceedings pending, or to the
knowledge of the Transferor threatened, against or affecting the
Transferor or any Affiliate of the Transferor or their respective
properties, in or before any court, arbitrator or other body, which may,
individually or in the aggregate, have a Material Adverse Effect.
(h) Use of Proceeds. No proceeds of any Transfer will
be used by the Transferor to acquire any security in any transaction
which is subject to Section 13 or 14 of the Securities Exchange Act of
1934, as amended.
(i) Place of Business. The principal place of business
and chief executive office of the Transferor are located at the address
of the Transferor indicated in Section 11.3 hereof and the offices where
the Transferor keeps all its Records, are located at the address(es)
described on Exhibit I or such other locations notified to the Company
in accordance with Section 2.8 hereof in jurisdictions where all action
required by Section 2.8 hereof has been taken and completed.
(j) Good Title. Upon each Transfer and each
recomputation of the Transferred Interest, the Company or the Agent on
behalf of the Company and the Bank Investors shall acquire a valid and
perfected first priority undivided percentage ownership interest to the
extent of the Transferred Interest or a first priority perfected secu-
rity interest in the Receivables existing on the date of such Transfer
and recomputation and in the Related Security and Collections with
respect thereto free and clear of any Adverse Claim.
(k) Tradenames, Etc. As of the date hereof: (i) the
Transferor has only the subsidiaries and divisions listed on Exhibit J
hereto; and (ii) the Transferor has, within the last five (5) years,
operated only under the tradenames identified in Exhibit J hereto, and,
within the last five (5) years, has not changed its name, merged with or
into or consolidated with any other corporation or been the subject of
any proceeding under Title 11, United States Code (Bankruptcy), except
as disclosed in Exhibit J hereto.
(l) Nature of Receivables. Each Receivable (x)
represented by the Transferor or the Servicer to be an Eligible Receiv-
able (including in any Investor Report or other report delivered
pursuant to Section 2.11 hereof) or (y) included in the calculation of
the Net Receivables Balance, in fact satisfies at such time the defini-
tion of "Eligible Receivable" set forth herein and is an "eligible
asset" as defined in Rule 3a-7 under the Investment Company Act, of
1940, as amended.
(m) Coverage Requirement; Amount of Receivables. The
Buyers' Percentage Factor does not exceed the Maximum Buyers' Percentage
Factor. As of the Cut-Off Date, the aggregate Outstanding Principal
Balance of the Receivables in existence was $168,260,400.40 and the Net
Receivable Balance was $167,778,375.87.
(n) Credit Guidelines. Since January 9, 1997, there
have been no material changes in the Credit Guidelines other than as
permitted hereunder. Since such date, no material adverse change has
occurred in the overall rate of collection of the Receivables.
(o) No Termination Event. No event has occurred and is
continuing and no condition exists which constitutes a Termination Event
or a Potential Termination Event.
(p) Not an Investment Company. The Transferor is not,
and is not controlled by, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, or is exempt from all
provisions of such Act.
(q) ERISA. Each of the Transferor and its ERISA
Affiliates is in compliance in all material respects with ERISA and no
lien exists in favor of the Pension Benefit Guaranty Corporation on any
of the Receivables.
(r) Lock-Box Accounts. The names and addresses of all
the Lock-Box Banks, together with the account numbers of the Lock-Box
Accounts at such Lock-Box Banks, are specified in Exhibit C hereto (or
at such other Lock-Box Banks and/or with such other Lock-Box Accounts as
have been notified to the Collateral Agent and for which Lock-Box
Agreements have been executed in accordance with Section 2.8(b) hereof
and delivered to the Servicer). All Obligors have been instructed to
make payment to a Lock-Box Account and only Collections are deposited
into the Lock-Box Accounts.
(s) Bulk Sales. No transaction contemplated hereby or
by the Receivables Purchase Agreement requires compliance with any bulk
sales act or similar law.
(t) Transfers Under Receivables Purchase Agreement.
Each Receivable which has been transferred to the Transferor by a
Designated Seller has been purchased by the Transferor from such
Designated Seller pursuant to, and in accordance with, the terms of the
Receivables Purchase Agreement.
(u) Preference; Voidability. The Transferor shall have
given reasonably equivalent value to each Designated Seller in
consideration for the transfer to the Transferor of the applicable
Receivables and Collections and Related Security from such Designated
Seller, and each such transfer shall not have been made for or on
account of an antecedent debt owed by such Designated Seller to the
Transferor and no such transfer is or may be voidable under any Section
of the Bankruptcy Reform Act of 1978 (11 U.S.C. Section 101 et seq.), as
amended.
(v) Representations and Warranties of each Designated
Seller. Each representation and warranty of each Designated Seller set
forth in Article IV of the Receivables Purchase Agreement is true and
correct in all material respects and the Transferor hereby remakes all
such representations and warranties for the benefit of the Agent, the
Company, the Bank Investors and the Administrative Agent.
Any document, instrument, certificate or notice delivered to
the Company hereunder shall be deemed a representation and warranty by
the Transferor.
SECTION 3.2. Representations and Warranties of the Servicer.
The Servicer represents and warrants to the Agent, the Company and the
Bank Investors that:
(a) Corporate Existence and Power. The Servicer is a
corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has all corporate
power and all material governmental licenses, authorizations, consents
and approvals required to carry on its business in each jurisdiction in
which its business is now conducted. The Servicer is duly qualified to
do business in, and is in good standing in, every other jurisdiction in
which the nature of its business requires it to be so qualified, except
where the failure to be so qualified or in good standing would not have
a Material Adverse Effect.
(b) Corporate and Governmental Authorization; Contraven-
tion. The execution, delivery and performance by the Servicer of this
Agreement are within the Servicer's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official
(except as contemplated by Section 2.8), and do not contravene, or
constitute a default under, any provision of applicable law or regula-
tion or of the charter or Bylaws of the Servicer or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Servicer or result in the creation or imposition of any lien on assets
of the Servicer or any of its Subsidiaries (except as contemplated by
Section 2.8).
(c) Binding Effect. This Agreement constitutes the
legal, valid and binding obligation of the Servicer enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws affecting the rights of creditors
generally.
(d) Accuracy of Information. All information heretofore
furnished by the Servicer in writing to the Transferor, the Company or
the Administrative Agent for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by the Servicer to the Transferor, the
Company or the Administrative Agent will be, true and accurate in every
material respect, on the date such information is stated or certified.
(e) Tax Status. The Servicer has filed all tax returns
(federal, state and local) required to be filed and has paid or made
adequate provision for the payment of all taxes, assessments and other
governmental charges.
(f) Action, Suits. Except as set forth in Exhibit H
attached hereto (as such exhibit may be amended from time to time),
there are no actions, suits or proceedings pending, or to the knowledge
of the Servicer threatened, against or seeking to prevent the issuance
of the Certificate or the consummation of any of the transactions
contemplated by this Agreement, or otherwise affecting the Servicer or
any Affiliate of the Servicer or their respective properties, in or
before any court, arbitrator or other body, which may, individually or
in the aggregate, have a Material Adverse Effect.
(g) Collections and Servicing. Since November 2, 1996,
there has been no material adverse change in the ability of the Servicer
to service and collect the Receivables and no material adverse change
has occurred in the overall rate of collections of Receivables.
(h) Not an Investment Company. The Servicer is not an
"investment company" within the meaning of the Investment Company Act of
1940, as amended, or is exempt from all provisions of such Act.
(i) ERISA. The Servicer is in compliance in all
material respects with ERISA.
SECTION 3.3. Reaffirmation of Representations and Warranties
by the Transferor and Servicer. On each day that a Transfer is made
hereunder, the Transferor, by accepting the proceeds of such Transfer,
whether delivered to the Transferor pursuant to Section 2.2(a) or
Section 2.5 hereof, and the Servicer, shall be deemed to have certified
that all of their respective representations and warranties described in
Sections 3.1 and 3.2 hereof are correct on and as of such day as though
made on and as of such day. Each Incremental Transfer shall be subject
to the further condition precedent that prior to the date of such Incre-
mental Transfer, the Servicer shall have delivered to the Agent and the
Administrative Agent, in form and substance satisfactory to the Agent
and the Administrative Agent, a completed Cycle Certificate dated the
second Business Day prior to the date of such Incremental Transfer,
together with such additional information as may be reasonably requested
by the Administrative Agent or the Agent; and the Transferor shall be
deemed to have represented and warranted that such conditions precedent
have been satisfied.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. Conditions to Closing. On or prior to the date
of execution hereof, the Transferor shall deliver to the Agent the
following documents, instruments and fees all of which shall be in a
form and substance acceptable to the Agent:
(a) A copy of the resolutions of the Board of Directors
of the Transferor certified by its Secretary approving the execution,
delivery and performance by the Transferor of this Agreement, the Re-
ceivables Purchase Agreement and the other Transaction Documents to be
delivered by the Transferor hereunder or thereunder.
(b) A copy of the resolutions of the Board of Directors
of each Designated Seller, the Servicer and the Servicer Guarantor
certified by its Secretary approving the execution, delivery and perfor-
mance by such Person of this Agreement, the Receivables Purchase Agree-
ment and the other Transactions Documents to be delivered by such Person
hereunder or thereunder.
(c) The Articles of Incorporation of the Transferor
certified by the Secretary of State or other similar official of the
Transferor's jurisdiction of incorporation dated a date reasonably prior
to the Closing Date.
(d) The Articles of Incorporation of each Designated
Seller, the Servicer and the Servicer Guarantor certified by the
Secretary of State or other similar official of such Person's jurisdic-
tion of incorporation dated a date reasonably prior to the Closing Date.
(e) A Good Standing Certificate for the Transferor
issued by the Secretary of State or a similar official of the
Transferor's jurisdiction of incorporation and certificates of quali-
fication as a foreign corporation issued by the Secretaries of State or
other similar officials of each jurisdiction where such qualification is
material to the transactions contemplated by this Agreement and the
other Transaction Documents, in each case, dated a date reasonably prior
to the Closing Date.
(f) A Good Standing Certificate for each Designated
Seller, the Servicer and the Servicer Guarantor issued by the Secretary
of State or a similar official of such Persons's jurisdiction of incor-
poration and certificates of qualification as a foreign corporation
issued by the Secretaries of State or other similar officials of each
jurisdiction when such qualification is material to the transactions
contemplated by this Agreement and the Receivables Purchase Agreement
and the other Transaction Documents, in each case, dated a date reason-
ably prior to the Closing Date.
(g) A Certificate of the Secretary of the Transferor
substantially in the form of Exhibit L attached hereto.
(h) A Certificate of the Secretary of each Designated
Seller, the Servicer and the Servicer Guarantor substantially in the
form of Exhibit L attached hereto.
(i) Copies of proper financing statements (Form UCC-1),
dated a date reasonably near to the date of the initial Incremental
Transfer naming the Transferor as the debtor in favor of the Agent, for
the benefit of the Company and the Bank Investors, secured party or
other similar instruments or documents as may be necessary or in the
reasonable opinion of the Agent desirable under the UCC of all appro-
priate jurisdictions or any comparable law to perfect the Agent's
undivided percentage interest in all Receivables and the Related
Security and Collections relating thereto.
(j) Copies of proper financing statements (Form UCC-1),
dated a date reasonably near to the date of the initial Incremental
Transfer naming each Designated Seller as the debtor in favor of the
Transferor as secured party and the Agent, for the benefit of the
Company and the Bank Investors, as assignee of the secured party or
other similar instruments or documents as may be necessary or in the
reasonable opinion of the Agent desirable under the UCC of all appro-
priate jurisdictions or any comparable law to perfect the Transferor's
ownership interest in all Receivables.
(k) Copies of proper financing statements (Form UCC-3),
if any, necessary to terminate all security interests and other rights
of any person in Receivables previously granted by Transferor.
(l) Copies of proper financing statements (Form UCC-3),
if any, necessary to terminate all security interests and other rights
of any person in Receivables previously granted by each Designated
Seller.
(m) Certified copies of request for information or
copies (Form UCC-11) (or a similar search report certified by parties
acceptable to the Agent) dated a date reasonably near the date of the
initial Incremental Transfer listing all effective financing statements
which name the Transferor or any Designated Seller (under their
respective present names and any previous names) as debtor and which are
filed in jurisdictions in which the filings were made pursuant to items
(i) or (j) above together with copies of such financing statements (none
of which shall cover any Receivables or Contracts).
(n) Executed copies of the Lock-Box Agreements relating
to each of the Lock-Box Banks and the Lock-Box Accounts.
(o) An opinion of Butler, Snow, O'Mara, Stevens &
Cannada, PLLC, special counsel to the Transferor, the Servicer, the
Servicer Guarantor and the Designated Sellers, covering the matters set
forth in Exhibit K hereto.
(p) An opinion of Butler, Snow, O'Mara, Stevens &
Cannada, PLLC, special counsel to the Transferor and the Designated
Sellers, covering certain bankruptcy and insolvency matters (i.e. "true
sale" and nonconsolidation) in form and substance satisfactory to the
Agent and Agent's counsel.
(q) An opinion of Baker, Donelson, Bearman & Caldwell,
special Tennessee counsel to Proffitt's, covering certain Tennessee
Uniform Commercial Code matters in form and substance satisfactory to
the Agent and Agent's counsel.
(r) An opinion of Schreck Morris, special Nevada counsel
to the Transferor, covering certain corporate and security interest
matters in form and substance satisfactory to the Agent and the Agent's
counsel.
(s) A computer tape setting forth as of the Cut-Off Date
all Receivables and the Outstanding Principal Balances thereon and such
other information as the Agent may reasonably request.
(t) An executed copy of this Agreement, the Receivables
Purchase Agreement, the Fee Letter and each of the other Transaction
Documents to be executed by the Designated Sellers, the Servicer, the
Servicer Guarantor or the Transferor.
(u) The Transfer Certificate, duly executed by the
Transferor.
(v) The Certificate, duly executed by the Transferor and
appropriately completed.
(w) The Arrangement Fee in accordance with Section
2.7(b).
(x) An Investor Report for December 31, 1996.
(y) A Cycle Certificate as of the Cut-Off Date.
(z) A writing indicating the appointment by the Trans-
feror and each Designated Seller of CT Corporation as agent for process
pursuant to Section 11.4(d) hereof.
(aa) Such other documents, instruments, certificates and
opinions as the Agent or the Administrative Agent, shall reasonably re-
quest.
ARTICLE V
COVENANTS
SECTION 5.1. Affirmative Covenants of Transferor. At all
times from the date hereof to the later to occur of (i) the Termination
Date or (ii) the date on which the Net Investment and all other Aggre-
gate Unpaids have been paid in full, in cash, unless the Agent shall
otherwise consent in writing:
(a) Financial Reporting. The Transferor will, and will
cause each Designated Seller and each of such Designated Seller's
Subsidiaries to, maintain, for itself and each of its respective Subsid-
iaries, a system of accounting established and administered in
accordance with GAAP, and furnish to the Agent:
(i) Annual Reporting. Within ninety (90) days after the
close of the Transferor's and Proffitt's fiscal years, (beginning
with the fiscal year ending, in the case of Proffitt's, in 1997,
and in the case of the Transferor, in 1998) audited financial
statements, prepared in accordance with GAAP on a consolidated
basis for (x) the Transferor and (y) for Proffitt's and its Sub-
sidiaries, in each case, including balance sheets as of the end of
such period, related statements of operations, shareholder's equity
and cash flows, accompanied by an unqualified audit report certi-
fied by independent certified public accountants, acceptable to the
Agent, prepared in accordance with GAAP and, upon the Agent's
request, any management letter prepared by said accountants and
accompanied by (i) a certificate of said accountants that
Proffitt's is in compliance with the financial covenants set forth
in Exhibit O attached hereto or, if Proffitt's is not in compliance
with such covenants, stating the nature and status thereof and (ii)
a certificate of the chief financial officer or chairman,
president, treasurer or any executive vice president of the Trans-
feror stating that no Termination Event or Potential Termination
Event exists, or if any Termination Event or Potential Termination
Event exists, stating the nature and status thereof and showing the
computation of each of the financial ratios and restrictions set
forth in Exhibit O attached hereto.
(ii) Quarterly Reporting. Within forty-five (45) days
after the close of the first three quarterly periods of each of the
Transferor's and Proffitt's fiscal years, for (x) the Transferor
and (y) for Proffitt's and its Subsidiaries, in each case, consol-
idated unaudited balance sheets as at the close of each such period
and consolidated related statements of operations, shareholder's
equity and cash flows for the period from the beginning of such
fiscal year to the end of such quarter, and showing the computation
of each of the financial ratios and restrictions set forth in
Exhibit O attached hereto all certified by its chief financial
officer, chairman, president, treasurer or any executive vice
president.
(iii) Compliance Certificate. Together with the finan-
cial statements required hereunder, a compliance certificate signed
by the chief financial officer, chairman, president, treasurer or
any executive vice president of the Transferor or Proffitt's, as
applicable, stating that (x) the attached financial statements
have been prepared in accordance with GAAP and accurately reflect
the financial condition of the Transferor or Proffitt's as ap-
plicable and (y) to the best of such Person's knowledge, no Termi-
nation Event or Potential Termination Event exists, or if any
Termination Event or Potential Termination Event exists, stating
the nature and status thereof and showing the computation of, and
showing compliance with, each of the financial ratios and restric-
tions set forth in Exhibit O attached hereto.
(iv) Shareholders Statements and Reports. Promptly upon
the furnishing thereof to the shareholders of Proffitt's, copies of
all financial statements, reports and proxy statements so fur-
nished.
(v) S.E.C. Filings. Promptly upon the filing thereof,
copies of all registration statements and annual, quarterly,
monthly or other regular reports which Proffitt's or any subsidiary
files with the Securities and Exchange Commission.
(vi) Notice of Termination Events or Potential
Termination Events. As soon as possible and in any event within
two (2) days after the occurrence of each Termination Event or each
Potential Termination Event, a statement of the chief financial
officer or chief accounting officer of the Transferor setting forth
details of such Termination Event or Potential Termination Event
and the action which the Transferor proposes to take with respect
thereto.
(vii) Change in Credit Guidelines and Debt Ratings.
Within thirty (30) days after the date any material change in or
amendment to the Credit Guidelines is made, a copy of the Credit
Guidelines then in effect indicating such change or amendment.
Within fifteen (15) days after the date of any change in Proffitt's
public or private debt ratings (including any related implied or
"shadow" ratings), if any, a written certification of Proffitt's
public and private debt ratings after giving effect to any such
change.
(viii) Credit Guidelines. Within ten (10) Business Days
of the request of the Agent, a complete copy of the Credit Guide-
lines then in effect.
(ix) ERISA. Promptly after the filing or receiving
thereof, copies of all reports and notices with respect to any
Reportable Event (as defined in Article IV of ERISA) which the
Transferor, any Designated Seller or any ERISA Affiliate of the
Transferor or any Designated Seller files under ERISA with the In-
ternal Revenue Service, the Pension Benefit Guaranty Corporation or
the U.S. Department of Labor or which the Transferor, any
Designated Seller or any ERISA Affiliates of the Transferor or any
Designated Seller receives from the Internal Revenue Service, the
Pension Benefit Guaranty Corporation or the U.S. Department of
Labor.
(x) Other Information. Such other information including
non-financial information) as the Agent or the Administrative Agent
may from time to time reasonably request with respect to any
Designated Seller, the Transferor or any Subsidiary of any of the
foregoing.
(b) Conduct of Business. The Transferor will, and will
cause each Designated Seller and each Designated Seller's Subsidiaries
to, carry on and conduct its business in substantially the same manner
and in substantially the same fields of enterprise as it is presently
conducted and do all things necessary to remain duly incorporated,
validly existing and in good standing as a domestic corporation in its
jurisdiction of incorporation and maintain all requisite authority to
conduct its business in each jurisdiction in which its business is
conducted.
(c) Compliance with Laws. The Transferor will, and will
cause each Designated Seller and each Designated Seller's Subsidiaries
to, comply with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it or its respective properties
may be subject.
(d) Furnishing of Information and Inspection of Records.
The Transferor will, and will cause each Designated Seller to, furnish
to the Agent from time to time such information with respect to the
Receivables as the Agent may reasonably request, including, without
limitation, listings identifying the Obligor and the Outstanding
Principal Balance for each Receivable. The Transferor will, and will
cause each Designated Seller to, at any time and from time to time
during regular business hours permit the Agent, or its agents or repre-
sentatives, (i) to examine and make copies of and take abstracts from
all Records and (ii) to visit the offices and properties of the
Transferor or such Designated Seller, as applicable, for the purpose of
examining such Records, and to discuss matters relating to Receivables
or the Transferor's or such Designated Seller's performance hereunder
and under the other Transaction Documents to which such Person is a
party with any of the officers, directors, employees or independent
public accountants of the Transferor or such Designated Seller, as
applicable, having knowledge of such matters.
(e) Keeping of Records and Books of Account. The Trans-
feror will, and will cause each Designated Seller to, maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Receivables in the
event of the destruction of the originals thereof), and keep and main-
tain, all documents, books, records and other information reasonably
necessary or advisable for the collection of all Receivables (including,
without limitation, records adequate to permit the daily identification
of each new Receivable and all Collections of and adjustments to each
existing Receivable). The Transferor will, and will cause each
Designated Seller to, give the Agent notice of any material change in
the administrative and operating procedures of the Transferor or such
Designated Seller, as applicable, referred to in the previous sentence.
(f) Performance and Compliance with Accounts. The
Transferor, at its expense, will, and will cause each Designated Seller
to, timely and fully perform and comply with all material provisions,
covenants and other promises required to be observed by the Transferor
or such Designated Seller under the Accounts related to the Receivables.
(g) Credit Guidelines. The Transferor will, and will
cause each Designated Seller to, comply in all material respects with
the Credit Guidelines in regard to each Receivable and the related
Account.
(h) Collections. The Transferor shall, and shall cause
each Designated Seller to, instruct all Obligors to cause all Collec-
tions to be deposited directly to a Lock-Box Account.
(i) Collections Received. The Transferor shall, and
shall cause each Designated Seller to, hold in trust, and deposit, imme-
diately, but in any event not later than the close of business on the
second Business Day following its receipt thereof, to a Lock-Box Account
all Collections received from time to time by the Transferor or such
Designated Seller, as the case may be.
(j) Sale Treatment. The Transferor will not (i) permit
any Designated Seller to, account for (including for accounting and tax
purposes), or otherwise treat, the transactions contemplated by the
Receivables Purchase Agreement in any manner other than as a sale of an
undivided percentage ownership interest in the Receivables by such
Designated Seller to the Transferor, or (ii) account for (other than for
tax purposes) or otherwise treat the transactions contemplated hereby in
any manner other than a sale of an undivided percentage ownership
interest in the Receivables by the Transferor to the Company or the Bank
Investors, as applicable. In addition, the Transferor shall, and shall
cause each Designated Seller to, disclose (in a footnote or otherwise)
in all of its respective financial statements (including any such
financial statements consolidated with any other Persons' financial
statements) the existence and nature of the transaction contemplated
hereby and by the Receivables Purchase Agreement and the interest of the
Transferor (in the case of a Designated Seller's financial statements),
the Company and the Bank Investors in the Affected Assets.
(k) Separate Business. The Transferor shall at all
times (a) to the extent the Transferor's office is located in the
offices of Proffitt's or any Affiliate of Proffitt's, pay fair market
rent for its executive office space located in the offices of Proffitt's
or any Affiliate of Proffitt's, (b) have at all times at least two
members of its board of directors which are not and, within the
immediately preceding two years, have not been employees, officers or
directors of Proffitt's or any Affiliate of Proffitt's or of any major
creditor of Proffitt's or any Affiliate of Proffitt's and are persons
who are familiar and have experience with asset securitization, (c)
maintain the Transferor's books, financial statements, accounting
records and other corporate documents and records separate from those of
Proffitt's or any other entity, (d) not commingle the Transferor's
assets with those of Proffitt's or any other entity, (e) act solely in
its corporate name and through its own authorized officers and agents,
(f) make investments directly or by brokers engaged and paid by the
Transferor or its agents (provided that if any such agent is an
Affiliate of the Transferor it shall be compensated at a fair market
rate for its services), (g) separately manage the Transferor's
liabilities from those of Proffitt's or any Affiliates of Proffitt's and
pay its own liabilities, including all administrative expenses, from its
own separate assets, except that Proffitt's may pay the organizational
expenses of the Transferor, and (h) pay from the Transferor's assets all
obligations and indebtedness of any kind incurred by the Transferor.
The Transferor shall abide by all corporate formalities, including the
maintenance of current minute books, and the Transferor shall cause its
financial statements to be prepared in accordance with GAAP in a manner
that indicates the separate existence of the Transferor and its assets
and liabilities. The Transferor shall (i) pay all its liabilities, (ii)
not assume the liabilities of Proffitt's or any Affiliate of Proffitt's,
(iii) not lend funds or extend credit to Proffitt's or any Affiliate of
Proffitt's except pursuant to the Receivables Purchase Agreement in
connection with the purchase of Receivables thereunder, (iv) not guaran-
tee the liabilities of Proffitt's or any Affiliates of Proffitt's and
(v) not own the stock of, or any other beneficial interest in, any
subsidiaries or any other entity. The officers and directors of the
Transferor (as appropriate) shall make decisions with respect to the
business and daily operations of the Transferor independent of and not
dictated by any controlling entity. The Transferor shall not engage in
any business not permitted by its Certificate of Incorporation as in
effect on the Closing Date.
(l) Inventory Financings. The Transferor shall, and
will cause each Designated Seller to, specifically exclude from the
property subject to any Adverse Claim granted on inventory any and all
accounts receivable generated by sales of such inventory and the pro-
ceeds thereof, and shall provide evidence, in each case satisfactory to
the Agent, that any and all accounts receivable generated by sales of
such inventory and the proceeds thereof shall have been excluded from
any such Adverse Claims.
(m) Corporate Documents. The Transferor shall not
amend, alter, change or repeal any Articles of its Articles of Incor-
poration without the prior written consent of the Agent.
SECTION 5.2. Negative Covenants of the Transferor. During
the term of this Agreement, unless the Agent shall otherwise consent in
writing:
(a) No Sales, Liens, Etc. Except as otherwise provided
herein and the Receivables Purchase Agreement, the Transferor will not,
and will not permit any Designated Seller to, sell, assign (by operation
of law or otherwise) or otherwise dispose of, or create or suffer to
exist any Adverse Claim upon (or the filing of any financing statement)
or with respect to (x) any of the Affected Assets, (y) any goods (other
than inventory), the sale of which may give rise to a Receivable or any
Receivable or related Account, or (z) any account which concentrates in
a Lock-Box Bank to which any Collections of any Receivable are sent, or
assign any right to receive income in respect thereof.
(b) No Extension or Amendment of Receivables. Except as
otherwise permitted in this Section 5.2 and in Section 6.2 hereof, the
Transferor will not, and will not permit any Designated Seller to, ex-
tend, amend or otherwise modify the terms of any Receivable, or amend,
modify or waive any term or condition of any Account related thereto.
The Transferor further covenants that, except as otherwise required by
any Requirement of Law, it shall not, and shall not cause or otherwise
permit the Servicer at any time to, reduce the periodic finance charges
assessed on any Receivable or other fees on any Account if, as a result
of such reduction, the reasonable expectation of the Net Portfolio Yield
as of such date would be less than 1.00% and unless (a) such reduction
is made applicable to the comparable segment of the consumer revolving
credit accounts owned and serviced by the Servicer that have char-
acteristics the same as, or substantially similar to, the Accounts that
are the subject of such change or (b) if it does not own such a compara-
ble segment, it will not make any such change with the intent to materi-
ally benefit itself over the Company and the Bank Investors.
(c) Performance of Account Agreements. The Transferor
shall not, and shall not permit any Designated Seller to fail to comply
with and perform its obligations under the applicable Account Agreements
relating to the Accounts and the Credit Guidelines except insofar as any
such failure to comply or perform would not materially and adversely
affect the rights of the Company, the Agent, or any Bank Investor in the
Receivables or the collectibility of the Receivables. The Transferor
shall not change the terms and provisions of the Account Agreements or
the Credit Guidelines in any respect (including, without limitation, the
calculation of the amount, and the timing, of uncollectible Receivables)
except to the extent (a) such change is made applicable to the compa-
rable segment of the consumer revolving credit accounts owned and
serviced by the Transferor or such Designated Seller that have char-
acteristics the same as, or substantially similar to, the Accounts that
are the subject of such change or (b) if it does not own such a compara-
ble segment, it will not make any such change with the intent to materi-
ally benefit itself over the Company, the Agent, or any Bank Investor,
and such change does not materially and adversely affect the rights of
the Company, the Agent or any Bank Investor in the Receivables or the
collectibility of the Receivables. References to the Receivables in
this paragraph shall be deemed to refer to the Receivables in the aggre-
gate.
(d) No Change in Business or Credit Guidelines. The
Transferor will not, and will not permit any Designated Seller to, make
any change in the character of its business or in the Credit Guidelines,
which change would, in either case, impair the collectibility of any
substantial portion of the Receivables or otherwise result in a Material
Adverse Effect.
(e) No Mergers, Etc. The Transferor will not, and
except as otherwise permitted pursuant to the Receivables Purchase
Agreement, will not permit any Designated Seller to, (i) consolidate or
merge with or into any other Person (except for a merger by a Designated
Seller with or into any wholly-owned subsidiary of such Designated
Seller, where the Designated Seller shall be the surviving entity and
except, with the express consent of the Agent, for the merger by the
Transferor with Parisian Services, Inc., where the Transferor shall be
the surviving entity) or (ii) sell, lease or transfer all or substan-
tially all of its assets to any other Person except that McRae's, Inc.
may sell substantially all of its assets to a partnership consisting
only of McRae's, Inc., as a general partner with at least 90% of the
partnership interest, and Parisian, Inc., as a general partner with not
more than 10% of the partnership interest, provided, that such partner-
ship shall enter into an agreement with McRae's which shall require the
partnership to sell all of its accounts receivable to McRae's, which
shall transfer all of its Receivables to the Transferor pursuant to a
Receivables Purchase Agreement.
(f) Change in Payment Instructions to Obligors. The
Transferor will not, and will not permit any Designated Seller to, add
or terminate any bank as a Lock-Box Bank or any account as a Lock-Box
Account to or from those listed in Exhibit C hereto or make any change
in its instructions to Obligors regarding payments to be made to any
Lock-Box Account, unless (i) such instructions are to deposit such
payments to another existing Lock-Box Account or (ii) the Agent shall
have received written notice of such addition, termination or change at
least 30 days prior thereto and the Agent shall have received a Lock-Box
Agreement executed by each new Lock-Box Bank or an existing Lock-Box
Bank with respect to each new Lock-Box Account, as applicable.
(g) Deposits to Lock-Box Accounts. The Transferor will
not, and will not permit any Designated Seller to, deposit or otherwise
credit, or cause or permit to be so deposited or credited, to any Lock-Box
Account cash or cash proceeds other than Collections of Receivables.
(h) Change of Name, Etc. The Transferor will not, and
will not permit any Designated Seller to, change its name, identity or
structure or the location of its chief executive office, unless at least
10 days prior to the effective date of any such change the Transferor or
such Designated Seller, as applicable, delivers to the Agent and the
Collateral Agent (i) such documents, instruments or agreements, executed
by the Transferor or such Designated Seller, as applicable, as are
necessary to reflect such change and to continue the perfection of the
Agent's and the Collateral Agent's ownership interests or security
interests in the Affected Assets and (ii) new or revised Lock-Box Agree-
ments executed by the Lock-Box Banks which reflect such change and
enable the Agent to continue to exercise its rights contained in Section
2.8 hereof.
(i) Amendment to Receivables Purchase Agreements. The
Transferor will not, and will not permit any Designated Seller to,
amend, modify, or supplement any Receivables Purchase Agreement, except
with the prior written consent of the Agent and the Administrative
Agent; nor shall the Transferor take, or permit any Designated Seller to
take, any other action under any Receivables Purchase Agreement that
shall have a material adverse affect on the Agent, the Company or any
Bank Investor or which is inconsistent with the terms of this Agreement.
(j) Other Debt. Except as provided for herein, the
Transferor will not create, incur, assume or suffer to exist any
indebtedness whether current or funded, or any other liability other
than (i) indebtedness of the Transferor representing fees, expenses and
indemnities arising hereunder or under a Receivables Purchase Agreement
for the purchase price of the Receivables under a Receivables Purchase
Agreement, and (ii) other indebtedness incurred in the ordinary course
of its business in an amount not to exceed $9,750 at any time out-
standing.
(k) ERISA Matters. The Transferor will not, and will
not permit any Designated Seller to, (i) engage or permit any of its
respective ERISA Affiliates to engage in any prohibited transaction (as
defined in Section 4975 of the Code and Section 406 of ERISA) for which
an exemption is not available or has not previously been obtained from
the U.S. Department of Labor; (ii) permit to exist any accumulated
funding deficiency (as defined in Section 302(a) of ERISA and Section
412(a) of the Code) or funding deficiency with respect to any Benefit
Plan other than a Multiemployer Plan; (iii) fail to make any payments to
any Multiemployer Plan that the Transferor, such Designated Seller or
any ERISA Affiliate of the Transferor or such Designated Seller is re-
quired to make under the agreement relating to such Multiemployer Plan
or any law pertaining thereto; (iv) terminate any Benefit Plan so as to
result in any liability; or (v) permit to exist any occurrence of any
reportable event described in Title IV of ERISA which represents a
material risk of a liability to the Transferor, such Designated Seller,
or any ERISA Affiliate of the Transferor or such Designated Seller under
ERISA or the Code.
(l) Payment to the Designated Sellers. With respect to
any Receivable sold by a Designated Seller to the Transferor, the
Transferor shall, and shall cause such Designated Seller to, effect such
sale under, and pursuant to the terms of, a Receivables Purchase Agree-
ment, including, without limitation, the payment by the Transferor
either in cash or by increase in the amount of the Subordinated Note to
such Designated Seller of an amount equal to the purchase price for such
Receivable as required by the terms of the Receivables Purchase Agree-
ment.
SECTION 5.3. Minimum Net Worth of Transferor.
(a) On the Closing Date, the Transferor shall have a Net
Worth of at least $10,000,000.
(b) The Transferor shall make no distributions of
dividends or returns of capital except to the extent that, after giving
effect thereto, the Transferor shall have a Net Worth at least equal to
10% of the highest aggregate Outstanding Principal Balance of all Eligi-
ble Receivables shown on any Cycle Certificate delivered with respect to
the immediately preceding twelve calendar month period.
SECTION 5.4. Covenants of the Servicer. At all times from the
date hereof to the later to occur of (i) the Termination Date or (ii)
the date on which the Net Investment and all other Aggregate Unpaids
have been paid in full, in cash, the Servicer covenants that, unless the
Agent shall otherwise consent in writing:
(a) Compliance with Requirements of Law. The Servicer
shall duly satisfy its obligations in all material respects on its part
to be fulfilled under or in connection with each Receivable and the
related Account, will maintain in effect all material qualifications
required under Requirements of Law in order to service properly each
Receivable and the related Account and will comply in all material
respects with all other Requirements of Law in connection with servicing
each Receivable and the related Account the failure to comply with which
would have a material adverse effect on the Company.
(b) No Rescission or Cancellation. The Servicer shall
not permit any rescission or cancellation of a Receivable except as
ordered by a court of competent jurisdiction or other Governmental
Authority or in the ordinary course of its business and in accordance
with the Credit Guidelines.
(c) Protection of Company's Rights. The Servicer shall
take no action, nor omit to take any action, which would impair the
rights of the Company in any Receivable or the related Account.
(d) All Consents Required. All approvals, authoriza-
tions, consents, orders or other actions of any Person or of any
governmental body or official required in connection with the execution
and delivery by the Servicer of this Agreement, the performance by the
Servicer of the transactions contemplated by this Agreement and the
fulfillment by the Servicer of the terms hereof, have been obtained.
(e) Custodian. The Servicer will, at its own cost and
expense, (i) maintain the books and records with respect to the Accounts
and the Receivables and copies of all documents relating to each Account
as custodian for the Company and (ii) clearly and unambiguously mark
such books and records that indicate the Receivables have been sold to
the Company and simultaneously assigned to the Agent, for benefit of the
Company and the Bank Investors, pursuant to this Agreement.
(f) No Extension or Amendment of Receivables. Except as
otherwise permitted in Sections 5.2 and 6.2 hereof, the Servicer will
not extend, amend or otherwise modify the terms of any Receivable, or
amend, modify or waive any term or condition of any Account related
thereto. The Servicer further covenants that, except as otherwise re-
quired by any Requirement of Law, it shall not reduce the periodic fi-
nance charges assessed on any Receivable or other fees on any Account
if, as a result of such reduction, the reasonable expectation of the Net
Portfolio Yield as of such date would be less than 1.00% and unless (a)
such reduction is made applicable to the comparable segment of the
consumer revolving credit accounts owned and serviced by the Servicer
that have characteristics the same as, or substantially similar to, the
Accounts that are the subject of such change or (b) if it does not own
such a comparable segment, it will not make any such change with the
intent to materially benefit the Transferor or itself over the Company
and the Bank Investors.
(g) No Change in Business. The Servicer will not make
any change in the character of its business which would impair the
collectibility of any Receivable or otherwise result in a Material
Adverse Effect.
(h) No Mergers, Etc. The Servicer will not (i) consoli-
date or merge with or into any other Person (except for a merger with or
into any wholly-owned subsidiary, where the Servicer shall be the
surviving entity), or (ii) sell, lease or transfer all or substantially
all of its assets to any other Person except that McRae's, Inc. may sell
substantially all of its assets to a partnership consisting only of
McRae's, Inc., as a general partner with at least 90% of the partnership
interest, and Parisian, Inc., as a general partner with not more than
10% of the partnership interest, provided, that such partnership shall
enter into an agreement with McRae's which shall require the partnership
to sell all of its accounts receivable to McRae's, which shall transfer
all of its Receivables to the Transferor pursuant to a Receivables
Purchase Agreement.
(i) Change in Payment Instructions to Obligors. The
Servicer will not make any change in the instructions to Obligors
regarding payments to be made to any Lock-Box Account, unless (i) such
instructions are to deposit such payments to another existing Lock-Box
Account or (ii) the Agent shall have received written notice of such
change at least 30 days prior thereto and the Agent shall have received
a Lock-Box Agreement executed by each new Lock-Box Bank or an existing
Lock-Box Bank with respect to each new Lock-Box Account, as applicable.
(j) Deposits to Lock-Box Accounts. The Servicer will
not deposit or otherwise credit, or cause or permit to be so deposited
or credited, to any Lock-Box Account cash or cash proceeds other than
Collections of Receivables.
ARTICLE VI
ADMINISTRATION AND COLLECTIONS
SECTION 6.1. Appointment of Servicer. The servicing, admin-
istering and collection of the Receivables shall be conducted by such
Person (the "Servicer") so designated from time to time in accordance
with this Section 6.1. Until the Company gives notice to McRae's of the
designation of a new Servicer, McRae's is hereby designated as, and
hereby agrees to perform the duties and obligations of, the Servicer
pursuant to the terms hereof. The Servicer may not delegate any of its
rights, duties or obligations hereunder, or designate a substitute
Servicer, without the prior written consent of the Agent, and provided
that the Servicer shall continue to remain solely liable for the perfor-
mance of the duties as Servicer hereunder notwithstanding any such
delegation hereunder. The Agent may, and upon the direction of the
Majority Investors the Agent shall, after the occurrence of a Servicer
Default or any other Termination Event designate as Servicer any Person
(including itself) to succeed McRae's or any successor Servicer, on the
condition in each case that any such Person so designated shall agree to
perform the duties and obligations of the Servicer pursuant to the terms
hereof. The Agent may notify any Obligor of the Transferred Interest.
SECTION 6.2. Duties of Servicer.
(a) The Servicer shall take or cause to be taken all
such action as may be necessary or advisable to collect each Receivable
from time to time, all in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with
the Credit Guidelines. Each of the Transferor, the Company, the Agent
and the Bank Investors hereby appoints as its agent the Servicer, from
time to time designated pursuant to Section 6.1 hereof, to enforce its
respective rights and interests in and under the Affected Assets. To
the extent permitted by applicable law, each of the Transferor and the
Designated Sellers (to the extent not then acting as Servicer hereunder)
hereby grants to any Servicer appointed hereunder an irrevocable power
of attorney to take any and all steps in the Transferor's and/or such
Designated Seller's name and on behalf of the Transferor or such
Designated Seller necessary or desirable, in the reasonable determi-
nation of the Servicer, to collect all amounts due under any and all
Receivables, including, without limitation, endorsing the Transferor's
and/or such Designated Seller's name on checks and other instruments
representing Collections and enforcing such Receivables and the related
Accounts. The Servicer shall set aside for the account of the Trans-
feror and the Company their respective allocable shares of the Collec-
tions of Receivables in accordance with Sections 2.5 and 2.6 hereof.
The Servicer shall segregate and deposit to the Agent's account the
Company's allocable share of Collections of Receivables when required
pursuant to Article II hereof. The Transferor shall deliver to the
Servicer and the Servicer shall hold in trust for the Transferor, the
Company, the Agent and the Bank Investors, in accordance with their re-
spective interests, all Records which evidence or relate to Receivables
or Related Security. Notwithstanding anything to the contrary contained
herein, the Agent shall have the absolute and unlimited right to direct
the Servicer (whether the Servicer is Proffitt's or any other Person) to
commence or settle any legal action to enforce collection of any
Receivable or to foreclose upon or repossess any Related Security. The
Servicer shall not make the Agent, the Company or any of the Bank
Investors a party to any litigation without the prior written consent of
such Person.
(b) The Servicer shall, as soon as practicable following
receipt thereof, turn over to the Transferor any collections of any in-
debtedness of any Person which is not on account of a Receivable. If
the Servicer is not the Transferor or an Affiliate of the Transferor,
the Servicer, by giving three Business Days' prior written notice to the
Agent, may revise the percentage used to calculate the Servicing Fee so
long as the revised percentage will not result in a Servicing Fee that
exceeds 110% of the reasonable and appropriate out-of-pocket costs and
expenses of such Servicer incurred in connection with the performance of
its obligations hereunder as documented to the reasonable satisfaction
of the Agent, provided, however, that at any time after the Buyers'
Percentage Factor equals or exceeds 100%, any compensation to the
Servicer in excess of the Servicing Fee initially provided for herein
shall be an obligation of the Transferor and shall not be payable, in
whole or in part, from Collections allocated to the Company or the Bank
Investors, as applicable. The Servicer, if other than the Transferor or
an Affiliate of the Transferor, shall as soon as practicable upon de-
mand, deliver to the Transferor all Records in its possession which evi-
dence or relate to indebtedness of an Obligor which is not a Receivable.
(c) On or before 90 days after the end of each fiscal
year of the Servicer, beginning with the fiscal year ending February 1,
1997, the Servicer shall cause a firm of independent public accountants
(who may also render other services to the Servicer, the Transferor, the
Designated Sellers or any Affiliates of any of the foregoing) to furnish
a report to the Agent to the effect that they have (i) compared the
information contained in a sample of the Investor Reports and Cycle Cer-
tificates delivered during such fiscal year then ended with the informa-
tion contained in the Accounts and the Servicer's records and computer
systems for such period, and that, on the basis of such examination and
comparison, such firm is of the opinion that the information contained
in the Investor Reports and the Cycle Certificates selected reconciles
with the information contained in the Accounts and the Servicer's re-
cords and computer system and that the servicing of the Receivables has
been conducted in compliance with this Agreement, and (ii) confirmed by
testing the mathematical accuracy of the information set forth in the
Investor Reports and Cycle Certificates delivered during such fiscal
year, except, in each case for (a) such exceptions as such firm shall
believe to be immaterial (which exceptions need not be enumerated) and
(b) such other exceptions as shall be set forth in such statement.
(d) Notwithstanding anything to the contrary contained
in this Article VI, the Servicer, if not the Transferor or any Affiliate
of the Transferor, shall have no obligation to collect, enforce or take
any other action described in this Article VI with respect to any
indebtedness that is not included in the Transferred Interest other than
to deliver to the Transferor the collections and documents with respect
to any such indebtedness as described in Section 6.2(b) hereof.
SECTION 6.3. Rights After Designation of New Servicer. At
any time following the designation of a Servicer (other than the
Transferor or any Affiliate of the Transferor) pursuant to Section 6.1
hereof:
(i) The Agent may direct that payment of all amounts
payable under any Receivable be made directly to the Agent or its
designee.
(ii) The Transferor shall, at the Agent's request and at
the Transferor's expense, give notice of the Agent's, the Trans-
feror's and/or the Bank Investors' ownership of Receivables to each
Obligor and direct that payments be made directly to the Agent or
its designee.
(iii) The Transferor shall, at the Agent's request, (A)
assemble all of the Records, and shall make the same available to
the Agent or its designee at a place selected by the Agent or its
designee, and (B) segregate all cash, checks and other instruments
received by it from time to time constituting Collections of
Receivables in a manner acceptable to the Agent and shall, promptly
upon receipt, remit all such cash, checks and instruments, duly en-
dorsed or with duly executed instruments of transfer, to the Agent
or its designee.
(iv) The Transferor and each Designated Seller hereby
authorize the Agent to take any and all steps in the Transferor's
or such Designated Seller's name and on behalf of the Transferor
and such Designated Seller necessary or desirable, in the determi-
nation of the Agent, to collect all amounts due under any and all
Receivables, including, without limitation, endorsing the
Transferor's or such Designated Seller's name on checks and other
instruments representing Collections and enforcing such Receivables
and the related Accounts.
SECTION 6.4. Servicer Default. The occurrence of any one or
more of the following events shall constitute a Servicer Default:
(a) the Servicer or, to the extent that the Transferor
or any Affiliate of the Transferor is then acting as Servicer, the
Transferor or such Affiliate, as applicable, shall fail (i) to observe
or perform any term, covenant or agreement hereunder (other than as
referred to in clauses (ii) or (iii) of this Section 6.4(a)) or under
any of the other Transaction Documents to which such Person is a party
or by which such Person is bound, and such failure shall remain
unremedied for ten (10) days, or (ii) to make any payment or deposit
required to be made by it hereunder when due or the Servicer shall fail
to observe or perform any term, covenant or agreement on the Servicer's
part to be performed under Section 2.8(b) hereof or (iii) to observe or
perform any term, covenant or agreement under Sections 5.4(a), 5.4(b),
5.4(c), 5.4(f), 5.4(g), 5.4(i) or 5.4(j); or
(b) any representation, warranty, certification or
statement made by the Servicer or the Transferor or any Affiliate of the
Transferor (in the event that the Transferor or such Affiliate is then
acting as the Servicer) in this Agreement, the Receivables Purchase
Agreement or in any of the other Transaction Documents or in any
certificate or report delivered by it pursuant to any of the foregoing
shall prove to have been incorrect in any material respect when made or
deemed made; or
(c) failure or the default by the Servicer or any of its
Subsidiaries in the performance of any material term, provision or
condition contained in any agreement under which any Indebtedness
greater than $5,000,000 was created or is governed, if such event is an
"event of default" or "default" under any such agreement; or any In-
debtedness of the Servicer or any of its Subsidiaries greater than
$5,000,000 shall be declared to be due and payable or required to be
prepaid (other than by a regularly scheduled payment) prior to the
scheduled date of maturity thereof; or
(d) any Event of Bankruptcy shall occur with respect to
the Servicer or any of its Subsidiaries; or
(e) there shall have occurred any material adverse
change in the operations of the Servicer since the end of the last
fiscal year ending prior to the date of its appointment as Servicer
hereunder or any other event shall have occurred which, in the
commercially reasonable judgment of the Agent, materially and adversely
affects the Servicer's ability to either collect the Receivables or to
perform under this Agreement.
SECTION 6.5. Responsibilities of the Transferor and the
Designated Sellers. Anything herein to the contrary notwithstanding,
the Transferor shall, and/or shall cause each Designated Seller to, (i)
perform all of such Designated Seller's obligations under the Accounts
related to the Receivables to the same extent as if interests in such
Receivables had not been sold hereunder and under the Receivables Pur-
chase Agreement and the exercise by the Agent, the Company and the Bank
Investors of their rights hereunder and under the Receivables Purchase
Agreement shall not relieve the Transferor or such Designated Seller
from such obligations and (ii) pay when due any taxes, including without
limitation, any sales taxes payable in connection with the Receivables
and their creation and satisfaction. Neither the Agent, the Company nor
any of the Bank Investors shall have any obligation or liability with
respect to any Receivable or related Accounts, nor shall it be obligated
to perform any of the obligations of any Designated Seller thereunder.
ARTICLE VII
TERMINATION EVENTS
SECTION 7.1. Termination Events. The occurrence of any one
or more of the following events shall constitute a Termination Event:
(a) the Transferor or the Servicer shall fail to make
any payment or deposit to be made by it hereunder or under the
Receivables Purchase Agreement when due hereunder or thereunder; or
(b) any representation, warranty, certification or
statement made by the Transferor in this Agreement, any other
Transaction Document to which it is a party or in any other document
delivered pursuant hereto or thereto shall prove to have been incorrect
in any material respect when made or deemed made; or
(c) the Transferor, or the Servicer, shall default in
the performance of any payment or undertaking (other than those covered
by clause (a) above) (i) to be performed or observed under Sections
5.1(a)(vi), 5.1(a)(vii), 5.1(b), 5.1(c), 5.1(f), 5.1(g), 5.1(h), 5.1(i),
5.1(k), 5.1(l), 5.2(a), 5.2(c), 5.2(d), 5.2(e), 5.2(f), 5.2(g) or 5.2(h)
or Section 5.3 or (ii) to be performed or observed under any other
provision hereof and such default in the case of this clause (ii) shall
continue for ten (10) days; or
(d) failure or the default by the Transferor or any
Designated Seller in the performance of any material term, provision or
condition contained in any agreement to which any such Person is a party
and under which any Indebtedness greater than $5,000,000 was created or
is governed, if such event is an "event of default" or "default" under
any such agreement; or any Indebtedness of the Transferor or any Desig-
nated Seller greater than $5,000,000 shall be declared to be due and
payable or required to be prepaid (other than by a regularly scheduled
payment) prior to the scheduled date of maturity thereof; or
(e) any Event of Bankruptcy shall occur with respect to
the Transferor, any Designated Seller or any Subsidiary of either the
Transferor or any Designated Seller; or
(f) the Agent, on behalf of the Company and/or the Bank
Investors, shall, for any reason, fail or cease to have a valid and per-
fected first priority ownership or security interest in the Affected
Assets free and clear of any Adverse Claims; or
(g) a Servicer Default shall have occurred; or
(h) any of the Receivables Purchase Agreements shall
have terminated; or
(i) the Transferor, the Servicer or any Designated
Seller shall enter into any transaction or merger whereby it is not the
surviving entity; or
(j) (i) the Buyers' Percentage Factor exceeds the
Maximum Buyers' Percentage Factor, unless the Transferor reduces the Net
Investment or increases the balance of the Affected Assets on the next
Business Day so as to reduce the Buyers' Percentage Factor to less than
or equal to the Maximum Buyers' Percentage Factor, (ii) the Buyers' Per-
centage Factor equals or exceeds 100% at any time; or (iii) the Net
Investment plus the aggregate Interest Component of all outstanding
Related Commercial Paper shall exceed the Facility Limit at any time; or
(k) the Payment Rate averaged for any three consecutive
Collection Periods is less than 16.00%; or
(l) the average Net Portfolio Yield for any three
consecutive Collection Periods is less than 1.00%; or
(m) the Delinquency Ratio averaged for any three
consecutive Collection Periods is greater than 7.50%; or
(n) the Default Ratio averaged for any three consecutive
Collection periods is greater than 9.00%; or
(o) the Dilution Ratio averaged over any three
consecutive Collection Periods is greater than or equal to 5.00%; or
(p) the Liquidity Provider or the Credit Support
Provider shall have given notice that an event of default has occurred
and is continuing under any of its respective agreements with the
Company; or
(q) the Commercial Paper issued by the Company shall not
be rated at least "A2" by Standard & Poor's and at least "P2" by
Moody's; or
(r) a Guarantor Default shall have occurred and be
continuing.
SECTION 7.2. Termination. (a) Upon the occurrence of any
Termination Event, the Agent may, or at the direction of the Majority
Investors shall, by notice to the Transferor and the Servicer declare
the Termination Date to have occurred; provided, however, that in the
case of any event described in Section 7.1(e), 7.1(f), 7.1(j)(ii) or
7.1(j)(iii) above, Termination Date shall be deemed to have occurred
automatically upon the occurrence of such event. Upon any such
declaration or automatic occurrence, the Agent shall have, in addition
to all other rights and remedies under this Agreement or otherwise, all
other rights and remedies provided under the UCC of the applicable
jurisdiction and other applicable laws, all of which rights shall be
cumulative.
(b) At all times after the declaration or automatic
occurrence of the Termination Date pursuant to Section 7.2(a), the
Carrying Costs shall thereafter be calculated on the basis of the Base
Rate plus 2.00% for all existing and future funding periods.
ARTICLE VIII
INDEMNIFICATION; EXPENSES; RELATED MATTERS
SECTION 8.1. Indemnities by the Transferor. Without limiting
any other rights which the Agent, the Company or the Bank Investors may
have hereunder or under applicable law, the Transferor hereby agrees to
indemnify the Company, the Bank Investors, the Agent, the Administrative
Agent, the Collateral Agent, the Liquidity Provider and the Credit Sup-
port Provider and any successors and permitted assigns and their respec-
tive officers, directors and employees (collectively, "Indemnified
Parties") from and against any and all damages, losses, claims, liabili-
ties, costs and expenses, including, without limitation, reasonable
attorneys' fees (which such attorneys may be employees of the Liquidity
Provider, the Credit Support Provider, the Agent, the Administrative
Agent or the Collateral Agent, as applicable) and disbursements (all of
the foregoing being collectively referred to as "Indemnified Amounts")
awarded against or incurred by any of them in any action or proceeding
between the Transferor, any Designated Seller or the Servicer and any of
the Indemnified Parties or between any of the Indemnified Parties and
any third party or otherwise arising out of or as a result of this
Agreement, the other Transaction Documents, the ownership or mainte-
nance, either directly or indirectly, by the Agent, the Company or any
Bank Investor of the Transferred Interest or any of the other
transactions contemplated hereby or thereby, excluding, however, (i)
Indemnified Amounts to the extent resulting from gross negligence or
willful misconduct on the part of an Indemnified Party or (ii) recourse
(except as otherwise specifically provided in this Agreement) for
uncollectible Receivables. Without limiting the generality of the
foregoing, the Transferor shall indemnify each Indemnified Party for
Indemnified Amounts relating to or resulting from:
(i) any representation or warranty made by the Trans-
feror or any Designated Seller or the Servicer or any officers of
the Transferor or any Designated Seller or the Servicer under or in
connection with this Agreement, the Receivables Purchase Agreement,
any of the other Transaction Documents, any Investor Report or any
other information or report delivered by the Transferor or the Ser-
vicer pursuant hereto, which shall have been false or incorrect in
any material respect when made or deemed made;
(ii) the failure by the Transferor or any Designated
Seller or the Servicer to comply with any applicable law, rule or
regulation with respect to any Receivable or the related Account,
or the nonconformity of any Receivable or the related Account with
any such applicable law, rule or regulation;
(iii) the failure to vest and maintain vested in the
Company and/or the Bank Investors, an undivided first priority,
perfected percentage ownership interest, to the extent of the
Transferred Interest, in the Affected Assets free and clear of any
Adverse Claim or (y) to create or maintain a valid and perfected
first priority security interest in favor of the Agent, for the
benefit of the Company and/or the Bank Investors, in the
Transferor's interest in the Affected Assets as contemplated
pursuant to Section 11.11, free and clear of any Adverse Claim;
(iv) the failure to file, or any delay in filing,
financing statements, continuation statements, or other similar in-
struments or documents under the UCC of any applicable jurisdiction
or other applicable laws with respect to any of the Affected
Assets;
(v) any dispute, claim, offset or defense (other than
discharge in bankruptcy) of the Obligor to the payment of any
Receivable (including, without limitation, a defense based on such
Receivable or the related Account not being the legal, valid and
binding obligation of such Obligor enforceable against it in accor-
dance with its terms), or any other claim resulting from the sale
of merchandise or services related to such Receivable or the fur-
nishing or failure to furnish such merchandise or services;
(vi) any failure of the Servicer to perform its duties
or obligations in accordance with the provisions hereof; or
(vii) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with merchandise or
services which are the subject of any Receivable;
(viii) the transfer of an ownership interest in any
Receivable other than an Eligible Receivable;
(ix) the failure by the Transferor or any Designated
Seller or the Servicer to comply with any term, provision or
covenant contained in this Agreement or any of the other Transac-
tion Documents to which it is a party or to perform any of its
respective duties under the Accounts;
(x) the Buyers' Percentage Factor exceeds the Maximum
Buyers' Percentage Factor at any time;
(xi) the failure of any Designated Seller to pay when
due any taxes, including without limitation, sales, excise or per-
sonal property taxes payable in connection with any of the Receiv-
ables;
(xii) any repayment by any Indemnified Party of any
amount previously distributed in reduction of Net Investment which
such Indemnified Party believes in good faith is required to be
made;
(xiii) the commingling by the Transferor, any Designated
Seller or the Servicer of Collections of Receivables at any time
with other funds;
(xiv) any investigation, litigation or proceeding
related to this Agreement, any of the other Transaction Documents,
the use of proceeds of Transfers by the Transferor or any
Designated Seller, the ownership of Transferred Interests, or any
Receivable, Related Security or Account;
(xv) the failure of any Lock-Box Bank to remit any
amounts held in the Lock-Boxes and/or the Lock-Box Accounts pur-
suant to the instructions of the Servicer, the Transferor, any
Designated Seller or the Agent (to the extent such Person is enti-
tled to give such instructions in accordance with the terms hereof
and of any applicable Lock-Box Agreement) whether by reason of the
exercise of set-off rights or otherwise;
(xvi) any inability to obtain any judgment in or utilize
the court or other adjudication system of, any state in which an
Obligor may be located as a result of the failure of the Transferor
or any Designated Seller to qualify to do business or file any
notice of business activity report or any similar report;
(xvii) any failure of the Transferor to give reasonably
equivalent value to a Designated Seller in consideration of the
purchase by the Transferor from such Designated Seller of any Re-
ceivable, or any attempt by any Person to void, rescind or set-aside
any such transfer under statutory provisions or common law or
equitable action, including, without limitation, any provision of
the Bankruptcy Code; or
(xviii) any action taken by the Transferor, any
Designated Seller or the Servicer in the enforcement or collection
of any Receivable;
provided, however, that if the Company enters into agreements for the
purchase of interests in receivables from one or more Other Transferors,
the Company shall allocate such Indemnified Amounts which are in
connection with the Liquidity Provider Agreement, the Credit Support
Agreement or the credit support furnished by the Credit Support Provider
to the Transferor and each Other Transferor; and provided, further, that
if such Indemnified Amounts are attributable to the Transferor, a
Designated Seller or the Servicer and not attributable to any Other
Transferor, the Transferor shall be solely liable for such Indemnified
Amounts or if such Indemnified Amounts are attributable to Other
Transferors and not attributable to the Transferor, any Designated
Seller or the Servicer, such Other Transferors shall be solely liable
for such Indemnified Amounts.
SECTION 8.2. Indemnity for Taxes, Reserves and Expenses. (a)
If after the date hereof, the adoption of any Law or bank regulatory
guideline or any amendment or change in the interpretation of any
existing or future Law or bank regulatory guideline by any Official Body
charged with the administration, interpretation or application thereof,
or the compliance with any directive of any Official Body (in the case
of any bank regulatory guideline, whether or not having the force of
Law):
(i) shall subject any Indemnified Party to any tax, duty
or other charge (other than Excluded Taxes) with respect to this
Agreement, the other Transaction Documents, the ownership,
maintenance or financing of the Transferred Interest, the Receiv-
ables or payments of amounts due hereunder, or shall change the
basis of taxation of payments to any Indemnified Party of amounts
payable in respect of this Agreement, the other Transaction Docu-
ments, the ownership, maintenance or financing of the Transferred
Interest, the Receivables or payments of amounts due hereunder or
its obligation to advance funds hereunder, under the Liquidity Pro-
vider Agreement or the credit support furnished by the Credit
Support Provider or otherwise in respect of this Agreement, the
other Transaction Documents, the ownership, maintenance or
financing of the Transferred Interest or the Receivables (except
for changes in the rate of general corporate, franchise, net income
or other income tax imposed on such Indemnified Party by the juris-
diction in which such Indemnified Party's principal executive
office is located);
(ii) shall impose, modify or deem applicable any re-
serve, special deposit or similar requirement (including, without
limitation, any such requirement imposed by the Board of Governors
of the Federal Reserve System) against assets of, deposits with or
for the account of, or credit extended by, any Indemnified Party or
shall impose on any Indemnified Party or on the United States
market for certificates of deposit or the London interbank market
any other condition affecting this Agreement, the other Transaction
Documents, the ownership, maintenance or financing of the Trans-
ferred Interest, the Receivables or payments of amounts due hereun-
der or its obligation to advance funds hereunder under the Liquid-
ity Provider Agreement or the credit support provided by the Credit
Support Provider or otherwise in respect of this Agreement, the
other Transaction Documents, the ownership, maintenance or
financing of the Transferred Interest or the Receivables; or
(iii) imposes upon any Indemnified Party any other
expense (including, without limitation, reasonable attorneys' fees
and expenses, and expenses of litigation or preparation therefor in
contesting any of the foregoing) with respect to this Agreement,
the other Transaction Documents, the ownership, maintenance or
financing of the Transferred Interest, the Receivables or payments
of amounts due hereunder or its obligation to advance funds hereun-
der under the Liquidity Provider Agreement or the credit support
furnished by the Credit Support Provider or otherwise in respect of
this Agreement, the other Transaction Documents, the ownership,
maintenance or financing of the Transferred Interests or the Re-
ceivables,
and the result of any of the foregoing is to increase the cost to such
Indemnified Party with respect to this Agreement, the other Transaction
Documents, the ownership, maintenance or financing of the Transferred
Interest, the Receivables, the obligations hereunder, the funding of any
purchases hereunder, the Liquidity Provider Agreement or the Credit
Support Agreement, by an amount deemed by such Indemnified Party to be
material, then, within ten (10) days after demand by such Indemnified
Party through the Agent, the Transferor shall pay to the Agent, for the
benefit of such Indemnified Party, such additional amount or amounts as
will compensate such Indemnified Party for such increased cost or
reduction.
(b) If any Indemnified Party shall have determined that
after the date hereof, the adoption of any applicable Law or bank
regulatory guideline regarding capital adequacy, or any change therein,
or any change in the interpretation thereof by any Official Body, or any
directive regarding capital adequacy (in the case of any bank regulatory
guideline, whether or not having the force of law) of any such Official
Body, has or would have the effect of reducing the rate of return on
capital of such Indemnified Party (or its parent) as a consequence of
such Indemnified Party's obligations hereunder or with respect hereto to
a level below that which such Indemnified Party (or its parent) could
have achieved but for such adoption, change, request or directive
(taking into consideration its policies with respect to capital ade-
quacy) by an amount deemed by such Indemnified Party to be material,
then from time to time, within ten (10) days after demand by such
Indemnified Party through the Agent, the Transferor shall pay to the
Agent, for the benefit of such Indemnified Party, such additional amount
or amounts as will compensate such Indemnified Party (or its parent) for
such reduction.
(c) The Agent will promptly notify the Transferor of any
event of which it has knowledge, occurring after the date hereof, which
will entitle an Indemnified Party to compensation pursuant to this Sec-
tion 8.2. A notice by the Agent or the applicable Indemnified Party
claiming compensation under this Section and setting forth the addition-
al amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount, the Agent or
any applicable Indemnified Party may use any reasonable averaging and
attributing methods.
(d) Anything in this Section 8.2 to the contrary not-
withstanding, if the Company enters into agreements for the acquisition
of interests in receivables from one or more Other Transferors, the
Company shall allocate the liability for any amounts under this Section
8.2 which are in connection with the Liquidity Provider Agreement, the
Credit Support Agreement or the credit support provided by the Credit
Support Provider ("Section 8.2 Costs") to the Transferor and each Other
Transferor; provided, however, that if such Section 8.2 Costs are
attributable to the Transferor, a Designated Seller or the Servicer and
not attributable to any Other Transferor, the Transferor shall be solely
liable for such Section 8.2 Costs or if such Section 8.2 Costs are at-
tributable to Other Transferors and not attributable to the Transferor,
any Designated Seller or the Servicer, such Other Transferors shall be
solely liable for such Section 8.2 Costs.
SECTION 8.3. Taxes. All payments made hereunder by the
Transferor or the Servicer (each, a "payor") to the Company, any Bank
Investor or the Agent (each, a "recipient") shall be made free and clear
of and without deduction for any present or future income, excise, stamp
or franchise taxes and any other taxes, fees, duties, withholdings or
other charges of any nature whatsoever imposed by any taxing authority
on any recipient (or any assignee of such parties) (such non-excluded
items being called "Taxes"), but excluding franchise taxes and taxes
imposed on or measured by the recipient's net income or gross receipts
("Excluded Taxes"). In the event that any withholding or deduction from
any payment made by the payor hereunder is required in respect of any
Taxes, then such payor shall:
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or
other documentation satisfactory to the Agent evidencing such payment to
such authority; and
(c) pay to the recipient such additional amount or
amounts as is necessary to ensure that the net amount actually received
by the recipient will equal the full amount such recipient would have
received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against any recipient with
respect to any payment received by such recipient hereunder, the
recipient may pay such Taxes and the payor will promptly pay such
additional amounts (including any penalties, interest or expenses) as
shall be necessary in order that the net amount received by the
recipient after the payment of such Taxes (including any Taxes on such
additional amount) shall equal the amount such recipient would have
received had such Taxes not been asserted.
If the payor fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the recipient the
required receipts or other required documentary evidence, the payor
shall indemnify the recipient for any incremental Taxes, interest, or
penalties that may become payable by any recipient as a result of any
such failure.
SECTION 8.4. Other Costs, Expenses and Related Matters. (a)
The Transferor agrees, upon receipt of a written invoice, to pay or
cause to be paid, and to save the Company, the Bank Investors and the
Agent harmless against liability for the payment of, all reasonable
out-of-pocket expenses (including, without limitation, attorneys',
accountants' and other third parties' fees and expenses, any filing fees
and expenses incurred by officers or employees of the Company, the Bank
Investors and/or the Agent) or intangible, documentary or recording
taxes incurred by or on behalf of the Company, any Bank Investor and the
Agent (i) in connection with the negotiation, execution, delivery and
preparation of this Agreement, the other Transaction Documents and any
documents or instruments delivered pursuant hereto and thereto and the
transactions contemplated hereby or thereby (including, without limita-
tion, the perfection or protection of the Transferred Interest) and (ii)
from time to time (a) relating to any amendments, waivers or consents
under this Agreement and the other Transaction Documents, (b) arising in
connection with the Company's, any Bank Investor's, the Agent's or the
Collateral Agent's enforcement or preservation of rights (including,
without limitation, the perfection and protection of the Transferred
Interest under this Agreement), or (c) arising in connection with any
audit, dispute, disagreement, litigation or preparation for litigation
involving this Agreement or any of the other Transaction Documents (all
of such amounts, collectively, "Transaction Costs").
(b) The Transferor shall pay the Agent, for the account
of the Company and the Bank Investors, as applicable, on demand any
Early Collection Fee due on account of the receipt by the Company or any
Bank Investor of any amounts applied in reduction of the Net Investment
on any day other than a Remittance Date or the last day of any
applicable funding period (in the case of any LIBOR-based funding).
SECTION 8.5. Reconveyance Under Certain Circumstances. The
Transferor agrees to accept the reconveyance from the Agent, on behalf
of the Company and/or the Bank Investors, of the Transferred Interest if
the Agent notifies Transferor of a material breach of any representation
or warranty made or deemed made pursuant to Article III of this
Agreement and Transferor shall fail to cure such breach within 15 days
(or, in the case of the representations and warranties in Sections
3.1(d) and 3.1(j), 3 days) of such notice. The reconveyance price shall
be paid by the Transferor to the Agent, for the account of the Company
and the Bank Investors, as applicable, in immediately available funds on
such 15th day (or 3rd day, if applicable) in an amount equal to the
Aggregate Unpaids.
ARTICLE IX
SERVICER GUARANTEE
SECTION 9.1. Guaranty of Obligations. Proffitt's
unconditionally guarantees the full and prompt payment when due of all
of the payment obligations and timely performance of all of the perfor-
mance obligations of McRae's as Servicer ("Obligations") of every kind
and nature now or hereafter existing, or due or to become due, under
this Agreement, to the Transferor, the Company, the Agent or any Bank
Investor. Proffitt's shall pay all reasonable costs and expenses
including, without limitation, all court costs and attorney's fees and
expenses paid or incurred by the Transferor, the Company, the Agent or
any Bank Investor in connection with (a) the collection of all or any
part of the Obligations from Proffitt's and (b) the prosecution or
defense of any action by or against the Transferor, the Company, the
Agent or any Bank Investor in connection with the Obligations whether
involving Proffitt's, McRae's or any other party including a trustee in
bankruptcy.
SECTION 9.2. Validity of Obligations. Irrevocability.
Proffitt's agrees that its obligations under this guaranty shall be
unconditional, irrespective of (i) the validity, enforceability, dis-
charge, disaffirmance, settlement or compromise (by any Person,
including a trustee in bankruptcy) of the Obligations or of this Agree-
ment, (ii) the absence of any attempt to collect the Obligations from
McRae's or any guarantor, (iii) the waiver or consent by the Transferor,
Company, the Agent or any Bank Investor with respect to any provision of
any instrument evidencing the Obligations, (iv) any change of the time,
manner or place of payment or performance, or any other term of any of
the Obligations, (v) any law, regulation or order of any jurisdiction
affecting any term of any of the Obligations or rights of the Transfer-
or, the Company, the Agent or any Bank Investor with respect thereto,
(vi) the failure by the Transferor, the Company, the Agent or any Bank
Investor to take any steps to perfect and maintain perfected its
respective interest in the Receivables or other property acquired by the
Transferor from McRae's or any security or collateral related to the
Obligations or (vii) any other circumstances which might otherwise
constitute a legal or equitable discharge or defense of a guarantor.
Proffitt's agrees that none of the Transferor, the Company, the Agent or
any Bank Investor shall be under any obligation to marshall any assets
in favor of or against or in payment of any or all of the Obligations.
Proffitt's further agrees that, to the extent that McRae's makes a
payment or payments to the Transferor, the Company, the Agent or any
Bank Investor, which payment or payments or any part thereof are subse-
quently invalidated, declared to be fraudulent or preferential, set
aside and/or required to be repaid to McRae's, its estate, trustee,
receiver or any other party, including without limitation, Proffitt's,
under any bankruptcy, insolvency or similar state or federal law, common
law or equitable cause, then to the extent of such payment or repayment,
the Obligation or part thereof which has been paid, reduced or satisfied
by such amount shall be reinstated and continued in full force and
effect as of the date such initial payment, reduction or satisfaction
occurred. Proffitt's waives all set-offs and counterclaims and all
presentments, demands for performance, notices of dishonor and notices
of acceptance of this guaranty. Proffitt's agrees that its obligations
under this guaranty shall be irrevocable.
SECTION 9.3. Rights of Set-Off. Proffitt's hereby authorizes
the Transferor, the Company, the Agent or any Bank Investor at any time
and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (whether general or special, time or
demand, provisional or final) at any time held and other indebtedness at
any time owing by the Transferor, the Company, the Agent or any Bank
Investor to or for the credit or the account of Proffitt's against any
and all of the obligations of Proffitt's now or hereafter existing under
this Agreement to the Transferor or the Company. Proffitt's acknowledg-
es that the Company's rights described in this Section 9.3 are in
addition to other rights and remedies (including, without limitation,
other rights of set-off) the Transferor or the Company may have.
SECTION 9.4. Representations and Warranties. Proffitt's
hereby represents and warrants to the Transferor, the Company, the Agent
and the Bank Investors as of the date hereof, as follows:
(a) Organization, etc. Proffitt's is a corporation duly
organized, validly existing and in good standing under the laws of
Tennessee and has full corporate power, authority and legal right to own
or lease all of its properties and assets, to carry on its business as
it is now being conducted and to execute, deliver and perform this
Agreement. Proffitt's is duly qualified as a foreign corporation in
good standing under the laws of each other jurisdiction in which the
nature of its business requires such qualification and in which failure
to so qualify would render this guaranty unenforceable or would have a
material adverse effect on Proffitt's ability to perform its obligations
under this Agreement.
(b) Authorization; Valid Agreement. The execution,
delivery and performance of this Agreement has been duly authorized by
all required corporate or other action on the part of Proffitt's, and
this Agreement constitutes the legal, valid and binding obligation of
Proffitt's, enforceable in accordance with its terms, subject to appli-
cable bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally as such laws would apply in the event
of the bankruptcy, insolvency, moratorium or other similar event with
respect to Proffitt's and to general principles of equity.
(c) No Conflicts. The execution, delivery and perfor-
mance by Proffitt's of this Agreement does not and will not (a)
contravene its charter or By-Laws, (b) in any material respect, violate
any provision of, or require any filing, registration, consent or
approval under, any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to Proffitt's, (c) result in a breach of or constitute a
default or require any consent under any material indenture or loan or
credit agreement or any other material agreement, lease or instrument to
which Proffitt's is a party or by which it or its properties may be
bound or affected or (d) result in, or require, the creation or
imposition of any material lien upon or with respect to any of the
properties now owned or hereafter acquired by Proffitt's.
(d) No Proceedings. There are no proceedings or inves-
tigations pending, or to the best knowledge of Proffitt's, threatened
against Proffitt's before any Governmental Authority (a) asserting the
invalidity of this Agreement, (b) seeking to prevent the consummation of
the transactions contemplated by this Agreement, (c) seeking any
determination or ruling that would materially adversely affect the
performance by Proffitt's of its obligations under this Agreement or (d)
seeking any determination or ruling that would materially adversely
affect the validity or enforceability of this Agreement.
SECTION 9.5. Guarantor Default. The occurrence of any one or
more of the following events shall constitute a Guarantor Default:
(a) any representation, warranty, certification or
statement made by Proffitt's in this Agreement shall prove to have been
incorrect in any material respect when made or deemed made; or
(b) Proffitt's shall (i) fail to pay when due any
amount to be paid by it hereunder, (ii) fail to observe or perform any
other term, covenant, condition or agreement provided for herein, which
failure, in the case of clause (ii) above, continues for a period of
thirty (30) days after the earlier of (A) the date on which written
notice of such failure shall have been given to Proffitt's by the Compa-
ny or the Administrative Agent or (B) the date on which the Transferor,
Proffitt's or McRae's, as applicable, became aware or, in the exercise
of reasonable care, should have become aware of such failure; or
(c) the failure by Proffitt's to satisfy the financial
covenants set forth in Exhibit O hereto; or
(d) Proffitt's or any Subsidiary shall fail to perform
any material term, provision or condition contained in any agreement
under which any Indebtedness greater than $5,000,000 was created or is
governed, if such event is an "event of default" or "default" under such
agreement; or any Indebtedness of Proffitt's or any Subsidiary greater
than $5,000,000 shall be declared to be due and payable or required to
be prepaid (other than by a regularly scheduled payment) prior to the
scheduled date of maturity thereof; or
(e) any Event of Bankruptcy shall occur with respect to
Proffitt's or an Event of Bankruptcy shall occur with respect to any
Subsidiary of Proffitt's which would have a Material Adverse Effect.
ARTICLE X
THE AGENT; BANK COMMITMENT
SECTION 10.1. Authorization and Action.The Company and each
Bank Investor hereby appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this
Agreement and the other Transaction Documents as are delegated to the
Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. In furtherance, and without limiting the
generality, of the foregoing, the Company and each Bank Investor hereby
appoints the Agent as its agent to execute and deliver all further
instruments and documents, and take all further action that the Agent
may deem necessary or appropriate or that the Company or a Bank Investor
may reasonably request in order to perfect, protect or more fully evi-
dence the interests transferred or to be transferred from time to time
by the Transferor hereunder, or to enable any of them to exercise or en-
force any of their respective rights hereunder, including, without
limitation, the execution by the Agent as secured party/assignee of such
financing or continuation statements, or amendments thereto or assign-
ments thereof, relative to all or any of the Receivables now existing or
hereafter arising, and such other instruments or notices, as may be
necessary or appropriate for the purposes stated hereinabove. The
Company and the Majority Investors may direct the Agent to take any such
incidental action hereunder. With respect to other actions which are
incidental to the actions specifically delegated to the Agent hereunder,
the Agent shall not be required to take any such incidental action here-
under, but shall be required to act or to refrain from acting (and shall
be fully protected in acting or refraining from acting) upon the
direction of the Majority Investors; provided, however, that Agent shall
not be required to take any action hereunder if the taking of such ac-
tion, in the reasonable determination of the Agent, shall be in viola-
tion of any applicable law, rule or regulation or contrary to any provi-
sion of this Agreement or shall expose the Agent to liability hereunder
or otherwise. Upon the occurrence and during the continuance of any
Termination Event or Potential Termination Event, the Agent shall take
no action hereunder (other than ministerial actions or such actions as
are specifically provided for herein) without the prior consent of the
Majority Investors. The Agent shall not, without the prior written
consent of all Bank Investors, which consent shall not be unreasonably
withheld or delayed, agree to (i) amend, modify or waive any provision
of this Agreement in any way which would (A) reduce or impair Col-
lections or the payment of Carrying Costs or fees payable hereunder to
the Bank Investors or delay the scheduled dates for payment of such
amounts, (B) increase the Servicing Fee (other than as permitted
pursuant to Section 6.2(b)), (C) modify any provisions of this Agreement
or a Receivables Purchase Agreement relating to the timing of payments
required to be made by the Transferor or the Designated Seller or the
application of the proceeds of such payments, (D) permit the appointment
of any Person (other than the Agent) as successor Servicer, or (E)
release any property from the lien provided by this Agreement (other
than as expressly contemplated herein). The Agent shall not agree to
any amendment of this Agreement which increases the dollar amount of a
Bank Investor's Commitment without the prior consent of such Bank Inves-
tor. In addition, the Agent shall not agree to any amendment of this
Agreement not specifically described in the two preceding sentences
without the consent of the related Majority Investors. "Majority Inves-
tors" shall mean, at any time, the Agent and those Bank Investors which
hold Commitments aggregating in excess of 51% of the Facility Limit as
of such date. In the event the Agent requests the Company's or a Bank
Investor's consent pursuant to the foregoing provisions and the Agent
does not receive a consent (either positive or negative) from the
Company or such Bank Investor within 10 Business Days of the Company's
or Bank Investor's receipt of such request, then the Company or such
Bank Investor (and its percentage interest hereunder) shall be disre-
garded in determining whether the Agent shall have obtained sufficient
consent hereunder.
(a) The Agent shall exercise such rights and powers
vested in it by this Agreement and the other Transaction Documents, 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.
SECTION 10.2. Agent's Reliance, Etc. Neither the Agent nor
any of its directors, officers, agents or employees shall be liable for
any action taken or omitted to be taken by it or them as Agent under or
in connection with this Agreement or any of the other Transaction
Documents, except for its or their own gross negligence or willful
misconduct. Without limiting the foregoing, the Agent: (i) may consult
with legal counsel (including counsel for the Transferor or a Designated
Seller), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accoun-
tants or experts; (ii) makes no warranty or representation to the
Company or any Bank Investor and shall not be responsible to the Company
or any Bank Investor for any statements, warranties or representations
made in or in connection with this Agreement; (iii) shall not have any
duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement or any of
the other Transaction Documents on the part of the Transferor, the Ser-
vicer or any Designated Seller or to inspect the property (including the
books and records) of the Transferor, the Servicer or any Designated
Seller; (iv) shall not be responsible to the Company or any Bank Inves-
tor for the due execution, legality, validity, enforceability, genuine-
ness, sufficiency or value of this Agreement, any of the other
Transaction Documents or any other instrument or document furnished
pursuant hereto or thereto; and (v) shall incur no liability under or in
respect of this Agreement or any of the other Transaction Documents by
acting upon any notice (including notice by telephone), consent,
certificate or other instrument or writing (which may be by telex)
believed by it to be genuine and signed or sent by the proper party or
parties.
SECTION 10.3. Credit Decision. The Company and each Bank
Investor acknowledges that it has, independently and without reliance
upon the Agent, any of the Agent's Affiliates, any other Bank Investor
or the Company (in the case of any Bank Investor) and based upon such
documents and information as it has deemed appropriate, made its own
evaluation and decision to enter into this Agreement and the other
Transaction Documents to which it is a party and, if it so determines,
to accept the transfer of any undivided ownership interest in the
Affected Assets hereunder. The Company and each Bank Investor also
acknowledges that it will, independently and without reliance upon the
Agent, any of the Agent's Affiliates, any other Bank Investor or the
Company (in the case of any Bank Investor) and based on such documents
and information as it shall deem appropriate at the time, continue to
make its own decisions in taking or not taking action under this Agree-
ment and the other Transaction Documents to which it is a party.
SECTION 10.4. Indemnification of the Agent. The Bank Inves-
tors agree to indemnify the Agent (to the extent not reimbursed by the
Transferor), ratably in accordance with their Pro Rata Shares, from and
against any and all liabilities, obligations, losses, damages, penal-
ties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Agent in any way relating to or arising out of this
Agreement or any action taken or omitted by the Agent, any of the other
Transaction Documents hereunder or thereunder, provided that the Bank
Investors shall not be liable for any portion of such liabilities, obli-
gations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, the Bank
Investors agree to reimburse the Agent, ratably in accordance with their
Pro Rata Shares, promptly upon demand for any out-of-pocket expenses
(including counsel fees) incurred by the Agent in connection with the
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement and the
other Transaction Documents, to the extent that such expenses are in-
curred in the interests of or otherwise in respect of the Bank Investors
hereunder and/or thereunder and to the extent that the Agent is not
reimbursed for such expenses by the Transferor.
SECTION 10.5. Successor Agent. The Agent may resign at any
time by giving written notice thereof to each Bank Investor, the Company
and the Transferor and may be removed at any time with cause by the
Majority Investors. Upon any such resignation or removal, the Company
and the Majority Investors shall appoint a successor Agent. The Company
and each Bank Investor agrees that it shall not unreasonably withhold or
delay its approval of the appointment of a successor Agent. If no such
successor Agent shall have been so appointed, and shall have accepted
such appointment, within 30 days after the retiring Agent's giving of
notice of resignation or the Majority Investors' removal of the retiring
Agent, then the retiring Agent may, on behalf of the Company and the
Bank Investors, appoint a successor Agent which successor Agent shall be
either (i) a commercial bank organized under the laws of the United
States or of any state thereof and have a combined capital and surplus
of at least $50,000,000 or (ii) an Affiliate of such a bank. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and obligations
under this Agreement. After any retiring Agent's resignation or removal
hereunder as Agent, the provisions of this Article IX shall continue to
inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent under this Agreement.
SECTION 10.6. Payments by the Agent. Unless specifically
allocated to a Bank Investor pursuant to the terms of this Agreement,
all amounts received by the Agent on behalf of the Bank Investors shall
be paid by the Agent to the Bank Investors (at their respective accounts
specified in their respective Assignment and Assumption Agreements) in
accordance with their respective related pro rata interests in the Net
Investment on the Business Day received by the Agent, unless such
amounts are received after 12:00 noon on such Business Day, in which
case the Agent shall use its reasonable efforts to pay such amounts to
the Bank Investors on such Business Day, but, in any event, shall pay
such amounts to the Bank Investors in accordance with their respective
related pro rata interests in the Net Investment not later than the fol-
lowing Business Day.
SECTION 10.7. Bank Commitment; Assignment to Bank Investors.
(a) Bank Commitment. At any time on or prior to the
Commitment Termination Date, in the event that the Company does not
effect an Incremental Transfer as requested under Section 2.2(a), then
at any time, the Transferor shall have the right to require the Company
to assign its interest in the Net Investment in whole to the Bank
Investors pursuant to this Section 10.7. In addition, at any time on or
prior to the Commitment Termination Date (i) upon the declaration of the
Termination Date because of the occurrence of a Termination Event or
(ii) the Company elects to give notice to the Transferor of a Reinvest-
ment Termination Date, the Transferor hereby requests and directs that
the Company assign its interest in the Net Investment in whole to the
Bank Investors pursuant to this Section 10.7 and the Transferor hereby
agrees to pay the amounts described in Section 10.7(d) below. Provided
that the Net Asset Test is satisfied, upon any such election by the
Company or any such request by the Transferor, the Company shall make
such assignment and the Bank Investors shall accept such assignment and
shall assume all of the Company's obligations hereunder. In connection
with any assignment from the Company to the Bank Investors pursuant to
this Section 10.7, each Bank Investor shall, on the date of such as-
signment, pay to the Company an amount equal to its Assignment Amount.
In addition, at any time on or prior to the Commitment Termination Date
the Transferor shall have the right to request funding under this Agree-
ment directly from the Bank Investors provided that at such time all
conditions precedent set forth herein for an Incremental Transfer shall
be satisfied and provided further that in connection with such funding
by the Bank Investors, the Bank Investors accept the assignment of all
of the Company's interest in the Net Investment and assume all of the
Company's obligations hereunder concurrently with or prior to any such
Incremental Transfer. Upon any assignment by the Company to the Bank
Investors contemplated hereunder, the Company shall cease to make any
additional Incremental Transfers hereunder.
(b) Assignment. No Bank Investor may assign all or a
portion of its interests in the Net Investment, the Receivables, and
Collections, Related Security and Proceeds with respect thereto and its
rights and obligations hereunder to any Person unless approved in
writing by the Agent. In the case of an assignment by the Company to
the Bank Investors or by a Bank Investor to another Person, the assignor
shall deliver to the assignee(s) an Assignment and Assumption Agreement
in substantially the form of Exhibit G attached hereto, duly executed,
assigning to the assignee a pro rata interest in the Net Investment, the
Receivables, and Collections, Related Security and Proceeds with respect
thereto and the assignor's rights and obligations hereunder and the
assignor shall promptly execute and deliver all further instruments and
documents, and take all further action, that the assignee may reasonably
request, in order to protect, or more fully evidence the assignee's
right, title and interest in and to such interest and to enable the
Agent, on behalf of such assignee, to exercise or enforce any rights
hereunder and under the other Transaction Documents to which such
assignor is or, immediately prior to such assignment, was a party. Upon
any such assignment, (i) the assignee shall have all of the rights and
obligations of the assignor hereunder and under the other Transaction
Documents to which such assignor is or, immediately prior to such
assignment, was a party with respect to such interest for all purposes
of this Agreement and under the other Transaction Documents to which
such assignor is or, immediately prior to such assignment, was a party
(it being understood that the Bank Investors, as assignees, shall (x) be
obligated to effect Incremental Transfers under Section 2.2(a) in accor-
dance with the terms thereof, notwithstanding that the Company was not
so obligated and (y) not have the right to elect the commencement of the
liquidation of the Net Investment pursuant to the definition of "Rein-
vestment Termination Date", notwithstanding that the Company had such
right) and (ii) the assignor shall relinquish its rights with respect to
such interest for all purposes of this Agreement and under the other
Transaction Documents to which such assignor is or, immediately prior to
such assignment, was a party. No such assignment shall be effective
unless a fully executed copy of the related Assignment and Assumption
Agreement shall be delivered to the Agent and the Transferor. All costs
and expenses of the Agent and the assignor incurred in connection with
any assignment hereunder shall be borne by the Transferor and not by the
assignor or any such assignee. No Bank Investor shall assign any
portion of its Commitment hereunder without also simultaneously assign-
ing an equal portion of its interest in the Liquidity Provider Agree-
ment.
(c) Effects of Assignment. By executing and delivering
an Assignment and Assumption Agreement, the assignor and assignee
thereunder confirm to and agree with each other and the other parties
hereto as follows: (i) other than as provided in such Assignment and
Assumption Agreement, the assignor makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties
or representations made in or in connection with this Agreement, the
other Transaction Documents or any other instrument or document fur-
nished pursuant hereto or thereto or the execution, legality, validity,
enforceability, genuineness, sufficiency or value or this Agreement, the
other Transaction Documents or any such other instrument or document;
(ii) the assignor makes no representation or warranty and assumes no re-
sponsibility with respect to the financial condition of the Transferor,
any Designated Seller or the Servicer or the performance or observance
by the Transferor, any Designated Seller or the Servicer of any of their
respective obligations under this Agreement, the Receivables Purchase
Agreement, the other Transaction Documents or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms that it
has received a copy of this Agreement, the Receivables Purchase Agree-
ment and such other instruments, documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Assumption Agreement and to purchase such
interest; (iv) such assignee will, independently and without reliance
upon the Agent, or any of its Affiliates, or the assignor and based on
such agreements, documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not
taking action under this Agreement and the other Transaction Documents;
(v) such assignee appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement,
the other Transaction Documents and any other instrument or document
furnished pursuant hereto or thereto as are delegated to the Agent by
the terms hereof or thereof, together with such powers as are reasonably
incidental thereto and to enforce its respective rights and interests in
and under this Agreement, the other Transaction Documents, the Receiv-
ables, the Collections and the Related Security; (vi) such assignee
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement and the other Trans-
action Documents are required to be performed by it as the assignee of
the assignor; and (vii) such assignee agrees that it will not institute
against the Company any proceeding of the type referred to in Section
11.9 prior to the date which is one year and one day after the payment
in full of all Commercial Paper issued by the Company.
(d) Transferor's Obligation to Pay Certain Amounts;
Additional Assignment Amount. The Transferor shall pay to the Agent,
for the account of the Company, in connection with any assignment by the
Company to the Bank Investors pursuant to this Section 10.7, an
aggregate amount equal to all Carrying Costs to accrue through the end
of each outstanding funding period plus all other Aggregate Unpaids
(other than the Net Investment). To the extent that such Carrying Costs
relate to interest or discount on Commercial Paper issued to fund the
Net Investment, if the Transferor fails to make payment of such amounts
at or prior to the time of assignment by the Company to the Bank Inves-
tors, such amount shall be paid by the Bank Investors (in accordance
with their respective Pro Rata shares) to the Company as additional con-
sideration for the interests assigned to the Bank Investors and the
amount of the "Net Investment" hereunder held by the Bank Investors
shall be increased by an amount equal to the additional amount so paid
by the Bank Investors.
(e) Administration of Agreement After Assignment. After
any assignment by the Company to the Bank Investors pursuant to this
Section 10.7 (and the payment of all amounts owing to the Company in
connection therewith), all rights of the Administrative Agent and the
Collateral Agent set forth herein shall be deemed to be afforded to the
Agent on behalf of the Bank Investors instead of either such party.
(f) Payments. After any assignment by the Company to
the Bank Investors pursuant to this Section 10.7, all payments to be
made hereunder by the Transferor or the Servicer to the Bank Investors
shall be made to the Agent's account as such account shall have been
notified to the Transferor and the Servicer.
(g) Downgrade of Bank Investor. If at any time prior to
any assignment by the Company to the Bank Investors as contemplated
pursuant to this Section 10.7, the short term debt rating of any Bank
Investor shall be "A-2" or "P-2" from Standard & Poor's or Moody's,
respectively, with negative credit implications, such Bank Investor,
upon request of the Agent, shall, within 30 days of such request, assign
its rights and obligations hereunder to another financial institution
(which institution's short term debt shall be rated at least "A-2" and
"P-2" from Standard & Poor's and Moody's, respectively, and which shall
not be so rated with negative credit implications). If the short term
debt rating of a Bank Investor shall be "A-3" or "P-3", or lower, from
Standard & Poor's or Moody's, respectively (or such rating shall have
been withdrawn by Standard & Poor's or Moody's), such Bank Investor,
upon request of the Agent, shall, within five (5) Business Days of such
request, assign its rights and obligations hereunder to another
financial institution (which institution's short term debt shall be
rated at least "A-2" and "P-2" from Standard & Poor's and Moody's,
respectively, and which shall not be so rated with negative credit
implications). In either such case, if any such Bank Investor shall not
have assigned its rights and obligations under this Agreement within the
applicable time period described above, the Company shall have the right
to require such Bank Investor to accept the assignment of such Bank
Investor's Pro Rata Share of the Net Investment; such assignment shall
occur in accordance with the applicable provisions of this Section 10.7.
Such Bank Investor shall be obligated to pay to the Company, in
connection with such assignment, in addition to the Pro Rata Share of
the Net Investment, an amount equal to the interest component of the
outstanding Commercial Paper issued to fund the portion of the Net
Investment being assigned to such Bank Investor, as reasonably deter-
mined by the Agent. Notwithstanding anything contained herein to the
contrary, upon any such assignment to a downgraded Bank Investor as
contemplated pursuant to the immediately preceding sentence, the
aggregate available amount of the Facility Limit, solely as it relates
to new Incremental Transfers by the Company, shall be reduced by the
amount of unused Commitment of such downgraded Bank Investor; it being
understood and agreed, that nothing in this sentence or the two
preceding sentences shall affect or diminish in any way any such
downgraded Bank Investor's Commitment to the Transferor or such
downgraded Bank Investor's other obligations and liabilities hereunder
and under the other Transaction Documents.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Term of Agreement. This Agreement shall
terminate on the date following the Termination Date upon which the Net
Investment and all other Aggregate Unpaids have been paid in full, in
each case, in cash; provided, however, that (i) the rights and remedies
of the Agent, the Company, the Bank Investors and the Administrative
Agent with respect to any representation and warranty made or deemed to
be made by the Transferor pursuant to this Agreement, (ii) the indemni-
fication and payment provisions of Article VIII, and (iii) the agreement
set forth in Section 11.9 hereof, shall be continuing and shall survive
any termination of this Agreement.
SECTION 11.2. Waivers; Amendments. No failure or delay on
the part of the Agent, the Company, the Administrative Agent or any Bank
Investor in exercising any power, right or remedy under this Agreement
shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or remedy preclude any other further
exercise thereof or the exercise of any other power, right or remedy.
The rights and remedies herein provided shall be cumulative and nonex-
clusive of any rights or remedies provided by law. Any provision of
this Agreement may be amended if, but only if, such amendment is in
writing and is signed by the Transferor, the Company, the Agent and the
Majority Investors.
SECTION 11.3. Notices. Except as provided below, all
communications and notices provided for hereunder shall be in writing
(including telecopy or electronic facsimile transmission or similar
writing) and shall be given to the other party at its address or
telecopy number set forth below or at such other address or telecopy
number as such party may hereafter specify for the purposes of notice to
such party. Each such notice or other communication shall be effective
(i) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified in this Section 11.3 and confirmation is
received, (ii) if given by mail 3 Business Days following such posting,
postage prepaid, U.S. certified or registered, (iii) if given by
overnight courier, one (1) Business Day after deposit thereof with a
national overnight courier service, or (iv) if given by any other means,
when received at the address specified in this Section 11.3. However,
anything in this Section to the contrary notwithstanding, the Transferor
hereby authorizes the Company to effect Transfers and funding period
selections based on telephonic notices made by any Person which the
Company in good faith believes to be acting on behalf of the Transferor.
The Transferor agrees to deliver promptly to the Company a written
confirmation of each telephonic notice signed by an authorized officer
of Transferor. However, the absence of such confirmation shall not
affect the validity of such notice. If the written confirmation differs
in any material respect from the action taken by the Company, the
records of the Company shall govern absent manifest error.
If to the Company:
Enterprise Funding Corporation
c/o Merrill Lynch Money Market, Inc.
World Financial Center
South Tower, 8th Floor
225 Liberty Street
New York, New York 10080
Telephone: (212) 236-7200
Telecopy: (212) 236-7584
(with a copy to the Administrative Agent)
If to the Transferor:
Proffitt's Credit Corporation
300 South Fourth Street, Suite 1100
Las Vegas, Nevada 89101
Telephone: (702) 598-3738
Telecopy: (702) 598-3651
Attn: Douglas E. Coltharp, President
(with a copy to Proffitt's, Inc.)
Payment Information:
NATIONSBANK OF TEXAS, N.A.
Dallas, Texas 75283-2406
Account Number: 3750796988
If to Proffitt's, Inc.
Proffitt's Inc.
3455 Highway 80 West
Jackson, Mississippi 39209
Telephone: (601) 968-4394
Telecopy: (601) 968-4354
Attn: Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
If to the Servicer:
MCRAE'S, INC.
3455 Highway 80 West
Jackson, Mississippi 39209
Telephone: (601) 968-4394
Telecopy: (601) 968-4354
Attn: Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
If to the Collateral Agent:
NationsBank, N.A.
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Attn: Michelle M. Heath-- NC1-007-10-07
Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
If to the Agent:
NationsBank, N.A.
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Attn: Michelle M. Heath-- NC1-007-10-07
Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
Payment Information:
NationsBank, N.A.
ABA 053-000-196
for the account of NationsBank Charlotte
Account No. 10822016511
Attn.: Camille Zerbinos
If to the Administrative Agent:
NationsBank, N.A.
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Attn: Michelle M. Heath-- NC1-007-10-07
Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
If to the Bank Investors, at their respective addresses set
forth on the signature pages hereto or of the Assignment and Assumption
Agreement pursuant to which it became a party hereto.
SECTION 11.4. Governing Law; Submission to Jurisdiction;
Integration.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE TRANSFEROR
HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK
STATE COURT SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. The Transferor hereby irrevocably
waives, to the fullest extent it may effectively do so, any objection
which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient
forum. Nothing in this Section 11.4 shall affect the right of the
Company to bring any action or proceeding against the Transferor or its
property in the courts of other jurisdictions.
(b) EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT
TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE AMONG ANY OF THEM ARISING OUT OF, CONNECTED
WITH, RELATING TO OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS.
(c) This Agreement contains the final and complete inte-
gration of all prior expressions by the parties hereto with respect to
the subject matter hereof and shall constitute the entire Agreement
among the parties hereto with respect to the subject matter hereof
superseding all prior oral or written understandings.
(d) The Transferor and each Designated Seller hereby
appoint CT Corporation, located at 1633 Broadway, New York, New York
10019, as the authorized agent upon whom process may be served in any
action arising out of or based upon this Agreement, the other
Transaction Documents to which such Person is a party or the transac-
tions contemplated hereby or thereby that may be instituted in the
United States District Court for the Southern District of New York and
of any New York State court sitting in The City of New York by the
Company, the Agent, any Bank Investor, the Collateral Agent or any
assignee of any of them.
SECTION 11.5. Severability; Counterparts. This Agreement may
be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall
constitute one and the same Agreement. Any provisions of this Agreement
which are prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 11.6. Successors and Assigns. This Agreement shall
be binding on the parties hereto and their respective successors and
assigns; provided, however, that neither the Transferor nor any
Designated Seller may assign any of its rights or delegate any of its
duties hereunder or under the Receivables Purchase Agreement or under
any of the other Transaction Documents to which it is a party without
the prior written consent of the Agent. No provision of this Agreement
shall in any manner restrict the ability of the Company or any Bank
Investor to assign, participate, grant security interests in, or other-
wise transfer any portion of the Transferred Interest.
(a) Each of the Transferor and each Designated
Seller hereby agrees and consents to the assignment by the Company from
time to time of all or any part of its rights under, interest in and
title to this Agreement and the Transferred Interest to any Liquidity
Provider. In addition, each of the Transferor and each Designated
Seller hereby consents to and acknowledges the assignment by the Company
of all of its rights under, interest in and title to this Agreement and
the Transferred Interest to the Collateral Agent.
SECTION 11.7. Waiver of Confidentiality. Each of the
Transferor and each Designated Seller hereby consents to the disclosure
of any non-public information with respect to it received by the
Company, the Agent, any Bank Investor or the Administrative Agent to any
of the Company, the Agent, any nationally recognized rating agency
rating the Company's Commercial Paper, the Administrative Agent, the
Collateral Agent, any Bank Investor or potential Bank Investor, the Li-
quidity Provider or the Credit Support Provider in relation to this
Agreement.
SECTION 11.8. Confidentiality Agreement. Each of the
Transferor and each Designated Seller hereby agrees that it will not
disclose the contents of this Agreement or any other proprietary or
confidential information of the Company, the Agent, the Administrative
Agent, the Collateral Agent, any Liquidity Provider or any Bank Investor
to any other Person except (i) its auditors and attorneys, employees or
financial advisors (other than any commercial bank) and any nationally
recognized rating agency, provided such auditors, attorneys, employees,
financial advisors or rating agencies are informed of the highly
confidential nature of such information or (ii) as may be required to
comply with any rules or reporting obligations described in the Securi-
ties Exchange Act of 1934, as amended or (iii) as otherwise required by
applicable law, order of a court of competent jurisdiction or as
required by an applicable state or federal regulatory authority in the
exercise of its duly authorized governmental powers.
SECTION 11.9. No Bankruptcy Petition Against the Company.
Each of the Transferor and each Designated Seller hereby covenants and
agrees that, prior to the date which is one year and one day after the
payment in full of all outstanding Commercial Paper or other indebt-
edness of the Company, it will not institute against, or join any other
Person in instituting against, the Company any bankruptcy, reorganiza-
tion, arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any state of
the United States.
SECTION 11.10. No Recourse Against Stockholders, Officers or
Directors. No recourse under any obligation, covenant or agreement of
the Company contained in this Agreement shall be had against Merrill
Lynch Money Markets Inc. (or any affiliate thereof), or any stockholder,
officer or director of the Company, as such, by the enforcement of any
assessment or by any legal or equitable proceeding, by virtue of any
statute or otherwise; it being expressly agreed and understood that this
Agreement is solely a corporate obligation of the Company, and that no
personal liability whatsoever shall attach to or be incurred by Merrill
Lynch Money Markets Inc. (or any affiliate thereof), or the stockhold-
ers, officers or directors of the buyer, as such, or any of them, under
or by reason of any of the obligations, covenants or agreements of the
Company contained in this Agreement, or implied therefrom, and that any
and all personal liability for breaches by the Company of any of such
obligations, covenants or agreements, either at common law or at equity,
or by statute or constitution, of Merrill Lynch Money Markets Inc. (or
any affiliate thereof) and every such stockholder, officer or director
of the Company is hereby expressly waived as a condition of and consid-
eration for the execution of this Agreement.
SECTION 11.11. Characterization of the Transactions Con-
templated by the Agreement. It is the intention of the parties that the
transactions contemplated hereby constitute the sale of the Transferred
Interest, conveying good title thereto free and clear of any Adverse
Claims to the Agent, on behalf of the Company and the Bank Investors,
and that the Transferred Interest not be part of the Transferor's estate
in the event of an insolvency. If, notwithstanding the foregoing, the
transactions contemplated hereby should be deemed a financing, the
parties intend that the Transferor shall be deemed to have granted to
the Agent, on behalf of the Company and the Bank Investors, and the
Transferor hereby grants to the Agent, on behalf of the Company and the
Bank Investors, a first priority perfected and continuing security
interest in all of the Transferor's right, title and interest in, to and
under the Receivables, together with Related Security, Collections and
Proceeds with respect thereto, and together with all of the Transferor's
rights under the Receivables Purchase Agreements with respect to the Re-
ceivables and with respect to any obligations thereunder of any
Designated Seller with respect to the Receivables, and that this Agree-
ment shall constitute a security agreement under applicable law. The
Transferor hereby assigns to the Agent, on behalf of the Company and the
Bank Investors, all of its rights and remedies under the Receivables
Purchase Agreement with respect to the Receivables and with respect to
any obligations thereunder of the Designated Sellers with respect to the
Receivables. The Transferor agrees that it shall not give any consent
or waiver required or permitted to be given under a Receivables Purchase
Agreement without the prior consent of the Agent.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Transfer and Administration Agreement as of the date
first written above.
ENTERPRISE FUNDING CORPORATION,
as Company
By: ___________________________
Name: _________________________
Title: ________________________
PROFFITT'S CREDIT CORPORATION,
as Transferor
By: ____________________________
Name: Douglas E. Coltharp
Title: President
McRAE'S, INC.,
as Servicer
By: _____________________________
Name: Douglas E. Coltharp
Title: Chief Financial Officer
PROFFITT'S, INC.
as Servicer Guarantor
By: _______________________________
Name: Douglas E. Coltharp
Title: Chief Financial Officer
Commitment NATIONSBANK, N.A., as Agent
$175,000,000 and a Bank Investor
By: ________________________________
Name: ______________________________
Title: _____________________________
Schedule A
----------
[Account Schedule]
Exhibit A
---------
[Form of Account]
Exhibit B
---------
[Credit Guidelines]
Exhibit C
---------
List of Lock-Box Banks and Accounts
1. For Proffitt's, Inc.:
First Tennessee Bank National Association
Post Office Box 84
Memphis, Tennessee 38101-0084
Account Number: 9763317
2. For McRae's, Inc.:
AmSouth Bank of Alabama
Main office, Birmingham
Post Office Box 11007
Birmingham, Alabama 35288
Account Number: 00-300-276
Exhibit D
---------
FORM OF LOCK-BOX AGREEMENT
January __, 1997
[Name and Address
of Lock-Box Bank]
Re: [Name of Designated Seller]
Lock-Box Account
No[s]. ___________
Ladies and Gentlemen:
[______________] (the "Seller") hereby notifies you that
in connection with certain transactions involving its accounts
receivable, it has transferred exclusive ownership and dominion of
its lock-box account no[s]. __________ maintained with you (collec-
tively the "Accounts") to NationsBank, N.A., as agent (the
"Agent"), and that the Seller will transfer exclusive control of
the Accounts to the Agent effective upon delivery to you of the
Notice of Effectiveness (as hereinafter defined).
In furtherance of the foregoing, the Seller and the Agent
hereby instruct you, beginning on the date of your receipt of the
Notice of Effectiveness: (i) to collect the monies, checks, in-
struments and other items of payment mailed to the Accounts; (ii)
to deposit into the Accounts all such monies, checks, instruments
and other items of payment or all funds collected with respect
thereto (unless otherwise instructed by the Agent); and (iii) to
transfer all funds deposited and collected in the Accounts pursuant
to instructions given to you by the Agent from time to time.
You are hereby further instructed: (i) unless and until
the Agent notifies you to the contrary at any time after your
receipt of the Notice of Effectiveness, to make such transfers from
the Accounts at such times and in such manner as the Seller or the
Servicer, in its capacity as servicer for the Agent, shall from
time to time instruct to the extent such instructions are not
inconsistent with the instructions set forth herein, and (ii) to
permit the Seller, the Servicer (in its capacity as servicer for
the Agent) and the Agent to obtain upon request any information
relating to the Accounts, including, without limitation, any
information regarding the balance or activity of the Accounts.
The Seller also hereby notifies you that, beginning on
the date of your receipt of the Notice of Effectiveness and
notwithstanding anything herein or elsewhere to the contrary, the
Agent, and neither the Seller nor Proffitt's Credit Corporation,
shall be irrevocably entitled to exercise any and all rights in re-
spect of or in connection with the Accounts, including, without
limitation, the right to specify when payments are to be made out
of or in connection with the Accounts. The Agent has a continuing
interest in all of the checks and their proceeds and all monies and
earnings, if any, thereon in the Accounts, and you shall be the
Agent's agent for the purpose of holding and collecting such
property. The monies, checks, instruments and other items of pay-
ment mailed to, and funds deposited to, the Accounts will not be
subject to deduction, set-off, banker's lien, or any other right
in favor of any person other than the Agent (except that you may
set off (i) all amounts due to you in respect of your customary
fees and expenses for the routine maintenance and operation of the
Accounts, and (ii) the face amount of any checks which have been
credited to the Accounts but are subsequently returned unpaid
because of uncollected or insufficient funds).
This Agreement may not be terminated at any time by the
Seller or you without the prior written consent of the Agent.
Neither this Agreement nor any provision hereof may be changed,
amended, modified or waived orally but only by an instrument in
writing signed by the Agent and the Seller.
You shall not assign or transfer your rights or
obligations hereunder (other than to the Agent) without the prior
written consent of the Agent and the Seller. Subject to the
preceding sentence, this Agreement shall be binding upon each of
the parties hereto and their respective successors and assigns, and
shall inure to the benefit of, and be enforceable by, the Agent,
each of the parties hereto and their respective successors and as-
signs.
You hereby represent that the person signing this
Agreement on your behalf is duly authorized by you to so sign.
You agree to give the Agent and the Seller prompt notice
if the Accounts become subject to any writ, garnishment, judgment,
warrant of attachment, execution or similar process.
Any notice, demand or other communication required or
permitted to be given hereunder shall be in writing and may be
personally served or sent by facsimile or by courier service or by
United States mail and shall be deemed to have been delivered when
delivered in person or by courier service or by facsimile or three
(3) Business Days after deposit in the United States mail (regis-
tered or certified, with postage prepaid and properly addressed).
For the purposes hereof, (i) the addresses of the parties hereto
shall be as set forth below each party's name below, or, as to each
party, at such other address as may be designated by such party in
a written notice to the other party and the Agent and (ii) the
address of the Agent shall be NationsBank, N.A., NationsBank
Corporate Center, 10th Floor, Charlotte, North Carolina 28255,
Attention: Michelle M. Heath, Structured Finance, or at such other
address as may be designated by the Agent in a written notice to
each of the parties hereto.
Please agree to the terms of, and acknowledge receipt of,
this notice by signing in the space provided below.
The transfer of control of the Accounts, referred to in
the first paragraph of this letter, shall become effective upon
delivery to you of a notice (the "Notice of Effectiveness") in
substantially the form attached hereto as Annex "1".
Very truly yours,
[Name of Designated Seller]
By: __________________________________
Title: _______________________________
Attention: ___________________________
Facsimile No.:
ACKNOWLEDGED AND AGREED:
[NAME OF LOCK-BOX BANK]
By:________________________
Title:_____________________
Date:______________________
[Address]
Attention:_________________
Facsimile No.:_____________
ANNEX 1
TO LOCK-BOX AGREEMENT
[FORM OF NOTICE OF EFFECTIVENESS]
DATED: ________, 199_
TO: [Name of Lock-Box Bank]
[Address]
ATTN: ______________________
Re: Lock-Box Account No[s]._______
Ladies and Gentlemen:
We hereby give you notice that the transfer of control
of the above-referenced Lock-Box Account[s], as described in our
letter agreement with you dated _______, 199_ is effective as of
the date hereof. You are hereby instructed to comply immediately
with the instructions set forth in that letter.
Very truly yours,
[Name of Designated Seller]
By:_____________________________
Title:__________________________
ACKNOWLEDGED AND AGREED:
[NAME OF LOCK-BOX BANK]
By:________________________
Title:_____________________
Date:______________________
[Address]
Attention:_________________
Facsimile No.:_____________
Exhibit E
----------
Form of Investor Report
Exhibit F
---------
[Transfer Certificate]
TRANSFER CERTIFICATE
Reference is made to the Transfer and Administration
Agreement dated as of January 15, 1997 (the "Agreement") among
Proffitt's Credit Corporation, as transferor (in such capacity, the
"Transferor"), McRae's, Inc., as servicer (in such capacity, the
"Servicer"), Proffitt's, Inc., Enterprise Funding Corporation (the
"Company"), NationsBank, N.A., as Agent, and certain financial
institutions from time to time a party thereto as Bank Investors.
Terms defined in the Agreement are used herein as therein defined.
The Transferor hereby conveys, transfers and assigns to
the Agent, on behalf of the Company and/or the Bank Investors, as
applicable, an undivided ownership interest in the Affected Assets
(each, an "Incremental Transfer"). Each Incremental Transfer by
the Transferor to the Agent and each reduction or increase in the
Net Investment in respect of each Incremental Transfer evidenced
hereby shall be indicated by the Agent on the grid attached hereto
which is part of this Transfer Certificate.
If, notwithstanding the foregoing, the transactions
contemplated hereby should be deemed a financing, the parties
intend that the Transferor shall be deemed to have granted to the
Agent, on behalf of the Company and the Bank Investors, and the
Transferor hereby grants to the Agent, on behalf of the Company and
the Bank Investors, a security interest in all of the Transferor's
right, title and interest in, to and under the Receivables,
together with Related Security, Collections and Proceeds with
respect thereto, and together with all of the Transferor's rights
under the Receivables Purchase Agreements with respect to the Re-
ceivables and with respect to any obligations thereunder of any
Designated Seller with respect to the Receivables, and that this
Agreement shall constitute a security agreement under applicable
law.
This Transfer Certificate is made without recourse except
as otherwise provided in the Agreement.
This Transfer Certificate shall be governed by, and
construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this
Transfer Certificate to be duly executed and delivered by its duly
authorized officer as of the date first above written.
Proffitt's Credit Corporation
By
Name:
Title:
GRID
Net Investment
Date of Amount of (Giving Effect
Incremental Incremental to Incremental
Transfer Transfer Transfer
----------- ----------- ------------
Exhibit G
---------
Form of Assignment and Assumption Agreement
Reference is made to the Transfer and Administration
Agreement dated as of January 15, 1997, as it may be amended or
modified from time to time (as so modified and amended, the "Agree-
ment") among Proffitt's Credit Corporation, as transferor (in such
capacity, the "Transferor"), McRae's, Inc., as servicer (in such
capacity, the "Servicer"), Proffitt's, Inc., Enterprise Funding
Corporation (the "Company"), NationsBank, N.A., as agent, and
certain financial institutions from time to time a party thereto
as Bank Investors. Terms defined in the Agreement are used herein
with the same meaning.
___________________ (the "Assignor") and
_____________________ (the "Assignee") agree as follows:
(a) The Assignor hereby sells and
assigns to the Assignee, and the Assignee hereby purchases and
assumes from the Assignor, a percentage interest in and to all
rights and obligations of the Bank Investors (including, without
limitation, such percentage interest in the Commitment) as of the
Effective Date (as such term is hereinafter defined) under the
Agreement equal to the percentage equivalent of a fraction the
numerator of which is $________ and the denominator of which is the
Facility Limit.
(b) In consideration of the payment
of $___________, being ___% of the existing Net Investment, and of
$___________, being ___% of the aggregate unpaid accrued Carrying
Costs payable to the Assignor, receipt of which payment is hereby
acknowledged, the Assignor hereby assigns to the Agent for the
account of the Assignee, and the Assignee hereby purchases from the
Assignor, a ___% interest in and to all of the Assignor's right,
title and interest in and to the Net Investment purchased by the
undersigned on _______________, 19__ under the Agreement.
(c) The Assignor (i) represents and
warrants that it is the legal and beneficial owner of the interest
being assigned by it hereunder and that such interest is free and
clear of any Lien created by it; (ii) makes no representation or
warranty and assumes no responsibility with respect to any state-
ments, warranties or representations made in or in connection with
the Agreement or any other instrument or document furnished
pursuant thereto or the execution, legality, validity, enforce-
ability, genuineness, sufficiency or value of the Agreement or the
Certificates, or any other instrument or document furnished
pursuant thereto; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition
of either the Transferor or the Designated Seller or the
performance or observance by either the Transferor or the
Designated Seller of any of its obligations under the Agreement,
the Certificate, or any instrument or document furnished pursuant
thereto.
(d) The Assignee (i) confirms that
it has received a copy of the Agreement, each Receivables Purchase
Agreement, the Certificate and the Fee Letter, together with copies
of the financial statements referred to in Section 5.1 of the
Agreement, to the extent delivered through the date of this Agree-
ment, and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter
into this Assignment and purchase such interest in the Assignor's
rights and obligations under the Agreement; (ii) agrees that it
will, independently and without reliance upon the Agent, any of its
Affiliates, the Assignor or any other Investor and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking
action under the Agreement, the Receivables Purchase Agreements,
the Certificate and the Fee Letter; (iii) appoints and authorizes
the Agent to take such action as agent on its behalf and to exer-
cise such power under the Agreement, the Receivables Purchase
Agreements, the Certificate and the Fee Letter as are delegated to
the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (iv) appoints the Agent to enforce
its respective rights and interests in and under the Affected
Assets in accordance with Section 10.7 of the Agreement; (v) agrees
that it will perform in accordance with their terms all of the
obligations which by the terms of the Agreement are required to be
performed by it as a Bank Investor; and (vi) specifies as its
address for notices and its account for payments the office and
account set forth beneath its name on the signature pages hereof[;
and (vii) attaches the forms prescribed by the Internal Revenue
Service of the United States of America certifying as to the
Assignee's status for purposes of determining exemption from United
States withholding taxes with respect to all payments to be made
to the Assignee under the Agreement or such other documents as are
necessary to indicate that all such payments are subject to such
rates at a rate reduced by an applicable tax treaty].1
(e) The effective date for this
Assignment shall be the later of (i) the date on which the Agent
receives this Assignment executed by the parties hereto, and re-
ceives and agrees to the consent of the Transferor executed in
substantially the form of Annex 1 hereto (the "Consent"), and (ii)
the date of this Assignment (the "Effective Date"). Following the
execution of this Assignment, this Assignment and such Consent will
be delivered to the Agent for acceptance and, with respect to the
Assignment, recording by the Agent.
(f) Upon such acceptance and
recording, as of the Effective Date, (i) the Assignee shall be a
party to the Agreement and, to the extent provided in this Assign-
ment, have the rights and obligations of a Bank Investor thereunder
and (ii) the Assignor shall, to the extent provided in this Assign-
ment, relinquish its rights and be released from its obligations
under the Agreement.
(g) Upon such acceptance and
recording, from and after the Effective Date, the Agent shall make
all payments under the Agreement in respect of the interest
assigned hereby (including, without limitation, all payments in
respect of such interest in Net Investment, Carrying Costs and
fees) to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments under the Agreement for periods
prior to the Effective Date directly between themselves.
(h) This Assignment shall be
governed by, and construed in accordance with, the laws of the
State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment to be executed by their respective officers thereunto
duly authorized as of the ____ day of _________, ___.
[NAME OF ASSIGNOR]
By:
Name:
Title:
[NAME OF ASSIGNEE]
By:
Name:
Title:
Address for notices and Account for payments:
[Address]
[Account]
Accepted this _____ day
of _______, ____
NATIONSBANK, N.A.,
as Agent
By: ________________________
Name:
Title:
_______________________________
1If the Assignee is organized under the laws of a jursidication
outside the United States.
Exhibit H
---------
List of Actions and Suits
None
Exhibit I
---------
Location of Records
1. 300 South Fourth Street
Suite 1100
Las Vegas, Nevada 89101
2. 3455 Highway 80 West
Jackson, Mississippi 39209
Exhibit J
---------
List of Subsidiaries, Divisions and Tradenames
None
Exhibit K
---------
[Form of Transferor's Counsel Opinion]
[Letterhead of Counsel for the Transferor]
January __, 1997
Enterprise Funding Corporation
c/o Merrill Lynch Money Markets Inc.
Merrill Lynch World Headquarters
World Financial Center--South Tower
225 Liberty Street--8th Floor
New York, New York 10080
NationsBank, N.A.
as Agent
100 North Tryon Street
Charlotte, North Carolina 28255
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section
4.1(o) of the Transfer and Administration Agreement dated as of
January 15, 1997 (the "Agreement") among Proffitt's Credit
Corporation, a Nevada corporation (the "Transferor"), McRae's,
Inc., a Mississippi corporation, as a designated seller and as ser-
vicer (the "Servicer"), Proffitt's, Inc., a Tennessee corporation,
individually, as servicer guarantor and as a designated seller (in
such capacity, a "Designated Seller", and together with McRae's,
Inc., the "Designated Sellers"), Enterprise Funding Corporation,
a Delaware corporation (the "Company"), NationsBank, N.A., a
national banking association ("NationsBank") as Agent and as a Bank
Investor, and certain financial institutions from time to time a
party thereto as Bank Investors. Terms defined in the Agreement
and not otherwise defined herein are used in this opinion with the
meanings so defined.
We have acted as counsel to the Designated Sellers, the
Servicer, the Servicer Guarantor and the Transferor in connection
with the preparation of the Agreement, the Receivables Purchase
Agreements, the other Transaction Documents and the transactions
contemplated thereby.
We have examined, on the date hereof, the Agreement and
all Exhibits thereto, each of the Receivables Purchase Agreements
and all Exhibits thereto, the Certificate and the Transfer Certifi-
cate delivered under the Agreement, certificates of public offi-
cials and of officers of the Transferor and the Designated Sellers
and certified copies of the Designated Sellers' and the
Transferor's certificates of incorporation, by-laws, resolutions
of the respective Boards of Directors authorizing the Designated
Sellers' and the Transferor's participation in the transactions
contemplated by the Agreement and the Receivables Purchase
Agreements (copies of each of the above having been delivered to
you), copies of the financing statements on Form UCC-1 filed in the
filing offices listed on Schedule I hereto executed by each
Designated Seller, as debtor, in favor of the Transferor, as
secured party, and showing thereon the Agent, on behalf of the Bank
Investors and the Company, as the assignee of the secured party,
substantially in the form attached hereto as Exhibit A (the
"Designated Sellers' Financing Statements") and copies of the fi-
nancing statements on Form UCC-1 filed in the filing offices listed
on Schedule II hereto executed by Transferor, as debtor, in favor
of the Agent, on behalf of the Bank Investors and the Company, as
secured party, substantially in the form attached hereto as Exhibit
B (the "Transferor Financing Statements"). We have also examined
the closing documents delivered pursuant to the Agreement and the
Receivables Purchase Agreements and copies of all such documents
and records, and have made such investigations of law, as we have
deemed necessary and relevant as a basis for our opinion. With
respect to the accuracy of material factual matters which were not
independently established, we have relied on certificates and
statements of officers of the Designated Sellers and the Trans-
feror.
On the basis of the foregoing, we are of the opinion
that:
1. The Transferor is a corporation duly incorporated,
validly existing and in good standing under the laws of Nevada, has
the corporate power and authority to own its properties and to
carry on its business as now being conducted, and had at all
relevant times, and now has, all necessary power, authority, and
legal right to acquire and own the Receivables, and is duly
qualified and in good standing as a foreign corporation and is
authorized to do business in each jurisdiction in which the
character of its properties or the nature of its business requires
such qualification or authorization, except for qualifications and
authorizations the lack of which, singly or in the aggregate, has
not had and will not have a materially adverse affect upon the
business properties of the Transferor or its ability to perform its
obligations under the Transaction Documents.
2. Each of the Designated Sellers is a corporation duly
incorporated, validly existing and in good standing under the laws
of its governing jurisdiction, has the corporate power and authori-
ty to own its properties and to carry on its business as now being
conducted, and had at all relevant times, and now has, all
necessary power, authority, and legal right to acquire and own the
Receivables, and is duly qualified and in good standing as a
foreign corporation and is authorized to do business in each
jurisdiction in which the character of its properties or the nature
of its business requires such qualification or authorization,
except for qualifications and authorizations the lack of which,
singly or in the aggregate, has not had and will not have a
materially adverse affect upon the business properties of the
Transferor or its ability to perform its obligations under the
Transaction Documents.
3. The Transferor has the power, corporate and other,
and has taken all necessary corporate action to execute, deliver
and perform the Agreement and the other Transaction Documents, each
in accordance with its respective terms, and to consummate the
transactions contemplated thereby. The Transaction Documents to
which the Transferor is a party have been duly executed and deliv-
ered by the Transferor and when duly executed and delivered will
constitute the legal, valid and binding obligations of the
Transferor enforceable against the Transferor in accordance with
their terms, except as enforcement thereof may be limited by
bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles.
4. Each of the Designated Sellers has the power, corpo-
rate and other, and has taken all necessary corporate action to
execute, deliver and perform the Receivables Purchase Agreement to
which it is a party and each other Transaction Document to which
it is a party, each in accordance with its respective terms, and
to consummate the transactions contemplated thereby. Each Transac-
tion Document to which a Designated Seller is a party has been duly
executed and delivered by such Designated Seller and when duly exe-
cuted and delivered will constitute the legal, valid and binding
obligation of such Designated Seller enforceable against such
Designated Seller in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency and
other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles.
5. The execution, delivery and performance in accordance
with their terms by the Transferor of the Agreement and the other
Transaction Documents and the consummation of the transactions con-
templated thereby, do not and will not (i) require (a) any govern-
mental approval or (b) any consent or approval of any stockholder
of the Transferor that has not been obtained, (ii) violate or con-
flict with, result in a breach of, or constitute a default under
(a) the certificate of incorporation or the by-laws of the Trans-
feror, (b) any other agreement to which the Transferor is a party
or by which the Transferor or any of its properties may be bound,
or (c) any applicable law, or any order, rule, or regulation appli-
cable to the Transferor of any court or of any federal or state
regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Transferor or any of
its properties, or (iii) result in or require the creation or
imposition of any Lien upon any of the assets, property or revenue
of the Transferor other than as contemplated by the Agreement.
6. The execution, delivery and performance in accordance
with their terms by each Designated Seller of the Receivables
Purchase Agreements and the other Transaction Documents to which
it is a party and the consummation of the transactions contemplated
thereby do not and will not (i) require (a) any governmental
approval or (b) any consent or approval of any stockholder of such
Designated Seller that has not been obtained, (ii) violate or con-
flict with, result in a breach of, or constitute a default under
(a) the certificate of incorporation or the by-laws of such
Designated Seller, (b) any other agreement to which such Designated
Seller is a party or by which such Designated Seller or any of its
properties may be bound, or (c) any applicable law, or any order,
rule, or regulation applicable to such Designated Seller of any
court or of any federal or state regulatory body, administrative
agency, or other governmental instrumentality having jurisdiction
over such Designated Seller or any of its properties, or (iii)
result in or require the creation or imposition of any Lien upon
any of the assets, property or revenue of such Designated Seller
other than as contemplated by the Receivables Purchase Agreement.
7. Except as set forth in the schedule attached hereto,
there are not, in any court or before any arbitrator of any kind
or before or by any governmental or non-governmental body, any ac-
tions, suits, proceedings or investigations, pending or to the best
of our knowledge after due inquiry, threatened (i) against the
Transferor or the business or any property of the Transferor except
actions, suits or proceedings that, if adversely determined, would
not, singly or in the aggregate, have a Material Adverse Effect or
(ii) relating to the Agreement or any other Transaction Document.
8. Except as set forth in the schedule attached hereto,
there are not, in any court or before any arbitrator of any kind
or before or by any governmental or non-governmental body, any ac-
tions, suits, proceedings or investigations, pending, or to the
best of our knowledge after due inquiry, threatened (i) against the
Designated Sellers or the business or any property of the
Designated Sellers except actions, suits or proceedings that, if
adversely determined, would not, singly or in the aggregate, have
a Material Adverse Effect or (ii) relating to the Receivables
Purchase Agreement, or any other Transaction Document.
9. The Receivables constitute ["accounts"] ["general
intangibles"]["chattel paper"] as [that][such] term[s] [is][are]
defined in the Uniform Commercial Code as in effect in [XYZ].
10. Each Receivables Purchase Agreement creates a valid
"security interest" (as that term is defined in Section 1-201(37)
of the Uniform Commercial Code (including the conflict of laws
rules thereof) as in effect in each applicable jurisdiction (the
"UCC"), including New York (the "New York UCC") and _______ (the
"XYZ UCC"), under Article 9 of the New York UCC ("Security Inter-
est") in favor of the Transferor in the Receivables conveyed
thereby and in the proceeds thereof (except that the Security
Interest will attach to any Receivable created after the date
hereof only when the applicable Designated Seller possesses rights
in such Receivable). The internal laws of XYZ govern the per-
fection by the filing of financing statements of the Transferor's
Security Interest in the Receivables and the proceeds thereof. The
Designated Sellers' Financing Statements have been filed in the
filing office(s) located in XYZ listed on Schedule I hereto, which
[is] [are] the only office(s) in which filings are required under
the XYZ UCC to perfect the Transferor's Security Interest in the
Receivables and the proceeds thereof, and accordingly the
Transferor's Security Interest will, on the date of the initial
transfer under each of the Receivables Purchase Agreements, be
perfected under Article 9 of the XYZ UCC in each Receivable
conveyed thereby and in the proceeds thereof. All filing fees and
all taxes required to be paid as a condition to or upon the filing
of the Designated Sellers' Financing Statements in XYZ have been
paid in full. As of the date hereof, there were no (i) UCC
financing statements naming a Designated Seller as debtor, seller
or assignor and covering any Receivables or any interest therein
or (ii) notices of the filing of any federal tax lien (filed pursu-
ant to Section 6323 of the Internal Revenue Code) or lien of the
Pension Benefit Guaranty Corporation (filed pursuant to Section
4068 of the Employment Retirement Insurance Act) covering any
Receivable or any interest therein. The filing of the Designated
Sellers' Financing Statements in the filing offices listed on
Schedule I will create a first priority Security Interest in each
Receivable. Such perfection and priority will continue, provided
that appropriate continuation statements are timely filed where and
when required under the UCC.
11. The Agreement and the Transfer Certificate creates
a valid "security interest" (as that term is defined in Section 1-201(37)
of the Uniform Commercial Code (including the conflict of
laws rules thereof) as in effect in each applicable jurisdiction
(the "UCC"), including New York (the "New York UCC") and _______
(the "XYZ UCC"), under Article 9 of the New York UCC ("Security
Interest") in favor of the Company in each Receivable (except that
the Security Interest will attach only when the Transferor
possesses rights in such Receivable). The internal laws of XYZ
govern the perfection by the filing of financing statements of the
Company's Security Interest in the Receivables and the proceeds
thereof. The Transferor Financing Statement(s) have been filed in
the filing office(s) located in XYZ listed on Schedule II hereto,
which [is] [are] the only office(s) in which filings are required
under the XYZ UCC to perfect the Company's Security Interest in the
Receivables and the proceeds thereof, and accordingly the Company's
Security Interest in each Receivable and the proceeds thereof will,
on the date of the initial transfer under the Agreement, be
perfected under Article 9 of the XYZ UCC. All filing fees and all
taxes required to be paid as a condition to or upon the filing of
the Transferor Financing Statement(s) in XYZ have been paid in
full. As of the date hereof, there were no (i) UCC financing
statements naming the Transferor as debtor, seller or assignor and
covering any Receivables or any interest therein or (ii) notices
of the filing of any federal tax lien (filed pursuant to Section
6323 of the Internal Revenue Code) or lien of the Pension Benefit
Guaranty Corporation (filed pursuant to Section 4068 of the Em-
ployment Retirement Insurance Act) covering any Receivable or any
interest therein. The filing of the Transferor Financing State-
ment(s) in the filing offices listed on Schedule II will create a
first priority Security Interest in each Receivable. Such
perfection and priority will continue, provided that appropriate
continuation statements are timely filed where and when required
under the UCC.
In giving the opinions in paragraphs 10 and 11, we have
assumed that (1) the Designated Sellers' and the Transferor's chief
executive offices will continue to be located in XYZ, and (2) the
Designated Sellers and the Transferor have kept and will continue
to keep all of their respective records concerning Receivables
located only in XYZ. The conclusions expressed in paragraphs 10
and 11 are subject to the accuracy of the personnel in the filing
offices referred to above with regard to the filing, indexing and
recording of financing statements and notices of Liens, and to the
correctness of reports to us by ____________, who performed the
searches of such records and who made the filings on behalf of the
Designated Sellers and the Transferor in XYZ.
In giving the opinions set forth in paragraphs 10 and 11,
we have assumed that all filings as appropriate in the event of a
change in the name, identity or corporate structure of the debtor
(or seller or assignor) named in any financing statements and all
continuation statements necessary under the UCC to maintain the
perfection of the Transferor's Security Interest and the Company's
Security Interest in the Receivables and the proceeds thereof will
be duly and timely filed. In giving such opinions, we also do not
express any opinion as to (a) transactions excluded from Article
9 of the UCC by virtue of Section 9-104 of the UCC, (b) any
security interest in proceeds except to the extent that the valid-
ity and perfection of any interest in proceeds (as such term is
defined under the UCC) thereof that is covered by the Designated
Sellers' Financing Statements or the Transferor Financing
Statements or any duly filed financing statement referred to above
may be permitted by Section 9-306 of the UCC, and (c) any security
interest that is terminated or released.
The foregoing opinions and conclusions were given only
in respect of the laws of XYZ, the Uniform Commercial Code as in
effect on the date hereof in the State of New York and, to the
extent specifically referred to herein, the Federal laws of the
United States of America.
This opinion has been delivered at your request for the
purposes contemplated by the Agreement. Without our prior written
consent, this opinion is not to be utilized or quoted for any other
purpose and no one other than you is entitled to rely thereon;
provided, that any Bank Investor, Liquidity Provider, any Credit
Support Provider and any placement agent or dealer of the Company's
commercial paper may rely on this opinion as of it were addressed
to them.
Very truly yours,
Exhibit L-1
-----------
[FORM OF SECRETARY'S CERTIFICATE]
I, __________________, the undersigned Proffitt's Credit
Corporation of (the "Company"), a ________ corporation, DO HEREBY
CERTIFY that:
1. Attached hereto as Annex A is a true and complete
copy of the Certificate of Incorporation of the Company as in
effect on the date hereof.
2. Attached hereto as Annex B is a true and complete
copy of the By-laws of the Company as in effect on the date hereof.
3. Attached hereto as Annex C is a true and complete
copy of the resolutions duly adopted by the Board of Directors of
the Company [adopted by consent] as of _________________, 199_,
authorizing the execution, delivery and performance of each of the
documents mentioned therein, which resolutions have not been
revoked, modified, amended or rescinded and are still in full force
and effect.
4. The below-named persons have been duly qualified as
and at all times since ________________, 199_, to and including the
date hereof have been officers or representatives of the Company
holding the respective offices or positions below set opposite
their names and are authorized to execute on behalf of the Company
the below-mentioned Transfer and Administration Agreement and all
other Transaction Documents (as defined in such Transfer and
Administration Agreement) to which the Company is a party and the
signatures below set opposite their names are their genuine signa-
tures:
Name Office Signatures
[OFFICE]
[OFFICE]
5. The representations and warranties of the Company
contained in Section 3.1 of the Transfer and Administration
Agreement dated as of January 15, 1997 among the Company, McRae's,
Inc., Proffitt's, Inc., Enterprise Funding Corporation,
NationsBank, N.A. and certain financial institutions named therein
are true and correct as if made on the date hereof.
WITNESS my hand and seal of the Company as of this ____
day of January, 1997.
Secretary
I, the undersigned, Vice President of the Company, DO
HEREBY CERTIFY that _____________________ is the duly elected and
qualified Secretary of the Company and the signature above is -
his/her genuine signature.
WITNESS my hand as of this ____ day of January, 1997.
Vice President
Exhibit L-2
-----------
[FORM OF SECRETARY'S CERTIFICATE]
I, __________________, the undersigned ________________
of [Proffitt's, Inc.] [McRae's, Inc.] (the "Company"), a ________
corporation, DO HEREBY CERTIFY that:
1. Attached hereto as Annex A is a true and complete
copy of the Certificate of Incorporation of the Company as in
effect on the date hereof.
2. Attached hereto as Annex B is a true and complete
copy of the By-laws of the Company as in effect on the date hereof.
3. Attached hereto as Annex C is a true and complete
copy of the resolutions duly adopted by the Board of Directors of
the Company [adopted by consent] as of _________________, 199_,
authorizing the execution, delivery and performance of each of the
documents mentioned therein, which resolutions have not been
revoked, modified, amended or rescinded and are still in full force
and effect.
4. The below-named persons have been duly qualified as
and at all times since ________________, 199_, to and including the
date hereof have been officers or representatives of the Company
holding the respective offices or positions below set opposite
their names and are authorized to execute on behalf of the Company
the below-mentioned Transfer and Administration Agreement and all
other Transaction Documents (as defined in such Transfer and
Administration Agreement) to which the Company is a party and the
signatures below set opposite their names are their genuine signa-
tures:
Name Office Signatures
[OFFICE]
[OFFICE]
5. The representations and warranties of the Company
contained in Section 3.1 of the Transfer and Administration
Agreement dated as of January 15, 1997 among the Company,
[Proffitt's, Inc.] [McRae's, Inc.], Proffitt's Credit Corporation,
Enterprise Funding Corporation, NationsBank, N.A. and certain
financial institutions named therein are true and correct as if
made on the date hereof.
WITNESS my hand and seal of the Company as of this ____
day of January __, 1997.
Secretary
I, the undersigned, Vice President of the Company, DO
HEREBY CERTIFY that _____________________ is the duly elected and
qualified Secretary of the Company and the signature above is -
his/her genuine signature.
WITNESS my hand as of this ____ day of January, 1997.
Vice President
Exhibit M
----------
[Form of Certificate]
THIS CERTIFICATE OR ANY INTEREST HEREIN MAY NOT BE TRANSFERRED,
ASSIGNED, EXCHANGED OR CONVEYED EXCEPT IN ACCORDANCE WITH THE
TRANSFER AND ADMINISTRATION AGREEMENT REFERRED TO HEREIN. THIS
CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES
LAWS AND NO TRANSFER HEREOF MAY BE MADE EXCEPT IN ACCORDANCE WITH
THE SECURITIES ACT OF 1933, AS AMENDED AND ANY OTHER APPLICABLE
LAWS.
No. 1 One Unit
[Date]
Evidencing an undivided interest in a pool of accounts receivables
acquired from time to time in the ordinary course of business by
Proffitt's Credit Corporation (the "Transferor").
This Certificate does not evidence an interest in or obligation of
Proffitt's Credit Corporation.
This certifies that NATIONSBANK, N.A., on behalf of and
as agent for Enterprise Funding Corporation and the Bank Investors
(as defined in the Agreement), as their respective interests may
appear from time to time, is the registered owner of a fractional
undivided interest in a pool of accounts receivables pursuant to
a Transfer and Administration Agreement among the Transferor,
Proffitt's, Inc., McRae's, Inc., Enterprise Funding Corporation,
NationsBank, N.A. and certain financial institutions named therein,
dated as of January 15, 1997 (the "Agreement"). The Receivables
consist of all accounts receivables generated under the Accounts
from time to time hereafter, all monies due or to become due in
payment of the Receivables and the other assets and interests as
provided in the Agreement.
To the extent not defined herein, capitalized terms used
herein have the meanings assigned to such terms in the Agreement.
This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement, as
amended from time to time, the holder hereof by virtue of the
acceptance hereof assents and by which the holder hereof is bound.
In the event of any inconsistency or conflict between the terms of
this Certificate and the terms of the Agreement, the terms of the
Agreement shall control.
This Certificate represents a fractional undivided inter-
est in the Receivables, including the right to receive Collections
and other amounts at the times and in the amounts specified in the
Agreement. The aggregate interest in the Receivables represented
by this Certificate at any time shall equal the Buyers' Percentage
Factor as determined in accordance with the Agreement.
IN WITNESS WHEREOF, the Transferor has caused this Cer-
tificate to be duly executed.
Proffitt's Credit Corporation
By:
Name:
Title:
Exhibit N
----------
Financial Covenant Definitions
"Acquisition" shall mean, the acquisition of (i) a con-
trolling equity interest in another Person (including the purchase
of an option, warrant or convertible or similar type security to
acquire such a controlling interest at the time it becomes
exercisable by the holder thereof), whether by purchase of such
equity interest or upon exercise of an option or warrant for, or
conversion of securities into, such equity interest, or (ii) assets
of another Person which constitute all or substantially all of the
assets of such Person or all or substantially all of a line or line
of business conducted by or a division of such Person.
"Agent" shall mean, for the purpose of these financial
covenant definitions, NationsBank of Texas, National Association,
a national banking association, in its capacity as agent for the
Lenders.
"Applicable Commitment Percentage" shall mean at any time
for each Lender with respect to the Revolving Credit Facility
(including its Participations and its obligations under the Credit
Facilities Agreement to NationsBank of Texas, National Association
to acquire Participations), a fraction (expressed as a percentage),
(A) the numerator of which shall be the amount of such Lender's
Revolving Credit Commitment at such date of determination (which
Revolving Credit Commitment for each Lender as of the Closing Date
is set forth in Exhibit A attached hereto and incorporated herein
by reference), and (B) the denominator of which shall be the Total
Revolving Credit Commitment at such date of determination provided
that each Applicable Commitment Percentage of each Lender shall be
increased or decreased to reflect any assignments to or by such
Lender effected in accordance with Section 11.01 of the Credit
Facilities Agreement.
"Borrower" shall mean, for the purpose of these financial
covenant definitions, Proffitt's, Inc., having a principal place
of business in Jackson, Mississippi.
"Borrowing Base" means, at any time of determination, an
amount determined pursuant to the following formula:
Borrowing
Base = Borrowing Base Factor multiplied by
(Eligible Inventory - Commercial L/Cs)
"Borrowing Base Factor" means 60% through the end of the
Borrower's fiscal year 1996 and 55% thereafter.
"Capital Leases" means all leases which have been or
should be capitalized in accordance with GAAP as in effect from
time to time including Statement No. 13 of the Financial Accounting
Standards Board and any successor thereof.
"Closing Date" means the date as of which the Credit
Facilities Agreement was executed by the Borrower, the Lenders and
the Agent and on which the conditions set forth in Section 5.01
thereof were satisfied.
"Commercial L/Cs" means, at any date of determination,
the aggregated stated amount of outstanding commercial or
documentary letters of credit issued for the benefit of any Person
and for the account of the Borrower or any Subsidiary to the extent
that such letters of credit were issued in connection with the pur-
chase of inventory by the Borrower or such Subsidiary and such
inventory is determined to be an asset thereof and included as such
on its books and records.
"Common Stock" means the common stock, par value $.10 per
share, of the Servicer.
"Consistent Basis" in reference to the application of
GAAP means the accounting principles observed in the period
referred to are comparable in all material respects to those
applied in the preparation of the audited financial statements of
the Borrower referred to in Section 6.01(f)(i) of the Credit
Facilities Agreement and the audited financial statements of the
Servicer, Proffitt's and each other Person referred to in Section
5.1(a) of the Agreement.
"Consolidated Capitalization" means, at any time at which
the amount thereof is to be determined, the sum of Consolidated
Funded Indebtedness plus Consolidated Shareholders' Equity.
"Consolidated EBITDA" means, with respect to Proffitt's
and its Subsidiaries for any period of computation thereof, the sum
of, without duplication, (i) Consolidated Net Income, plus (ii)
Consolidated Interest Expense, plus (iii) taxes on income, plus
(iv) amortization, plus (v) depreciation, all determined on a
consolidated basis in accordance with GAAP applied on a Consistent
Basis; provided however, at all times until a Four-Quarter Period
wholly occurs after the Closing Date, Consolidated EBITDA shall be
calculated giving pro forma effect to the Parisian Acquisition for
the Four-Quarter Period ending on or most recently prior to the
date of computation; provided further, that certain one-time
extraordinary charges incurred by Proffitt's as a result of the
Parisian Acquisition and the Acquisition by Proffitt's of all the
capital stock of Younkers, Inc. pursuant to that certain Agreement
and Plan of Merger among Proffitt's, Baltic Merger Corporation and
Younkers, Inc. dated as of October 22, 1995 shall be excluded from
the computation of Consolidated EBITDA.
"Consolidated Financing Charges" means those charges owed
and allocated to third parties with respect to accounts receivable
securitizations transacted in the ordinary course of business and
consistent with past practice.
"Consolidated Fixed Charge Ratio" means, with respect to
Proffitt's and its Subsidiaries for the Four-Quarter Period ending
on the date of computation thereof, the ratio of (a) Consolidated
EBITDA plus Consolidated Financing Charges plus, to the extent
deducted in arriving at Consolidated EBITDA, lease, rental and all
other payments made in respect of or in connection with operating
leases, to (b) Consolidated Fixed Charges during such Four-Quarter
Period.
"Consolidated Fixed Charges" means, with respect to
Proffitt's and its Subsidiaries, for the periods indicated, the sum
of, without duplication, (i) Consolidated Interest Expense, plus
(ii) to the extent deducted in arriving at Consolidated EBITDA,
lease, rental and all other payments made in respect of or in
connection with operating leases, plus (iii) current maturities of
Consolidated Funded Indebtedness, plus (iv) all dividends and other
distributions (other than distributions in the form of any stock
(including without limitation capital stock of the Proffitt's),
security, note or other instrument) paid during such period
(regardless of when declared) on any shares of capital stock of
Proffitt's then outstanding, including without limitation its
Common Stock and its preferred stock, plus (v) Consolidated
Financing Charges, all determined on a consolidated basis in accor-
dance with GAAP applied on a Consistent Basis.
"Consolidated Funded Indebtedness" means, at any time as
of which the amount thereof is to be determined, all indebtedness
in respect of money borrowed of Proffitt's and its Subsidiaries,
including without limitation all Capital Leases and the deferred
purchase price of any property or asset, evidenced by a promissory
note, bond or similar written obligation for the payment of money
(including, but not limited to, conditional sales or similar title
retention agreements and all current maturities and borrowings
under short term loans) plus the face amount of all issued and
outstanding standby letters of credit and all obligations (to the
extent not duplicative) arising under such letters of credit, all
determined on a consolidated basis in accordance with GAAP applied
on a Consistent Basis.
"Consolidated Interest Expense" means, with respect to
any period of computation thereof, the gross interest expense of
Proffitt's and its Subsidiaries, including without limitation (i)
the amortization of debt discounts, (ii) the amortization of all
fees (including, without limitation, fees payable in respect of a
Swap Agreement) payable in connection with the incurrence of
Indebtedness to the extent included in interest expense and (iii)
the portion of all payments made in connection with Capital Leases
allocable to interest expense, all determined on a consolidated
basis in accordance with GAAP applied on a Consistent Basis.
"Consolidated Net Income" means, for any period of
computation thereof, the gross revenues from operations of
Proffitt's and its Subsidiaries (including interest income from
investments), less all operating and non-operating expenses of
Proffitt's and its Subsidiaries including taxes on income, all
determined on a consolidated basis in accordance with GAAP applied
on a Consistent Basis; but excluding as income: (i) net gains on
the sale, conversion or other disposition of capital assets, net
gains on the acquisition, retirement, sale or other disposition of
capital stock and other securities of Proffitt's or its Subsid-
iaries, and net gains on the collection of proceeds of life
insurance policies, which net gains in the aggregate during any
Four-Quarter Period exceed $200,000, (ii) any write-up of any
asset, and (iii) any other net gain or credit of an extraordinary
nature, all determined in accordance with GAAP applied on a
Consistent Basis.
"Consolidated Shareholders' Equity" means at any time as
of which the amount thereof is to be determined, the sum of the
following in respect of Proffitt's and its Subsidiaries (determined
on a consolidated basis and excluding intercompany items among
Proffitt's and its Subsidiaries and any upward adjustment after the
Closing Date due to revaluation of assets): (i) the amount of
issued and outstanding share capital, plus (ii) the amount of addi-
tional paid-in capital and retained income (or, in the case of a
deficit, minus the amount of such deficit), plus (iii) the amount
of any foreign currency translation adjustment (if positive, of,
if negative, minus the amount of such translation adjustment) minus
(iv) the book value of any treasury stock and the book value of any
stock subscription receivables, all as determined in accordance
with GAAP applied on a Consistent Basis.
"Consolidated Senior Indebtedness" means at any time as
of which the amount thereof is to be determined, the difference of
all Consolidated Funded Indebtedness then outstanding, including
without limitation any Loans, minus the aggregate principal amount
of any Consolidated Funded Indebtedness then outstanding
subordinate in terms acceptable to the Agent and the Required
Lenders of payment and available remedy to the Loans and the terms
and conditions set forth herein, including without limitation
Consolidated Subordinated Debt.
"Consolidated Subordinated Debt" means at any time as of
which the amount thereof is to be determined, the sum of the
following in respect of Proffitt's and its Subsidiaries determined
on a consolidated basis: (i) the Convertible Subordinated
Debentures, (ii) the Junior Subordinated Debentures, (iii) the
Parisian Senior Subordinated Notes and (iv) all other Consolidated
Funded Indebtedness which is by its terms subordinate in all
respects to the Loans as required by, and in substance acceptable
to, the Agent.
"Contingent Obligation" of any Person means (i) all
contingent liabilities required (or which, upon the creation or
incurring thereof, would be required) to be included in the
consolidated financial statements (including footnotes) of such
Person in accordance with GAAP applied on a Consistent Basis,
including Statement No. 5 of the Financial Accounting Standards
Board, (ii) all reimbursement obligations of such Person with
respect to any letter of credit and all obligations of such Person
guaranteeing or in effect guaranteeing any Indebtedness, dividend
or other obligation of any other Person (the "primary obligor") in
any manner, whether directly or indirectly, including obligations
of such Person however incurred:
(i) to purchase such Indebtedness or other
obligation or any property or assets constituting
security therefor;
(ii) to advance or supply funds in any manner (i)
for the purchase or payment of such Indebtedness or
other obligation, or (ii) to maintain a minimum working
capital, net worth or other balance sheet condition or
any income statement condition of the primary obligor;
(iii) to grant or convey any lien, security
interest, pledge, charge or other encumbrance on any
property or assets of such Person to secure payment of
such Indebtedness or other obligation;
(iv) to lease property or to purchase securities or
other property or services primarily for the purpose of
assuring the owner or holder of such Indebtedness or
obligation of the ability of the primary obligor to make
payment of such Indebtedness or other obligation; or
(v) otherwise to assure the owner of the
Indebtedness or such obligation of the primary obligor
against loss in respect thereof;
with respect to Contingent Obligations (such as litigation,
guarantees and pension plan liabilities), such liabilities shall
be computed at the amount which, in light of all the facts and
circumstances existing at the time, represent the present value of
the amount which can reasonably be expected to become an actual or
matured liability.
"Convertible Subordinated Debentures" means the 4 3/4%
Convertible Subordinated Debentures Due 2003 of Proffitt's in the
aggregate principal amount of $86,250,000 issued pursuant to that
certain Indenture dated as of October 26, 1993, between Proffitt's
and Union Planters National Bank, as trustee (the "Convertible
Subordinated Debentures Indenture").
"Credit Facilities Agreement" shall mean that certain
Credit Facilities and Reimbursement Agreement, dated as of October
11, 1996, among Proffitt's, Inc., as Borrower, each Lender party
thereto and NationsBank of Texas, National Association, in its
capacity as Agent for the Lenders, as amended and modified up to
January 15, 1996.
"Four-Quarter Period" means a period of four full
consecutive quarter annual periods, taken together as one
accounting period, and in the event any such quarter annual period
occurs prior to the effective date of the Parisian Acquisition, or
is the period in which such effective date occurs (each a "Pre-Acquisition
Period"), all financial statements, data, computations
and determinations for such Four-Quarter Period shall be made on
a pro forma basis for each Pre-Acquisition Period giving effect to
the Parisian Acquisition for all prior periods.
"Indebtedness" means with respect to any Person, without
duplication, all Indebtedness for Money Borrowed, all indebtedness
of such Person for the acquisition of property, all indebtedness
secured by any Lien on the property of such Person whether or not
such indebtedness is assumed, all liability of such Person by way
of endorsements (other than for collection or deposit in the
ordinary course of business), all Contingent Obligations, all Rate
Hedging Obligations, that portion of obligations with respect to
Capital Leases and other items which in accordance with GAAP is
classified as a liability on a balance sheet; but excluding all
accounts payable and accruals, in each case in the ordinary course
of business and only so long as payment therefor is due within one
year; provided that in no event shall the term Indebtedness include
surplus and retained earnings, minority interest in Subsidiaries,
lease obligations (other than pursuant to Capital Leases), reserves
for deferred income taxes and investment credits, other deferred
credits and reserves, and deferred compensation obligations.
"Junior Subordinated Debentures" means the 7.5% Junior
Subordinated Debentures Due March 31, 2004 of Proffitt's issued in
the original aggregate principal amount of $17,500,000.
"Lender" shall mean each lender having executed and
delivered a signature page to the Credit Facilities Agreement or
an instrument of assignment with respect to the Credit Facilities
Agreement pursuant to Section 11.01 thereof on or prior to January
15, 1997.
"Letter of Credit" means a standby letter of credit
issued by NationsBank of Texas, National Association, for the
account of the Borrower in favor of a Person advancing credit or
securing an obligation on behalf of the Borrower.
"Lien" means any interest in property securing any
obligation owed to, or a claim by, a Person other than the owner
of the property, whether such interest is based on the common law,
statue or contract, and including but not limited to the lien or
security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. For the purposes
of the Credit Facilities Agreement and these financial covenants,
the Borrower and its Subsidiaries shall be deemed to be the owners
of any property which either of them have acquired or hold subject
to a conditional sale agreement, financing lease, or other arrange-
ment pursuant to which title to the property has been retained by
or vested in some other Person for security purposes.
"Loan" or "Loans" means any of the Revolving Credit Loans
or Swing Line Loans.
"Outstanding Letters of Credit" means all undrawn amounts
of Letters of Credit plus all Reimbursement Obligations.
"Parisian" means Parisian, Inc., an Alabama corporation,
acquired as part of the Parisian Acquisition and thereafter a
Subsidiary.
"Parisian Acquisition" means the Acquisition by
Proffitt's of Parisian wherein each issued and outstanding share
of Parisian's common shares will be converted into cash and shares
of the common stock of Proffitt's, substantially in accordance with
the terms and conditions of the Purchase Agreement.
"Parisian Senior Subordinated Notes" means the 9.875%
Senior Subordinated Notes Due 2003 of Parisian in the aggregate
principal amount of $125,000,000 issued pursuant to the Parisian
Indenture.
"Participation" means, with respect to any Lender other
than NationsBank of Texas, N.A., the extension of credit
represented by a participation of such Lender under the Credit
Facilities Agreement in the liability of NationsBank of Texas,
N.A., in respect of a Swing Line Loan made or Letter of Credit
issued by NationsBank of Texas, N.A. in accordance with the terms
of the Credit Facilities Agreement.
"Person" means an individual, partnership, limited
partnership, corporation, limited liability corporation, trust,
unincorporated organization, association, joint venture or a
government or agency or political subdivision thereof.
"Purchase Agreement" means that certain Agreement and
Plan of Merger by and among Parisian, Casablanca Merger Corp., an
Alabama corporation and wholly owned subsidiary of the Borrower,
and the Borrower dated as of July 8, 1996 setting forth the terms
and conditions of the Parisian Acquisition.
"Rate Hedging Obligations" means any and all obligations
of the Borrower, whether absolute or contingent and howsoever and
whensoever created, arising, evidenced or acquired (including all
renewals, extensions and modifications thereof and substitutions
therefor), under (a) any and all agreements, devices or
arrangements designed to protect at least one of the parties
thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or
exchange transactions, including, but not limited to, U.S. dollar-denominated
or cross-currency interest rate exchange agreements,
forward currency exchange agreements, interest rate cap or collar
protection agreements, forward rate currency or interest rate
options, puts, warrants and those commonly known as interest rate
"swap" agreements; and (b) any and all cancellations, buybacks,
reversals, terminations or assignments of any of the foregoing.
"Required Lenders" means, as of any date, Lenders on such
date having Credit Exposure (as defined below) aggregating at least
51% of the aggregate Credit Exposure of all the Lenders on such
date. For purposes of the preceding sentence, the amount of the
"Credit Exposure" of each Lender shall be equal at all times (i)
other than following the occurrence and during the continuance of
an Event of Default (as defined in the Credit Facilities
Agreement), to its Revolving Credit Commitment, and (ii) following
the occurrence and during the continuance of an Event of Default
(as defined in the Credit Facilities Agreement), to the aggregate
principal amount of Revolving Credit Loans owing to such Lender
plus the amount of such Lender's Applicable Commitment Percentage
of Swing Line Outstanding and Outstanding Letters of Credit;
provided that, if any Lender shall have failed to pay to
NationsBank of Texas, National Association, its Applicable Commit-
ment Percentage of any Swing Line Loan or drawing under any Letter
of Credit resulting in an outstanding Reimbursement Obligation,
such Lender's Credit Exposure attributable to such Swing Line
Outstanding or outstanding Letters of Credit or both shall be
deemed to be held by NationsBank of Texas, National Association for
purposes of this definition.
"Revolving Credit Facility" means the facility described
in Section 2.01 of the Credit Facilities Agreement providing for
Loans to the Borrower by the Lenders in the aggregate principal
amount equal to (i) the lesser of the Borrowing Base and the Total
Revolving Credit Commitment, less (ii) the aggregate principal
amount of Swing Line Outstanding and Outstanding Letters of Credit.
"Revolving Credit Loan" means a Loan made pursuant to the
Revolving Credit Facility (but specifically excludes all Swing Line
Loans).
"Subsidiary" means any corporation or other entity in
which more than 50% of its outstanding voting stock or more than
50% of all equity interests is owned directly or indirectly by the
Borrower and/or by one or more of the Borrower's Subsidiaries at
or after the Closing Date, including without limitation Parisian,
Inc.
"Swap Agreement" means, for the purpose of these
financial covenant definitions, one or more agreements between the
Borrower and another Person, on terms mutually acceptable to the
Borrower and such Person, which agreements create Rate Hedging
Obligations.
"Swing Line Loans" means Loans made by NationsBank of
Texas, National Association to the Borrower pursuant to Section
2.02 of the Credit Facilities Agreement.
"Swing Line Outstandings" means, as of any date of
determination, the aggregate principal amount of all Swing Line
Loans then outstanding.
"Total Letter of Credit Commitment" shall mean an amount
equal to $15,000,000, "Total Revolving Credit Commitment" means an
amount equal to $275,000,000, as reduced from time to time in
accordance with Section 2.09 of the Credit Facilities Agreement;
the Total Letter of Credit Commitment and the Total Swing Line
Commitment are included within, and are not in addition to, the
Total Revolving Credit Commitment.
"Total Swing Line Commitment" means an amount equal to
$20,000,000.
Exhibit O
---------
Financial Covenants and Ratios
Capitalized terms used in this Exhibit which are defined in Exhibit
N hereto shall have the meanings set forth therein.
1. Proffitt's Inc. shall not permit at any time during the peri-
ods set forth below the ratio of Consolidated Senior Indebt-
edness to Consolidated Capitalization to be greater than the
ratios set forth opposite the following respective periods:
Period Ratio
Closing Date through Fiscal Year End 1996 .50 to 1.00
At all times thereafter .40 to 1.00
2. Proffitt's Inc. shall not permit, at any time during any
four-quarter period of Proffitt's Inc. ending during the
periods set forth below, the Consolidated Fixed Charge Ratio
for such four-quarter period to be equal to or less than the
ratios set forth opposite the respective periods below:
Period Ratio
Closing Date through Fiscal Year End 1996 1.25 to 1.00
At all times thereafter 1.50 to 1.00
3. Proffitt's Inc. shall not permit at any time the ratio of
Consolidated Funded Indebtedness to Consolidated EBITDA to be
equal to or greater than the following ratios set forth
opposite the following periods below:
Period Ratio
Closing Date through Fiscal Year End 1996 4.00 to 1.00
At all times thereafter 3.50 to 1.00
Exhibit P
----------
[FORM OF CYCLE CERTIFICATE]
X:\WPDATA\JAS\PROFFITT\SECURITI\10-K.497\EX-10-8.ASC
AMENDMENT TO
TRANSFER AND ADMINISTRATION AGREEMENT
AMENDMENT (this "Amendment") dated as of January 30, 1997 to
the TRANSFER AND ADMINISTRATION AGREEMENT, dated as of January 15, 1997,
(the "Agreement") by and among PROFFITT'S CREDIT CORPORATION, a Nevada
corporation, as transferor (in such capacity, the "Transferor"),
PROFFITT'S, INC., a Tennessee corporation ("Proffitt's") in its capacity
as servicer guarantor ("Servicer Guarantor"), MCRAE'S, INC., a Missis-
sippi corporation, as servicer (the "Servicer" or "McRae's"), ENTERPRISE
FUNDING CORPORATION, a Delaware corporation (the "Company") and
NATIONSBANK, N.A., a national banking association ("NationsBank"), as
agent for the Company and the Bank Investors (in such capacity, the
"Agent") and as a Bank Investor.
W I T N E S S E T H :
WHEREAS, the Company, the Transferor, Proffitt's, the Servicer
Guarantor, the Servicer and NationsBank have entered into the Agreement
and wish to amend the Agreement as hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants herein contained, the parties hereto hereby agree as
follows:
SECTION 1. Defined Terms. Unless otherwise defined herein,
the terms used herein shall have the meanings assigned to such terms in
the Agreement. Terms defined in the Agreement and defined in this
Section 1 are amended hereby and shall have the meanings assigned in
this Section 1. For convenience of reference only, text representing
modifications to the existing language of any definition found in the
Agreement is italicized.
"Account" shall mean all credit or charge accounts established
pursuant to an Account Agreement between (i) each Designated Seller
other than Parisian, Inc. and an Obligor as of the Cut-Off Date and on
any day thereafter, or (ii) Parisian, Inc. and an Obligor as of the
Parisian Cut-Off Date and on any day thereafter. The Accounts shall be
identified by account number and by the Outstanding Principal Balance as
of the Cut-Off Date or as of the Parisian Cut-Off Date, as applicable,
and referred to in the Account Schedule delivered to the Agent on the
Closing Date in the case of (i) above, and on the Effective Date, in the
case of (ii) above, pursuant to Section 2.8, and shall include any
Related Account. Any Account established after the Cut-Off Date and the
Parisian Cut-Off Date also shall be identified on and referred to in the
Account Schedule as such schedule may be amended from time to time
pursuant to Section 2.8.
"Account Agreement" shall mean the credit and charge card
agreements governing the rights and obligations of the applicable
Designated Seller and each obligor using the private label credit card
identified as a "McRae's," "Parisian," "Proffitt's" (or other Designated
Seller) credit card, as parties thereto, and each Federal Truth in Lend-
ing Statement for the Accounts, in substantially the forms attached as
Exhibit A to this Agreement, as such agreements or statement may be
amended, modified or otherwise changed from time to time.
"Credit Guidelines" shall mean (i) the Designated Sellers'
credit and collection policy or policies and practices, relating to
Accounts and Receivables existing on the Closing Date and (ii) with
respect to, and for only so long as there are any, Parisian Receivables,
the Parisian Credit Guidelines, in each case as referred to in Exhibit
B attached hereto, as modified and as supplemented from time to time in
compliance with Section 5.2(c) and 5.2(d).
"Default Ratio" means, with respect to any Collection Period,
the ratio (expressed as a percentage) computed as of the last day of
each Collection Period by dividing (i) the product of (x) 12 and (y) the
aggregate amount of Receivables which became Defaulted Receivables
during such Collection Period by (ii) the aggregate amount of all Re-
ceivables (other than Parisian Receivables and Defaulted Receivables) as
of the last day of the prior Collection Period.
"Defaulted Receivable" means any Receivable other than a
Parisian Receivable: (i) as to which any payment, or part thereof,
remains unpaid for 181 days or more from the original due date for such
Receivable; (ii) as to which an Event of Bankruptcy has occurred and is
continuing with respect to the Obligor thereof; (iii) which has been
identified by the Transferor, the Designated Seller or the Servicer as
uncollectible; or (iv) which, consistent with the Credit Guidelines,
should be written off as uncollectible.
"Delinquency Ratio" means, the ratio (expressed as a
percentage) computed as of the last day of each Collection Period by
dividing (i) the aggregate amount of all Delinquent Receivables as of
such date by (ii) the aggregate amount of all Receivables (other than
Parisian Receivables and Defaulted Receivables) as of such date.
"Delinquent Receivable" means any Receivable other than a
Parisian Receivable: (i) as to which any payment, or part thereof, re-
mains unpaid for more than 30 days from the original due date for such
Receivable and (ii) which is not a Defaulted Receivable.
"Designated Seller" means (i) Proffitt's, Inc., a Tennessee
corporation, (ii) McRae's, Inc. a Mississippi corporation, (iii)
Parisian, Inc., an Alabama corporation, and until merged with and into
Parisian, Inc., Parisian Services, Inc. and (iv) any other Person desig-
nated with the written consent of the Agent as the "seller" under any
Receivables Purchase Agreement, and in each case such Person's succes-
sors and permitted assigns.
"Dilution Ratio" shall mean the ratio (expressed as a
percentage) computed as of the last day of each Collection Period by
dividing (i) the aggregate amount by which Receivables are reduced or
cancelled as a result of any defective, rejected or returned merchandise
or services and all credits, rebates, discounts, disputes, warranty
claims, repossessed or returned goods, chargebacks, allowances, or any
other downward adjustments to the balance of such Receivable without
receiving Collections therefor and prior to such Receivable becoming a
Defaulted Receivable or a Parisian Charge-Off, (whether effected through
the granting of credits against the applicable Receivables or by the
issuance of a check or other payment in respect of (and as payment for)
such reduction) by a Designated Seller, the Transferor or the Servicer,
provided to Obligors in respect of Receivables during such month by (ii)
the aggregate Outstanding Principal Balance of all Receivables as of the
last day of the preceding Collection Period.
"Effective Date" means the date occurring after all conditions
precedent described in Section 19 of this Amendment have been fulfilled
on which each of the Company, the Transferor, Proffitt's, the Servicer
Guarantor, the Servicer and NationsBank shall have executed and deliv-
ered one or more counterparts of this Amendment and each shall have re-
ceived one or more counterparts of this Amendment executed by the
others.
"Eligible Account" shall mean, as of the Cut-Off Date or, with
respect to Accounts related to Parisian Receivables, as of the Parisian
Cut-Off Date (and, with respect to Accounts arising after the Cut-Off
Date and the Parisian Cut-Off Date, as applicable, as of the date of
creation), each Account in existence and owned by a Designated Seller:
(a) which is payable in United States Dollars;
(b) the credit card or cards related thereto have not been
reported lost or stolen or designated fraudulent;
(c) the Obligor on which has provided, as its most recent
billing address, an address located in the United States or its territo-
ries or possessions, or Canada, or which is a United States military
address;
(d) which is not an Account as to which any of the Receiv-
ables existing thereunder are Defaulted Receivables or Receivables that
have been otherwise charged-off or written-off as uncollectible;
(e) which has been created by a Designated Seller in the
ordinary course of its business in accordance with, or under standards
no less stringent than, the Credit Guidelines;
(f) with respect to which the applicable Designated Seller
has good title thereto, free and clear of all Adverse Claims; and
(g) the Obligor on which has not been identified by the
Servicer or the Transferor, as applicable, in its computer files as
having (i) died, (ii) commenced, or had commenced in respect of such
Obligor, a case, action or proceeding under any law of any jurisdiction
relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking relief with respect to such Obligor's debts, or seeking to have
such Obligor adjudicated bankrupt or insolvent, or to have a receiver,
trustee, custodian or other similar official appointed for such Obligor
or for all or any substantial part of such Obligor's assets or (iii)
made a general assignment of such Obligor's assets for the benefit of
such Obligor's creditors, which assignment is then in full force and
effect.
"Eligible Receivable" means, at any time, any Receivable:
(a) with respect to which, the related Account is an Eligible
Account;
(b) which has been originated by a Designated Seller in the
ordinary course of its business, sold to the Transferor pursuant to (and
in accordance with) the Receivables Purchase Agreement and to which the
Transferor has good title thereto, free and clear of all Adverse Claims;
(c) which (together with the Collections and Related Security
related thereto) has been the subject of either a valid transfer and
assignment from the Transferor to the Agent, on behalf of the Company
and the Bank Investors, of all of the Transferor's right, title and
interest therein or the grant of a first priority perfected security
interest therein (and in the Collections and Related Security related
thereto), effective until the termination of this Agreement;
(d) which arises pursuant to an Account with respect to which
the applicable Designated Seller and the Transferor has performed all
obligations required to be performed by it thereunder, including without
limitation shipment of the merchandise and/or the performance of the
services purchased thereunder;
(e) a purchase of which with the proceeds of Commercial Paper
would constitute a "current transaction" within the meaning of Section
3(a)(3) of the Securities Act of 1933, as amended;
(f) which is an "account" or a "general intangible" or
"chattel paper" within the meaning of Article 9 of the UCC of all appli-
cable jurisdictions;
(g) which arises under an Account that, together with such
Receivable, is in full force and effect and constitutes the legal, valid
and binding obligation of the related Obligor enforceable against such
Obligor in accordance with its terms and is not subject to any
litigation, right of rescission, dispute, offset, counterclaim or other
defense;
(h) which was created in compliance, in all material re-
spects, with all laws, rules or regulations applicable thereto (in-
cluding, without limitation, laws, rules and regulations relating to
truth in lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and privacy) and
pursuant to an Account Agreement which complies, in all material re-
spects, with all such laws, rules and regulations;
(i) which (A) satisfies all applicable requirements of the
Credit Guidelines, (B) has not been waived or modified except in
accordance with the Credit Guidelines, and (C) is assignable without the
consent of, or notice to, the Obligor thereunder;
(j) the Obligor of which has been directed to make all
payments to a specified account of the Servicer with respect to which
there shall be a Lock-Box Agreement in effect;
(k) with respect to which all material consents, licenses,
approvals or authorizations of, or registrations or declarations with,
any Governmental Authority required to be obtained, effected or given by
the Transferor or by the applicable Designated Seller in connection with
the creation of such Receivable or the execution, delivery, creation and
performance by the Transferor or by the applicable Designated Seller of
the Account Agreement pursuant to which such Receivable was created,
have been duly obtained, effected or given and are in full force and
effect;
(l) the assignment of which under the Receivables Purchase
Agreement by the applicable Designated Seller and hereunder by the
Transferor does not violate, conflict or contravene any applicable laws,
rules, regulations, orders or writs or any contractual or other re-
striction, limitation or encumbrance; and
(m) as to which the Obligor has not exceeded its credit limit
by an amount in excess of the greater of (i) $300 or (ii) 10% of such
credit limit as determined as of each cycle closing date, except for
exceptions which are immaterial in the aggregate.
"Facility Limit" means $300,000,000; provided that such amount
may not at any time exceed the aggregate Commitments at any time in
effect; provided, further, that (i) if after the occurrence of a
Parisian Termination Event, the Buyer's Percentage Factor (calculated
without giving effect to the inclusion of any Parisian Receivables) is
equal to or less than the Maximum Buyer's Percentage Factor, the Facili-
ty Limit shall mean $175,000,000, and (ii) from and after the Termina-
tion Date the Facility Limit shall at all times equal the Net Investment
plus the Aggregate Interest Component.
"Finance Charge Collections" shall mean that portion of the
Collections with respect to the Receivables which are properly
designated in the Accounts as Finance Charges, together with (i) any
Recoveries (net of liquidation expenses, if any) in respect of Defaulted
Receivables, Parisian Charge-Offs and Related Security with respect
thereto and (ii) all Discount Receivable Collections.
"Net Portfolio Yield" shall mean, with respect to any
Collection Period, the annualized percentage equivalent of a fraction
the numerator of which is Finance Charge Collections less the Carrying
Costs for such Collection Period less the aggregate outstanding balance
of all Receivables which became Defaulted Receivables during such
Collection Period less Parisian Charge-Offs for such Collection Period
less the Servicing Fee with respect to such Collection Period and the
denominator of which is the daily average aggregate Outstanding Princi-
pal Balance of all Receivables during such Collection Period.
"Outstanding Principal Balance" means, with respect to any Re-
ceivable at any time, the then outstanding principal amount thereof
excluding any accrued and outstanding Finance Charges related thereto
and giving effect to the amount of any credit balances and other adjust-
ments existing with respect to such Receivable on such day. The out-
standing principal amount of (i) any Defaulted Receivables and (ii) any
Parisian Receivable written off as uncollectible shall be considered to
be zero for the purposes of any determination hereunder of the aggregate
Outstanding Principal Balance of the Receivables or the aggregate
Outstanding Principal Balance of Eligible Receivables.
"Parisian Amortization Period" means the period of time
commencing upon the occurrence of a Parisian Termination Event and
ending on the first Business Day following the day upon which the Agent
has released its lien on the Parisian Receivables pursuant to Section
2.15.
"Parisian Charge-Offs" means, for any period of determination,
the aggregate amount of Parisian Receivables written off as
uncollectible during such period in accordance with Parisian's Credit
Guidelines.
"Parisian's Credit Guidelines" shall mean the Parisian, Inc.
credit and collection policy or policies and practices, relating to
Accounts and Parisian Receivables existing on the Parisian Cut-Off Date
and referred to in Exhibit B attached hereto, as modified and supple-
mented in compliance with Section 5.2(c) and 5.2(d).
"Parisian Cut-Off Date" shall mean January 29, 1997.
"Parisian Default Ratio" means, as of the end of any calendar
month, the decimal equivalent of the fraction (expressed as a
percentage) the numerator of which equals the aggregate amount of Pari-
sian Charge-Offs occurring in such period, and the denominator of which
is the aggregate outstanding balance of all Parisian Receivables as of
the last day of the prior Collection Period, excluding from such
balance, without duplication, the amount of Parisian Charge-Offs.
"Parisian Delinquency Ratio" means, as of the end of any
calendar month, the decimal equivalent of a fraction (expressed as a
percentage) the numerator of which is the aggregate outstanding balance
of all Parisian Receivables that are 60 or more days (inclusive) past
due (as determined in accordance with the Parisian Credit Guidelines and
that do not also constitute Parisian Charge-Offs), and the denominator
of which equals the aggregate outstanding balance of all Parisian
Receivables (other than Parisian Charge-Offs) as of the end of such day.
"Parisian Receivables" means the indebtedness owed by any
Obligor and sold to the Transferor pursuant to that certain Receivables
Purchase Agreement dated as of the date hereof, between the Transferor,
as purchaser thereunder, Parisian, Inc. and Parisian Services, Inc.,
each as seller thereunder and McRae's, Inc., as servicer thereunder,
whether constituting an account, chattel paper, instrument, investment
property or general intangible, and arising in connection with the sale
or lease of merchandise or the rendering of services, and includes the
right to payment of any Finance Charges and other obligations of such
Obligor with respect thereto. A Parisian Receivable shall be deemed to
have been created or the amount thereof increased as of the end of the
day on the Date of Processing of such Parisian Receivable or such in-
crease to the amount thereof.
"Parisian Termination Event" shall mean (i) the occurrence, as
of the last day of any calendar month, of either of the following: (A)
the three month average of the Parisian Delinquency Ratio has exceeded
4.0% for two consecutive months, or (B) the three month average of the
Parisian Default Ratio has exceeded 7.0% for two consecutive months, or
(ii) the failure of Parisian, Inc. to convert the Parisian Credit
Guidelines and related accounts receivable management systems to the
systems employed by Proffitt's, Inc. and McRae's, Inc. on or prior to
September 30, 1997.
"Receivable" means the indebtedness owed to a Designated
Seller by any Obligor (without giving effect to any purchase under the
Receivables Purchase Agreement by the Transferor at any time) under an
Account and sold by such Designated Seller to the Transferor pursuant to
a Receivables Purchase Agreement, whether constituting an account, chat-
tel paper, instrument, investment property or general intangible, aris-
ing in connection with the sale or lease of merchandise or the rendering
of services, and includes the right to payment of any Finance Charges
and other obligations of such Obligor with respect thereto. A
Receivable shall (i) be deemed to have been created or the amount
thereof increased as of the end of the day on the Date of Processing of
such Receivable or such increase to the amount thereof and (ii) from and
after the time the Agent shall have released its lien on the Parisian
Receivables pursuant to Section 2.15, shall not include in its meaning,
any Parisian Receivable.
"Recoveries" shall mean all amounts received or collected by
the Servicer with respect to Defaulted Receivables plus the aggregate
amount of cash received during such period (net of out-of-pocket collec-
tion expenses, including reasonable attorneys' fees, of persons other
than Parisian or Parisian Services, Inc.) on Parisian Receivables
previously written off as uncollectible in accordance with Parisian's
Credit Guidelines.
"Related Account" shall mean an Account having the following
characteristics: (i) such Related Account was originated in accordance
with the applicable Credit Guidelines; (ii) the Obligor or Obligors with
respect to such Related Account is the same Person or Persons as the
Obligor or Obligors of an Account; (iii) such Related Account is
originated as a result of the credit card with respect thereto being
lost or stolen; and (iv) such Related Account can be traced or
identified as a successor account to an Account by reference to or by
way of the computer or other records of the Servicer or the Transferor.
SECTION 2. Amendment to Section 2.5 ("Allocations of
Collections; Non-Liquidation Settlement and Reinvestment Procedures;
Servicer Advances"). (a) Clause (v) of Section 2.5(a) of the Agreement
is hereby deleted in its entirety and replaced with the following text
(solely for convenience of reference, the revised language in this
subsection is italicized):
"(v) fifth, with respect to any Remittance Date
occurring on or after the Termination Date, to the payment of
the Buyers' Percentage Factor of the sum of (A) the outstand-
ing balance of Receivables which have become Defaulted Receiv-
ables during such Collection Period plus (B) Parisian Charge-Offs for
such Collection Period, which payment shall be treat-
ed as a portion of Principal Collections allocable to the
Company and applied pursuant to Section 2.5(b) below;"
(b) The first paragraph of subsection (b) of Section 2.5 is
hereby deleted in its entirety and replaced with the following text
(solely for convenience of reference, the revised language in this
subsection is italicized):
"On each Remittance Date occurring (x) prior to the
Termination Date and (y) at any time other than during the
Parisian Amortization Period, (i) the Servicer shall allocate
to the Company and/or the Bank Investors the Buyers' Percent-
age Factor of Principal Collections received during the
related Collection Period and not previously applied or ac-
counted for and, at the Transferor's option, (A) pay such
amount to the Transferor, for the benefit of the Company
and/or the Bank Investors, and the Transferor shall apply such
amount toward the purchase of additional undivided percentage
interests in each Receivable pursuant to Section 2.2(b), or
(B) pay such amount to the Agent in reduction of the Net In-
vestment and (ii) the Servicer shall pay to the Transferor the
portion of such Principal Collections not allocated to the
Transferred Interest and remaining after any reallocations
pursuant to Section 2.5(c) below.
(c) The second paragraph of subsection (b) of Section 2.5 is
hereby deleted in its entirety and replaced with the following text
(solely for convenience of reference, the revised language in this
subsection is italicized):
"On each Remittance Date during the Parisian Amortization
Period, or immediately following the Parisian Amortization
Period if the Parisian Amortization Period ends subsequent to
the immediately preceding Remittance Date, or on or subsequent
to the Termination Date, the Servicer shall allocate to the
Company or the Bank Investors, as applicable, the Buyers'
Percentage Factor of all Principal Collections received during
the related Collection Period and not previously applied or
accounted for and pay such amount to the Agent in reduction of
the Net Investment. In the event that either the Parisian
Amortization Period has commenced or the Termination Date oc-
curred as a result of a Termination Event, the portion of such
Principal Collections not allocated to the Transferred In-
terest and remaining after any reallocations pursuant to
Section 2.5(c) below shall be distributed to the Agent in
reduction of the Net Investment and, in the case of any other
Termination Date, the portion of such Principal Collections
not allocated to the Transferred Interest and remaining after
any allocations pursuant to Section 2.5(c) below shall be dis-
tributed to the Transferor."
SECTION 3. Amendment to Section 2.6 ("Liquidation Settlement
Procedures"). (a) The first paragraph of Section 2.6 is hereby deleted
in its entirety and replaced with the following text (solely for conve-
nience of reference, the revised language in this subsection is itali-
cized):
"If, on the Termination Date or the first day of the
Parisian Amortization Period the Buyers' Percentage Factor is
greater than the Maximum Buyers' Percentage Factor, then the
Transferor shall immediately pay to the Agent, for the benefit
of the Company or the Bank Investors, as applicable, from
previously received Principal Collections, an amount equal to
the amount that, when applied in reduction of the Net Invest-
ment, will result in a Buyers' Percentage Factor less than or
equal to the Maximum Buyers' Percentage Factor. Such amount
shall be applied by the Agent to the reduction of the Net In-
vestment. On each Remittance Date occurring during the
Parisian Amortization Period or on and following the Termina-
tion Date, Principal Collections shall be applied in accor-
dance with Section 2.5(b)."
SECTION 4. Amendment to Section 2.9 ("Deemed Collections;
Application of Payments"). (a) Subsection (a) of Section 2.9 is hereby
deleted in its entirety and replaced with the following text (solely for
convenience of reference, the revised language in this subsection is
italicized):
"If on any day the Outstanding Principal Balance of a
Receivable is either (x) reduced as a result of any defective,
rejected or returned merchandise or services, any discount,
credit, rebate, dispute, warranty claim, repossessed or
returned goods, chargeback, allowance or any billing
adjustment, or (y) reduced or canceled as a result of a setoff
or offset in respect of any claim by any Person (whether such
claim arises out of the same or a related transaction or an
unrelated transaction) or (z) any other downward adjustments
to the balance of such Receivable without receiving Collec-
tions therefor and prior to such Receivable becoming a
Defaulted Receivable or otherwise being charged off as
uncollectible, the amount of such cancellation, reduction or
adjustment shall thereafter be deducted from the aggregate
Outstanding Principal Balance of the Receivables and the Net
Receivables Balance. If such reduction would result in a
Buyers' Percentage Factor greater than the Maximum Buyers'
Percentage Factor, the Transferor shall pay (or direct the
Servicer to pay from Collections otherwise distributable to
the Transferor) to the Agent, for the benefit of the Company
or the Bank Investors, as applicable, an amount equal to the
amount that, when applied in reduction of the Net Investment,
will result in a Buyers' Percentage Factor less than or equal
to the Maximum Buyers' Percentage Factor. Such amount shall
be applied by the Agent to the reduction of the Net Invest-
ment."
SECTION 5. Addition of New Section 2.15. Article II is
hereby amended by the addition of the following text as a new Section
2.15:
"SECTION 2.15. Removal of Parisian Receivables. Following the
occurrence of a Parisian Termination Event and upon the later
to occur of (A) the Net Worth of the Transferor is at least
equal to the greater of (x) 10% of the highest aggregate
Outstanding Principal Balance of all Eligible Receivables
shown on any Cycle Certificate delivered with respect to the
immediately preceding twelve calendar month period (exclusive
of the principal balance of any Parisian Receivable included
therein) and (y) $10,000,000 and (B) the Buyer's Percentage
Factor (calculated without giving effect to the inclusion of
any Parisian Receivables) is equal to or less than the Maximum
Buyer's Percentage Factor, (i) the Servicer shall cause all
Accounts related to Parisian Receivables to be removed from
the Account Schedule, (ii) the Agent shall execute such
instruments, financing statements and termination statements
(in each case prepared by and at the expense of the
Transferor) as may be necessary under the applicable UCC in
order to release its interest in the Parisian Receivables and
(iii) the term "Parisian Receivables" as used herein shall
have no further meaning or import. The parties hereto agree
that they shall execute and deliver all instruments, financing
statements and amendments thereto and hereto as may be neces-
sary in order to effect the termination of the Agent's
interest in the Parisian Receivables and to cure any ambiguity
resulting from the references herein to Parisian Receivables,
it being expressly understood that, notwithstanding any
contrary provision contained in Section 11.2, any such amend-
ment hereto shall not require the consent of any Bank In-
vestor."
SECTION 6. Amendment to Section 3.1 ("Representations and
Warranties of the Transferor"). (a) The text of subsection (m) of
Section 3.1 is hereby deleted in its entirety and replaced with the
following text (solely for convenience of reference, the revised lan-
guage in this subsection is italicized):
"Coverage Requirement; Amount of Receivables. The Buyers'
Percentage Factor does not exceed the Maximum Buyers'
Percentage Factor. As of the Cut-Off Date, the aggregate Out-
standing Principal Balance of the Receivables in existence was
$168,260,400.40 and the Net Receivable Balance was
$167,778,375.87, and as of the Parisian Cut-Off Date, the
aggregate Outstanding Principal Balance of the Receivables in
existence was $295,394,168 and the Net Receivable Balance was
$294,787,484."
(b) The text of subsection (o) of Section 3.1 is hereby
deleted in its entirety and replaced with the following text (solely for
convenience of reference, the revised language in this subsection is
italicized):
"No Termination Event or Parisian Termination Event. No event
has occurred and is continuing and no condition exists which
constitutes a Termination Event, a Potential Termination Event
or, for so long as there has been no commencement and
completion of a Parisian Amortization Period, a Parisian Ter-
mination Event."
SECTION 7. Amendment to Section 5.2 ("Negative Covenants of
the Transferor"). (a) The text of subsection (e) of Section 5.2 is
hereby deleted in its entirety and replaced with the following text
(solely for convenience of reference, the revised language in this
subsection is italicized):
"No Mergers, Etc. The Transferor will not, and except as
otherwise permitted pursuant to the Receivables Purchase
Agreement, will not permit any Designated Seller to, (i) con-
solidate or merge with or into any other Person (except for a
merger by a Designated Seller with or into any wholly-owned
subsidiary of such Designated Seller, where the Designated
Seller shall be the surviving entity) or (ii) sell, lease or
transfer all or substantially all of its assets to any other
Person except that McRae's, Inc. may sell substantially all of
its assets (other than Receivables) to a partnership consist-
ing only of McRae's, Inc., as a general partner with at least
90% of the partnership interest, and Parisian, Inc., as a
general partner with not more than 10% of the partnership
interest."
(b) The text of subsection (h) of Section 5.2 is hereby
deleted in its entirety and replaced with the following text (solely for
convenience of reference, the revised language in this subsection is
italicized):
"Change of Name, Etc. The Transferor will not, and will not
permit any Designated Seller to, change its name, identity or
structure or the location of its chief executive office,
unless at least 10 days prior to the effective date of any
such change the Transferor or such Designated Seller, as
applicable, delivers to the Agent and the Collateral Agent (i)
such documents, instruments or agreements, executed by the
Transferor or such Designated Seller, as applicable, as are
necessary to reflect such change and to continue the perfec-
tion of the Agent's and the Collateral Agent's ownership
interests or security interests in the Affected Assets and
(ii) new or revised Lock-Box Agreements executed by the Lock-Box
Banks which reflect such change and enable the Agent to
continue to exercise its rights contained in Section 2.8
hereof; provided, that Parisian Services, Inc. may merge with
and into Parisian, Inc. in compliance with the foregoing upon
less than 10 days advance delivery of the aforementioned
documents, instruments and agreements."
(c) The text of subsection (j) of Section 5.2 is hereby
deleted in its entirety and replaced with the following text (solely for
convenience of reference, the revised language in this subsection is
italicized):
"Other Debt. Except as provided for herein, the Transferor
will not create, incur, assume or suffer to exist any
indebtedness whether current or funded, or any other liability
other than (i) indebtedness of the Transferor representing
fees, expenses and indemnities arising hereunder or under a
Receivables Purchase Agreement for the purchase price of the
Receivables under a Receivables Purchase Agreement, (ii)
indebtedness assumed from Parisian Services, Inc. in
connection with the acquisition of Parisian Receivables from
Parisian Services, Inc. and (iii) other indebtedness incurred
in the ordinary course of its business in an amount not to
exceed $9,750 at any time outstanding."
(d) The text of subsection (l) of Section 5.2 is hereby
deleted in its entirety and replaced with the following text (solely for
convenience of reference, the revised language in this subsection is
italicized):
"Payment to the Designated Sellers. With respect to any
Receivable sold by a Designated Seller to the Transferor, the
Transferor shall, and shall cause such Designated Seller to,
effect such sale under, and pursuant to the terms of, a
Receivables Purchase Agreement, including, without limitation,
the payment by the Transferor either in cash, a contribution
of capital or by increase in the amount of the Subordinated
Note to such Designated Seller, as applicable, of an amount
equal to the purchase price for such Receivable as required by
the terms of the Receivables Purchase Agreement."
SECTION 8. Amendment to Section 5.3 ("Minimum Net Worth of
the Transferor"). (a) The text of subsection (a) of Section 5.3 is
hereby deleted in its entirety and replaced with the following text
(solely for convenience of reference, the revised language in this
subsection is italicized):
"As of the Effective Date, the Transferor shall have a Net
Worth of at least $24,000,000, provided, however, that on the
first Business Day immediately following the day the Agent has
released its lien on Parisian Receivables pursuant to Section
2.15, the Transferor shall have a Net Worth not less than the
greater of (x) 10% of the highest aggregate Outstanding Prin-
cipal Balance of all Eligible Receivables shown on any Cycle
Certificate delivered with respect to the immediately
preceding twelve calendar month period (exclusive of the
principal balance of any Parisian Receivables included there-
in) and (y) $10,000,000."
SECTION 9. Amendment to Section 5.4 ("Negative Covenants of
the Servicer"). (a) The text of subsection (h) of Section 5.4 is
hereby deleted in its entirety and replaced with the following text
(solely for convenience of reference, the revised language in this
subsection is italicized):
"No Mergers, Etc. The Servicer will not (i) consolidate or
merge with or into any other Person (except for a merger with
or into any wholly-owned subsidiary, where the Servicer shall
be the surviving entity), or (ii) sell, lease or transfer all
or substantially all of its assets to any other Person except
that McRae's, Inc. may sell substantially all of its assets
(other than Receivables) to a partnership consisting only of
McRae's, Inc., as a general partner with at least 90% of the
partnership interest, and Parisian, Inc., as a general partner
with not more than 10% of the partnership interest.
SECTION 10. Amendment to Section 6.1 ("Appointment of
Servicer"). The text of Section 6.1 is hereby deleted in its entirety
and replaced with the following text (solely for convenience of refer-
ence, the revised language in this subsection is italicized):
"The servicing, administering and collection of the Receiv-
ables shall be conducted by such Person (the "Servicer") so
designated from time to time in accordance with this Section
6.1. Until the Company gives notice to McRae's of the desig-
nation of a new Servicer, McRae's is hereby designated as, and
hereby agrees to perform the duties and obligations of, the
Servicer pursuant to the terms hereof. Provided that the
Servicer may delegate its servicing obligations and duties
with respect to the Parisian Receivables to Parisian, Inc.
(and the Agent, by its execution of this Agreement, shall be
deemed to have consented to such delegation), the Servicer may
not delegate any of its rights, duties or obligations hereun-
der, or designate a substitute Servicer, without the prior
written consent of the Agent, and provided that the Servicer
shall continue to remain solely liable for the performance of
the duties as Servicer hereunder notwithstanding any such
delegation hereunder. The Agent may, and upon the direction
of the Majority Investors the Agent shall, after the occur-
rence of a Servicer Default or any other Termination Event
designate as Servicer any Person (including itself) to succeed
McRae's or any successor Servicer, on the condition in each
case that any such Person so designated shall agree to perform
the duties and obligations of the Servicer pursuant to the
terms hereof. The Agent may notify any Obligor of the Trans-
ferred Interest."
SECTION 11. Amendment to Section 6.4 ("Servicer Default").
(a) The text of subsection (a) to Section 6.4 is hereby deleted in its
entirety and replaced with the following text (solely for convenience of
reference, the revised language in this subsection is italicized):
"the Servicer (including any delegate of the Servicer) or, to
the extent that the Transferor or any Affiliate of the Trans-
feror is then acting as Servicer, the Transferor or such
Affiliate, as applicable, shall fail (i) to observe or perform
any term, covenant or agreement hereunder (other than as
referred to in clauses (ii) or (iii) of this Section 6.4(a))
or under any of the other Transaction Documents to which such
Person is a party or by which such Person is bound, and such
failure shall remain unremedied for ten (10) days, or (ii) to
make any payment or deposit required to be made by it hereun-
der when due or the Servicer shall fail to observe or perform
any term, covenant or agreement on the Servicer's part to be
performed under Section 2.8(b) hereof or (iii) to observe or
perform any term, covenant or agreement under Sections 5.4(a),
5.4(b), 5.4(c), 5.4(e), 5.4(f), 5.4(g), 5.4(i) or 5.4(j); or"
(b) The text of subsection (b) to Section 6.4 is hereby
deleted in its entirety and replaced with the following text (solely for
convenience of reference, the revised language in this subsection is
italicized):
"any representation, warranty, certification or statement made
by the Servicer (or any delegate of the Servicer) or the
Transferor or any Affiliate of the Transferor (in the event
that the Transferor or such Affiliate is then acting as the
Servicer) in this Agreement, the Receivables Purchase Agree-
ment or in any of the other Transaction Documents or in any
certificate or report delivered by it pursuant to any of the
foregoing shall prove to have been incorrect in any material
respect when made or deemed made; or"
(c) The text of subsection (c) to Section 6.4 is hereby
deleted in its entirety and replaced with the following text (solely for
convenience of reference, the revised language in this subsection is
italicized):
"failure or the default by the Servicer, any delegate of the
Servicer or any of the Servicer's Subsidiaries in the perfor-
mance of any material term, provision or condition contained
in any agreement under which any Indebtedness greater than
$5,000,000 was created or is governed, if such event is an
"event of default" or "default" under any such agreement; or
any Indebtedness of the Servicer, any delegate of the Servicer
or any of the Servicer's Subsidiaries greater than $5,000,000
shall be declared to be due and payable or required to be
prepaid (other than by a regularly scheduled payment) prior to
the scheduled date of maturity thereof; or"
(d) The text of subsection (d) to Section 6.4 is hereby
deleted in its entirety and replaced with the following text (solely for
convenience of reference, the revised language in this subsection is
italicized):
"any Event of Bankruptcy shall occur with respect to the
Servicer, any delegate of the Servicer or any of its Subsid-
iaries; or"
SECTION 12. Amendment to Section 7.1 ("Termination Events")
(a) The text of subsection (h) to Section 7.1 is hereby deleted in its
entirety and replaced with the following text (solely for convenience of
reference, the revised language in this subsection is italicized):
"any of the Receivables Purchase Agreements shall have
terminated, provided, however, that the parties to that
certain Receivables Purchase Agreement, dated as of January
27, 1993, between McRae's, Inc. and McRae's of Alabama, an
Alabama corporation, may agree to terminate such agreement
without causing a Termination Event hereunder;"
(b) The text of subsection (i) to Section 7.1 is hereby
deleted in its entirety and replaced with the following text (solely for
convenience of reference, the revised language in this subsection is
italicized):
"the Transferor, the Servicer or any Designated Seller shall
enter into any transaction or merger whereby it is not the
surviving entity, provided, however, that Parisian Services,
Inc. may merge with and into Parisian, Inc.; or"
(c) The text of subsection (r) to Section 7.1 is hereby delet-
ed in its entirety and replaced with the text below (solely for conve-
nience of reference, the revised language in this subsection is itali-
cized), and immediately after the revised subsection (r), there shall be
added to Section 7.1 a new subsection (s) as indicated below:
"(r) a Guarantor Default shall have occurred and be
continuing; or
(s) the Transferor shall not, on any day after the Effective
Date, be the direct and wholly-owned subsidiary of Proffitt's,
Inc. and Parisian, Inc. as the exclusive owners of 100% of the
Transferor's common stock."
SECTION 13. Amendment to the Account Schedule. Schedule A to
the Agreement is hereby amended by adding thereto those accounts
identified by account number and Parisian Receivable balance included in
the computer tape delivered to the Agent pursuant to Section 19 hereof.
SECTION 14. Amendment to Exhibit A ("Form of Account").
Exhibit A to the Agreement is hereby amended by adding thereto a copy of
the form of Parisian, Inc. and Parisian Services, Inc. revolving charge
card agreement.
SECTION 15. Amendment to Exhibit B ("Form of Credit
Guidelines"). Exhibit B to the Agreement is hereby amended by adding
thereto a copy of the Parisian Credit Guidelines.
SECTION 16. Amendment to Exhibit C ("List of Lock-Box Banks
and Accounts"). Exhibit C to the Agreement is hereby amended by adding
the following text immediately after the words "Account Number: 00-300-276":
"3. For Parisian Receivables:
AmSouth Bank of Alabama
P.O. Box 11007
Birmingham, Alabama 35288
Account Number: 45467803"
SECTION 17. Amendment to Exhibit E ("Form of Investor
Report"). Exhibit E to the Agreement is hereby amended by replacing the
existing Form of Investor Report with the form attached hereto as
Exhibit E.
SECTION 18. Amendment to Exhibit P ("Form of Cycle
Certificate"). Exhibit P to the Agreement is hereby amended by
replacing the existing Form of Cycle Certificate with the form attached
hereto as Exhibit P.
SECTION 19. Conditions Precedent. This Amendment shall not
become effective until the following shall have occurred:
(a) Parisian, Inc. shall have delivered to the Agent evidence
satisfactory to the Agent and its counsel demonstrating that it has
complied, as a Designated Seller, with all of the provisions described
in Section 2.8 of the Agreement. Such evidence shall include, but not
be limited to, (i) certified copies of all necessary search reports,
financing statements, assignments of financing statements and
terminations of financing statements, (ii) evidence or appropriate
certification confirming that it has clearly and unambiguously marked
its master data processing records and any storage containers containing
Records to indicate that the Parisian Receivables and a corresponding
interest in the related Accounts have been conveyed to the Transferor,
and subsequently transferred to the Agent, for the benefit of the
Company and the Bank Investors, and that the legend described in Section
2.8 of the Agreement has been affixed as described and (iii) confirma-
tion that a computer tape containing a true and complete list of all Ac-
counts related to the Parisian Receivables in existence as of the
Parisian Cut-Off Date has been delivered to the Agent and that such list
of Accounts, identifying therein all account numbers and Parisian
Receivable balance, should be added to and become part of Schedule A to
the Agreement.
(b) Parisian, Inc. shall have delivered to the Agent each of
the following, in form and substance satisfactory to the Agent and its
counsel:
(1) A copy of the resolutions of the Board of Directors of
Parisian, Inc. and Parisian Services, Inc., each certified by its
respective Secretary approving the execution, delivery and perfor-
mance by such Person of the Receivables Purchase Agreement and each
other document required to be delivered by such Person hereunder or
thereunder.
(2) The Articles of Incorporation for each of Parisian, Inc.
and Parisian Services, Inc., certified by the Secretary of State or
other similar official of such Person's jurisdiction of incorpora-
tion dated a date reasonably prior to the Effective Date.
(3) Good Standing Certificates for Parisian, Inc. and
Parisian Services, Inc. issued by the Secretary of State or a simi-
lar official of such Persons's jurisdiction of incorporation and
certificates of qualification as a foreign corporation issued by
the Secretaries of State or other similar officials of each juris-
diction when such qualification is material to the transactions
contemplated by the Agreement, the Receivables Purchase Agreement,
this Amendment and each other document executed in connection with
any of the foregoing, in each case, dated a date reasonably prior
to the Effective Date.
(4) Certificates of the respective Secretary of Parisian,
Inc. and of Parisian Services, Inc., substantially in the form of
Exhibit L attached to the Agreement.
(5) Copies of proper financing statements (Form UCC-1), dated
a date reasonably near to the Effective Date naming each of
Parisian Services, Inc. and Parisian, Inc. as debtor in favor of
the Transferor as secured party and the Agent, for the benefit of
the Company and the Bank Investors, as assignee of the secured
party or other similar instruments or documents as may be necessary
or in the reasonable opinion of the Agent desirable under the UCC
of all appropriate jurisdictions or any comparable law to perfect
the Transferor's ownership interest in all Parisian Receivables.
(6) Copies of proper financing statements (Form UCC-3), if
any, necessary to terminate all security interests and other rights
of any person in Parisian Receivables previously granted by any
person, including, without limitation, Sheffield Receivables Corpo-
ration, Parisian of Tennessee, Inc., Hess Specialty Department
Stores, LLC, Parisian Services, Inc. and Parisian, Inc.
(7) Certified copies of request for information or copies
(Form UCC-11) (or a similar search report certified by parties
acceptable to the Agent) dated a date reasonably near the date of
the Effective Date listing all effective financing statements which
name Sheffield Receivables Corporation, Parisian of Tennessee,
Inc., Hess Specialty Department Stores, LLC, Parisian Services,
Inc. and Parisian, Inc. (under their respective present names and
any previous names) as debtor and which are filed in jurisdictions
in which the filings were made pursuant to item 5 above together
with copies of such financing statements (none of which shall cover
any Receivables or Contracts).
(8) Executed copies of the Lock-Box Agreement between AmSouth
Bank of Alabama and Parisian, Inc. relating to the Lock-Box Bank
and the Lock-Box Account for Collections related to the Parisian
Receivables.
(9) Notices of termination of, or other acceptable evidence
of the termination of, any existing lock-box agreements related to
or formerly employed in connection with the Parisian Receivables
and the Sheffield Facility (as defined below).
(10) A Cycle Certificate for the Parisian Cut-Off Date.
(11) An Investor Report dated as of December 31, 1996 and
which includes the Parisian Receivables.
(12) Such other agreements, instruments or documentation as
the Agent and its counsel shall require.
(c) The Agent shall have received an opinion or opinions of
Butler, Snow, O'Mara, Stevens & Cannada, PLLC, special counsel to
Parisian, Inc. and Parisian, Services, Inc., covering certain corporate
and bankruptcy matters in form and substance satisfactory to the Agent
and its counsel.
(d) The Agent shall have received an opinion of Schreck Mor-
ris, special Nevada counsel to the Transferor, covering certain corpo-
rate matters related to this Amendment in form and substance satisfac-
tory to the Agent and the Agent's counsel.
(e) A computer tape setting forth as of the Parisian Cut-Off
Date all Parisian Receivables and the Outstanding Principal Balances
thereon and such other information as the Agent may reasonably request.
(f) The Agent shall have received in connection with the
termination of that certain Receivables Purchase Agreement, dated as of
March 31, 1993 between Parisian Services, Inc., as seller, Sheffield
Receivables Corporation, as purchaser, The Bank of Nova Scotia, as the
agent and Barclays Bank PLC, New York Branch, as the administrative
agent and managing agent thereunder, as such agreement has been amended,
supplemented and modified to the Effective Date (together with all
related documents and agreements, the "Sheffield Facility") such
agreements, documents and instruments as are necessary and appropriate
to reflect the termination of the Sheffield Facility, including without
limitation, the termination of the Second Amended and Restated Financing
and Collection Agency Agreement, and the release of all liens and secu-
rity interests of all secured parties holding an interest in the Pari-
sian Receivables arising under or related thereto. The foregoing agree-
ments, documents, and instruments shall include, but not be limited to,
a payoff letter setting forth the pay-off amount, a release agreement
and UCC-3 termination statements, each in form and substance reasonably
satisfactory to the Agent.
(g) [Reserved].
(h) The Administrative Agent shall have received payment in
immediately available funds of an amendment fee in the amount of
$25,000.
(i) The Agent shall have received evidence satisfactory to
the Agent and its counsel that (i) no further action is required or
shall be necessary to satisfy any conditions precedent to the
Receivables Purchase Agreement dated as of the date hereof between the
Transferor, as purchaser, Parisian Services, Inc. and Parisian, Inc., as
sellers thereunder, and McRae's, Inc., as servicer; and (ii) but for the
filing with the Secretary of State of Alabama of the Articles of Merger
and the Plan of Merger of Parisian Services, Inc. with and into Pari-
sian, Inc., whereby Parisian, Inc. will succeed to all of the rights and
obligations of Parisian Services, Inc., no further action is required or
shall be necessary in order for the merger of Parisian Services, Inc.
with and into Parisian, Inc. to be effective and (iii) no further
action is required or shall be necessary to the execution and delivery
of that certain Amended and Restated Management Agreement between
McRae's of Alabama, Inc. and McRae's, Inc. dated as of the date hereof
and effective as of January 15, 1997.
SECTION 20. Separate Agreement. The parties hereto agree
that it shall be a Termination Event under the Agreement if Proffitt's,
Inc. fails to provide satisfactory evidence to the Agent on or before
February 14, 1997 that (i) the definition of "Recoveries" as defined and
used in that certain Pooling and Servicing Agreement dated as of June
13, 1995, among Younkers Credit Corporation, as seller, Younkers, Inc.,
as servicer and Chemical Bank, as trustee and in that certain Receiv-
ables Purchase Agreement, dated as of June 13, 1995, between Younkers,
Inc., as seller thereunder and Younkers Credit Corporation as purchaser
thereunder, has been satisfactorily revised and the foregoing agreements
amended to mean only those recoveries of amounts due and owing under
charge card accounts originated by Younkers, Inc. pursuant to charge
card account agreements between Younkers, Inc. and the obligors on such
charge card accounts and (ii) all appropriate UCC financing statements
filed in connection with such Pooling and Servicing Agreement and such
Receivables Purchase Agreement have been satisfactorily amended as
described in clause (i). In addition, Proffitt's, Inc. agrees to use
its good faith efforts to cause Younkers Credit Corporation, a Delaware
Corporation, a special purpose subsidiary of Younkers, Inc., to enter
into an intercreditor agreement between the Transferor and Younkers
Credit Corporation in form and substance satisfactory to the Agent and
its counsel, on or before February 14, 1997.
SECTION 21. Limited Scope. This amendment is specific to the
circumstances described above and does not imply any future amendment or
waiver of rights allocated to the Company, the Transferor, Proffitt's,
the Servicer Guarantor, the Servicer and NationsBank under the Transfer
and Administration Agreement.
SECTION 22. Governing Law. THIS AMENDMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 23. Severability; Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute
one and the same instrument. Any provisions of this Amendment which are
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 24. Ratification; Agreement to Remain in Full Force
and Effect. Except as expressly affected by the provisions hereof, the
Transfer and Administration Agreement as amended shall remain in full
force and effect in accordance with its terms and ratified and confirmed
by the parties hereto. On and after the date hereof, each reference in
the Transfer and Administration Agreement to "this Agreement", "hereun-
der", "herein" or words of like import shall mean and be a reference to
the Transfer and Administration Agreement as amended by this Amendment.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed as of the date and year first above written.
ENTERPRISE FUNDING CORPORATION,
as Company
By:
Name:
Title:
PROFFITT'S CREDIT CORPORATION,
as Transferor
By:
Name: Douglas E. Coltharp
Title: President
McRAE'S, INC.,
as Servicer
By:
Name: Douglas E. Coltharp
Title: Chief Financial Officer
PROFFITT'S, INC.
as Servicer Guarantor
By:
Name: Douglas E. Coltharp
Title: Chief Financial Officer
NATIONSBANK, N.A., as Agent
and a Bank Investor
By:
Name:
Title:
Exhibit E
Form of Investor Report
Exhibit P
Form of Cycle Certificate
X:\WPDATA\JAS\PROFFITT\SECURITI\10-K.497\EX-10-9.ASC
====================================================================
RECEIVABLES PURCHASE AGREEMENT
between
PROFFITT'S, INC.
as Seller
and
PROFFITT'S CREDIT CORPORATION,
as Purchaser
and
MCRAE'S, INC.
as Servicer
Dated as of January 15, 1997
====================================================================
RECEIVABLES PURCHASE AGREEMENT
This RECEIVABLES PURCHASE AGREEMENT, dated as of January 15,
1997 (as amended, supplemented or otherwise modified and in effect
from time to time, this "Agreement"), between PROFFITT'S, INC., a
Tennessee corporation, as seller (the "Seller"), PROFFITT'S CREDIT
CORPORATION, a Nevada corporation, as purchaser (the "Purchaser"), and
MCRAE'S, INC., a Mississippi corporation, as servicer ("McRae's").
W I T N E S S E T H :
WHEREAS, the Purchaser desires to purchase from time to time
certain accounts receivable existing on the Closing Date and acquired
or generated thereafter in the normal course of the Seller's business
pursuant to certain revolving consumer credit card accounts;
WHEREAS, the Seller desires to sell and assign from time to
time such certain accounts receivable to the Purchaser upon the terms
and conditions hereinafter set forth;
WHEREAS, the Servicer has agreed to service the accounts
receivable sold to the Purchaser by the Seller hereunder;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is hereby
agreed by and between the Purchaser and the Seller as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. All capitalized terms used
herein shall have the meanings specified herein or, if not so
specified, the meaning specified in, or incorporated by reference
into, the Transfer Agreement, and shall include in the singular number
the plural and in the plural number the singular:
"Advance" shall have the meaning specified in Section
3.2(a).
"Agent" shall mean NationsBank, N.A., as agent on behalf of
Enterprise and the Bank Investors pursuant to the Transfer Agreement.
"Bank Investors" shall have the meaning specified in the
Transfer Agreement.
"Closing Date" shall mean January 16, 1997.
"Eligible Receivable" shall have the meaning specified in
the Transfer Agreement.
"Enterprise" shall mean Enterprise Funding Corporation, a
Delaware corporation, and its successors and assigns.
"Event of Bankruptcy" shall have the meaning specified in
the Transfer Agreement.
"McRae's" shall mean McRae's, Inc., a Mississippi
corporation, and its successors and assigns.
"Outstanding Principal Balance" shall have the meaning
specified in the Transfer Agreement.
"Purchase Date" shall have the meaning assigned in Section
3.2(b) hereof.
"Purchase Rate" shall mean the percentage equivalent of the
decimal representation of the following expression:
(1.00 + APY) minus (BDA + SF + PCF + OE + RF)
where:
APY = average portfolio yield of the Seller (expressed as the
decimal equivalent of a percentage) as reasonably
determined over the preceding twelve months (or such
other period reasonably determined by the Purchaser);
BDA = an allowance for bad debts, based on, among other
relevant factors, historical rates for the previous
twelve months (or such other period reasonably
determined by the Purchaser);
SF = a Servicer fee equal to 2.00% per annum;
PCF = the Purchaser's cost of funds, as calculated from time
to time, equal to the sum of (i) the product of the
Maximum Buyers' Percentage multiplied by the prime rate
(as published in the Money Rates Section of The Wall
Street Journal) plus (ii) the product of (x) 20% (to be
adjusted from time to time based on changes to the
Purchaser's reasonably estimated marginal cost of
funds) multiplied by (y) the sum of one minus the Maxi-
mum Buyers' Percentage;
OE = the percentage equivalent of the fraction the numerator
of which is the Purchaser's annualized estimate of
projected operating expenses for the next twelve months
and the denominator of which is the estimated
Outstanding Principal Balance of Receivables expected
to be sold in the next twelve months; and
RF = a contingency risk factor based on industry and
economic considerations, as determined by the Purchaser
in its reasonable discretion and as agreed upon between
the Purchaser and the Seller.
"Purchase Period" shall mean, with respect to Receivables
sold by the Seller to the Purchaser after the Closing Date, the
Collection Period reported upon in the most recent Investor Report
delivered after the Closing Date.
"Purchase Price" shall have the meaning set forth in Section
3.1 hereof.
"Purchaser" shall mean Proffitt's Credit Corporation, a
Nevada corporation, and its successors and assigns.
"Receivable" shall mean, for purposes of this Agreement, the
indebtedness owed to the Seller by any Obligor under an Account
(whether such Account is in existence as of the Closing Date or there-
after created), whether constituting an account, chattel paper, in-
strument or general intangible, arising in connection with the sale of
merchandise or services, and which, in all cases shall include, the
right to payment of any Finance Charges and other obligations of such
Obligor with respect thereto.
"Related Security" shall have the meaning specified in the
Transfer Agreement.
"Relevant UCC" shall mean the Uniform Commercial Code as in
effect in the States of New York and Mississippi, as applicable.
"Secured Obligations" shall have the meaning set forth in
Section 2.1(d) hereof.
"Servicer" shall mean McRae's.
"Subordinated Note" shall have the meaning specified in
Section 3.2(b).
"Termination Date" shall have the meaning specified in
Section 8.1.
"Transfer Agreement" shall mean the Transfer and
Administration Agreement, dated as of January 15, 1997, by and among
the Purchaser, McRae's, Inc., as Servicer, Proffitt's, Inc., as
Servicer Guarantor, Enterprise Funding Corporation and NationsBank
N.A., as Agent and Bank Investor, as such agreement may be amended,
modified or supplemented from time to time.
SECTION 1.2. Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
generally accepted accounting principles. All terms used in Article 9
of the Relevant UCC, and not specifically defined herein, are used
herein as defined in such Article 9.
SECTION 1.3. Computation of Time Periods. Unless otherwise
stated in this Agreement, in the computation of a period of time from
a specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each means "to but
excluding."
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
ARTICLE II
PURCHASE, CONVEYANCE AND SERVICING OF RECEIVABLES
SECTION 2.1. Sale. (a) Upon the terms and subject to the
conditions set forth herein, the Seller hereby sells, assigns,
transfers and conveys to the Purchaser, and the Purchaser hereby
purchases from the Seller, on the terms and subject to the conditions
specifically set forth herein, all of the Seller's right, title and
interest, whether now owned or hereafter acquired, in, to and under
the Receivables outstanding on the Closing Date and thereafter owned
by the Seller, through any Termination Date (but not thereafter), to-
gether with all Related Security and Collections with respect thereto
and all proceeds of the foregoing. The foregoing sale, assignment,
transfer and conveyance does not constitute an assumption by the
Purchaser of any obligations of the Seller or any other Person to
Obligors or to any other Person in connection with the Receivables or
under any Related Security, Account Agreement or other agreement and
instrument relating to the Receivables. With respect to Receivables
sold by the Seller on the Closing Date, such Receivables shall be
deemed to be all the Receivables of the Seller that exist as of the
close of business on the Cut-Off Date. With respect to Receivables
sold by the Seller after the Closing Date, such Receivables shall be
deemed to be all the Receivables created after the close of business
on the Cut-Off Date.
(b) In connection with the foregoing sale, the Seller
agrees to record and file on or prior to the Closing Date, at its own
expense, a financing statement or statements with respect to the
Receivables and the other property described in Section 2.1(a) sold by
the Seller hereunder meeting the requirements of applicable state law
in such manner and in such jurisdictions as are necessary to perfect
and protect the interests of the Purchaser created hereby under the
Relevant UCC (subject, in the case of Related Security constituting
returned inventory, to the applicable provisions of Section 9-306 of
the Relevant UCC) against all creditors of and purchasers from the
Seller, and to deliver either the originals of such financing state-
ments or a file-stamped copy of such financing statements or other
evidence of such filings to the Purchaser on the Closing Date.
(c) The Seller agrees that from time to time, at its
expense, it will promptly execute and deliver all instruments and
documents and take all actions as may be necessary or as the Purchaser
may reasonably request in order to perfect or protect the interest of
the Purchaser in the Receivables purchased hereunder or to enable the
Purchaser to exercise or enforce any of its rights hereunder. Without
limiting the foregoing, the Seller will, in order to accurately re-
flect this purchase and sale transaction, execute and file such
financing or continuation statements or amendments thereto or assign-
ments thereof (as permitted pursuant hereto) as may be requested by
the Purchaser, and upon the request of the Purchaser, mark its master
data processing records and other documents with a legend describing
the purchase by the Purchaser of the Receivables and the subsequent
transfer thereof to the Agent pursuant to the Transfer Agreement and
stating "THE RECEIVABLES IN THESE FILES HAVE BEEN ACQUIRED BY AND
CONVEYED TO PROFFITT'S CREDIT CORPORATION AND AN INTEREST THEREIN HAS
BEEN ASSIGNED TO NATIONSBANK, N.A., AS AGENT, FOR THE BENEFIT OF
ENTERPRISE FUNDING CORPORATION AND THOSE CERTAIN BANK INVESTORS
PURSUANT TO THE TRANSFER AND ADMINISTRATION AGREEMENT DATED AS OF
JANUARY 15, 1997, AS AMENDED FROM TIME TO TIME, AMONG PROFFITT'S
CREDIT CORPORATION, NATIONSBANK, N.A., ENTERPRISE FUNDING CORPORATION
AND THE OTHER SIGNATORIES NAMED THEREIN." The Seller shall, upon re-
quest of the Purchaser, obtain such additional search reports as the
Purchaser shall request. To the fullest extent permitted by appli-
cable law, the Purchaser shall be permitted to sign and file continua-
tion statements and amendments thereto and assignments thereof without
the Seller's signature. Carbon, photographic or other reproduction of
this Agreement or any financing statement shall be sufficient as a
financing statement.
(d) It is the express intent of the Seller and the
Purchaser that the conveyance of the Receivables by the Seller to the
Purchaser pursuant to this Agreement be construed as a sale of such
Receivables by the Seller to the Purchaser. Further, it is not the
intention of the Seller and the Purchaser that such conveyance be
deemed a grant of a security interest in the Receivables by the Seller
to the Purchaser to secure a debt or other obligation of the Seller.
However, in the event that, notwithstanding the express intent of the
parties, the Receivables are construed to constitute property of the
Seller, then (i) this Agreement also shall be deemed to be, and hereby
is, a security agreement within the meaning of the Relevant UCC; and
(ii) the conveyance by the Seller provided for in this Agreement shall
be deemed to be, and the Seller hereby grants to the Purchaser, a
security interest in, to and under all of the Seller's right, title
and interest in, to and under the Receivables outstanding on the Clos-
ing Date and thereafter owned by the Seller, together with all Related
Security and Collections with respect thereto and all proceeds of the
foregoing, to secure the rights of the Purchaser set forth in this
Agreement or as may be determined in connection therewith by
applicable law (collectively, the "Secured Obligations"). The Seller
and the Purchaser shall, to the extent consistent with this Agreement,
take such actions as may be necessary to ensure that, if this
Agreement were deemed to create a security interest in the Receiv-
ables, such security interest would be deemed to be a perfected
security interest in favor of the Purchaser under applicable law and
will be maintained as such throughout the term of this Agreement.
SECTION 2.2. Servicing of Receivables. The servicing,
administering and collection of the Receivables shall be conducted by
McRae's, which hereby agrees to perform, take or cause to be taken all
such action as may be necessary or advisable to collect each
Receivable from time to time, all in accordance with applicable laws,
rules and regulations and with the care and diligence which McRae's
employs in servicing similar receivables for its own account, in
accordance with the Credit Guidelines. With the consent of the Agent
and the Purchaser, McRae's may delegate certain functions to
Proffitt's, however, no such delegation shall relieve McRae's of its
obligations hereunder. The Purchaser hereby appoints the Servicer as
its agent to enforce the Purchaser's rights and interests in, to and
under the Receivables, the Related Security and the Collections with
respect thereto. The Servicer shall hold in trust for the Purchaser,
in accordance with its interests, all Records which evidence or relate
to the Receivables or Related Security, Collections and proceeds with
respect thereto. Notwithstanding anything to the contrary contained
herein, from and after the occurrence of a Termination Event or a
Servicer Default (each as defined in the Transfer Agreement), the
Agent or Enterprise, shall have the absolute and unlimited right to
terminate the McRae's servicing activities described in this Section
2.2. In consideration of the foregoing, the Purchaser agrees to pay
the Servicer a servicing fee of 2.00% per annum on the aggregate Out-
standing Principal Balance of Receivables sold, payable monthly, for
its performance of the duties and obligations described in this
Section 2.2; provided that any such monthly payment shall be reduced
by any amounts payable in such month by Enterprise or the Bank
Investors to the Servicer, in its capacity as Servicer pursuant to the
Transfer Agreement.
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ARTICLE III
CONSIDERATION AND PAYMENT; RECEIVABLES
SECTION 3.1. Purchase Price. (a) The Purchase Price for
the Receivables and related property conveyed on the Closing Date to
the Purchaser by the Seller under this Agreement shall be a dollar
amount equal to the product of (i) the aggregate Outstanding Principal
Balance of the Receivables as of the Cut-Off Date, as reflected on the
Cycle Certificate delivered on the Closing Date and (ii) the Purchase
Rate.
The Purchase Price for the Receivables and related property
conveyed on any date after the Closing Date shall be the dollar amount
equal to the product of (i) the aggregate Outstanding Principal
Balance of the Receivables sold during the applicable Purchase Period
as reflected in the applicable Investor Report and (ii) the Purchase
Rate on such date.
SECTION 3.2. Payment of Purchase Price. (a) The Purchase
Price for the Receivables sold on the Closing Date shall be paid (i)
by payment of $40,064,000 in immediately available funds, (ii) through
an advance under the Subordinated Note (such advance and any advance
thereunder as contemplated by Section 3.2(b), each an "Advance") in
the amount of $1,542,684.75 and (iii) the balance of the Purchase
Price shall be deemed paid as a contribution to the capital of the
Purchaser by the Seller of Receivables.
(b) The Purchase Price for the Receivables sold by the
Seller on any date after the date hereof (each, a "Purchase Date")
shall be paid either (i) in cash or (ii) if Purchaser does not have
sufficient cash to pay the Purchase Price, by means of (A) an Advance
under the Subordinated Note or (B) with the consent of the Seller,
capital contributed by the Seller to the Purchaser in the form of a
contribution of the additional Receivables or (iii) with the consent
of the Seller, any combination of the foregoing. In the event the
Purchaser does not have sufficient cash to pay the Purchase Price due
on any Purchase Date and the Seller is not willing to consent to the
payment of such insufficiency by means of a capital contribution, such
insufficiency shall be evidenced by the making of an Advance on such
Purchase Date in an original principal amount equal to such cash
shortfall owed to the Seller, provided, however that (i) at all times
prior to December 31, 1997, the Seller and the Purchaser agree to act
in good faith to minimize the amount of Advances made under the
Subordinated Note so as to cause the Purchaser's Net Worth to be not
less than 10% of the highest aggregate Outstanding Principal Balance
of all Eligible Receivables shown on any Cycle Certificate delivered
by the Servicer under the Transfer Agreement during the preceding
twelve months and (ii) from and after December 31, 1997, no Advance
shall be made if immediately thereafter the Net Worth of the Purchaser
would be less than 10% of the highest aggregate Outstanding Principal
Balance of all Eligible Receivables shown on any Cycle Certificate
delivered by the Servicer under the Transfer Agreement during the
preceding twelve months. All Advances made by the Seller to the Pur-
chaser shall be evidenced by a single subordinated note, duly executed
on behalf of the Purchaser, in substantially the form of Exhibit B
annexed hereto, delivered and payable to the Seller in a principal
amount equal to $75,000,000 (the "Subordinated Note"). The Seller is
hereby authorized by the Purchaser to endorse on the schedule attached
to the Subordinated Note (or a continuation of such schedule attached
thereto and made a part thereof) an appropriate notation evidencing
the date and amount of each Advance, as well as the date and amount of
each payment with respect thereto; provided, however, that the failure
of any Person to make such a notation shall not affect any obligations
of the Purchaser thereunder. Any such notation shall be conclusive
and binding as to the date and amount of such Advance, or payment of
principal or interest thereon, absent manifest error.
(c) The terms and conditions of the Subordinated Note and
all Advances thereunder shall be as follows:
(i) Repayment of Advances. All amounts paid by the
Purchaser with respect to the Advances shall be allocated first to the
repayment of accrued interest until all such interest is paid, and
then to the outstanding principal amount of the Advances. Subject to
the provisions of this Agreement, the Purchaser may borrow, repay and
reborrow Advances on and after the date hereof and prior to the
termination of this Agreement, subject to the terms, provisions and
limitations set forth herein.
(ii) Interest. The Subordinated Note shall bear
interest from its date on the outstanding principal balance thereof at
a rate per annum equal to one month LIBOR as published in the Money
Rates Section of The Wall Street Journal. Interest on each Advance
shall be computed based on the number of days elapsed in a year of 360
days.
(iii) Sole and Exclusive Remedy/Subordination. The
Purchaser shall be obligated to repay Advances to the Seller only to
the extent of funds available to the Purchaser from Collections on the
Receivables and, to the extent that such payments are insufficient to
pay all amounts owing to the Seller under the Subordinated Note, the
Seller shall not have any claim against the Purchaser for such amounts
and no further or additional recourse shall be available against
Purchaser. The Subordinated Note shall be fully subordinated to any
rights of Enterprise, the Bank Investors and their permitted assigns
pursuant to the Transfer Agreement, and shall not evidence any rights
in the Receivables.
(iv) Offsets, etc. The Purchaser may offset any
amount due and owing by the Seller against any amount due and owing by
Purchaser to the Seller under the terms of the Subordinated Note.
SECTION 3.3. Monthly Report. On each Determination Date,
the Seller shall deliver to the Purchaser a report covering the
preceding Collection Period, substantially in the form of the Investor
Report attached as Exhibit E to the Transfer Agreement, showing (i)
the aggregate Purchase Price of Receivables acquired or generated by
the Seller in the preceding Collection Period and (ii) the aggregate
Outstanding Principal Balance of such Receivables that are Eligible
Receivables as of the last day of such preceding Collection Period.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Seller's Representations and Warranties. The
Seller represents and warrants to the Purchaser as of the Closing Date
and shall be deemed to represent and warrant as of the date of the
creation of any sale of any interest in Receivables to the Purchaser
pursuant to this Agreement that:
(a) Corporate Existence and Power. The Seller is a corpo-
ration duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all corporate power
and all material governmental licenses, authorizations, consents and
approvals required to carry on its business in each jurisdiction in
which its business is now conducted. The Seller is duly qualified to
do business in, and is in good standing in, every other jurisdiction
in which the nature of its business requires it to be so qualified,
except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect.
(b) Corporate and Governmental Authorization; Contraven-
tion. The execution, delivery and performance by the Seller of this
Agreement are within the Seller's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any Official Body or official thereof
(except for the filing of UCC financing statements as required by this
Agreement), and do not contravene, or constitute a default under, any
provision of applicable law, rule or regulation or of the Certificate
of Incorporation or Bylaws of the Seller or of any agreement, judg-
ment, injunction, order, writ, decree or other instrument binding upon
the Seller or result in the creation or imposition of any Adverse
Claim on the assets of the Seller or any of its Subsidiaries (except
those created by this Agreement).
(c) Binding Effect. This Agreement will constitute the
legal, valid and binding obligation of the Seller, enforceable against
the Seller in accordance with its terms, subject to applicable bank-
ruptcy, insolvency, moratorium or other similar laws affecting the
rights of creditors generally.
(d) Perfection. Immediately preceding the sale of the Re-
ceivables and related property pursuant to this Agreement, the Seller
was the owner of all of the Receivables, free and clear of all Adverse
Claims. On or prior to the date of each sale of Receivables pursuant
to this Agreement, all financing statements and other documents re-
quired to be recorded or filed in order to perfect and protect the
ownership interest of the Purchaser in and to the Receivables against
all creditors of and purchasers from the Seller will have been duly
filed in each filing office necessary for such purpose and all filing
fees and taxes, if any, payable in connection with such filings shall
have been paid in full.
(e) Accuracy of Information. All information heretofore
furnished by the Seller to the Purchaser, the Agent, Enterprise and
any Bank Investor for purposes of or in connection with this Agreement
or any transaction contemplated hereby is, and all such information
hereafter furnished by the Seller to the Purchaser, the Agent,
Enterprise and any Bank Investor will be, true and accurate in every
material respect, on the date such information is stated or certified.
(f) Tax Status. The Seller has filed all material tax re-
turns (federal, state and local) required to be filed and has paid or
made adequate provision for the payment of all taxes, assessments and
other governmental charges.
(g) Action, Suits. Except as set forth in this Agreement,
there are no actions, suits or proceedings pending, or to the knowl-
edge of the Seller threatened, against or affecting the Seller or any
Affiliate of the Seller or their respective properties, in or before
any court, arbitrator or other body, which may, individually or in the
aggregate, have a Material Adverse Effect.
(h) Place of Business. The principal place of business and
chief executive office of the Seller is located at Jackson,
Mississippi, and the offices where the Seller keeps all its Records,
are located at the address(es) described on Exhibit C hereto or such
other locations notified to the Purchaser in accordance with this
Agreement in jurisdictions where all action required by the terms of
this Agreement has been taken and completed.
(i) Good Title. Upon the sale of the Receivables and
related property to the Purchaser pursuant to this Agreement, the
Purchaser shall acquire a valid and perfected first priority ownership
interest in each Receivable (and in the Related Security, Collections
and Proceeds with respect thereto) that exists on the date of this
Agreement and in each Receivable thereafter owned by the Seller and in
the Related Security, Collections and Proceeds with respect thereto
until the Termination Date in each case free and clear of any Adverse
Claim.
(j) Tradenames, Etc. As of the date hereof: (i) the
Seller's chief executive office is located at the address for notices
set forth in Section 9.3; (ii) the Seller has only the subsidiaries
and divisions listed on Exhibit D hereto; and (iii) the Seller has,
within the last five (5) years, operated only under the tradenames
identified in Exhibit D hereto, and, within the last five (5) years,
has not changed its name, merged with or into or consolidated with any
other corporation or been the subject of any proceeding under Title
11, United States Code (Bankruptcy), except as disclosed in Exhibit D
hereto.
(k) Nature of Receivables. Each Receivable (x) represented
by the Seller to be an Eligible Receivable, or (y) included in the
calculation of the Net Receivables Balance in fact satisfies at such
time the definition of "Eligible Receivable" set forth in the Transfer
Agreement and is an "eligible asset" as defined in Rule 3a-7 under the
Investment Company Act of 1940, as amended.
(l) Amount of Receivables. As of the Cut-Off Date, the
aggregate Outstanding Principal Balance of the Receivables in exis-
tence was at least $52,659,882.40.
(m) Credit Guidelines. Since January 9, 1997, there have
been no material changes in the Credit Guidelines other than as
permitted hereunder and under the Transfer Agreement. Since such
date, no material adverse change has occurred in the overall rate of
collection of the Receivables.
(n) Collections and Servicing. Since November 2, 1996,
there has been no material adverse change in the ability of the Seller
to service and collect the Receivables.
(o) Not an Investment Company. The Seller is not, and is
not controlled by, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or is exempt from all
provisions of such Act.
(p) ERISA. Each of the Seller and its ERISA Affiliates is
in compliance in all material respects with ERISA and no lien exists
in favor of the Pension Benefit Guaranty Corporation on any of the Re-
ceivables.
(q) Lock-Box Accounts. The names and addresses of all the
Lock-Box Banks, together with the account numbers of the Lock-Box
Accounts at such Lock-Box Banks, are specified in Exhibit C to the
Transfer Agreement (or at such other Lock-Box Banks and/or with such
other Lock-Box Accounts as have been notified to the Purchaser and the
Agent and for which Lock-Box Agreements have been executed in accor-
dance with Section 2.8(b) of the Transfer Agreement and delivered to
the Servicer). All Obligors have been instructed to make payment to a
Lock-Box Account and only Collections are deposited into the Lock-Box
Accounts.
(r) Bulk Sales. No transaction contemplated by this
Agreement requires compliance with any bulk sales act or similar law.
(s) Preference; Voidability. The Seller warrants that the
conveyance of the applicable Receivables and Collections and Related
Security to the Purchaser, and each such conveyance, shall not have
been made for or on account of an antecedent debt owed by the Seller
to the Purchaser and no such transfer is or may be voidable under any
Section of the Bankruptcy Reform Act of 1978 (11 U.S.C. Section 101 et
seq.), as amended.
SECTION 4.2. Reaffirmation of Representations and Warran-
ties by the Seller; Notice of Breach. On each sale date, the Seller,
by accepting the proceeds of such sale, shall be deemed to have certi-
fied that all representations and warranties described in Section 4.1
are true and correct on and as of such day as though made on and as of
such day. The representations and warranties set forth in Section 4.1
shall survive the conveyance of the Receivables to the Purchaser, and
termination of the rights and obligations of the Purchaser and the
Seller under this Agreement. Upon discovery by the Purchaser or the
Seller of a breach of any of the foregoing representations and war-
ranties, the party discovering such breach shall give prompt written
notice to the other within three Business Days of such discovery.
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ARTICLE V
COVENANTS OF THE SELLER
SECTION 5.1. Covenants of the Seller. The Seller hereby
covenants and agrees with the Purchaser that, for so long as this
Agreement is in effect, and until all Receivables, an interest in
which has been sold to the Purchaser pursuant hereto, shall have been
paid in full or written-off as uncollectible, and all amounts owed by
the Seller pursuant to this Agreement have been paid in full, unless
the Purchaser otherwise consents in writing, the Seller covenants and
agrees as follows:
(a) Conduct of Business. The Seller will, and will cause
each of its Subsidiaries to, carry on and conduct its business in sub-
stantially the same manner and in substantially the same fields of
enterprise as it is presently conducted and do all things necessary to
remain duly incorporated, validly existing and in good standing as a
domestic corporation in its jurisdiction of incorporation and will
maintain all requisite authority to conduct its business in each
jurisdiction in which its business is conducted.
(b) Compliance with Laws. The Seller will, and will cause
each of its Subsidiaries to, comply in all material respects with all
laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it or its properties may be subject.
(c) Furnishing of Information and Inspection of Records.
The Seller will furnish to the Purchaser from time to time such infor-
mation with respect to the Receivables as the Purchaser may reasonably
request, including, without limitation, listings identifying the
Obligor and the Outstanding Principal Balance for each Receivable.
The Seller will at any time and from time to time during regular busi-
ness hours permit the Purchaser, or its agents or representatives, (i)
to examine and make copies of and abstracts from all Records and (ii)
to visit the offices and properties of the Seller for the purpose of
examining such Records, and to discuss matters relating to Receivables
or the Seller's performance hereunder with any of the officers, direc-
tors, employees or independent public accountants of the Seller having
knowledge of such matters.
(d) Keeping of Records and Books of Account. The Seller
will maintain a system of accounting established and administered in
accordance with generally accepted accounting principles, consistently
applied, and will maintain and implement administrative and operating
procedures (including, without limitation, an ability to recreate
records evidencing Receivables in the event of the destruction of the
originals thereof), and keep and maintain, all documents, books,
records and other information reasonably necessary or advisable for
the collection of all Receivables (including, without limitation,
records adequate to permit the daily identification of each new
Receivable and all Collections of and adjustments to each existing
Receivable). The Seller will give the Purchaser and the Agent notice
of any material change in the administrative and operating procedures
of the Seller referred to in the previous sentence.
(e) Performance and Compliance with Receivables and
Accounts. The Seller at its expense will timely and fully perform and
comply with all material provisions, covenants and other promises re-
quired to be observed by it under the Accounts related to the Receiv-
ables.
(f) Credit and Collection Policies. The Seller will comply
in all material respects with the Credit Guidelines in regard to each
Receivable and the related Account.
(g) Collections. The Seller shall instruct all Obligors to
cause all Collections to be deposited directly to a Lock-Box Account.
(h) Collections Received. The Seller shall hold in trust,
and deposit, immediately, but in any event not later than the close of
business on the second Business Day following its receipt thereof, to
a Lock-Box Account all Collections received from time to time by the
Seller.
(i) Sale Treatment. The Seller agrees to treat this
conveyance for all purposes (including, without limitation, tax and
financial accounting purposes) as a sale and, to the extent any such
reporting is required, shall report the transactions contemplated by
this Agreement on all relevant books, records, tax returns, financial
statements and other applicable documents as a sale of the Receivables
to the Purchaser.
(j) ERISA. The Seller shall promptly give the Purchaser
written notice upon becoming aware that the Seller or any of its
Subsidiaries is not in compliance in all material respects with ERISA
or that any ERISA lien on any of the Receivables exists.
SECTION 5.2. Negative Covenants of the Seller. During the
term of this Agreement, unless the Agent and the Purchaser shall
otherwise consent in writing:
(a) No Sales, Liens, Etc. Except as otherwise provided
herein, the Seller will not sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any
Adverse Claim upon (or the filing of any financing statement) or with
respect to (x) any of the Receivables, the Related Security or
Collections, (y) any goods (other than inventory), the sale of which
may give rise to any Receivable, Related Security or Collections (sub-
ject, in each case with respect to Related Security constituting re-
turned inventory, to the applicable provisions of Section 9-306 of the
Relevant UCC) or (z) upon or with respect to any account which concen-
trates in a Lock-Box Bank (including any Lock-Box Account) to which
any Collections of any Receivable are sent, or, in each case, assign
any right to receive income in respect thereof. The Seller shall, and
will cause each of its Subsidiaries to, specifically exclude from the
property subject to any Adverse Claim granted on inventory any and all
accounts receivable generated by sales of such inventory and the
proceeds thereof and shall provide, upon the Purchaser's request, evi-
dence satisfactory to the Purchaser that any such Adverse Claim (and
each related UCC financing statement or other related filing) express-
ly excludes any such accounts receivable. The Seller will provide the
Purchaser and the Agent with a copy of any inventory financing agree-
ment at least three Business Days prior to the effectiveness thereof.
(b) No Extension or Amendment of Receivables. The Seller
will not extend, amend or otherwise modify the terms of any Receiv-
able, or amend, modify or waive any term or condition of any Account
related thereto, except as provided in Sections 5.2 and 6.2 of the
Transfer Agreement.
(c) No Change in Business or Credit Guidelines. Except as
provided in the Transfer Agreement, the Seller will not make any
change in the character of its business or in the Credit Guidelines,
which change might, in either case, impair the collectability of any
substantial portion of the Receivables or otherwise result in a
Material Adverse Effect.
(d) Change in Payment Instructions to Obligors. The Seller
will not add or terminate, or make any change to, any Lock-Box
Account, except in accordance with the Transfer Agreement.
(e) Deposits to Lock-Box Accounts. The Seller will not
deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any Lock-Box Account, cash or cash proceeds other than
Collections of Receivables.
(f) Change of Name, Etc. The Seller shall not change its
name, identity or structure or location of its chief executive office,
unless at least ten (10) days prior to the effective date of any such
change the Seller delivers to the Purchaser and the Agent (i) such
documents, instruments or agreements, including, without limitation,
appropriate financing statements under the Relevant UCC, executed by
the Seller necessary to reflect such change and to continue the
perfection of the Purchaser's and any assignee's interest in the
Receivables and (ii) new or revised Lock-Box Agreements which reflect
such change and enable the Agent to exercise its rights under Section
2.8 of the Transfer Agreement.
(g) Separate Business. The Seller shall not: (i) fail to
maintain separate books, financial statements, accounting records and
other corporate documents from those of the Purchaser, (ii) commingle
any of its assets or the assets of any of its Affiliates with those of
the Purchaser, (iii) pay from its own assets any obligation or
indebtedness of any kind incurred by the Purchaser, (iv) directly, or
through any of its Affiliates, borrow funds or accept credit or
guaranties from the Purchaser except pursuant to this Agreement in
connection with the purchase of the Receivables.
SECTION 5.3. Indemnification. The Seller agrees to indem-
nify, defend and hold the Purchaser harmless from and against any and
all loss, liability, damage, judgment, claim, deficiency, or expense
(including interest, penalties, reasonable attorneys' fees and amounts
paid in settlement) to which the Purchaser or any assignee thereof may
become subject insofar as such loss, liability, damage, judgment,
claim, deficiency, or expense arises out of or is based upon a breach
by the Seller of its representations, warranties and covenants con-
tained herein, or any information certified in any schedule or
certificate delivered by the Seller hereunder, being untrue in any
material respect at any time. The obligations of the Seller under
this Section 5.3 shall be considered to have been relied upon by the
Purchaser, Enterprise and the Agent and shall survive the execution,
delivery, performance and termination of this Agreement, regardless of
any investigation made by the Purchaser, Enterprise or the Agent or on
behalf of any of them.
ARTICLE VI
REPURCHASE OBLIGATION
SECTION 6.1. Mandatory Repurchase.
(a) Breach of Warranty. If on any day any Receivable,
which has been sold by the Seller hereunder and which has been
reported by the Seller as an Eligible Receivable, shall fail to meet
the conditions set forth in the definition of "Eligible Receivable"
(except to the extent such conditions expressly relate to an earlier
date) or for which any representation or warranty made herein in
respect of such Receivable shall no longer be true, the Seller shall
be deemed to have received on such day a Collection of such Receivable
in full and shall on such day pay to the Purchaser an amount equal to
the aggregate Outstanding Principal Balance of such Receivable;
provided that, prior to the Termination Date, such amount may be paid
by a reduction in the Purchase Price paid to the Seller on the next
occurring Purchase Date, unless the Purchaser is required to make a
payment in respect of such breach pursuant to the Transfer Agreement.
(b) Reconveyance Under Certain Circumstances. The Seller
agrees that, with respect to any Receivable sold hereunder, in the
event of a breach of any of the representations and warranties set
forth in Sections 4.1(e), 4.1(g), 4.1(h), 4.1(j), 4.1(l), 4.1(o),
4.1(p) or 4.1(q), the Seller shall accept the reconveyance of such
Receivable upon receipt by the Seller of notice given in writing by
the Purchaser and the Seller's failure to cure such breach within
thirty (30) days (or, in the case of representations and warranties
found in Sections 4.1(d) or 4.1(i), within three (3) days) of such no-
tice. In the event of a reconveyance under this Section 6.1(b), the
Seller shall pay to the Purchaser in immediately available funds on
such 30th day (or third day, if applicable) an amount equal to the
Outstanding Principal Balance of any such Receivable; provided that,
prior to the Termination Date, such amount may be paid by a reduction
in the Purchase Price paid to the Seller on the next occurring
Purchase Date, unless the Purchaser is required to make a payment in
respect of such breach pursuant to the Transfer Agreement.
SECTION 6.2. Dilutions, Etc. The Seller agrees that if on
any day the Outstanding Principal Balance of a Receivable sold by the
Seller hereunder is either (x) reduced as a result of any defective,
rejected or returned merchandise or services, any discount, credit,
rebate, dispute, warranty claim, repossessed or returned goods,
chargeback, allowance or any billing adjustment, or (y) reduced or
canceled as a result of a setoff or offset in respect of any claim by
any Person (whether such claim arises out of the same or a related
transaction or an unrelated transaction) or (z) any other downward
adjustments to the balance of such Receivable without receiving
Collections therefor and prior to such Receivable becoming a Defaulted
Receivable, then the Seller shall be deemed to have received on such
day a collection of such Receivable in the amount of such reduction,
cancellation or payment made by the Obligor and shall on such day pay
to the Purchaser an amount equal to such reduction or cancellation;
provided that, prior to the Termination Date, such amount may be paid
by a reduction in the Purchase Price paid to the Seller on the next
occurring Purchase Date, unless the Purchaser is required to make a
payment in respect of such breach pursuant to the Transfer Agreement.
SECTION 6.3 No Recourse. Except as otherwise provided in
this Article VI, the purchase and sale of the Receivables under this
Agreement shall be without recourse to the Seller.
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ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1. Conditions to the Purchaser's Obligations
Regarding Receivables. The obligations of the Purchaser to purchase
the Receivables on the Closing date and any Purchase Date shall be
subject to the satisfaction of the following conditions:
(a) All representations and warranties of the Seller con-
tained in this Agreement shall be true and correct on the Closing Date
and on each Purchase Date thereafter with the same effect as though
such representations and warranties had been made on such date;
(b) All information concerning the Receivables provided to
the Purchaser shall be true and correct in all material respects as of
the Closing Date, in the case of any Receivables existing on the Clos-
ing Date, or the Purchase Date, in the case of any Receivables created
after the Closing Date;
(c) The Seller shall have substantially performed all other
obligations required to be performed by the provisions of this Agree-
ment;
(d) The Seller shall have filed or caused to be filed the
financing statement(s) required to be filed pursuant to Section
2.1(b);
(e) All corporate and legal proceedings and all instruments
in connection with the transactions contemplated by this Agreement
shall be satisfactory in form and substance to the Purchaser, and the
Purchaser shall have received from the Seller copies of all documents
(including, without limitation, records of corporate proceedings)
relevant to the transactions herein contemplated as the Purchaser may
reasonably have requested; and
(f) On the Closing Date, the Seller shall deliver to the
Purchaser and the Agent a Cycle Certificate as of the Cut-Off Date.
ARTICLE VIII
TERM AND TERMINATION
SECTION 8.1. Term. This Agreement shall commence as of the
date of execution and delivery hereof and shall continue in full force
and effect until the date following the earlier of (i) the date desig-
nated by the Purchaser or the Seller as the termination date at any
time following sixty (60) day's written notice to the other (with a
copy thereof to the Agent), (ii) the date on which the Agent declares
a Termination Date pursuant to Section 7.2 of the Transfer Agreement,
(iii) the day on which a Reinvestment Termination Date shall occur
under the Transfer Agreement unless the Transferred Interest shall
have been assigned (or concurrently is so assigned) to the Bank In-
vestors under Section 10.7 of the Transfer Agreement, (iv) upon the
occurrence of an Event of Bankruptcy with respect to either the Pur-
chaser or the Seller, (v) the close of business on the third Business
Day following a conveyance of Receivables to the Purchaser for which
the Purchaser does not pay the Purchase Price in accordance with the
provisions hereof, or (vi) the date on which either the Purchaser or
the Seller becomes unable for any reason to purchase or re-purchase
any Receivable in accordance with the provisions of this Agreement or
defaults on its obligations hereunder, which default continues
unremedied for more than thirty (30) days after written notice (any
such date being a "Termination Date"); provided, however, that the
termination of this Agreement pursuant to this Section 8.1 hereof
shall not discharge any Person from any obligations incurred prior to
such termination, including, without limitation, any obligations to
make any payments with respect to the interest of the Purchaser in any
Receivable sold prior to such termination.
SECTION 8.2. Effect of Termination. Following the
termination of this Agreement pursuant to Section 8.1, the Seller
shall not sell, and the Purchaser shall not purchase, any Receivables.
No termination or rejection or failure to assume the executory obliga-
tions of this Agreement in any Event of Bankruptcy with respect to the
Seller or the Purchaser shall be deemed to impair or affect the
obligations pertaining to any executed sale or executed obligations,
including, without limitation, pre-termination breaches of represen-
tations and warranties by the Seller or the Purchaser. Without
limiting the foregoing, prior to termination, the failure of the
Seller to deliver computer records of Receivables or any reports
regarding the Receivables shall not render such transfer or obligation
executory, nor shall the continued duties of the parties pursuant to
Article V or Section 9.1 of this Agreement render an executed sale
executory.
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ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1. Amendment. This Agreement and the rights and
obligations of the parties hereunder may not be changed orally, but
only by an instrument in writing signed by the Purchaser and the
Seller and consented to in writing by the Agent. Any reconveyance
executed in accordance with the provisions hereof shall not be con-
sidered amendments to this Agreement.
SECTION 9.2. GOVERNING LAW; Submission to Jurisdiction.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF MISSISSIPPI.
(b) The parties hereto hereby submit to the nonexclu-
sive jurisdiction of the United States District Court for the Southern
District of New York and of any New York state court sitting in The
City of New York for purposes of all legal proceedings arising out of
or relating to this Agreement or the transactions contemplated hereby.
Each party hereto hereby irrevocably waives, to the fullest extent it
may effectively do so, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court
has been brought in an inconvenient forum. Nothing in this Section
9.2 shall affect the right of the Purchaser to bring any other action
or proceeding against the Seller or its property in the courts of
other jurisdictions.
SECTION 9.3. Notices. Except as provided below, all
communications and notices provided for hereunder shall be in writing
(including telecopy or electronic facsimile transmission or similar
writing) and shall be given to the other party at its address or
telecopy number set forth below or at such other address or telecopy
number as such party may hereafter specify for the purposes of notice
to such party. Each such notice or other communication shall be
effective (i) if given by telecopy, when such telecopy is transmitted
to the telecopy number specified in this Section 9.3 and confirmation
is received, (ii) if given by mail three Business Days following such
posting, postage prepaid, U.S. certified or registered, (iii) if given
by overnight courier, one Business Day after deposit thereof with a
national overnight courier service, or (iv) if given by any other
means, when received at the address specified in this Section 9.3.
(a) in the case of the Purchaser:
Proffitt's Credit Corporation
300 South Fourth Street, Suite 1100
Las Vegas, Nevada 89101
Attn: Douglas E. Coltharp, President
Telephone: (702) 598-3738
Telecopy: (702) 598-3651
(with a copy to Proffitt's, Inc.)
with a copy to:
NationsBank, N.A.
NationsBank Corporate Center
100 North Tryon Street
NC1-007-10-07
Charlotte, NC 28255
Attention: Michelle M. Heath NC1-007-10-07
Structured Finances
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
(b) in the case of the Seller:
Proffitt's Inc.
3455 Highway 80 West
Jackson, Mississippi 39209
Telephone: (601) 968-4394
Telecopy: (601) 968-4354
Attn: Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
(c) in the case of the Servicer:
MCRAE'S, INC.
3455 Highway 80 West
Jackson, Mississippi 39209
Telephone: (601) 968-4394
Telecopy: (601) 968-4354
Attn: Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
(with a copy to Proffitt's, Inc.)
or, as to each party, at such other address as shall be designated by
such party in a written notice to each other party.
SECTION 9.4. Severability of Provisions. If any one or
more of the covenants, agreements, provisions or terms of this Agree-
ment or any other Conveyance Paper shall for any reason whatsoever be
held invalid, then such covenants, agreements, provisions, or terms
shall be deemed severable from the remaining covenants, agreements,
provisions, or terms of this Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Agreement.
SECTION 9.5. Assignment. This Agreement may not be
assigned by the parties hereto, except that the Purchaser may assign
its rights hereunder pursuant to the Transfer Agreement to the Agent,
for the benefit of Enterprise and the Bank Investors, and that Enter-
prise may assign any or all of its rights to any Liquidity Provider.
The Purchaser hereby notifies (and the Seller hereby acknowledges
that) the Purchaser, pursuant to the Transfer Agreement, has assigned
its rights hereunder to the Agent. All rights of the Purchaser here-
under may be exercised by the Agent or its assignees, to the extent of
their respective rights pursuant to such assignments.
SECTION 9.6. Further Assurances. The Purchaser and the
Seller agree to do and perform, from time to time, any and all acts
and to execute any and all further instruments required or reasonably
requested by the other party more fully to effect the purposes of this
Agreement, including, without limitation, the execution of any
financing statements or continuation statements or equivalent
documents relating to the Receivables for filing under the provisions
of the Relevant UCC or other laws of any applicable jurisdiction.
SECTION 9.7. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Purchaser, the
Seller or the Agent, any right, remedy, power or privilege hereunder,
shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privilege provided by law.
SECTION 9.8. Counterparts. This Agreement may be executed
in two or more counterparts including telecopy transmission thereof
(and by different parties on separate counterparts), each of which
shall be an original, but all of which together shall constitute one
and the same instrument.
SECTION 9.9. Binding Effect; Third-Party Beneficiaries.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
The Agent, on behalf of Enterprise and the Bank Investors, and any Li-
quidity Provider is intended by the parties hereto to be a third-party
beneficiary of this Agreement.
SECTION 9.10. Merger and Integration. Except as
specifically stated otherwise herein, this Agreement sets forth the
entire understanding of the parties relating to the subject matter
hereof, and all prior understandings, written or oral, are superseded
by this Agreement. This Agreement may not be modified, amended,
waived or supplemented except as provided herein.
SECTION 9.11. Headings. The headings herein are for
purposes of reference only and shall not otherwise affect the meaning
or interpretation of any provision hereof.
SECTION 9.12. Exhibits. The schedules and exhibits
referred to herein shall constitute a part of this Agreement and are
incorporated into this Agreement for all purposes.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Purchaser, the Seller and the
Servicer each have caused this Receivables Purchase Agreement to be
duly executed by their respective officers as of the day and year
first above written.
PROFFITT'S, INC.,
as Seller
By:
Name:
Title:
PROFFITT'S CREDIT CORPORATION,
as Purchaser
By:
Name:
Title:
MCRAE'S, INC.,
as Servicer
By:
Name:
Title:
Acknowledged and agreed as
of the date first above written:
ENTERPRISE FUNDING CORPORATION
By:_____________________________
Name:
Title:
NATIONSBANK, N.A., as Agent
By:_____________________________
Name:
Title:
EXHIBIT A
[FORM OF MONTHLY REPORT]
EXHIBIT B
FORM OF SUBORDINATED NOTE
__________________
_________ __, 199_
FOR VALUE RECEIVED, the undersigned, PROFFITT'S CREDIT
CORPORATION, a Nevada corporation (the "Maker"), hereby promises to
pay to the order of PROFFITT'S, INC. (the "Payee"), on _________, ____
or earlier as provided for in the Receivables Purchase Agreement dated
as of the date hereof between the Maker and the Payee (as such
agreement may from time to time be amended, supplemented or otherwise
modified and in effect, the "Receivables Purchase Agreement"), the
lesser of the principal sum of Seventy-Five Million Dollars
($75,000,000.00) or the aggregate unpaid principal amount of all
Advances to the Maker from the Payee pursuant to the terms of the
Receivables Purchase Agreement, in lawful money of the United States
of America in immediately available funds, and to pay interest from
the date thereof on the principal amount hereof from time to time
outstanding, in like funds, at said office, at the rate per annum set
forth in the Receivables Purchase Agreement and shall be payable in
arrears on the first day of each calendar month (or if any such day is
not a Business Day, on the succeeding Business Day).
The Maker hereby waives diligence, presentment, demand,
protest and notice of any kind whatsoever. The non-exercise by the
holder hereof of any of its rights hereunder in any particular
instance shall not constitute a waiver thereof in that or any
subsequent instance.
All borrowings evidenced by this Subordinated Note and all
payments and prepayments of the principal hereof and interest hereon
and the respective dates thereof shall be endorsed by the holder
hereof on the schedule attached hereto and made a part hereof, or on a
continuation thereof which shall be attached hereto and made a part
hereof, or otherwise recorded by such holder in its internal records;
provided, however, that the failure of the holder hereof to make such
a notation or any error in such a notation shall not in any manner
affect the obligation of the Maker to make payments of principal and
interest in accordance with the terms of this Subordinated Note and
the Receivables Purchase Agreement.
The Maker shall have the right to prepay and, subject to the
limitations set forth in the Receivables Purchase Agreement, reborrow
Advances made to it without penalty or premium.
This Subordinated Note is the Subordinated Note referred to
in the Receivables Purchase Agreement, which, among other things,
contains provisions for the subordination of this Subordinated Note to
the rights of certain parties under the Transfer Agreement, all upon
the terms and conditions therein specified.
This Note shall be governed by, and construed in accordance
with, the laws of the State of Mississippi.
PROFFITT'S CREDIT CORPORATION
By:
Name:
Title:
<TABLE>
<CAPTION>
Advances and Payments
<S> <C> <C> <C> <C>
Amount of Payments Unpaid Principal Name of Person
Date Advance Principal/Interest Balance of Note Making Notation
1/15/97 $1,542,684.75
</TABLE>
EXHIBIT C
LOCATION OF RECORDS, PRINCIPAL PLACE OF BUSINESS, ETC.
1. 300 South Fourth Street
Suite 1100
Las Vegas, Nevada 89101
2. 3455 Highway 80 West
Jackson, Mississippi 39209
EXHIBIT D
TRADENAMES, ETC.
None
=====================================================================
RECEIVABLES PURCHASE AGREEMENT
between
MCRAE'S, INC.
as Seller and Servicer
and
PROFFITT'S CREDIT CORPORATION,
as Purchaser
Dated as of January 15, 1997
======================================================================
RECEIVABLES PURCHASE AGREEMENT
This RECEIVABLES PURCHASE AGREEMENT, dated as of January 15,
1997 (as amended, supplemented or otherwise modified and in effect
from time to time, this "Agreement"), between MCRAE'S, INC., a
Mississippi corporation, as seller (the "Seller") and as servicer (in
such capacity, the "Servicer"), and PROFFITT'S CREDIT CORPORATION, a
Nevada corporation, as purchaser (the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Purchaser desires to purchase from time to time
certain accounts receivable existing on the Closing Date and acquired
or generated thereafter in the normal course of the Seller's business
pursuant to certain revolving consumer credit card accounts;
WHEREAS, the Seller desires to sell and assign from time to
time such certain accounts receivable to the Purchaser upon the terms
and conditions hereinafter set forth;
WHEREAS, the Servicer has agreed to service the accounts
receivable sold to the Purchaser by the Seller hereunder;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is hereby
agreed by and between the Purchaser and the Seller as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. All capitalized terms used
herein shall have the meanings specified herein or, if not so
specified, the meaning specified in, or incorporated by reference
into, the Transfer Agreement, and shall include in the singular number
the plural and in the plural number the singular:
"Advance" shall have the meaning specified in Section
3.2(a).
"Agent" shall mean NationsBank, N.A., as agent on behalf of
Enterprise and the Bank Investors pursuant to the Transfer Agreement.
"Bank Investors" shall have the meaning specified in the
Transfer Agreement.
"Closing Date" shall mean January 16, 1997.
"Eligible Receivable" shall have the meaning specified in
the Transfer Agreement.
"Enterprise" shall mean Enterprise Funding Corporation, a
Delaware corporation, and its successors and assigns.
"Event of Bankruptcy" shall have the meaning specified in
the Transfer Agreement.
"McRae's" shall mean McRae's, Inc., a Mississippi
corporation, and its successors and assigns.
"McRae's of Alabama Purchase Agreement" shall mean that
certain Receivables Purchase Agreement dated as of January 27, 1993,
by and between McRae's, Inc. and McRae's of Alabama, Inc., an Alabama
corporation, as the same has been amended, modified and supplemented
to the date hereof.
"Outstanding Principal Balance" shall have the meaning
specified in the Transfer Agreement.
"Purchase Date" shall have the meaning assigned in Section
3.2(b) hereof.
"Purchase Rate" shall mean the percentage equivalent of the
decimal representation of the following expression:
(1.00 + APY) minus (BDA + SF + PCF + OE + RF)
where:
APY = average portfolio yield of the Seller (expressed as the
decimal equivalent of a percentage) as reasonably
determined over the preceding twelve months (or such
other period reasonably determined by the Purchaser);
BDA = an allowance for bad debts, based on, among other
relevant factors, historical rates for the previous
twelve months (or such other period reasonably
determined by the Purchaser);
SF = a Servicer fee equal to 2.00% per annum;
PCF = the Purchaser's cost of funds, as calculated from time
to time, equal to the sum of (i) the product of the
Maximum Buyers' Percentage multiplied by the prime rate
(as published in the Money Rates Section of The Wall
Street Journal) plus (ii) the product of (x) 20% (to be
adjusted from time to time based on changes to the
Purchaser's reasonably estimated marginal cost of
funds) multiplied by (y) the sum of one minus the Maxi-
mum Buyers' Percentage;
OE = the percentage equivalent of the fraction the numerator
of which is the Purchaser's annualized estimate of
projected operating expenses for the next twelve months
and the denominator of which is the estimated
Outstanding Principal Balance of Receivables expected
to be sold in the next twelve months; and
RF = a contingency risk factor based on industry and
economic considerations, as determined by the Purchaser
in its reasonable discretion and as agreed upon between
the Purchaser and the Seller.
"Purchase Period" shall mean, with respect to Receivables
sold by the Seller to the Purchaser after the Closing Date, the
Collection Period reported upon in the most recent Investor Report
delivered after the Closing Date.
"Purchase Price" shall have the meaning set forth in Section
3.1 hereof.
"Purchaser" shall mean Proffitt's Credit Corporation, a
Nevada corporation, and its successors and assigns.
"Receivable" shall mean, for purposes of this Agreement, the
indebtedness owed to the Seller by any Obligor under an Account
(whether such Account is in existence as of the Closing Date or there-
after created), whether constituting an account, chattel paper, in-
strument or general intangible, arising in connection with the sale of
merchandise or services, and which, in all cases shall include, the
right to payment of any Finance Charges and other obligations of such
Obligor with respect thereto.
"Related Security" shall have the meaning specified in the
Transfer Agreement.
"Relevant UCC" shall mean the Uniform Commercial Code as in
effect in the States of New York and Mississippi, as applicable.
"Secured Obligations" shall have the meaning set forth in
Section 2.1(d) hereof.
"Servicer" shall mean McRae's.
"Subordinated Note" shall have the meaning specified in
Section 3.2(b).
"Termination Date" shall have the meaning specified in
Section 8.1.
"Transfer Agreement" shall mean the Transfer and
Administration Agreement, dated as of January 15, 1997, by and among
the Purchaser, McRae's, Inc., as Servicer, Proffitt's, Inc., as
Servicer Guarantor, Enterprise Funding Corporation and NationsBank
N.A., as Agent and Bank Investor, as such agreement may be amended,
modified or supplemented from time to time.
SECTION 1.2. Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
generally accepted accounting principles. All terms used in Article 9
of the Relevant UCC, and not specifically defined herein, are used
herein as defined in such Article 9.
SECTION 1.3. Computation of Time Periods. Unless otherwise
stated in this Agreement, in the computation of a period of time from
a specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each means "to but
excluding."
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ARTICLE II
PURCHASE, CONVEYANCE AND SERVICING OF RECEIVABLES
SECTION 2.1. Sale. (a) Upon the terms and subject to the
conditions set forth herein, the Seller hereby sells, assigns,
transfers and conveys to the Purchaser, and the Purchaser hereby
purchases from the Seller, on the terms and subject to the conditions
specifically set forth herein, all of the Seller's right, title and
interest, whether now owned or hereafter acquired, in, to and under
the Receivables outstanding on the Closing Date and thereafter owned
by the Seller, through any Termination Date (but not thereafter), to-
gether with all Related Security and Collections with respect thereto
and all proceeds of the foregoing. The foregoing sale, assignment,
transfer and conveyance does not constitute an assumption by the
Purchaser of any obligations of the Seller or any other Person to
Obligors or to any other Person in connection with the Receivables or
under any Related Security, Account Agreement or other agreement and
instrument relating to the Receivables. With respect to Receivables
sold by the Seller on the Closing Date, such Receivables shall be
deemed to be all the Receivables of the Seller that exist as of the
close of business on the Cut-Off Date. With respect to Receivables
sold by the Seller after the Closing Date, such Receivables shall be
deemed to be all the Receivables created after the close of business
on the Cut-Off Date.
(b) In connection with the foregoing sale, the Seller
agrees to record and file on or prior to the Closing Date, at its own
expense, a financing statement or statements with respect to the
Receivables and the other property described in Section 2.1(a) sold by
the Seller hereunder meeting the requirements of applicable state law
in such manner and in such jurisdictions as are necessary to perfect
and protect the interests of the Purchaser created hereby under the
Relevant UCC (subject, in the case of Related Security constituting
returned inventory, to the applicable provisions of Section 9-306 of
the Relevant UCC) against all creditors of and purchasers from the
Seller, and to deliver either the originals of such financing state-
ments or a file-stamped copy of such financing statements or other
evidence of such filings to the Purchaser on the Closing Date.
(c) The Seller agrees that from time to time, at its
expense, it will promptly execute and deliver all instruments and
documents and take all actions as may be necessary or as the Purchaser
may reasonably request in order to perfect or protect the interest of
the Purchaser in the Receivables purchased hereunder or to enable the
Purchaser to exercise or enforce any of its rights hereunder. Without
limiting the foregoing, the Seller will, in order to accurately re-
flect this purchase and sale transaction, execute and file such
financing or continuation statements or amendments thereto or assign-
ments thereof (as permitted pursuant hereto) as may be requested by
the Purchaser, and upon the request of the Purchaser, mark its master
data processing records and other documents with a legend describing
the purchase by the Purchaser of the Receivables and the subsequent
transfer thereof to the Agent pursuant to the Transfer Agreement and
stating "THE RECEIVABLES IN THESE FILES HAVE BEEN ACQUIRED BY AND
CONVEYED TO PROFFITT'S CREDIT CORPORATION AND AN INTEREST THEREIN HAS
BEEN ASSIGNED TO NATIONSBANK, N.A., AS AGENT, FOR THE BENEFIT OF
ENTERPRISE FUNDING CORPORATION AND THOSE CERTAIN BANK INVESTORS
PURSUANT TO THE TRANSFER AND ADMINISTRATION AGREEMENT DATED AS OF
JANUARY 15, 1997, AS AMENDED FROM TIME TO TIME, AMONG PROFFITT'S
CREDIT CORPORATION, NATIONSBANK, N.A., ENTERPRISE FUNDING CORPORATION
AND THE OTHER SIGNATORIES NAMED THEREIN." The Seller shall, upon re-
quest of the Purchaser, obtain such additional search reports as the
Purchaser shall request. To the fullest extent permitted by appli-
cable law, the Purchaser shall be permitted to sign and file continua-
tion statements and amendments thereto and assignments thereof without
the Seller's signature. Carbon, photographic or other reproduction of
this Agreement or any financing statement shall be sufficient as a
financing statement.
(d) It is the express intent of the Seller and the
Purchaser that the conveyance of the Receivables by the Seller to the
Purchaser pursuant to this Agreement be construed as a sale of such
Receivables by the Seller to the Purchaser. Further, it is not the
intention of the Seller and the Purchaser that such conveyance be
deemed a grant of a security interest in the Receivables by the Seller
to the Purchaser to secure a debt or other obligation of the Seller.
However, in the event that, notwithstanding the express intent of the
parties, the Receivables are construed to constitute property of the
Seller, then (i) this Agreement also shall be deemed to be, and hereby
is, a security agreement within the meaning of the Relevant UCC; and
(ii) the conveyance by the Seller provided for in this Agreement shall
be deemed to be, and the Seller hereby grants to the Purchaser, a
security interest in, to and under all of the Seller's right, title
and interest in, to and under the Receivables outstanding on the Clos-
ing Date and thereafter owned by the Seller, together with all Related
Security and Collections with respect thereto and all proceeds of the
foregoing, to secure the rights of the Purchaser set forth in this
Agreement or as may be determined in connection therewith by
applicable law (collectively, the "Secured Obligations"). The Seller
and the Purchaser shall, to the extent consistent with this Agreement,
take such actions as may be necessary to ensure that, if this
Agreement were deemed to create a security interest in the Receiv-
ables, such security interest would be deemed to be a perfected
security interest in favor of the Purchaser under applicable law and
will be maintained as such throughout the term of this Agreement.
SECTION 2.2. Servicing of Receivables. The servicing,
administering and collection of the Receivables shall be conducted by
McRae's, which hereby agrees to perform, take or cause to be taken all
such action as may be necessary or advisable to collect each
Receivable from time to time, all in accordance with applicable laws,
rules and regulations and with the care and diligence which McRae's
employs in servicing similar receivables for its own account, in
accordance with the Credit Guidelines. With the consent of the Agent
and the Purchaser, McRae's may delegate certain functions to
Proffitt's, however, no such delegation shall relieve McRae's of its
obligations hereunder. The Purchaser hereby appoints the Servicer as
its agent to enforce the Purchaser's rights and interests in, to and
under the Receivables, the Related Security and the Collections with
respect thereto. The Servicer shall hold in trust for the Purchaser,
in accordance with its interests, all Records which evidence or relate
to the Receivables or Related Security, Collections and proceeds with
respect thereto. Notwithstanding anything to the contrary contained
herein, from and after the occurrence of a Termination Event or a
Servicer Default (each as defined in the Transfer Agreement), the
Agent or Enterprise, shall have the absolute and unlimited right to
terminate the McRae's servicing activities described in this Section
2.2. In consideration of the foregoing, the Purchaser agrees to pay
the Servicer a servicing fee of 2.00% per annum on the aggregate Out-
standing Principal Balance of Receivables sold, payable monthly, for
its performance of the duties and obligations described in this
Section 2.2; provided that any such monthly payment shall be reduced
by any amounts payable in such month by Enterprise or the Bank
Investors to the Servicer, in its capacity as Servicer pursuant to the
Transfer Agreement.
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ARTICLE III
CONSIDERATION AND PAYMENT; RECEIVABLES
SECTION 3.1. Purchase Price. (a) The Purchase Price for
the Receivables and related property conveyed on the Closing Date to
the Purchaser by the Seller under this Agreement shall be a dollar
amount equal to the product of (i) the aggregate Outstanding Principal
Balance of the Receivables as of the Cut-Off Date, as reflected on the
Cycle Certificate delivered on the Closing Date and (ii) the Purchase
Rate.
The Purchase Price for the Receivables and related property
conveyed on any date after the Closing Date shall be the dollar amount
equal to the product of (i) the aggregate Outstanding Principal
Balance of the Receivables sold during the applicable Purchase Period
as reflected in the applicable Investor Report and (ii) the Purchase
Rate on such date.
SECTION 3.2. Payment of Purchase Price. (a) The Purchase
Price for the Receivables sold on the Closing Date shall be paid (i)
by payment of $87,936,000 in immediately available funds and (ii)
through an advance under the Subordinated Note (such advance and any
advance thereunder as contemplated by Section 3.2(b), each an "Ad-
vance") in the amount of $25,352,507.64.
(b) The Purchase Price for the Receivables sold by the
Seller on any date after the date hereof (each, a "Purchase Date")
shall be paid either (i) in cash or (ii) if Purchaser does not have
sufficient cash to pay the Purchase Price, subject to the next suc-
ceeding sentence, by means of an Advance under the Subordinated Note
or (iii) with the consent of the Seller, any combination of the
foregoing. In the event the Purchaser does not have sufficient cash
to pay the Purchase Price due on any Purchase Date, such insufficiency
shall be evidenced by the making of an Advance on such Purchase Date
in an original principal amount equal to such cash shortfall owed to
the Seller; provided, however, that (i) at all times prior to December
31, 1997, the Seller and the Purchaser agree to act in good faith to
minimize the amount of Advances made under the Subordinated Note so as
to cause the Purchaser's Net Worth to be not less than 10% of the
highest aggregate Outstanding Principal Balance of all Eligible
Receivables shown on any Cycle Certificate delivered by the Servicer
under the Transfer Agreement during the preceding twelve months and
(ii) from and after December 31, 1997, no Advance shall be made if
immediately thereafter the Net Worth of the Purchaser would be less
than 10% of the highest aggregate Outstanding Principal Balance of all
Eligible Receivables shown on any Cycle Certificate delivered by the
Servicer under the Transfer Agreement during the preceding twelve
months. All Advances made by the Seller to the Purchaser shall be
evidenced by a single subordinated note, duly executed on behalf of
the Purchaser, in substantially the form of Exhibit B annexed hereto,
delivered and payable to the Seller in a principal amount equal to
$150,000,000 (the "Subordinated Note"). The Seller is hereby autho-
rized by the Purchaser to endorse on the schedule attached to the
Subordinated Note (or a continuation of such schedule attached thereto
and made a part thereof) an appropriate notation evidencing the date
and amount of each Advance, as well as the date and amount of each
payment with respect thereto; provided, however, that the failure of
any Person to make such a notation shall not affect any obligations of
the Purchaser thereunder. Any such notation shall be conclusive and
binding as to the date and amount of such Advance, or payment of prin-
cipal or interest thereon, absent manifest error.
(c) The terms and conditions of the Subordinated Note and
all Advances thereunder shall be as follows:
(i) Repayment of Advances. All amounts paid by the
Purchaser with respect to the Advances shall be allocated first to the
repayment of accrued interest until all such interest is paid, and
then to the outstanding principal amount of the Advances. Subject to
the provisions of this Agreement, the Purchaser may borrow, repay and
reborrow Advances on and after the date hereof and prior to the
termination of this Agreement, subject to the terms, provisions and
limitations set forth herein.
(ii) Interest. The Subordinated Note shall bear
interest from its date on the outstanding principal balance thereof at
a rate per annum equal to one month LIBOR as published in the Money
Rates Section of The Wall Street Journal. Interest on each Advance
shall be computed based on the number of days elapsed in a year of 360
days.
(iii) Sole and Exclusive Remedy/Subordination. The
Purchaser shall be obligated to repay Advances to the Seller only to
the extent of funds available to the Purchaser from Collections on the
Receivables and, to the extent that such payments are insufficient to
pay all amounts owing to the Seller under the Subordinated Note, the
Seller shall not have any claim against the Purchaser for such amounts
and no further or additional recourse shall be available against
Purchaser. The Subordinated Note shall be fully subordinated to any
rights of Enterprise, the Bank Investors and their permitted assigns
pursuant to the Transfer Agreement, and shall not evidence any rights
in the Receivables.
(iv) Offsets, etc. The Purchaser may offset any
amount due and owing by the Seller against any amount due and owing by
Purchaser to the Seller under the terms of the Subordinated Note.
SECTION 3.3. Monthly Report. On each Determination Date,
the Seller shall deliver to the Purchaser a report covering the
preceding Collection Period, substantially in the form of the Investor
Report attached as Exhibit E to the Transfer Agreement, showing (i)
the aggregate Purchase Price of Receivables acquired or generated by
the Seller in the preceding Collection Period and (ii) the aggregate
Outstanding Principal Balance of such Receivables that are Eligible
Receivables as of the last day of such preceding Collection Period.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Seller's Representations and Warranties. The
Seller represents and warrants to the Purchaser as of the Closing Date
and shall be deemed to represent and warrant as of the date of the
creation of any sale of any interest in Receivables to the Purchaser
pursuant to this Agreement that:
(a) Corporate Existence and Power. The Seller is a corpo-
ration duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all corporate power
and all material governmental licenses, authorizations, consents and
approvals required to carry on its business in each jurisdiction in
which its business is now conducted. The Seller is duly qualified to
do business in, and is in good standing in, every other jurisdiction
in which the nature of its business requires it to be so qualified,
except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect.
(b) Corporate and Governmental Authorization; Contraven-
tion. The execution, delivery and performance by the Seller of this
Agreement are within the Seller's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any Official Body or official thereof
(except for the filing of UCC financing statements as required by this
Agreement), and do not contravene, or constitute a default under, any
provision of applicable law, rule or regulation or of the Certificate
of Incorporation or Bylaws of the Seller or of any agreement, judg-
ment, injunction, order, writ, decree or other instrument binding upon
the Seller or result in the creation or imposition of any Adverse
Claim on the assets of the Seller or any of its Subsidiaries (except
those created by this Agreement).
(c) Binding Effect. This Agreement will constitute the
legal, valid and binding obligation of the Seller, enforceable against
the Seller in accordance with its terms, subject to applicable bank-
ruptcy, insolvency, moratorium or other similar laws affecting the
rights of creditors generally.
(d) Perfection. Immediately preceding the sale of the Re-
ceivables and related property pursuant to this Agreement, the Seller
was the owner of all of the Receivables, free and clear of all Adverse
Claims. On or prior to the date of each sale of Receivables pursuant
to this Agreement, all financing statements and other documents re-
quired to be recorded or filed in order to perfect and protect the
ownership interest of the Purchaser in and to the Receivables against
all creditors of and purchasers from the Seller will have been duly
filed in each filing office necessary for such purpose and all filing
fees and taxes, if any, payable in connection with such filings shall
have been paid in full.
(e) Accuracy of Information. All information heretofore
furnished by the Seller to the Purchaser, the Agent, Enterprise and
any Bank Investor for purposes of or in connection with this Agreement
or any transaction contemplated hereby is, and all such information
hereafter furnished by the Seller to the Purchaser, the Agent,
Enterprise and any Bank Investor will be, true and accurate in every
material respect, on the date such information is stated or certified.
(f) Tax Status. The Seller has filed all material tax re-
turns (federal, state and local) required to be filed and has paid or
made adequate provision for the payment of all taxes, assessments and
other governmental charges.
(g) Action, Suits. Except as set forth in this Agreement,
there are no actions, suits or proceedings pending, or to the knowl-
edge of the Seller threatened, against or affecting the Seller or any
Affiliate of the Seller or their respective properties, in or before
any court, arbitrator or other body, which may, individually or in the
aggregate, have a Material Adverse Effect.
(h) Place of Business. The principal place of business and
chief executive office of the Seller is located at Jackson,
Mississippi, and the offices where the Seller keeps all its Records,
are located at the address(es) described on Exhibit C hereto or such
other locations notified to the Purchaser in accordance with this
Agreement in jurisdictions where all action required by the terms of
this Agreement has been taken and completed.
(i) Good Title. Upon the sale of the Receivables and
related property to the Purchaser pursuant to this Agreement, the
Purchaser shall acquire a valid and perfected first priority ownership
interest in each Receivable (and in the Related Security, Collections
and Proceeds with respect thereto) that exists on the date of this
Agreement and in each Receivable thereafter owned by the Seller and in
the Related Security, Collections and Proceeds with respect thereto
until the Termination Date in each case free and clear of any Adverse
Claim.
(j) Tradenames, Etc. As of the date hereof: (i) the
Seller's chief executive office is located at the address for notices
set forth in Section 9.3; (ii) the Seller has only the subsidiaries
and divisions listed on Exhibit D hereto; and (iii) the Seller has,
within the last five (5) years, operated only under the tradenames
identified in Exhibit D hereto, and, within the last five (5) years,
has not changed its name, merged with or into or consolidated with any
other corporation or been the subject of any proceeding under Title
11, United States Code (Bankruptcy), except as disclosed in Exhibit D
hereto.
(k) Nature of Receivables. Each Receivable (x) represented
by the Seller to be an Eligible Receivable, or (y) included in the
calculation of the Net Receivables Balance in fact satisfies at such
time the definition of "Eligible Receivable" set forth in the Transfer
Agreement and is an "eligible asset" as defined in Rule 3a-7 under the
Investment Company Act of 1940, as amended.
(l) Amount of Receivables. As of the Cut-Off Date, the
aggregate Outstanding Principal Balance of the Receivables in exis-
tence was at least $115,600,518.00.
(m) Credit Guidelines. Since January 9, 1997 there have
been no material changes in the Credit Guidelines other than as
permitted hereunder and under the Transfer Agreement. Since such
date, no material adverse change has occurred in the overall rate of
collection of the Receivables.
(n) Collections and Servicing. Since November 2, 1996,
there has been no material adverse change in the ability of the Seller
to service and collect the Receivables.
(o) Not an Investment Company. The Seller is not, and is
not controlled by, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or is exempt from all
provisions of such Act.
(p) ERISA. Each of the Seller and its ERISA Affiliates is
in compliance in all material respects with ERISA and no lien exists
in favor of the Pension Benefit Guaranty Corporation on any of the Re-
ceivables.
(q) Lock-Box Accounts. The names and addresses of all the
Lock-Box Banks, together with the account numbers of the Lock-Box
Accounts at such Lock-Box Banks, are specified in Exhibit C to the
Transfer Agreement (or at such other Lock-Box Banks and/or with such
other Lock-Box Accounts as have been notified to the Purchaser and the
Agent and for which Lock-Box Agreements have been executed in accor-
dance with Section 2.8(b) of the Transfer Agreement and delivered to
the Servicer). All Obligors have been instructed to make payment to a
Lock-Box Account and only Collections are deposited into the Lock-Box
Accounts.
(r) Bulk Sales. No transaction contemplated by this
Agreement requires compliance with any bulk sales act or similar law.
(s) Preference; Voidability. The Seller warrants that the
conveyance of the applicable Receivables and Collections and Related
Security to the Purchaser, and each such conveyance, shall not have
been made for or on account of an antecedent debt owed by the Seller
to the Purchaser and no such transfer is or may be voidable under any
Section of the Bankruptcy Reform Act of 1978 (11 U.S.C. Section 101 et
seq.), as amended.
SECTION 4.2. Reaffirmation of Representations and Warran-
ties by the Seller; Notice of Breach. On each sale date, the Seller,
by accepting the proceeds of such sale, shall be deemed to have certi-
fied that all representations and warranties described in Section 4.1
are true and correct on and as of such day as though made on and as of
such day. The representations and warranties set forth in Section 4.1
shall survive the conveyance of the Receivables to the Purchaser, and
termination of the rights and obligations of the Purchaser and the
Seller under this Agreement. Upon discovery by the Purchaser or the
Seller of a breach of any of the foregoing representations and war-
ranties, the party discovering such breach shall give prompt written
notice to the other within three Business Days of such discovery.
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ARTICLE V
COVENANTS OF THE SELLER
SECTION 5.1. Covenants of the Seller. The Seller hereby
covenants and agrees with the Purchaser that, for so long as this
Agreement is in effect, and until all Receivables, an interest in
which has been sold to the Purchaser pursuant hereto, shall have been
paid in full or written-off as uncollectible, and all amounts owed by
the Seller pursuant to this Agreement have been paid in full, unless
the Purchaser otherwise consents in writing, the Seller covenants and
agrees as follows:
(a) Conduct of Business. The Seller will, and will cause
each of its Subsidiaries to, carry on and conduct its business in sub-
stantially the same manner and in substantially the same fields of
enterprise as it is presently conducted and do all things necessary to
remain duly incorporated, validly existing and in good standing as a
domestic corporation in its jurisdiction of incorporation and will
maintain all requisite authority to conduct its business in each
jurisdiction in which its business is conducted.
(b) Compliance with Laws. The Seller will, and will cause
each of its Subsidiaries to, comply in all material respects with all
laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it or its properties may be subject.
(c) Furnishing of Information and Inspection of Records.
The Seller will furnish to the Purchaser from time to time such infor-
mation with respect to the Receivables as the Purchaser may reasonably
request, including, without limitation, listings identifying the
Obligor and the Outstanding Principal Balance for each Receivable.
The Seller will at any time and from time to time during regular busi-
ness hours permit the Purchaser, or its agents or representatives, (i)
to examine and make copies of and abstracts from all Records and (ii)
to visit the offices and properties of the Seller for the purpose of
examining such Records, and to discuss matters relating to Receivables
or the Seller's performance hereunder with any of the officers, direc-
tors, employees or independent public accountants of the Seller having
knowledge of such matters.
(d) Keeping of Records and Books of Account. The Seller
will maintain a system of accounting established and administered in
accordance with generally accepted accounting principles, consistently
applied, and will maintain and implement administrative and operating
procedures (including, without limitation, an ability to recreate
records evidencing Receivables in the event of the destruction of the
originals thereof), and keep and maintain, all documents, books,
records and other information reasonably necessary or advisable for
the collection of all Receivables (including, without limitation,
records adequate to permit the daily identification of each new
Receivable and all Collections of and adjustments to each existing
Receivable). The Seller will give the Purchaser and the Agent notice
of any material change in the administrative and operating procedures
of the Seller referred to in the previous sentence.
(e) Performance and Compliance with Receivables and
Accounts. The Seller at its expense will timely and fully perform and
comply with all material provisions, covenants and other promises re-
quired to be observed by it under the Accounts related to the Receiv-
ables.
(f) Credit and Collection Policies. The Seller will comply
in all material respects with the Credit Guidelines in regard to each
Receivable and the related Account.
(g) Collections. The Seller shall instruct all Obligors to
cause all Collections to be deposited directly to a Lock-Box Account.
(h) Collections Received. The Seller shall hold in trust,
and deposit, immediately, but in any event not later than the close of
business on the second Business Day following its receipt thereof, to
a Lock-Box Account all Collections received from time to time by the
Seller.
(i) Sale Treatment. The Seller agrees to treat this
conveyance for all purposes (including, without limitation, tax and
financial accounting purposes) as a sale and, to the extent any such
reporting is required, shall report the transactions contemplated by
this Agreement on all relevant books, records, tax returns, financial
statements and other applicable documents as a sale of the Receivables
to the Purchaser.
(j) ERISA. The Seller shall promptly give the Purchaser
written notice upon becoming aware that the Seller or any of its
Subsidiaries is not in compliance in all material respects with ERISA
or that any ERISA lien on any of the Receivables exists.
SECTION 5.2. Negative Covenants of the Seller. During the
term of this Agreement, unless the Agent and the Purchaser shall
otherwise consent in writing:
(a) No Sales, Liens, Etc. Except as otherwise provided
herein, the Seller will not sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any
Adverse Claim upon (or the filing of any financing statement) or with
respect to (x) any of the Receivables, the Related Security or
Collections, (y) any goods (other than inventory), the sale of which
may give rise to any Receivable, Related Security or Collections (sub-
ject, in each case with respect to Related Security constituting re-
turned inventory, to the applicable provisions of Section 9-306 of the
Relevant UCC) or (z) upon or with respect to any account which concen-
trates in a Lock-Box Bank (including any Lock-Box Account) to which
any Collections of any Receivable are sent, or, in each case, assign
any right to receive income in respect thereof. The Seller shall, and
will cause each of its Subsidiaries to, specifically exclude from the
property subject to any Adverse Claim granted on inventory any and all
accounts receivable generated by sales of such inventory and the
proceeds thereof and shall provide, upon the Purchaser's request, evi-
dence satisfactory to the Purchaser that any such Adverse Claim (and
each related UCC financing statement or other related filing) express-
ly excludes any such accounts receivable. The Seller will provide the
Purchaser and the Agent with a copy of any inventory financing agree-
ment at least three Business Days prior to the effectiveness thereof.
(b) No Extension or Amendment of Receivables. The Seller
will not extend, amend or otherwise modify the terms of any Receiv-
able, or amend, modify or waive any term or condition of any Account
related thereto, except as provided in Sections 5.2 and 6.2 of the
Transfer Agreement.
(c) No Change in Business or Credit Guidelines. Except as
provided in the Transfer Agreement, the Seller will not make any
change in the character of its business or in the Credit Guidelines,
which change might, in either case, impair the collectability of any
substantial portion of the Receivables or otherwise result in a
Material Adverse Effect.
(d) Change in Payment Instructions to Obligors. The Seller
will not add or terminate, or make any change to, any Lock-Box
Account, except in accordance with the Transfer Agreement.
(e) Deposits to Lock-Box Accounts. The Seller will not
deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any Lock-Box Account, cash or cash proceeds other than
Collections of Receivables.
(f) Change of Name, Etc. The Seller shall not change its
name, identity or structure or location of its chief executive office,
unless at least ten (10) days prior to the effective date of any such
change the Seller delivers to the Purchaser and the Agent (i) such
documents, instruments or agreements, including, without limitation,
appropriate financing statements under the Relevant UCC, executed by
the Seller necessary to reflect such change and to continue the
perfection of the Purchaser's and any assignee's interest in the
Receivables and (ii) new or revised Lock-Box Agreements which reflect
such change and enable the Agent to exercise its rights under Section
2.8 of the Transfer Agreement.
(g) Separate Business. The Seller shall not: (i) fail to
maintain separate books, financial statements, accounting records and
other corporate documents from those of the Purchaser, (ii) commingle
any of its assets or the assets of any of its Affiliates with those of
the Purchaser, (iii) pay from its own assets any obligation or
indebtedness of any kind incurred by the Purchaser, (iv) directly, or
through any of its Affiliates, borrow funds or accept credit or
guaranties from the Purchaser except pursuant to this Agreement in
connection with the purchase of the Receivables.
SECTION 5.3. Indemnification. The Seller agrees to indem-
nify, defend and hold the Purchaser harmless from and against any and
all loss, liability, damage, judgment, claim, deficiency, or expense
(including interest, penalties, reasonable attorneys' fees and amounts
paid in settlement) to which the Purchaser or any assignee thereof may
become subject insofar as such loss, liability, damage, judgment,
claim, deficiency, or expense arises out of or is based upon a breach
by the Seller of its representations, warranties and covenants con-
tained herein, or any information certified in any schedule or
certificate delivered by the Seller hereunder, being untrue in any
material respect at any time. The obligations of the Seller under
this Section 5.3 shall be considered to have been relied upon by the
Purchaser, Enterprise and the Agent and shall survive the execution,
delivery, performance and termination of this Agreement, regardless of
any investigation made by the Purchaser, Enterprise or the Agent or on
behalf of any of them.
ARTICLE VI
REPURCHASE OBLIGATION
SECTION 6.1. Mandatory Repurchase.
(a) Breach of Warranty. If on any day any Receivable,
which has been sold by the Seller hereunder and which has been
reported by the Seller as an Eligible Receivable, shall fail to meet
the conditions set forth in the definition of "Eligible Receivable"
(except to the extent such conditions expressly relate to an earlier
date) or for which any representation or warranty made herein in
respect of such Receivable shall no longer be true, the Seller shall
be deemed to have received on such day a Collection of such Receivable
in full and shall on such day pay to the Purchaser an amount equal to
the aggregate Outstanding Principal Balance of such Receivable;
provided that, prior to the Termination Date, such amount may be paid
by a reduction in the Purchase Price paid to the Seller on the next
occurring Purchase Date, unless the Purchaser is required to make a
payment in respect of such breach pursuant to the Transfer Agreement.
(b) Reconveyance Under Certain Circumstances. The Seller
agrees that, with respect to any Receivable sold hereunder, in the
event of a breach of any of the representations and warranties set
forth in Sections 4.1(e), 4.1(g), 4.1(h), 4.1(j), 4.1(l), 4.1(o),
4.1(p) or 4.1(q), the Seller shall accept the reconveyance of such
Receivable upon receipt by the Seller of notice given in writing by
the Purchaser and the Seller's failure to cure such breach within
thirty (30) days (or, in the case of representations and warranties
found in Sections 4.1(d), 4.1(i) or 4.1(t), within three (3) days) of
such notice. In the event of a reconveyance under this Section
6.1(b), the Seller shall pay to the Purchaser in immediately available
funds on such 30th day (or third day, if applicable) an amount equal
to the Outstanding Principal Balance of any such Receivable; provided
that, prior to the Termination Date, such amount may be paid by a
reduction in the Purchase Price paid to the Seller on the next
occurring Purchase Date, unless the Purchaser is required to make a
payment in respect of such breach pursuant to the Transfer Agreement.
SECTION 6.2. Dilutions, Etc. The Seller agrees that if on
any day the Outstanding Principal Balance of a Receivable sold by the
Seller hereunder is either (x) reduced as a result of any defective,
rejected or returned merchandise or services, any discount, credit,
rebate, dispute, warranty claim, repossessed or returned goods,
chargeback, allowance or any billing adjustment, or (y) reduced or
canceled as a result of a setoff or offset in respect of any claim by
any Person (whether such claim arises out of the same or a related
transaction or an unrelated transaction) or (z) any other downward
adjustments to the balance of such Receivable without receiving
Collections therefor and prior to such Receivable becoming a Defaulted
Receivable, then the Seller shall be deemed to have received on such
day a collection of such Receivable in the amount of such reduction,
cancellation or payment made by the Obligor and shall on such day pay
to the Purchaser an amount equal to such reduction or cancellation;
provided that, prior to the Termination Date, such amount may be paid
by a reduction in the Purchase Price paid to the Seller on the next
occurring Purchase Date, unless the Purchaser is required to make a
payment in respect of such breach pursuant to the Transfer Agreement.
SECTION 6.3 No Recourse. Except as otherwise provided in
this Article VI, the purchase and sale of the Receivables under this
Agreement shall be without recourse to the Seller.
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ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1. Conditions to the Purchaser's Obligations
Regarding Receivables. The obligations of the Purchaser to purchase
the Receivables on the Closing date and any Purchase Date shall be
subject to the satisfaction of the following conditions:
(a) All representations and warranties of the Seller con-
tained in this Agreement shall be true and correct on the Closing Date
and on each Purchase Date thereafter with the same effect as though
such representations and warranties had been made on such date;
(b) All information concerning the Receivables provided to
the Purchaser shall be true and correct in all material respects as of
the Closing Date, in the case of any Receivables existing on the Clos-
ing Date, or the Purchase Date, in the case of any Receivables created
after the Closing Date;
(c) The Seller shall have substantially performed all other
obligations required to be performed by the provisions of this Agree-
ment;
(d) The Seller shall have filed or caused to be filed the
financing statement(s) required to be filed pursuant to Section
2.1(b);
(e) All corporate and legal proceedings and all instruments
in connection with the transactions contemplated by this Agreement
shall be satisfactory in form and substance to the Purchaser, and the
Purchaser shall have received from the Seller copies of all documents
(including, without limitation, records of corporate proceedings)
relevant to the transactions herein contemplated as the Purchaser may
reasonably have requested; and
(f) On the Closing Date, the Seller shall deliver to the
Purchaser and the Agent a Cycle Certificate as of the Cut-Off Date.
ARTICLE VIII
TERM AND TERMINATION
SECTION 8.1. Term. This Agreement shall commence as of the
date of execution and delivery hereof and shall continue in full force
and effect until the date following the earlier of (i) the date desig-
nated by the Purchaser or the Seller as the termination date at any
time following sixty (60) day's written notice to the other (with a
copy thereof to the Agent), (ii) the date on which the Agent declares
a Termination Date pursuant to Section 7.2 of the Transfer Agreement,
(iii) the day on which a Reinvestment Termination Date shall occur
under the Transfer Agreement unless the Transferred Interest shall
have been assigned (or concurrently is so assigned) to the Bank In-
vestors under Section 10.7 of the Transfer Agreement, (iv) upon the
occurrence of an Event of Bankruptcy with respect to either the Pur-
chaser or the Seller, (v) the close of business on the third Business
Day following a conveyance of Receivables to the Purchaser for which
the Purchaser does not pay the Purchase Price in accordance with the
provisions hereof, or (vi) the date on which either the Purchaser or
the Seller becomes unable for any reason to purchase or re-purchase
any Receivable in accordance with the provisions of this Agreement or
defaults on its obligations hereunder, which default continues
unremedied for more than thirty (30) days after written notice (any
such date being a "Termination Date"); provided, however, that the
termination of this Agreement pursuant to this Section 8.1 hereof
shall not discharge any Person from any obligations incurred prior to
such termination, including, without limitation, any obligations to
make any payments with respect to the interest of the Purchaser in any
Receivable sold prior to such termination.
SECTION 8.2. Effect of Termination. Following the
termination of this Agreement pursuant to Section 8.1, the Seller
shall not sell, and the Purchaser shall not purchase, any Receivables.
No termination or rejection or failure to assume the executory obliga-
tions of this Agreement in any Event of Bankruptcy with respect to the
Seller or the Purchaser shall be deemed to impair or affect the
obligations pertaining to any executed sale or executed obligations,
including, without limitation, pre-termination breaches of represen-
tations and warranties by the Seller or the Purchaser. Without
limiting the foregoing, prior to termination, the failure of the
Seller to deliver computer records of Receivables or any reports
regarding the Receivables shall not render such transfer or obligation
executory, nor shall the continued duties of the parties pursuant to
Article V or Section 9.1 of this Agreement render an executed sale
executory.
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ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1. Amendment. This Agreement and the rights and
obligations of the parties hereunder may not be changed orally, but
only by an instrument in writing signed by the Purchaser and the
Seller and consented to in writing by the Agent. Any reconveyance
executed in accordance with the provisions hereof shall not be con-
sidered amendments to this Agreement.
SECTION 9.2. GOVERNING LAW; Submission to Jurisdiction.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF MISSISSIPPI.
(b) The parties hereto hereby submit to the nonexclu-
sive jurisdiction of the United States District Court for the Southern
District of New York and of any New York state court sitting in The
City of New York for purposes of all legal proceedings arising out of
or relating to this Agreement or the transactions contemplated hereby.
Each party hereto hereby irrevocably waives, to the fullest extent it
may effectively do so, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court
has been brought in an inconvenient forum. Nothing in this Section
9.2 shall affect the right of the Purchaser to bring any other action
or proceeding against the Seller or its property in the courts of
other jurisdictions.
SECTION 9.3. Notices. Except as provided below, all
communications and notices provided for hereunder shall be in writing
(including telecopy or electronic facsimile transmission or similar
writing) and shall be given to the other party at its address or
telecopy number set forth below or at such other address or telecopy
number as such party may hereafter specify for the purposes of notice
to such party. Each such notice or other communication shall be
effective (i) if given by telecopy, when such telecopy is transmitted
to the telecopy number specified in this Section 9.3 and confirmation
is received, (ii) if given by mail three Business Days following such
posting, postage prepaid, U.S. certified or registered, (iii) if given
by overnight courier, one Business Day after deposit thereof with a
national overnight courier service, or (iv) if given by any other
means, when received at the address specified in this Section 9.3.
(a) in the case of the Purchaser:
Proffitt's Credit Corporation
300 South Fourth Street, Suite 1100
Las Vegas, Nevada 89101
Attn: Douglas E. Coltharp, President
Telephone: (702) 598-3738
Telecopy: (702) 598-3651
with a copy to Proffitt's, Inc.:
Proffitt's Inc.
3455 Highway 80 West
Jackson, Mississippi 39209
Telephone: (601) 968-4394
Telecopy: (601) 968-4354
Attn: Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
with a copy to:
NationsBank, N.A.
NationsBank Corporate Center
100 North Tryon Street
NC1-007-10-07
Charlotte, NC 28255
Attention: Michelle M. Heath NC1-007-10-07
Structured Finances
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
(b) in the case of the Seller:
MCRAE'S, INC.
3455 Highway 80 West
Jackson, Mississippi 39209
Telephone: (601) 968-4394
Telecopy: (601) 968-4354
Attn: Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
(c) in the case of the Servicer:
MCRAE'S, INC.
3455 Highway 80 West
Jackson, Mississippi 39209
Telephone: (601) 968-4394
Telecopy: (601) 968-4354
Attn: Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
(with a copy to Proffitt's, Inc.)
or, as to each party, at such other address as shall be designated by
such party in a written notice to each other party.
SECTION 9.4. Severability of Provisions. If any one or
more of the covenants, agreements, provisions or terms of this Agree-
ment or any other Conveyance Paper shall for any reason whatsoever be
held invalid, then such covenants, agreements, provisions, or terms
shall be deemed severable from the remaining covenants, agreements,
provisions, or terms of this Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Agreement.
SECTION 9.5. Assignment. This Agreement may not be
assigned by the parties hereto, except that the Purchaser may assign
its rights hereunder pursuant to the Transfer Agreement to the Agent,
for the benefit of Enterprise and the Bank Investors, and that Enter-
prise may assign any or all of its rights to any Liquidity Provider.
The Purchaser hereby notifies (and the Seller hereby acknowledges
that) the Purchaser, pursuant to the Transfer Agreement, has assigned
its rights hereunder to the Agent. All rights of the Purchaser here-
under may be exercised by the Agent or its assignees, to the extent of
their respective rights pursuant to such assignments.
SECTION 9.6. Further Assurances. The Purchaser and the
Seller agree to do and perform, from time to time, any and all acts
and to execute any and all further instruments required or reasonably
requested by the other party more fully to effect the purposes of this
Agreement, including, without limitation, the execution of any
financing statements or continuation statements or equivalent
documents relating to the Receivables for filing under the provisions
of the Relevant UCC or other laws of any applicable jurisdiction.
SECTION 9.7. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Purchaser, the
Seller or the Agent, any right, remedy, power or privilege hereunder,
shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privilege provided by law.
SECTION 9.8. Counterparts. This Agreement may be executed
in two or more counterparts including telecopy transmission thereof
(and by different parties on separate counterparts), each of which
shall be an original, but all of which together shall constitute one
and the same instrument.
SECTION 9.9. Binding Effect; Third-Party Beneficiaries.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
The Agent, on behalf of Enterprise and the Bank Investors, and any Li-
quidity Provider is intended by the parties hereto to be a third-party
beneficiary of this Agreement.
SECTION 9.10. Merger and Integration. Except as
specifically stated otherwise herein, this Agreement sets forth the
entire understanding of the parties relating to the subject matter
hereof, and all prior understandings, written or oral, are superseded
by this Agreement. This Agreement may not be modified, amended,
waived or supplemented except as provided herein.
SECTION 9.11. Headings. The headings herein are for
purposes of reference only and shall not otherwise affect the meaning
or interpretation of any provision hereof.
SECTION 9.12. Exhibits. The schedules and exhibits
referred to herein shall constitute a part of this Agreement and are
incorporated into this Agreement for all purposes.
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IN WITNESS WHEREOF, the Purchaser, the Seller and the
Servicer each have caused this Receivables Purchase Agreement to be
duly executed by their respective officers as of the day and year
first above written.
MCRAE'S, INC.,
as Seller and Servicer
By:
Name:
Title:
PROFFITT'S CREDIT CORPORATION,
as Purchaser
By:
Name:
Title:
Acknowledged and agreed as
of the date first above written:
ENTERPRISE FUNDING CORPORATION
By:_____________________________
Name:
Title:
NATIONSBANK, N.A., as Agent
By:_____________________________
Name:
Title:
EXHIBIT A
[FORM OF MONTHLY REPORT]
EXHIBIT B
FORM OF SUBORDINATED NOTE
__________________
_________ __, 199_
FOR VALUE RECEIVED, the undersigned, PROFFITT'S CREDIT
CORPORATION, a Nevada corporation (the "Maker"), hereby promises to
pay to the order of MCRAE'S, INC. (the "Payee"), on _________, ____
or earlier as provided for in the Receivables Purchase Agreement
dated as of the date hereof between the Maker and the Payee (as
such agreement may from time to time be amended, supplemented or
otherwise modified and in effect, the "Receivables Purchase Agree-
ment"), the lesser of the principal sum of One Hundred and Fifty
Million Dollars ($150,000,000.00) or the aggregate unpaid principal
amount of all Advances to the Maker from the Payee pursuant to the
terms of the Receivables Purchase Agreement, in lawful money of the
United States of America in immediately available funds, and to pay
interest from the date thereof on the principal amount hereof from
time to time outstanding, in like funds, at said office, at the
rate per annum set forth in the Receivables Purchase Agreement and
shall be payable in arrears on the first day of each calendar month
(or if any such day is not a Business Day, on the succeeding Busi-
ness Day).
The Maker hereby waives diligence, presentment, demand,
protest and notice of any kind whatsoever. The non-exercise by the
holder hereof of any of its rights hereunder in any particular
instance shall not constitute a waiver thereof in that or any
subsequent instance.
All borrowings evidenced by this Subordinated Note and
all payments and prepayments of the principal hereof and interest
hereon and the respective dates thereof shall be endorsed by the
holder hereof on the schedule attached hereto and made a part
hereof, or on a continuation thereof which shall be attached hereto
and made a part hereof, or otherwise recorded by such holder in its
internal records; provided, however, that the failure of the holder
hereof to make such a notation or any error in such a notation
shall not in any manner affect the obligation of the Maker to make
payments of principal and interest in accordance with the terms of
this Subordinated Note and the Receivables Purchase Agreement.
The Maker shall have the right to prepay and, subject to
the limitations set forth in the Receivables Purchase Agreement,
reborrow Advances made to it without penalty or premium.
This Subordinated Note is the Subordinated Note referred
to in the Receivables Purchase Agreement, which, among other
things, contains provisions for the subordination of this
Subordinated Note to the rights of certain parties under the
Transfer Agreement, all upon the terms and conditions therein
specified.
This Note shall be governed by, and construed in
accordance with, the laws of the State of Mississippi.
PROFFITT'S CREDIT CORPORATION
By:
Name:
Title:
<TABLE>
Advances and Payments
<CAPTION>
<S> <C> <C> <C> <C>
Amount of Payments Unpaid Principal Name of Person
Date Advance Principal/Interest Balance of Note Making Notation
1/15/97 $25,352,507.64
</TABLE>
EXHIBIT C
LOCATION OF RECORDS, PRINCIPAL PLACE OF BUSINESS, ETC.
3455 Highway 80 West
Jackson, Mississippi 39209
EXHIBIT D
TRADENAMES, ETC.
None
=====================================================================
RECEIVABLES PURCHASE AGREEMENT
between
PARISIAN SERVICES, INC.
and
PARISIAN, INC.,
each, a Seller
and
PROFFITT'S CREDIT CORPORATION,
as Purchaser
and
MCRAE'S, INC.
as Servicer
Dated as of January 30, 1997
=====================================================================
RECEIVABLES PURCHASE AGREEMENT
This RECEIVABLES PURCHASE AGREEMENT, dated as of January 30,
1997 (as amended, supplemented or otherwise modified and in effect from
time to time, this "Agreement"), between PARISIAN SERVICES, INC., an
Alabama corporation, PARISIAN, INC., an Alabama corporation, each a
seller (in such capacity, a "Seller" and together the "Sellers"),
PROFFITT'S CREDIT CORPORATION, a Nevada corporation, as purchaser (the
"Purchaser"), and MCRAE'S, INC., a Mississippi corporation, as servicer
("McRae's").
W I T N E S S E T H :
WHEREAS, the Purchaser desires to purchase on the Closing Date
from Parisian Services, Inc. and from Parisian, Inc. any and all exist-
ing accounts receivable and to purchase from time to time thereafter
certain accounts receivable generated in the normal course of Parisian,
Inc.'s business pursuant to certain revolving consumer credit card ac-
counts;
WHEREAS, Parisian Services, Inc. desires to sell and assign to
the Purchaser as of the Closing Date all of its existing accounts
receivable and certain related obligations and liabilities and the Pur-
chaser has agreed to acquire from Parisian Services, Inc. all of such
accounts receivable and those certain related obligations and
liabilities as described herein;
WHEREAS, Parisian, Inc. desires to sell and assign to the
Purchaser all of its existing accounts receivable as of the Closing Date
and to sell and assign to the Purchaser from time to time thereafter
certain accounts receivable upon the terms and conditions hereinafter
set forth;
WHEREAS, Parisian Services, Inc. has agreed to merge with and
into Parisian, Inc. and Parisian, Inc. has agreed to assume thereby and
hereby all of the remaining obligations and liabilities of Parisian
Services, Inc., including, without limitation, certain liabilities and
obligations in respect of the accounts receivable transferred hereunder
by Parisian Services, Inc. to the Purchaser;
WHEREAS, the Servicer has agreed to service, upon the terms
and conditions described herein, the accounts receivable sold to the
Purchaser by the Sellers hereunder;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is hereby
agreed by and between the Purchaser and the Sellers as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. All capitalized terms used herein
shall have the meanings specified herein or, if not so specified, the
meaning specified in, or incorporated by reference into, the Transfer
Agreement, and shall include in the singular number the plural and in
the plural number the singular:
"Advance" shall have the meaning specified in Section 3.2(a).
"Agent" shall mean NationsBank, N.A., as agent on behalf of
Enterprise and the Bank Investors pursuant to the Transfer Agreement.
"Bank Investors" shall have the meaning specified in the
Transfer Agreement.
"Closing Date" shall mean January 30, 1997.
"Eligible Receivable" shall have the meaning specified in the
Transfer Agreement.
"Enterprise" shall mean Enterprise Funding Corporation, a
Delaware corporation, and its successors and assigns.
"Event of Bankruptcy" shall have the meaning specified in the
Transfer Agreement.
"Hess Specialty Department Store" shall mean Hess Specialty
Department Store, LLC, an Ohio limited liability company (formerly, Hess
Specialty Department Store, Inc., an Ohio corporation), together with
its successors and assigns.
"McRae's" shall mean McRae's, Inc., a Mississippi corporation,
and its successors and assigns.
"Outstanding Principal Balance" shall have the meaning
specified in the Transfer Agreement.
"Promissory Note" shall have the meaning assigned in Section
3.2(a) hereof.
"Purchase Date" shall have the meaning assigned in Section
3.2(b) hereof.
"Purchase Rate" shall mean the percentage equivalent of the
decimal representation of the following expression:
(1.00 + APY) minus (BDA + SF + PCF + OE + RF)
where:
APY = average portfolio yield of the applicable Seller
(expressed as the decimal equivalent of a percentage) as
reasonably determined over the preceding twelve months
(or such other period reasonably determined by the Pur-
chaser);
BDA = an allowance for bad debts, based on, among other
relevant factors, historical rates for the previous
twelve months (or such other period reasonably determined
by the Purchaser);
SF = a Servicer fee equal to 2.00% per annum;
PCF = the Purchaser's cost of funds, as calculated from time to
time, equal to the sum of (i) the product of the Maximum
Buyers' Percentage multiplied by the prime rate (as
published in the Money Rates Section of The Wall Street
Journal) plus (ii) the product of (x) 20% (to be adjusted
from time to time based on changes to the Purchaser's
reasonably estimated marginal cost of funds) multiplied
by (y) the sum of one minus the Maximum Buyers' Percent-
age;
OE = the percentage equivalent of the fraction the numerator
of which is the Purchaser's annualized estimate of
projected operating expenses for the next twelve months
and the denominator of which is the estimated Outstanding
Principal Balance of Receivables expected to be sold in
the next twelve months; and
RF = a contingency risk factor based on industry and economic
considerations, as determined by the Purchaser in its
reasonable discretion and as agreed upon between the
Purchaser and the applicable Seller.
"Purchase Period" shall mean, with respect to Receivables sold
by the Sellers to the Purchaser after the Closing Date, the Collection
Period reported upon in the most recent Investor Report delivered after
the Closing Date.
"Purchase Price" shall have the meaning set forth in Section
3.1 hereof.
"Purchaser" shall mean Proffitt's Credit Corporation, a Nevada
corporation, and its successors and assigns.
"Receivable" shall mean, for purposes of this Agreement, the
indebtedness owed to a Seller by an Obligor under an Account (whether
such Account is in existence as of the Closing Date or thereafter creat-
ed), whether constituting an account, chattel paper, instrument or
general intangible, arising in connection with the sale of merchandise
or services, and which, in all cases shall include, the right to payment
of any Finance Charges and other obligations of such Obligor with re-
spect thereto.
"Related Security" shall have the meaning specified in the
Transfer Agreement.
"Relevant UCC" shall mean the Uniform Commercial Code as in
effect in the States of New York and Mississippi, as applicable.
"Secured Obligations" shall have the meaning set forth in
Section 2.1(d) hereof.
"Servicer" shall mean McRae's, and, without limiting the
obligation of McRae's as Servicer hereunder, shall include each Person
to whom McRae's delegates servicing functions pursuant to Section 2.2
hereof.
"Subordinated Note" shall have the meaning specified in
Section 3.2(b).
"Termination Date" shall have the meaning specified in Section
8.1.
"Transfer Agreement" shall mean the Transfer and
Administration Agreement, dated as of January 15, 1997, by and among the
Purchaser, McRae's, Inc., as Servicer, Proffitt's, Inc., as Servicer
Guarantor, Enterprise Funding Corporation and NationsBank N.A., as Agent
and Bank Investor, as such agreement may be amended, modified or supple-
mented from time to time.
SECTION 1.2 Other Terms. All accounting terms not specifi-
cally defined herein shall be construed in accordance with generally
accepted accounting principles. All terms used in Article 9 of the
Relevant UCC, and not specifically defined herein, are used herein as
defined in such Article 9.
SECTION 1.3 Computation of Time Periods. Unless otherwise
stated in this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means "from
and including" and the words "to" and "until" each means "to but
excluding."
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ARTICLE II
PURCHASE, CONVEYANCE AND SERVICING OF RECEIVABLES
SECTION 2.1 Sale. (a) Upon the terms and subject to the
conditions set forth herein, the Sellers hereby sell, assign, transfer
and convey to the Purchaser, and the Purchaser hereby purchases from the
Sellers, on the terms and subject to the conditions specifically set
forth herein, all of the Sellers' right, title and interest, whether now
owned or hereafter acquired, in, to and under the Receivables outstand-
ing on the Closing Date and thereafter owned by the Sellers, through any
Termination Date (but not thereafter), together with all Related Secu-
rity and Collections with respect thereto and all proceeds of the fore-
going. The foregoing sale, assignment, transfer and conveyance does not
constitute an assumption by the Purchaser of any obligations of the
Sellers or any other Person to Obligors or to any other Person in con-
nection with the Receivables or under any Related Security, Account
Agreement or other agreement and instrument relating to the Receivables.
With respect to the Closing Date, the Sellers hereby sell all Receiv-
ables that exist as of the close of business on the Parisian Cut-Off
Date. Commencing on the date of effectiveness of the merger of Parisian
Services, Inc. with and into Parisian, Inc., Parisian, Inc. hereby sells
all Receivables created after the close of business on the Parisian Cut-Off
Date.
(b) In connection with the foregoing sale, each Seller agrees
to record and file on or prior to the Closing Date, each at its own ex-
pense, a financing statement or statements with respect to the
Receivables and the other property described in Section 2.1(a) sold by
such Seller hereunder meeting the requirements of applicable state law
in such manner and in such jurisdictions as are necessary to perfect and
protect the interests of the Purchaser created hereby under the Relevant
UCC (subject, in the case of Related Security constituting returned
inventory, to the applicable provisions of Section 9-306 of the Relevant
UCC) against all creditors of and purchasers from the Sellers, and to
deliver either the originals of such financing statements or a file-stamped
copy of such financing statements or other evidence of such
filings to the Purchaser on the Closing Date.
(c) The Sellers agree that from time to time, at no expense
to the Purchaser, they will promptly execute and deliver all instruments
and documents and take all actions as may be necessary or as the
Purchaser may reasonably request in order to perfect or protect the
interest of the Purchaser in the Receivables purchased hereunder or to
enable the Purchaser to exercise or enforce any of its rights hereunder.
Without limiting the foregoing, the Sellers will, in order to accurately
reflect this purchase and sale transaction, execute and file such
financing or continuation statements or amendments thereto or assign-
ments thereof (as permitted pursuant hereto) as may be requested by the
Purchaser, and upon the request of the Purchaser, mark all master data
processing records and other documents with a legend describing the
purchase by the Purchaser of the Receivables and the subsequent transfer
thereof to the Agent pursuant to the Transfer Agreement and stating "THE
RECEIVABLES IN THESE FILES HAVE BEEN ACQUIRED BY AND CONVEYED TO
PROFFITT'S CREDIT CORPORATION AND AN INTEREST THEREIN HAS BEEN ASSIGNED
TO NATIONSBANK, N.A., AS AGENT, FOR THE BENEFIT OF ENTERPRISE FUNDING
CORPORATION AND THOSE CERTAIN BANK INVESTORS PURSUANT TO THE TRANSFER
AND ADMINISTRATION AGREEMENT DATED AS OF JANUARY 15, 1997, AS AMENDED
FROM TIME TO TIME, AMONG PROFFITT'S CREDIT CORPORATION, NATIONSBANK,
N.A., ENTERPRISE FUNDING CORPORATION AND THE OTHER SIGNATORIES NAMED
THEREIN." The Sellers shall, upon request of the Purchaser, obtain such
additional search reports as the Purchaser shall request. To the
fullest extent permitted by applicable law, the Purchaser shall be per-
mitted to sign and file continuation statements and amendments thereto
and assignments thereof without the Sellers' signature. Carbon, photo-
graphic or other reproduction of this Agreement or any financing
statement shall be sufficient as a financing statement.
(d) It is the express intent of the Sellers and the Purchaser
that the conveyance of the Receivables by the Sellers to the Purchaser
pursuant to this Agreement be construed as a sale of such Receivables by
the Sellers to the Purchaser. Further, it is not the intention of the
Sellers and the Purchaser that such conveyance be deemed a grant of a
security interest in the Receivables by the Sellers to the Purchaser to
secure a debt or other obligation of the Sellers. However, in the event
that, notwithstanding the express intent of the parties, the Receivables
are construed to constitute property of the Sellers, then (i) this
Agreement also shall be deemed to be, and hereby is, a security agree-
ment within the meaning of the Relevant UCC; and (ii) the conveyance by
the Sellers provided for in this Agreement shall be deemed to be, and
the Sellers hereby grant to the Purchaser, a security interest in, to
and under all of the Sellers' right, title and interest in, to and under
the Receivables outstanding on the Closing Date and thereafter owned by
a Seller, together with all Related Security and Collections with
respect thereto and all proceeds of the foregoing, to secure the rights
of the Purchaser set forth in this Agreement or as may be determined in
connection therewith by applicable law (collectively, the "Secured Obli-
gations"). The Sellers and the Purchaser shall, to the extent consis-
tent with this Agreement, take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a security interest
in the Receivables, such security interest would be deemed to be a
perfected security interest in favor of the Purchaser under applicable
law and will be maintained as such throughout the term of this
Agreement.
SECTION 2.2 Servicing of Receivables. The servicing, admin-
istering and collection of the Receivables shall be conducted by
McRae's, which hereby agrees to perform, take or cause to be taken all
such action as may be necessary or advisable to collect each Receivable
from time to time, all in accordance with applicable laws, rules and
regulations and with the care and diligence which McRae's employs in
servicing similar receivables for its own account, in accordance with
the Credit Guidelines. With the consent of the Agent and the Purchaser,
McRae's may delegate certain servicing functions to Parisian, Inc.,
however, no such delegation shall relieve McRae's of its obligations
hereunder. The Purchaser hereby appoints the Servicer as its agent to
enforce the Purchaser's rights and interests in, to and under the
Receivables, the Related Security and the Collections with respect
thereto. The Servicer shall hold in trust for the Purchaser, in accor-
dance with its interests, all Records which evidence or relate to the
Receivables or Related Security, Collections and proceeds with respect
thereto. Notwithstanding anything to the contrary contained herein,
from and after the occurrence of a Termination Event, a Parisian
Termination Event or a Servicer Default (each as defined in the Transfer
Agreement), the Agent or Enterprise, shall have the absolute and unlim-
ited right to terminate McRae's servicing activities described in this
Section 2.2 (including therein the activities of any Person to whom
McRae's has delegated servicing functions pursuant to this Section 2.2).
In consideration of the foregoing, the Purchaser agrees to pay the
Servicer a servicing fee of 2.00% per annum on the aggregate Outstanding
Principal Balance of Receivables sold, payable monthly, for its perfor-
mance of the duties and obligations described in this Section 2.2;
provided that any such monthly payment shall be reduced by any amounts
payable in such month by Enterprise or the Bank Investors to the
Servicer, in its capacity as Servicer pursuant to the Transfer Agree-
ment.
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ARTICLE III
CONSIDERATION AND PAYMENT; RECEIVABLES
SECTION 3.1. Purchase Price. The Purchase Price for the
Receivables and related property conveyed on the Closing Date to the
Purchaser (i) by Parisian Services, Inc., as Seller, shall be a dollar
amount equal to $135,583,785 representing the product of (x) the aggre-
gate Outstanding Principal Balance of the Receivables conveyed to the
Purchaser by Parisian Services, Inc. as of the Parisian Cut-Off Date, as
reflected on the Cycle Certificate delivered on the Closing Date and (y)
98%, and (ii) by Parisian, Inc., as Seller, shall be a dollar amount
equal to the product of (x) the aggregate Outstanding Principal Balance
of the Receivables conveyed to the Purchaser by Parisian, Inc. as of the
Parisian Cut-Off Date, as reflected on the Cycle Certificate delivered
on the Closing Date and (y) the Purchase Rate.
The Purchase Price for the Receivables and related property
conveyed on any date after the Closing Date shall be the dollar amount
equal to the product of (i) the aggregate Outstanding Principal Balance
of the Receivables sold during the applicable Purchase Period as
reflected in the applicable Investor Report and (ii) the Purchase Rate
on such date.
SECTION 3.2. Payment of Purchase Price. (a) The Purchase
Price for the Receivables sold by Parisian Services, Inc. on the Closing
Date shall be paid (i) by a payment of $110,000,000 in immediately
available funds, (ii) by the delivery of 242 shares of the common stock
of the Purchaser representing 49.19% of the issued and outstanding
common stock of Proffitt's Credit Corporation having a fair market value
reasonably estimated to be equal to not less than $9,697,211, it being
expressly understood that such shares are to be held, following the
merger of Parisian Services, Inc. with and into Parisian, Inc., by
Parisian, Inc. and (iii) by the assumption by the Purchaser of all of
Parisian Services, Inc.'s current and outstanding obligations under
those certain promissory notes of Parisian Services, Inc., each dated
July 31, 1995 and payable to the order of (x) Parisian, Inc., (y)
Parisian of Tennessee, Inc. and (z) Hess Specialty Department Store,
Limited Liability Company (the successor in interest to Hess Specialty
Department Store, Inc.), (collectively, the "Promissory Note") which
such Promissory Note has an aggregate outstanding principal amount due
equal to not more than $15,886,574 as of the Closing Date.
(b) The Purchase Price for the Receivables sold by Parisian,
Inc. as the Seller on any date after the date hereof (each, a "Purchase
Date") shall be paid either (i) in cash or (ii) if Purchaser does not
have sufficient cash to pay the Purchase Price, by means of (A) an Ad-
vance under the Subordinated Note or (B) with the consent of the Seller,
capital contributed by the Seller to the Purchaser in the form of a con-
tribution of the additional Receivables or (iii) with the consent of the
Seller, any combination of the foregoing. In the event the Purchaser
does not have sufficient cash to pay the Purchase Price due on any
Purchase Date and the Seller is not willing to consent to the payment of
such insufficiency by means of a capital contribution, such insufficien-
cy shall be evidenced by the making of an Advance on such Purchase Date
in an original principal amount equal to such cash shortfall owed to the
Seller, provided, however that (i) at all times prior to December 31,
1997, (x) the amount of Advances made under the Subordinated Note shall
not cause the Purchaser's Net Worth to be less than 8.0% of the highest
aggregate Outstanding Principal Balance of all Eligible Receivables
shown on any Cycle Certificate delivered by the Servicer under the
Transfer Agreement during the preceding twelve months and (y) the
Sellers and the Purchaser agree to act in good faith to minimize the
amount of Advances made under the Subordinated Note so as to cause the
Purchaser's Net Worth to be not less than 10% of the highest aggregate
Outstanding Principal Balance of all Eligible Receivables shown on any
Cycle Certificate delivered by the Servicer under the Transfer Agreement
during the preceding twelve months, and (ii) from and after December 31,
1997, no Advance shall be made if immediately thereafter the Net Worth
of the Purchaser would be less than 10% of the highest aggregate
Outstanding Principal Balance of all Eligible Receivables shown on any
Cycle Certificate delivered by the Servicer under the Transfer Agreement
during the preceding twelve months.
The parties hereto agree that (a) in connection with the
assumption by the Purchaser of the obligations of Parisian Services,
Inc. under the Promissory Note, (b) in connection with the merger of
Parisian Services, Inc. with and into Parisian, Inc., and (c) in
recognition of the succession to and assumption by Parisian, Inc. of all
rights and obligations of each of Parisian of Tennessee, Inc. and Hess
Specialty Department Store pursuant to the merger of each such entity
with and into Parisian, Inc., the Promissory Note and the obligations
thereunder is hereby amended and restated and, together with all future
Advances made by Parisian, Inc. as Seller to the Purchaser, shall be
evidenced by a single subordinated note duly executed on behalf of the
Purchaser in substantially the form of Exhibit B annexed hereto,
delivered and payable to Parisian, Inc., as Seller, in a principal
amount equal to $100,000,000 (the "Subordinated Note"). Parisian, Inc.
is hereby authorized by the Purchaser to endorse on the schedule at-
tached to the Subordinated Note (or a continuation of such schedule
attached thereto and made a part thereof) an appropriate notation
evidencing the date and amount of each Advance, as well as the date and
amount of each payment with respect thereto; provided, however, the
initial aggregate outstanding amount endorsed as having been advanced
under the Subordinated Note shall equal the aggregate outstanding amount
of the obligations owing under the Promissory Note as of the Closing
Date; and provided, further, that the failure of any Person to make such
notation shall not affect any obligations of the Purchaser thereunder.
Any such notation shall be conclusive and binding as to the date and
amount of Advance, or payment of principal or interest thereon, absent
manifest error.
(c) The terms and conditions of the Subordinated Note and all
Advances thereunder shall be as follows:
(i) Repayment of Advances. All amounts paid by the
Purchaser with respect to the Advances shall be allocated first to the
repayment of accrued interest until all such interest is paid, and then
to the outstanding principal amount of the Advances. Subject to the
provisions of this Agreement, the Purchaser may borrow, repay and
reborrow Advances on and after the date hereof and prior to the
termination of this Agreement, subject to the terms, provisions and
limitations set forth herein.
(ii) Interest. The Subordinated Note shall bear
interest from its date on the outstanding principal balance thereof at
a rate per annum equal to one month LIBOR as published in the Money
Rates Section of The Wall Street Journal. Interest on each Advance
shall be computed based on the number of days elapsed in a year of 360
days.
(iii) Sole and Exclusive Remedy/Subordination. The
Purchaser shall be obligated to repay Advances to Parisian, Inc. only to
the extent of funds available to the Purchaser from Collections on the
Receivables and, to the extent that such payments are insufficient to
pay all amounts owing to Parisian, Inc. under the Subordinated Note,
Parisian, Inc. shall not have any claim against the Purchaser for such
amounts and no further or additional recourse shall be available against
Purchaser. The Subordinated Note shall be fully subordinated to any
rights of Enterprise, the Bank Investors and their permitted assigns
pursuant to the Transfer Agreement, and shall not evidence any rights in
the Receivables.
(iv) Offsets, etc. The Purchaser may offset any amount
due and owing by Parisian, Inc. against any amount due and owing by Pur-
chaser to Parisian, Inc. under the terms of the Subordinated Note.
SECTION 3.3. Monthly Report. On each Determination Date,
Parisian, Inc. shall deliver to the Purchaser a report covering the
preceding Collection Period, substantially in the form of the Investor
Report attached as Exhibit E to the Transfer Agreement, showing (i) the
aggregate Purchase Price of Receivables acquired or generated by
Parisian, Inc. in the preceding Collection Period and (ii) the aggregate
Outstanding Principal Balance of such Receivables that are Eligible
Receivables as of the last day of such preceding Collection Period.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Sellers Representations and Warranties. (a)
Representations and Warranties of Parisian Services, Inc. Parisian
Services, Inc., as Seller hereunder, represents and warrants to the Pur-
chaser as of the Closing Date that:
(i) Corporate Existence and Power. Parisian Services, Inc.
is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and
has all corporate power and all material governmental licenses,
authorizations, consents and approvals required to carry on its
business in each jurisdiction in which its business is now con-
ducted. Parisian Services, Inc. is duly qualified to do business
in, and is in good standing in, every other jurisdiction in which
the nature of its business requires it to be so qualified, except
where the failure to be so qualified or in good standing would not
have a Material Adverse Effect.
(ii) Corporate and Governmental Authorization; Contravention.
The execution, delivery and performance by Parisian Services, Inc.
of this Agreement are within Parisian Services, Inc.'s corporate
powers, have been duly authorized by all necessary corporate
action, require no action by or in respect of, or filing with, any
Official Body or official thereof (except for the filing of UCC
financing statements as required by this Agreement), and do not
contravene, or constitute a default under, any provision of
applicable law, rule or regulation or of the Certificate of
Incorporation or Bylaws of Parisian Services, Inc. or of any agree-
ment, judgment, injunction, order, writ, decree or other instrument
binding upon the Seller or result in the creation or imposition of
any Adverse Claim on the assets of Parisian Services, Inc. (except
those created by this Agreement).
(iii) Binding Effect. This Agreement will constitute the
legal, valid and binding obligation of Parisian Services, Inc. en-
forceable against Parisian Services, Inc. in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws affecting the rights of creditors generally.
(iv) Perfection. Immediately preceding the sale of the Re-
ceivables and related property pursuant to this Agreement, Parisian
Services, Inc. was the owner of all of the Receivables purported to
be transferred by Parisian Services, Inc. to the Purchaser
hereunder, free and clear of all Adverse Claims. On or prior to
the date of this Agreement, all financing statements and other
documents required to be recorded or filed in order to perfect and
protect the ownership interest of the Purchaser in and to the
Receivables purported to be transferred by Parisian Services, Inc.
to the Purchaser hereunder against all creditors of and purchasers
from Parisian Services, Inc. will have been duly filed in each
filing office necessary for such purpose and all filing fees and
taxes, if any, payable in connection with such filings shall have
been paid in full.
(v) Accuracy of Information. All information heretofore
furnished by Parisian Services, Inc. to the Purchaser, the Agent,
Enterprise and any Bank Investor for purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and
all such information hereafter furnished by Parisian Services, Inc.
to the Purchaser, the Agent, Enterprise and any Bank Investor will
be, true and accurate in every material respect, on the date such
information is stated or certified.
(vi) Tax Status. Parisian Services, Inc. has filed all
material tax returns (federal, state and local) required to be
filed and has paid or made adequate provision for the payment of
all taxes, assessments and other governmental charges.
(vii) Action, Suits. Except as set forth in this Agreement,
there are no actions, suits or proceedings pending, or to the
knowledge of Parisian Services, Inc., threatened, against or af-
fecting Parisian Services, Inc. or any Affiliate of Parisian
Services, Inc. or their respective properties, in or before any
court, arbitrator or other body, which may, individually or in the
aggregate, have a Material Adverse Effect.
(viii) Place of Business. The principal place of business
and chief executive office of Parisian Services, Inc. is located at
750 Lakeshore Drive, Birmingham, Alabama 35211, and the offices
where Parisian Services, Inc. keeps all its Records, are located at
the address(es) described on Exhibit C hereto or such other loca-
tions notified to the Purchaser in accordance with this Agreement
in jurisdictions where all action required by the terms of this
Agreement has been taken and completed.
(ix) Good Title. Upon the sale of the Receivables and relat-
ed property to the Purchaser pursuant to this Agreement, the
Purchaser shall acquire a valid and perfected first priority owner-
ship interest in each Receivable (and in the Related Security,
Collections and Proceeds with respect thereto) purported to be
transferred by Parisian Services, Inc. that exists on the date of
this Agreement and is owned by Parisian Services, Inc., as Seller,
and in the Related Security, Collections and Proceeds, in each case
free and clear of any Adverse Claim.
(x) Tradenames, Etc. As of the date hereof: (i) the Seller
has, within the last five (5) years, operated only under the
tradenames identified in Exhibit D attached hereto and (ii) within
the last five (5) years, has not changed its name, merged with or
into or consolidated with any other corporation or been the subject
of any proceeding under Title 11, United States Code (Bankruptcy),
except as disclosed in Exhibit D attached hereto.
(xi) Nature of Receivables. Each Receivable (x) represented
by the Seller to be an Eligible Receivable, or (y) included in the
calculation of the Net Receivables Balance in fact satisfies at
such time the definition of "Eligible Receivable" set forth in the
Transfer Agreement and is an "eligible asset" as defined in Rule
3a-7 under the Investment Company Act of 1940, as amended.
(xii) Amount of Receivables. As of the Parisian Cut-Off
Date, the aggregate Outstanding Principal Balance of the Receiv-
ables in existence and purported to be transferred by Parisian Ser-
vices, Inc. to the Purchaser hereunder was at least $138,350,800.
(xiii) Not an Investment Company. Parisian Services, Inc. is
not, and is not controlled by, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or is
exempt from all provisions of such Act.
(xiv) ERISA. Each of Parisian Services, Inc. and its ERISA
Affiliates is in compliance in all material respects with ERISA and
no lien exists in favor of the Pension Benefit Guaranty Corporation
on any of the Receivables.
(xv) Lock-Box Accounts. The names and addresses of all the
Lock-Box Banks, together with the account numbers of the Lock-Box
Accounts at such Lock-Box Banks, are specified in Exhibit C to the
Transfer Agreement (or at such other Lock-Box Banks and/or with
such other Lock-Box Accounts as have been notified to the Purchaser
and the Agent and for which Lock-Box Agreements have been executed
in accordance with Section 2.8(b) of the Transfer Agreement and
delivered to the Servicer). All Obligors have been instructed to
make payment to a Lock-Box Account and only Collections are
deposited into the Lock-Box Accounts.
(xvi) Bulk Sales. No transaction contemplated by this Agree-
ment requires compliance with any bulk sales act or similar law.
(xvii) Preference; Voidability. Parisian Services, Inc.
warrants that the conveyance of the applicable Receivables and
Collections and Related Security from Parisian Services, Inc. to
the Purchaser shall not have been made for or on account of an
antecedent debt owed by Parisian Services, Inc. to the Purchaser
and no such transfer is or may be voidable under any Section of the
Bankruptcy Reform Act of 1978 (11 U.S.C. Section 101 et seq.), as
amended.
(b) Parisian, Inc. Representations and Warranties. Parisian,
Inc., as Seller hereunder, represents and warrants to the Purchaser as
of the Closing Date and shall be deemed to represent and warrant as of
the date of the creation or any sale of any interest in Receivables to
the Purchaser pursuant to this Agreement that:
(i) Corporate Existence and Power. Such Seller is a corpo-
ration duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has all corporate
power and all material governmental licenses, authorizations,
consents and approvals required to carry on its business in each
jurisdiction in which its business is now conducted. Such Seller
is duly qualified to do business in, and is in good standing in,
every other jurisdiction in which the nature of its business
requires it to be so qualified, except where the failure to be so
qualified or in good standing would not have a Material Adverse Ef-
fect.
(ii) Corporate and Governmental Authorization; Contravention.
The execution, delivery and performance by such Seller of this
Agreement are within such Seller's corporate powers, have been duly
authorized by all necessary corporate action, require no action by
or in respect of, or filing with, any Official Body or official
thereof (except for the filing of UCC financing statements as re-
quired by this Agreement), and do not contravene, or constitute a
default under, any provision of applicable law, rule or regulation
or of the Certificate of Incorporation or Bylaws of such Seller or
of any agreement, judgment, injunction, order, writ, decree or
other instrument binding upon such Seller or result in the creation
or imposition of any Adverse Claim on the assets of such Seller or
any of its Subsidiaries (except those created by this Agreement).
(iii) Binding Effect. This Agreement will constitute the
legal, valid and binding obligation of such Seller, enforceable
against such Seller in accordance with its terms, subject to appli-
cable bankruptcy, insolvency, moratorium or other similar laws
affecting the rights of creditors generally.
(iv) Perfection. On or prior to the date of each sale of
Receivables pursuant to this Agreement, all financing statements
and other documents required to be recorded or filed in order to
perfect and protect the ownership interest of the Purchaser in and
to the Receivables against all creditors of and purchasers from
such Seller will have been duly filed in each filing office
necessary for such purpose and all filing fees and taxes, if any,
payable in connection with such filings shall have been paid in
full.
(v) Accuracy of Information. All information heretofore
furnished by such Seller to the Purchaser, the Agent, Enterprise
and any Bank Investor for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by such Seller to the Purchaser,
the Agent, Enterprise and any Bank Investor will be, true and accu-
rate in every material respect, on the date such information is
stated or certified.
(vi) Tax Status. Such Seller has filed all material tax re-
turns (federal, state and local) required to be filed and has paid
or made adequate provision for the payment of all taxes,
assessments and other governmental charges.
(vii) Action, Suits. Except as set forth in this Agreement,
there are no actions, suits or proceedings pending, or to the
knowledge of such Seller threatened, against or affecting such
Seller or any Affiliate of such Seller or their respective proper-
ties, in or before any court, arbitrator or other body, which may,
individually or in the aggregate, have a Material Adverse Effect.
(viii) Place of Business. The principal place of business
and chief executive office of such Seller is located at 3455
Highway 80 West, Jackson, Mississippi 39209, and the offices where
such Seller keeps all its Records, are located at the address(es)
described on Exhibit C hereto or such other locations notified to
the Purchaser in accordance with this Agreement in jurisdictions
where all action required by the terms of this Agreement has been
taken and completed.
(ix) Good Title. Upon the sale of the Receivables and relat-
ed property to the Purchaser pursuant to this Agreement, the
Purchaser shall acquire a valid and perfected first priority owner-
ship interest in each Receivable (and in the Related Security, Col-
lections and Proceeds with respect thereto) that exists on the date
of this Agreement and in each Receivable thereafter owned by such
Seller and in the Related Security, Collections and Proceeds with
respect thereto until the Termination Date in each case free and
clear of any Adverse Claim.
(x) Tradenames, Etc. As of the date hereof: (i) Parisian,
Inc.'s chief executive office is located at the address for notices
set forth in Section 9.3; (ii) Parisian, Inc. has only the subsid-
iaries and divisions listed on Exhibit D attached hereto; and (iii)
Parisian, Inc. has, within the last five (5) years, operated only
under the tradenames identified in Exhibit D attached hereto, and,
within the last five (5) years, has not changed its name, merged
with or into or consolidated with any other corporation or been the
subject of any proceeding under Title 11, United States Code (Bank-
ruptcy), except as disclosed in Exhibit D attached hereto.
(xi) Nature of Receivables. Each Receivable (x) represented
by such Seller to be an Eligible Receivable, or (y) included in the
calculation of the Net Receivables Balance in fact satisfies at
such time the definition of "Eligible Receivable" set forth in the
Transfer Agreement and is an "eligible asset" as defined in Rule
3a-7 under the Investment Company Act of 1940, as amended.
(xii) [Reserved]
(xiii) Credit Guidelines. Since January 16, 1997, there have
been no material changes in the Parisian Credit Guidelines other
than as permitted hereunder and under the Transfer Agreement.
Since such date, no material adverse change has occurred in the
overall rate of collection of the Receivables.
(xiv) Collections and Servicing. Since January 16, 1997,
there has been no material adverse change in the ability of
Parisian, Inc. to service and collect the Receivables.
(xv) Not an Investment Company. Such Seller is not, and is
not controlled by, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, or is exempt from
all provisions of such Act.
(xvi) ERISA. Each of Parisian, Inc. and its ERISA Affiliates
is in compliance in all material respects with ERISA and no lien
exists in favor of the Pension Benefit Guaranty Corporation on any
of the Receivables.
(xvii) Lock-Box Accounts. The names and addresses of all the
Lock-Box Banks, together with the account numbers of the Lock-Box
Accounts at such Lock-Box Banks, are specified in Exhibit C to the
Transfer Agreement (or at such other Lock-Box Banks and/or with
such other Lock-Box Accounts as have been notified to the Purchaser
and the Agent and for which Lock-Box Agreements have been executed
in accordance with Section 2.8(b) of the Transfer Agreement and
delivered to such Servicer). All Obligors have been instructed to
make payment to a Lock-Box Account and only Collections are
deposited into the Lock-Box Accounts.
(xviii) Bulk Sales. No transaction contemplated by this
Agreement requires compliance with any bulk sales act or similar
law.
(xix) Preference; Voidability. Parisian, Inc. warrants that
the conveyance of the applicable Receivables and Collections and
Related Security from Parisian Services, Inc. to the Purchaser
shall not have been made for or on account of an antecedent debt
owed by Parisian, Inc. to the Purchaser and no such transfer is or
may be voidable under any Section of the Bankruptcy Reform Act of
1978 (11 U.S.C. Section 101 et seq.), as amended.
SECTION 4.2. Reaffirmation of Representations and Warranties
by Parisian, Inc.; Notice of Breach. On each sale date, Parisian, Inc.,
by accepting the proceeds of such sale, shall be deemed to have certi-
fied that (i) all representations and warranties described in Section
4.1(a) regarding any Receivables are true and correct on and as of such
day as though made on and as of such day and (ii) all representations
and warranties described in Section 4.1(b) are true and correct on and
as of such day as though made on and as of such day. The representa-
tions and warranties set forth in Section 4.1 shall survive the convey-
ance of the Receivables to the Purchaser, and termination of the rights
and obligations of the Purchaser and the Sellers under this Agreement.
Upon discovery by the Purchaser or either of the Sellers of a breach of
any of the foregoing representations and warranties, the party
discovering such breach shall give prompt written notice to the others
within three Business Days of such discovery.
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ARTICLE V
COVENANTS OF THE SELLER
SECTION 5.1. Covenants of Each Seller. Each Seller hereby
jointly and severally covenants and agrees with the Purchaser that, for
so long as this Agreement is in effect, and until all Receivables, an
interest in which has been sold to the Purchaser pursuant hereto, shall
have been paid in full or written-off as uncollectible, and all amounts
owed by such Seller pursuant to this Agreement have been paid in full,
unless the Purchaser otherwise consents in writing:
(a) Conduct of Business. The Seller will, and will cause
each of its Subsidiaries to, carry on and conduct its business in sub-
stantially the same manner and in substantially the same fields of
enterprise as it is presently conducted and do all things necessary to
remain duly incorporated, validly existing and in good standing as a
domestic corporation in its jurisdiction of incorporation and will
maintain all requisite authority to conduct its business in each
jurisdiction in which its business is conducted.
(b) Compliance with Laws. The Seller will, and will cause
each of its Subsidiaries to, comply in all material respects with all
laws, rules, regulations, orders, writs, judgments, injunctions, decrees
or awards to which it or its properties may be subject.
(c) Furnishing of Information and Inspection of Records. The
Seller will furnish to the Purchaser from time to time such information
with respect to the Receivables as the Purchaser may reasonably request,
including, without limitation, listings identifying the Obligor and the
Outstanding Principal Balance for each Receivable. The Seller will at
any time and from time to time during regular business hours permit the
Purchaser, or its agents or representatives, (i) to examine and make
copies of and abstracts from all Records and (ii) to visit the offices
and properties of the Seller for the purpose of examining such Records,
and to discuss matters relating to Receivables or the Seller's perfor-
mance hereunder with any of the officers, directors, employees or inde-
pendent public accountants of the Seller having knowledge of such mat-
ters.
(d) Keeping of Records and Books of Account. The Seller will
maintain a system of accounting established and administered in
accordance with generally accepted accounting principles, consistently
applied, and will maintain and implement administrative and operating
procedures (including, without limitation, an ability to recreate
records evidencing Receivables in the event of the destruction of the
originals thereof), and keep and maintain, all documents, books, records
and other information reasonably necessary or advisable for the collec-
tion of all Receivables (including, without limitation, records adequate
to permit the daily identification of each new Receivable and all
Collections of and adjustments to each existing Receivable). The Seller
will give the Purchaser and the Agent notice of any material change in
the administrative and operating procedures of the Seller referred to in
the previous sentence.
(e) Performance and Compliance with Receivables and Accounts.
The Seller at its expense will timely and fully perform and comply with
all material provisions, covenants and other promises required to be ob-
served by it under the Accounts related to the Receivables.
(f) Credit and Collection Policies. The Seller will comply
in all material respects with the Parisian Credit Guidelines in regard
to each Receivable and the related Account.
(g) Collections. The Seller shall instruct all Obligors to
cause all Collections to be deposited directly to a Lock-Box Account.
(h) Collections Received. The Seller shall hold in trust,
and deposit, immediately, but in any event not later than the close of
business on the second Business Day following its receipt thereof, to a
Lock-Box Account all Collections received from time to time by the
Seller.
(i) Sale Treatment. The Seller agrees to treat this
conveyance for all purposes (including, without limitation, tax and
financial accounting purposes) as a sale and, to the extent any such
reporting is required, shall report the transactions contemplated by
this Agreement on all relevant books, records, tax returns, financial
statements and other applicable documents as a sale of the Receivables
to the Purchaser.
(j) ERISA. The Seller shall promptly give the Purchaser
written notice upon becoming aware that the Seller or any of its
Subsidiaries is not in compliance in all material respects with ERISA or
that any ERISA lien on any of the Receivables exists.
SECTION 5.2. Negative Covenants of the Seller. During the
term of this Agreement, unless the Agent and the Purchaser shall
otherwise consent in writing, each Seller jointly and severally agrees
with and covenants to the Purchaser as follows:
(a) No Sales, Liens, Etc. Except as otherwise provided
herein, the Seller will not sell, assign (by operation of law or other-
wise) or otherwise dispose of, or create or suffer to exist any Adverse
Claim upon (or the filing of any financing statement) or with respect to
(x) any of the Receivables, the Related Security or Collections, (y) any
goods (other than inventory), the sale of which may give rise to any Re-
ceivable, Related Security or Collections (subject, in each case with
respect to Related Security constituting returned inventory, to the
applicable provisions of Section 9-306 of the Relevant UCC) or (z) upon
or with respect to any account which concentrates in a Lock-Box Bank
(including any Lock-Box Account) to which any Collections of any Receiv-
able are sent, or, in each case, assign any right to receive income in
respect thereof. The Seller shall, and will cause each of its Subsid-
iaries to, specifically exclude from the property subject to any Adverse
Claim granted on inventory any and all accounts receivable generated by
sales of such inventory and the proceeds thereof and shall provide, upon
the Purchaser's request, evidence satisfactory to the Purchaser that any
such Adverse Claim (and each related UCC financing statement or other
related filing) expressly excludes any such accounts receivable. The
Seller will provide the Purchaser and the Agent with a copy of any
inventory financing agreement at least three Business Days prior to the
effectiveness thereof.
(b) No Extension or Amendment of Receivables. The Seller
will not extend, amend or otherwise modify the terms of any Receivable,
or amend, modify or waive any term or condition of any Account related
thereto, except as provided in Sections 5.2 and 6.2 of the Transfer
Agreement.
(c) No Change in Business or Parisian Credit Guidelines.
Except as provided in the Transfer Agreement, the Seller will not make
any change in the character of its business or in the Parisian Credit
Guidelines, which change might, in either case, impair the
collectability of any substantial portion of the Receivables or other-
wise result in a Material Adverse Effect.
(d) Change in Payment Instructions to Obligors. The Seller
will not add or terminate, or make any change to, any Lock-Box Account,
except in accordance with the Transfer Agreement.
(e) Deposits to Lock-Box Accounts. The Seller will not
deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any Lock-Box Account, cash or cash proceeds other than
Collections of Receivables.
(f) Change of Name, Etc. The Seller shall not change its
name, identity or structure or location of its chief executive office,
unless at least ten (10) days prior to the effective date of any such
change the Seller delivers to the Purchaser and the Agent (i) such docu-
ments, instruments or agreements, including, without limitation,
appropriate financing statements under the Relevant UCC, executed by the
Seller necessary to reflect such change and to continue the perfection
of the Purchaser's and any assignee's interest in the Receivables and
(ii) new or revised Lock-Box Agreements which reflect such change and
enable the Agent to exercise its rights under Section 2.8 of the Trans-
fer Agreement; provided, however, that Parisian Services, Inc. may merge
with and into Parisian, Inc. without further action on the Sellers' part
except for the execution and delivery to the Agent of all necessary
termination agreements, quit claims and releases or the filing of any
necessary financing statements reflecting the assignments of Parisian
Services, Inc's interest in Receivables to Parisian, Inc., the Purchaser
or to the Agent, as appropriate.
(g) Separate Business. Each of the Sellers shall not: (i)
fail to maintain separate books, financial statements, accounting
records and other corporate documents from those of the Purchaser, (ii)
commingle any of its assets or the assets of any of its Affiliates with
those of the Purchaser, (iii) pay from its own assets any obligation or
indebtedness of any kind incurred by the Purchaser, (iv) directly, or
through any of its Affiliates, borrow funds or accept credit or
guaranties from the Purchaser except pursuant to this Agreement in con-
nection with the purchase of the Receivables.
SECTION 5.3. Indemnification. Parisian, Inc. agrees to
indemnify, defend and hold the Purchaser harmless from and against any
and all loss, liability, damage, judgment, claim, deficiency, or expense
(including interest, penalties, reasonable attorneys' fees and amounts
paid in settlement) to which the Purchaser or any assignee thereof may
become subject insofar as such loss, liability, damage, judgment, claim,
deficiency, or expense arises out of or is based upon a breach by a
Seller of its representations, warranties and covenants contained
herein, or any information certified in any schedule or certificate
delivered by a Seller hereunder, being untrue in any material respect at
any time. The obligations of Parisian, Inc. under this Section 5.3
shall be considered to have been relied upon by the Purchaser,
Enterprise and the Agent and shall survive the execution, delivery, per-
formance and termination of this Agreement, regardless of any investi-
gation made by the Purchaser, Enterprise or the Agent or on behalf of
any of them.
ARTICLE VI
REPURCHASE OBLIGATION
SECTION 6.1. Mandatory Repurchase.
(a) Breach of Warranty. If on any day any Receivable, which
has been sold by the Sellers hereunder and which has been reported by
the Sellers as an Eligible Receivable, shall fail to meet the conditions
set forth in the definition of "Eligible Receivable" (except to the
extent such conditions expressly relate to an earlier date) or for which
any representation or warranty made herein in respect of such Receivable
shall no longer be true, Parisian, Inc. shall be deemed to have received
on such day a Collection of such Receivable in full and shall on such
day pay to the Purchaser an amount equal to the aggregate Outstanding
Principal Balance of such Receivable; provided that, prior to the
Termination Date, such amount may be paid by a reduction in the Purchase
Price paid to Parisian, Inc. as Seller on the next occurring Purchase
Date, unless Parisian, Inc. is required to make a payment in respect of
such breach pursuant to the Transfer Agreement.
(b) Reconveyance Under Certain Circumstances. Parisian, Inc.
agrees that, with respect to any Receivable sold hereunder, in the event
of a breach of any of the representations and warranties set forth in
Sections 4.1(a)(v) or 4.1(b)(v), 4.1(a)(vii) or 4.1(b)(vii),
4.1(a)(viii) or 4.1(b)(viii), 4.1(b)(x), 4.1(a)(xii), 4.1(a)(xiii) or
4.1(b)(xv), 4.1(a)(xiv) or 4.1(b)(xvi) or 4.1(a)(xv) or 4.1(b)(xvii),
the Seller shall accept the reconveyance of such Receivable upon receipt
by the Seller of notice given in writing by the Purchaser and the
Seller's failure to cure such breach within thirty (30) days (or, in the
case of representations and warranties found in Sections 4.1(a)(iv) or
4.1(b)(iv) or 4.1(a)(ix) or 4.1(b)(ix), within three (3) days) of such
notice. In the event of a reconveyance under this Section 6.1(b),
Parisian, Inc. shall pay to the Purchaser in immediately available funds
on such 30th day (or third day, if applicable) an amount equal to the
Outstanding Principal Balance of any such Receivable; provided that,
prior to the Termination Date, such amount may be paid by a reduction in
the Purchase Price paid to Parisian, Inc. as Seller on the next
occurring Purchase Date, unless the Purchaser is required to make a
payment in respect of such breach pursuant to the Transfer Agreement.
SECTION 2. Dilutions, Etc. Parisian, Inc. agrees that if on
any day the Outstanding Principal Balance of a Receivable sold by a
Seller hereunder is either (x) reduced as a result of any defective, re-
jected or returned merchandise or services, any discount, credit,
rebate, dispute, warranty claim, repossessed or returned goods,
chargeback, allowance or any billing adjustment, or (y) reduced or can-
celed as a result of a setoff or offset in respect of any claim by any
Person (whether such claim arises out of the same or a related transac-
tion or an unrelated transaction) or (z) any other downward adjustments
to the balance of such Receivable without receiving Collections therefor
and prior to such Receivable becoming a Defaulted Receivable, then Pari-
sian, Inc. as Seller shall be deemed to have received on such day a col-
lection of such Receivable in the amount of such reduction, cancellation
or payment made by the Obligor and shall on such day pay to the
Purchaser an amount equal to such reduction or cancellation; provided
that, prior to the Termination Date, such amount may be paid by a reduc-
tion in the Purchase Price paid to Parisian, Inc. on the next occurring
Purchase Date, unless the Purchaser is required to make a payment in
respect of such breach pursuant to the Transfer Agreement.
SECTION 3 No Recourse. Except as otherwise provided in this
Article VI, the purchase and sale of the Receivables under this
Agreement shall be without recourse to the Sellers.
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ARTICLE VII
CONDITIONS PRECEDENT
SECTION 1 Conditions to the Purchaser's Obligations Regarding
Receivables. The obligations of the Purchaser to purchase the
Receivables on the Closing Date and any Purchase Date shall be subject
to the satisfaction of the following conditions:
(a) All representations and warranties of the Sellers con-
tained in this Agreement shall be true and correct on the Closing Date
and all representations and warranties of Parisian, Inc. contained
herein shall be true and correct on each Purchase Date thereafter with
the same effect as though such representations and warranties had been
made on such date;
(b) All information concerning the Receivables provided to
the Purchaser shall be true and correct in all material respects as of
the Closing Date, in the case of any Receivables existing on the Closing
Date, or the Purchase Date, in the case of any Receivables created after
the Closing Date;
(c) The Sellers shall have substantially performed all other
obligations required to be performed by the provisions of this Agree-
ment;
(d) The Sellers shall have filed or caused to be filed the
financing statement(s) required to be filed pursuant to Section 2.1(b);
(e) All corporate and legal proceedings and all instruments
in connection with the transactions contemplated by this Agreement shall
be satisfactory in form and substance to the Purchaser, and the
Purchaser shall have received from the Seller copies of all documents
(including, without limitation, records of corporate proceedings)
relevant to the transactions herein contemplated as the Purchaser may
reasonably have requested;
(f) On the Closing Date, the Sellers shall deliver to the
Purchaser and the Agent a Cycle Certificate as of the Parisian Cut-Off
Date;
(g) On or before the Closing Date, the Sellers shall have
delivered to the Purchaser and the Agent evidence of termination of that
certain Receivables Purchase Agreement, dated as of March 31, 1993
between Parisian Services, Inc., as seller, Sheffield Receivables
Corporation, as purchaser, The Bank of Nova Scotia, as the agent and
Barclays Bank PLC, New York Branch, as the administrative agent and
managing agent thereunder, as such agreement has been amended,
supplemented and modified to the Effective Date (together with all
related documents and agreements, the "Sheffield Facility"), such
agreements, documents and instruments as are necessary and appropriate
to reflect the termination of the Sheffield Facility, including without
limitation, the termination of the Second Amended and Restated Financing
and Collection Agency Agreement, and the release of all liens and
security interests of all secured parties holding an interest in
Receivables arising under or related thereto. The foregoing agreements,
documents, and instruments shall include, but not be limited to, each
originally executed note or instrument executed on behalf of a Seller
and payable to a transferor of accounts receivables purporting to
represent an outstanding obligation of such Seller arising in connection
with the acquisition of any Receivable, a payoff letter setting forth
the pay-off amount, a release agreement and UCC-3 termination state-
ments, each in form and substance reasonably satisfactory to the Agent;
and
(h) On or before the Closing Date, Parisian, Inc. shall have
delivered to the Purchaser and the Agent satisfactory evidence of having
executed and delivered for filing with the offices of the applicable
Secretaries of State of, that certain merger agreement pursuant to which
Parisian of Tennessee, Inc. and Hess Specialty Department Store, merged
with and into Parisian, Inc., with Parisian, Inc. surviving the merger
and assuming thereby all of the rights, obligations and liabilities of
each constituent entity to such merger.
(i) On or before the Closing Date, Parisian, Inc. shall have
delivered to the Purchaser and the Agent evidence satisfactory to the
Agent and its counsel that (i) no further action is required or shall be
necessary to satisfy this or any other conditions precedent to this Re-
ceivables Purchase Agreement and (ii) but for the filing with the
applicable offices of the Secretaries of State of the Articles of Merger
and the Plan of Merger of Parisian Services, Inc. with and into Pari-
sian, Inc., whereby Parisian, Inc. will succeed to all of the rights and
obligations of Parisian Services, Inc., no further action is required or
shall be necessary in order for the merger of Parisian Services, Inc.
with and into Parisian, Inc. to be effective.
ARTICLE VIII
TERM AND TERMINATION
SECTION 8.1. Term. This Agreement shall commence as of the
date of execution and delivery hereof and shall continue in full force
and effect until the date following the earlier of (i) the date desig-
nated by the Purchaser or Parisian, Inc. as Seller as the termination
date at any time following sixty (60) day's written notice to the other
(with a copy thereof to the Agent), (ii) the date on which the Agent
declares a Termination Date pursuant to Section 7.2 of the Transfer
Agreement, (iii) the day on which a Reinvestment Termination Date shall
occur under the Transfer Agreement unless the Transferred Interest shall
have been assigned (or concurrently is so assigned) to the Bank In-
vestors under Section 10.7 of the Transfer Agreement, (iv) upon the
occurrence of an Event of Bankruptcy with respect to either the Pur-
chaser or either of the Sellers, (v) the close of business on the third
Business Day following a conveyance of Receivables to the Purchaser for
which the Purchaser does not pay the Purchase Price in accordance with
the provisions hereof, (vi) the occurrence of a Parisian Termination
Event, (vii) the failure to complete and consummate the merger of
Parisian Services, Inc. with and into Parisian, Inc. on or before the
third Business Day following the Closing Date, or (viii) the date on
which either the Purchaser or Parisian, Inc., as a Seller, becomes
unable for any reason to purchase or re-purchase any Receivable in
accordance with the provisions of this Agreement or defaults on its
obligations hereunder, which default continues unremedied for more than
thirty (30) days after written notice (any such date being a "Termina-
tion Date"); provided, however, that the termination of this Agreement
pursuant to this Section 8.1 hereof shall not discharge any Person from
any obligations incurred prior to such termination, including, without
limitation, any obligations to make any payments with respect to the
interest of the Purchaser in any Receivable sold prior to such termina-
tion.
SECTION 8.2. Effect of Termination. Following the
termination of this Agreement pursuant to Section 8.1, the Sellers shall
not sell, and the Purchaser shall not purchase, any Receivables. No
termination or rejection or failure to assume the executory obligations
of this Agreement in any Event of Bankruptcy with respect to the Seller
or the Purchaser shall be deemed to impair or affect the obligations
pertaining to any executed sale or executed obligations, including,
without limitation, pre-termination breaches of representations and
warranties by the Sellers or the Purchaser. Without limiting the fore-
going, prior to termination, the failure of the Sellers to deliver
computer records of Receivables or any reports regarding the Receivables
shall not render such transfer or obligation executory, nor shall the
continued duties of the parties pursuant to Article V or Section 9.1 of
this Agreement render an executed sale executory.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1. Amendment. This Agreement and the rights and
obligations of the parties hereunder may not be changed orally, but only
by an instrument in writing signed by the Purchaser and each Seller then
in existence and consented to in writing by the Agent. Any reconveyance
executed in accordance with the provisions hereof shall not be con-
sidered amendments to this Agreement.
SECTION 9.2. GOVERNING LAW; Submission to Jurisdiction.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MISSISSIPPI.
(b) The parties hereto hereby submit to the nonexclusive
jurisdiction of the United States District Court for the Southern
District of New York and of any New York state court sitting in The City
of New York for purposes of all legal proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby.
Each party hereto hereby irrevocably waives, to the fullest extent it
may effectively do so, any objection which it may now or hereafter have
to the laying of the venue of any such proceeding brought in such a
court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum. Nothing in this Section 9.2
shall affect the right of the Purchaser to bring any other action or
proceeding against the Seller or its property in the courts of other
jurisdictions.
SECTION 9.3. Notices. Except as provided below, all
communications and notices provided for hereunder shall be in writing
(including telecopy or electronic facsimile transmission or similar
writing) and shall be given to the other party at its address or
telecopy number set forth below or at such other address or telecopy
number as such party may hereafter specify for the purposes of notice to
such party. Each such notice or other communication shall be effective
(i) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified in this Section 9.3 and confirmation is
received, (ii) if given by mail three Business Days following such
posting, postage prepaid, U.S. certified or registered, (iii) if given
by overnight courier, one Business Day after deposit thereof with a
national overnight courier service, or (iv) if given by any other means,
when received at the address specified in this Section 9.3.
(a) in the case of the Purchaser:
Proffitt's Credit Corporation
300 South Fourth Street, Suite 1100
Las Vegas, Nevada 89101
Attn: Douglas E. Coltharp, President
Telephone: (702) 598-3738
Telecopy: (702) 598-3651
with a copy to:
Proffitt's Inc.
3455 Highway 80 West
Jackson, Mississippi 39209
Telephone: (601) 968-4394
Telecopy: (601) 968-4354
Attn: Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
with an additional copy to:
NationsBank, N.A.
NationsBank Corporate Center
100 North Tryon Street
NC1-007-10-07
Charlotte, NC 28255
Attention: Michelle M. Heath NC1-007-10-07
Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
(b) in the case of the Sellers:
Parisian, Inc.
3455 Highway 80 West
Jackson, Mississippi 39209
Telephone: (601) 968-4394
Telecopy: (601) 968-4354]
Attn: Douglas E. Coltharp
Executive Vice President,
Chief Financial Officer and Treasurer
Parisian Services, Inc.
3455 Highway 80 West
Jackson, Mississippi 39209
Telephone: (601) 968-4394
Telecopy: (601) 968-4354
Attn: James Glasscock
Executive Vice President and
Assistant Secretary
(c) in the case of the Servicer:
MCRAE'S, INC.
3455 Highway 80 West
Jackson, Mississippi 39209
Telephone: (601) 968-4394
Telecopy: (601) 968-4354
Attn: Douglas E. Coltharp
Executive Vice President and
Chief Financial Officer
(with a copy to each of Parisian, Inc. and Proffitt's,
Inc.)
or, as to each party, at such other address as shall be designated by
such party in a written notice to each other party.
SECTION 9.4. Severability of Provisions. If any one or more
of the covenants, agreements, provisions or terms of this Agreement or
any other Conveyance Paper shall for any reason whatsoever be held
invalid, then such covenants, agreements, provisions, or terms shall be
deemed severable from the remaining covenants, agreements, provisions,
or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
SECTION 9.5. Assignment. This Agreement may not be assigned
by the parties hereto, except that the Purchaser may assign its rights
hereunder pursuant to the Transfer Agreement to the Agent, for the
benefit of Enterprise and the Bank Investors, and that Enterprise may
assign any or all of its rights to any Liquidity Provider. The Purchas-
er hereby notifies (and the Sellers hereby acknowledge that) the Pur-
chaser, pursuant to the Transfer Agreement, has assigned its rights
hereunder to the Agent. All rights of the Purchaser hereunder may be
exercised by the Agent or its assignees, to the extent of their
respective rights pursuant to such assignments.
SECTION 9.6. Further Assurances. The Purchaser and the
Sellers agree to do and perform, from time to time, any and all acts and
to execute any and all further instruments required or reasonably
requested by the other party more fully to effect the purposes of this
Agreement, including, without limitation, the execution of any financing
statements or continuation statements or equivalent documents relating
to the Receivables for filing under the provisions of the Relevant UCC
or other laws of any applicable jurisdiction.
SECTION 9.7. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Purchaser, the
Sellers or the Agent, any right, remedy, power or privilege hereunder,
shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exhaustive of any rights, reme-
dies, powers and privilege provided by law.
SECTION 9.8. Counterparts. This Agreement may be executed in
two or more counterparts including telecopy transmission thereof (and by
different parties on separate counterparts), each of which shall be an
original, but all of which together shall constitute one and the same
instrument.
SECTION 9.9. Binding Effect; Third-Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. The
Agent, on behalf of Enterprise and the Bank Investors, and any Liquidity
Provider is intended by the parties hereto to be a third-party benefi-
ciary of this Agreement.
SECTION 9.10. Merger and Integration. Except as specifically
stated otherwise herein, this Agreement sets forth the entire under-
standing of the parties relating to the subject matter hereof, and all
prior understandings, written or oral, are superseded by this Agreement.
This Agreement may not be modified, amended, waived or supplemented
except as provided herein.
SECTION 9.11. Headings. The headings herein are for purposes
of reference only and shall not otherwise affect the meaning or
interpretation of any provision hereof.
SECTION 9.12. Exhibits. The schedules and exhibits referred
to herein shall constitute a part of this Agreement and are incorporated
into this Agreement for all purposes.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Purchaser, the Sellers and the
Servicer each have caused this Receivables Purchase Agreement to be duly
executed by their respective officers as of the day and year first above
written.
PARISIAN, INC.,
as Seller
By:
Name:
Title:
PARISIAN SERVICES, INC.,
as Seller
By:
Name:
Title:
PROFFITT'S CREDIT CORPORATION,
as Purchaser
By:
Name:
Title:
MCRAE'S, INC.,
as Servicer
By:
Name:
Title:
Acknowledged and agreed as
of the date first above written:
ENTERPRISE FUNDING CORPORATION
By:_____________________________
Name:
Title:
NATIONSBANK, N.A., as Agent
By:_____________________________
Name:
Title:
EXHIBIT A
[FORM OF MONTHLY REPORT]
EXHIBIT B
FORM OF SUBORDINATED NOTE
Number 1 $__________________
January __, 1997
FOR VALUE RECEIVED, the undersigned, PROFFITT'S CREDIT
CORPORATION, a Nevada corporation (the "Maker"), hereby promises to pay
to the order of PARISIAN, INC. (the "Payee"), on _________, ____ or
earlier as provided for in the Receivables Purchase Agreement dated as
of the date hereof between the Maker and the Payee (as such agreement
may from time to time be amended, supplemented or otherwise modified and
in effect, the "Receivables Purchase Agreement"), the lesser of the
principal sum of ________ Million Dollars ($__,000,000.00) or the aggre-
gate unpaid principal amount of all Advances to the Maker from the Payee
pursuant to the terms of the Receivables Purchase Agreement, in lawful
money of the United States of America in immediately available funds,
and to pay interest from the date thereof on the principal amount hereof
from time to time outstanding, in like funds, at said office, at the
rate per annum set forth in the Receivables Purchase Agreement and shall
be payable in arrears on the first day of each calendar month (or if any
such day is not a Business Day, on the succeeding Business Day).
The Maker hereby waives diligence, presentment, demand,
protest and notice of any kind whatsoever. The non-exercise by the
holder hereof of any of its rights hereunder in any particular instance
shall not constitute a waiver thereof in that or any subsequent
instance.
All borrowings evidenced by this Subordinated Note and all
payments and prepayments of the principal hereof and interest hereon and
the respective dates thereof shall be endorsed by the holder hereof on
the schedule attached hereto and made a part hereof, or on a continua-
tion thereof which shall be attached hereto and made a part hereof, or
otherwise recorded by such holder in its internal records; provided,
however, that the failure of the holder hereof to make such a notation
or any error in such a notation shall not in any manner affect the
obligation of the Maker to make payments of principal and interest in
accordance with the terms of this Subordinated Note and the Receivables
Purchase Agreement.
This Subordinated Note represents the indebtedness of the
Maker described in Section 3.2 of the Receivables Purchase Agreement,
including the assumption by the Maker and the amendment and restatement
of the aggregate outstanding indebtedness under those certain promissory
notes of Parisian Services, Inc. (to be canceled in exchange herefor)
each dated July 31, 1995 made payable to the order of (x) Parisian,
Inc., (y) Parisian of Tennessee, Inc. and (z) Hess Specialty Department
Store, Limited Liability Company (the successor in interest to Hess Spe-
cialty Department Store, Inc.).<PAGE>
The Maker shall have the right to prepay and, subject to the
limitations set forth in the Receivables Purchase Agreement, reborrow
Advances made to it without penalty or premium.
This Subordinated Note is the Subordinated Note referred to in
the Receivables Purchase Agreement, which, among other things, contains
provisions for the subordination of this Subordinated Note to the rights
of certain parties under the Transfer Agreement, all upon the terms and
conditions therein specified.
This Note shall be governed by, and construed in accordance
with, the laws of the State of Mississippi.
PROFFITT'S CREDIT CORPORATION
By:
Name:
Title:
<TABLE>
Advances and Payments
<CAPTION>
<S> <C> <C> <C> <C>
Amount of Payments Unpaid Principal Name of Person
Date Advance Principal/Interest Balance of Note Making Notation
1/30/97 N/A N/A Amount of N/A
Promissory Note
[AS BALANCE FORWARD]
EXHIBIT C
LOCATION OF RECORDS, PRINCIPAL PLACE OF BUSINESS, ETC.
Parisian Services, Inc.
Principal Place 750 Lakeshore Drive
of Business: Birmingham, Alabama 35211
Location of Records: 750 Lakeshore Drive
Birmingham, Alabama 35211
Parisian, Inc.
Principal Place 3455 Highway 80 West
of Business: Jackson, Mississippi 39209
Location of Records: 3455 Highway 80 West
Jackson, Mississippi 39209
750 Lakeshore Drive
Birmingham, Alabama 35211
EXHIBIT D
TRADENAMES, ETC.
Parisian Services, Inc. is the wholly-owned subsidiary of Parisian, Inc.
</TABLE>
====================================================================
AMENDMENT NO. 2
Dated as of February 1, 1997
to
POOLING AND SERVICING AGREEMENT
Dated as of June 13, 1995
By and Between
YOUNKERS CREDIT CORPORATION,
Seller,
PROFFITT'S, INC.,
successor-by-merger to Younkers, Inc.,
Servicer,
and
THE CHASE MANHATTAN BANK,
formerly known as Chemical Bank,
Trustee
=====================================================================
AMENDMENT NO. 2
This AMENDMENT NO. 2 dated as of February 1, 1997 (this
"Amendment") is among YOUNKERS CREDIT CORPORATION, a Delaware
corporation (the "Seller"), PROFFITT'S, INC, a Tennessee corporation and
successor-by-merger to Younkers, Inc., a Delaware corporation (the
"Servicer"), and THE CHASE MANHATTAN BANK, formerly known as Chemical
Bank, as Trustee (the "Trustee") under the Pooling and Servicing
Agreement dated as of June 13, 1995 among the Seller, the Servicer and
the Trustee (the "Agreement").
W I T N E S S E T H:
WHEREAS, the parties hereto are parties to the Agreement
(capitalized terms used and not otherwise defined herein shall be
defined as they are defined in the Agreement);
WHEREAS, the Seller, the Servicer and the Trustee are
authorized by Section 13.1(b) of the Agreement to enter into this
Amendment; and
NOW, THEREFORE, in consideration of the mutual promises
contained herein, in the Agreement and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
Section 1. Amendments to the Agreement
1.1 The definition of "Recoveries" in Section 1.1 of the
Agreement is amended in its entirety to read as follows:
"'Recoveries' shall mean all amounts recorded as recoveries
with respect to receivables (whether or not in respect of
Accounts) arising under Charge Account Agreements that relate
to "Younkers" credit cards and which have previously been
charged off as uncollectible."
1.2 Section 2.5(o) of the Agreement is amended to add the
following sentence at the end thereof:
"Notwithstanding the foregoing, Seller may amend the
provisions of its Certificate of Incorporation to reflect the
merger of Younkers, Inc. with and into Proffitt's, Inc., a
Tennessee corporation."
1.3 Section 8.7 is amended in its entirety to read as
follows:
"In the ordinary course of business, the Servicer may at any
time delegate any duties hereunder to any other Person who
agrees to conduct such duties in accordance with the Charge
Account Guidelines. In addition, the Servicer may at any time
delegate any or all of its duties hereunder to McRae's, Inc.,
a Mississippi corporation ("McRae's"), provided that McRae's
agrees to conduct such duties in accordance with the Charge
Account Guidelines.
Any such delegations shall not relieve the Servicer of its
liability and responsibility with respect to such duties, and
shall not constitute a resignation within the meaning of
Section 8.5 hereof."
Section 2. Amendment of UCC Financing Statements.
The parties hereto agree that the UCC financing statements
originally filed against Younkers, Inc., naming Seller as
Purchaser/Secured Party and the Trustee as Assignee, may be amended to
reflect the revised definition of "Recoveries" set forth above.
Section 3. Representations and Warranties.
Each of the Seller and the Servicer represents and warrants
that:
(a) Its execution, delivery and performance of this Amendment
are within its corporate powers, have been duly authorized by all
necessary corporate action and do not require any consent or
approval which has not been obtained.
(b) This Amendment and the Agreement as amended hereby are
legal, valid and binding obligations of it enforceable in
accordance with their respective terms, except as enforcement may
be limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally or by general
equitable principles.
Section 3. Conditions Precedent.
This Amendment shall become effective as of its date,
provided that all of the following conditions are met:
(a) This Amendment shall have been executed and delivered
by the parties hereto;
(b) the Servicer shall have provided an Officer's
Certificate to the Trustee to the effect that (i) this Amendment
will not materially and adversely affect the interests of any
Certificateholder, (ii) the Servicer provided at least ten
Business Days' prior written notice to each Rating Agency of this
Amendment and received written confirmation from each Rating
Agency to the effect that the rating of any Series rated by such
Rating Agency will not be reduced or withdrawn as a result of
this Amendment and (iii) all of the conditions precedent to the
effectiveness of this Amendment have been satisfied;
(c) the Seller and the Servicer shall have provided
Opinions of Counsel to the Trustee to the effect that (i) this
Amendment shall not cause the Trust to be characterized for
Federal income tax purposes as an association taxable as a
corporation or otherwise have any material adverse impact on the
Federal income taxation of any outstanding Series of Investor
Certificates or any Certificate Owner, and (ii) this Amendment
complies with all the requirements of the Agreement.
Section 4. Miscellaneous.
(a) Applicability of the Agreement.
In all respects not inconsistent with the terms and
provisions of this Amendment, the provisions of the Agreement are
hereby ratified, approved and confirmed.
(b) Headings.
The captions in this Amendment are for convenience of
reference only and shall not define or limit the provisions hereof.
(c) Counterparts.
This Amendment may be executed in counterparts, each of which
shall constitute an original but all of which, when taken together,
shall constitute but one and the same instrument.
(d) Governing Law.
THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
(e) The Trustee.
The Trustee shall not be responsible in any manner whatsoever
for or in respect of the sufficiency of this Amendment or for or in
respect of the recitals contained herein, all of which recitals are
made solely by the Seller and the Servicer.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective
officers thereunto duly authorized as of the date first above written.
YOUNKERS CREDIT CORPORATION
By:_______________________________
Name:____________________________
Title:___________________________
PROFFITT'S, INC.
By: _____________________________
Name:____________________________
Title:___________________________
THE CHASE MANHATTAN BANK, as Trustee
By: _____________________________
Name:____________________________
Title:___________________________
G.R. HERBERGER'S, INC.
401(K) EMPLOYEE STOCK PURCHASE PLAN
AND EMPLOYEE STOCK OWNERSHIP PLAN
This instrument drafted by:
Briggs and Morgan
2400 IDS Center
Minneapolis, Minnesota 55402
TABLE OF CONTENTS
ARTICLE I - INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.1 Name of Plan and Trust . . . . . . . . . . . . . .1
Section 1.2 Purpose. . . . . . . . . . . . . . . . . . . . . .1
Section 1.3 Application to Employees Terminating After
Effective Date . . . . . . . . . . . . . . . . . . . . .1
Section 1.4 Plan Maintained by More Than One Employer. . . . .1
Section 1.5 Background . . . . . . . . . . . . . . . . . . . .1
ARTICLE 11 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . .3
Section 2.1 Account. . . . . . . . . . . . . . . . . . . . . .3
Section 2.2 Acquisition Loan . . . . . . . . . . . . . . . . .3
Section 2.2A Actual Deferral Percentage ("ADP"). . . . . . . .3
Section 2.3 Beneficiary. . . . . . . . . . . . . . . . . . . .3
Section 2.4 Board of Directors . . . . . . . . . . . . . . . .3
Section 2.5 Break in Service . . . . . . . . . . . . . . . . .3
Section 2.6 Code . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.7 Compensation . . . . . . . . . . . . . . . . . . 4
Section 2.8 Controlled Group . . . . . . . . . . . . . . . . .5
Section 2.9 Effective Date . . . . . . . . . . . . . . . . . .5
Section 2.9A Elective Deferrals or Elective Deferral
Contributions. . . . . . . . . . . . . . . . . . . . . .5
Section 2.10 Employee. . . . . . . . . . . . . . . . . . . . .6
Section 2.11 Employer . . . . . . . . . . . . . . . . . . . .6
Section 2.12 Employer Stock. . . . . . . . . . . . . . . . . .6
Section 2.13 Employment Year . . . . . . . . . . . . . . . . .6
Section 2.14 ERISA . . . . . . . . . . . . . . . . . . . . . .6
Section 2.14A Excess Contributions. . . . . . . . . . . . . . .6
Section 2.14B Excess Elective Deferrals . . . . . . . . . . . .6
Section 2.15 Fair Market Value Per Share . . . . . . . . . . .7
Section 2.16 Fiduciary . . . . . . . . . . . . . . . . . . . .7
Section 2.17 Financed Shares . . . . . . . . . . . . . . . . .7
Section 2.18 Forfeitures . . . . . . . . . . . . . . . . . . .7
Section 2.19 Highly Compensated Employee . . . . . . . . . . .7
Section 2.20 Hour of Service . . . . . . . . . . . . . . . . 10
Section 2.21 Limitation Year . . . . . . . . . . . . . . . . 10
Section 2.22 Non-Highly Compensated Employee . . . . . . . . 11
Section 2.23 Normal Retirement Age . . . . . . . . . . . . . 11
Section 2.24 Parental Absence. . . . . . . . . . . . . . . . 11
Section 2.25 Participant . . . . . . . . . . . . . . . . . . 11
Section 2.26 Plan. . . . . . . . . . . . . . . . . . . . . . 12
Section 2.27 Plan Administrator. . . . . . . . . . . . . . . 12
Section 2.28 Plan Year . . . . . . . . . . . . . . . . . . . 12
Section 2.29 Sponsor . . . . . . . . . . . . . . . . . . . . 12
Section 2.30 Trust . . . . . . . . . . . . . . . . . . . . . 12
Section 2.31 Trust Fund. . . . . . . . . . . . . . . . . . . 12
Section 2.32 Trustee . . . . . . . . . . . . . . . . . . . . 12
Section 2.33 Valuation Date. . . . . . . . . . . . . . . . . 12
Section 2.34 Year of Service . . . . . . . . . . . . . . . . 12
Section 2.35 Year of Service for Participation . . . . . . . 12
Section 2.36 Year of Service for Vesting . . . . . . . . . . 13
ARTICLE III - ELIGIBILITY AND PARTICIPATION. . . . . . . 14
Section 3.1 Eligibility for Participation. . . . . . . . . . 14
Section 3.2 Eligibility Computation Periods. . . . . . . . . 14
Section 3.3 Participation Upon Reemployment. . . . . . . . . 14
Section 3.4 Participation After Normal Retirement Age. . . . 15
Section 3.5 Collective Bargaining Agreement. . . . . . . . . 15
ARTICLE IV - CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . 16
Section 4.1 Employer ESOP Contribution . . . . . . . . . . . 16
Section 4.1A Employer Contributions Pursuant to
Participant Elective Deferral Agreement . . . . . . . . 16
Section 4.2 Time of Payment and Form of Contribution . . . . 18
Section 4.3 Allocation of Employer ESOP Contribution . . . . 18
Section 4.4 Allocation of Forfeitures. . . . . . . . . . . . 20
Section 4.5 Advance Employer Contributions . . . . . . . . . 20
Section 4.6 Limitations on Allocations . . . . . . . . . . . 20
Section 4.7 Defined Benefit and Defined Contribution
Plans . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.8 No Contributions by Participants . . . . . . . . 23
Section 4.9 Make-Up Contributions for Omitted
Participants. . . . . . . . . . . . . . . . . . . . . . 23
Section 4.10 Exclusive Benefit; Refund of Employer
Contribution. . . . . . . . . . . . . . . . . . . . . . 24
Section 4.11 Dividends . . . . . . . . . . . . . . . . . . . 25
Section 4.12 Rollover Contributions. . . . . . . . . . . . . 26
Section 4.13 Non-Discrimination Requirements . . . . . . . . 26
Section 4.14 Elective Deferral Accounts. . . . . . . . . . . 29
ARTICLE V - DETERMINATION OF VALUE OF PARTICIPANT'S ACCOUNTS . 30
Section 5.1 Trust Fund and Allocation of Earnings. . . . . . 30
Section 5.2 Determination of Market Value. . . . . . . . . . 30
Section 5.3 Diversification of Investments . . . . . . . . . 30
ARTICLE VI - RETIREMENT AND OTHER TERMINATION OF
PARTICIPATION; VESTING. . . . . . . . . . . . . . . . . . . . 32
Section 6.1 Full Vesting: Retirement, Death or Disability. . 32
Section 6.2 Other Termination of Employment:
Participant's Vested Percentage . . . . . . . . . . . . 32
Section 6.3 Vesting Upon Termination of the Plan . . . . . . 33
Section 6.4 Forfeiture of Nonvested Benefit. . . . . . . . . 33
Section 6.5 Computation of Years of Service and Breaks
in Service. . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.6 Years of Service . . . . . . . . . . . . . . . . 35
Section 6.7 Forfeiture Due to Discharge of Employment
for Cause . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE VII - PARENTAL ABSENCE PROVISIONS. . . . . . . . . . . . . . 37
Section 7.1 Effective Date of Article VII. . . . . . . . . . 37
Section 7.2 Hours of Service Credited for Parental
Absence . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.3 Plan Years to Which Hours of Service are
Credited. . . . . . . . . . . . . . . . . . . . . . . . 37
Section 7.4 Information to Plan Administrator. . . . . . . . 37
ARTICLE VIII - DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . 38
Section 8.1 Time of Distribution . . . . . . . . . . . . . . 38
Section 8.2 Manner of Distribution . . . . . . . . . . . . . 40
Section 8.3 Form of Distribution . . . . . . . . . . . . . . 41
Section 8.4 Required Distribution After Death. . . . . . . . 41
Section 8.5 Put Option . . . . . . . . . . . . . . . . . . . 42
Section 8.6 Right of First Refusal . . . . . . . . . . . . . 43
Section 8.7 Distribution Prior to a Five Consecutive
Breaks in Service; Restoration of Forfeited Account . . 45
Section 8.8 Reemployment After Distribution Has Been
Made or Commenced . . . . . . . . . . . . . . . . . . . 46
Section 8.9 Designation of Beneficiaries . . . . . . . . . . 46
Section 8.10 Minors and Persons Under Legal Disability . . . 47
Section 8.11 Interest of Persons Who Cannot Be Located . . . 47
Section 8.12 Non-alienation of Benefits. . . . . . . . . . . 48
Section 8.13 Distribution Upon Attaining Age 59. . . . . . . 48
Section 8.14 Distribution Due to Hardship. . . . . . . . . . 48
Section 8.15 Direct Rollovers. . . . . . . . . . . . . . . . 51
ARTICLE IX - TOP-HEAVY PLAN PROVISIONS . . . . . . . . . . . . . . . 53
Section 9.1 Definitions. . . . . . . . . . . . . . . . . . . 53
Section 9.2 Determination of Top-Heavy . . . . . . . . . . . 55
Section 9.3 Minimum Contribution . . . . . . . . . . . . . . 56
Section 9.4 Limitation on Compensation Taken Into
Account . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.5 Vesting for Top-Heavy Plan . . . . . . . . . . . 57
Section 9.6 Combined Plan Limitations. . . . . . . . . . . . 57
ARTICLE X - PLAN ADMINISTRATION. . . . . . . . . . . . . . . . . . . 58
Section 10.1 Employer Responsibility . . . . . . . . . . . . 58
Section 10.2 Powers and Duties of the Plan Administrator . . 58
Section 10.3 Records and Reports of the Plan Administrator . 59
Section 10.4 Plan Administrative Committee . . . . . . . . . 59
Section 10.5 Organization and Operation of the Plan
Administrative Committee. . . . . . . . . . . . . . . . 59
Section 10.6 Compensation and Responsibility for
Payment of Expenses of the Plan Administrator . . . . . 60
Section 10.7 Indemnity of Plan Administrator or Plan
Administrative Committee Members. . . . . . . . . . . . 60
Section 10.8 Claims Procedure. . . . . . . . . . . . . . . . 60
Section 10.9 Voting Rights . . . . . . . . . . . . . . . . . 61
Section 10.10 Bonding. . . . . . . . . . . . . . . . . . . . 62
ARTICLE XI - PLAN LOANS. . . . . . . . . . . . . . . . . . . . . . . 63
Section 11.1 Plan Loans. . . . . . . . . . . . . . . . . . . 63
ARTICLE XII - QUALIFIED DOMESTIC RELATIONS ORDERS. . . . . . . . . . 64
Section 12.1 Permissible Assignment. . . . . . . . . . . . . 64
Section 12.2 Definitions . . . . . . . . . . . . . . . . . . 64
Section 12.3 Notification. . . . . . . . . . . . . . . . . . 65
Section 12.4 Disposition of Disputed Funds . . . . . . . . . 66
Section 12.5 Payment of Benefits . . . . . . . . . . . . . . 66
Section 12.6 Form of Payment . . . . . . . . . . . . . . . . 66
ARTICLE XIII - AMENDMENTS AND ACTION BY SPONSOR/EMPLOYER . . . . . . 67
Section 13.1 Amendments. . . . . . . . . . . . . . . . . . . 67
Section 13.2 Action by Sponsor/Employer. . . . . . . . . . . 67
Section 13.3 Plan Ceases to Constitute an ESOP . . . . . . . 67
ARTICLE XIV - SUCCESSOR SPONSOR AND MERGER OR
CONSOLIDATION OF PLANS . . . . . . . . . . . . . . . . . . . . . . 68
Section 14.1 Successor Sponsor . . . . . . . . . . . . . . . 68
Section 14.2 Plan Assets . . . . . . . . . . . . . . . . . . 68
ARTICLE XV - PLAN TERMINATION. . . . . . . . . . . . . . . . . . . . 69
Section 15.1 Termination of Plan and Trust . . . . . . . . . 69
Section 15.2 Full Vesting. . . . . . . . . . . . . . . . . . 69
Section 15.3 Distribution of Trust Fund. . . . . . . . . . . 69
ARTICLE XVI - MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . 70
Section 16.1 Nonguaranty of Employment . . . . . . . . . . . 70
Section 16.2 Rights to Trust Assets. . . . . . . . . . . . . 70
Section 16.3 Word Usage. . . . . . . . . . . . . . . . . . . 70
ARTICLE I - INTRODUCTION
Section 1.1 Name of Plan and Trust
(a) The name of this Plan is the G. R. Herberger's, Inc.
401(k) Employee Stock Purchase Plan and Employee Stock Ownership
Plan.
(b) The name of the Trust for the Plan is the G. R.
Herberger's, Inc. Employee Stock Ownership Trust.
Section 1.2 Purpose
This Plan is intended to be a qualified stock bonus plan including
a qualified 401(k) plan within the meaning of Code Section 401(k) and a
qualified employee stock ownership plan within the meaning of Code
Section 4975(e)(7). This Plan was established and is maintained for the
exclusive purpose of providing benefits for the Employees of the
Employer and their Beneficiaries, and to enable eligible Employees to
acquire a proprietary interest in common stock of the Employer. This
Plan is designed to invest primarily in Employer securities. The terms
and provisions of this Plan and Trust are intended to conform to the
requirements of Sections 401(a), 401(k) and 501(a) of the Internal
Revenue Code of 1986, as amended, and the Employee Retirement Income
Security Act of 1974 (ERISA).
Section 1.3 Application to Employees Terminating After Effective Date
The provisions of this Plan as amended and restated shall apply
only to an Employee who terminates employment on or after the Effective
Date unless otherwise provided herein. The rights and benefits, if any,
of an Employee who terminated prior to the Effective Date shall be
determined in accordance with the prior provisions of the Plan in effect
on the date such Employee terminated employment.
Section 1.4 Plan Maintained by More Than One Employer
Upon written consent by the Board of Directors more than one
Employer may adopt this Plan.
Section 1.5 Background
This Plan was first adopted effective January 1, 1967 as a profit
sharing plan. The Plan was amended and restated, effective January 1,
1976, to conform to the requirements of ERISA. Such Plan and Trust were
amended and restated, effective January 1, 1984, to conform to the
requirements of the Tax Equity and Fiscal Responsibility Act of 1982
(TEFRA), the Retirement Equity Act of 1984 (REA), and the Tax Reform Act
of 1984 (TRA).
Under the terms of the Profit Sharing Plan, the Employer has the
ability to amend the Plan. Effective January 1, 1989, the Profit
Sharing Plan was modified, amended and restated in its entirety to
conform to the Tax Reform Act of 1986 (TRA '86), the Revenue Act of
1987, and the Tax and Miscellaneous Revenue Act of 1988. It is intended
that the Plan be converted to an Employee Stock Ownership Plan effective
December 31, 1989.
ARTICLE II - DEFINITIONS
Section 2.1 Account shall mean the entire interest of each
Participant in the Trust.' The Trustee shall create and maintain a
separate account for each Participant and shall credit thereto the
amount of contributions to the Plan and all gains and losses allocable
thereto. Within each Participant's Account, separate accountings shall
be maintained for: (i) Elective Deferral Contributions, and (ii)
Employer ESOP Contributions, if any, and all gains and losses thereon.
That portion of a Participant's Account attributable to Elective
Deferral Contributions shall be referred to as the Participant's
Elective Deferral Account.
Section 2.2 Acquisition Loan shall mean a loan (or other
extension of credit) used by the Trust to finance the acquisition of
Employer Stock, which loan may constitute an extension of credit to the
Trust from a "party in interest" (as defined in ERISA Section 3(14)).
Section 2.2A Actual Deferral Percentage ("ADP") shall mean, for
a specified group of Participants for a Plan Year, the average of the
ratios (calculated separately for each Participant in such group to the
nearest one-hundredth of one percent) of the amount of Employer
contributions actually paid over to the Trust on behalf of such
Participant for the Plan Year to the Participant's Compensation, as
defined under Section 2.7, for such Plan Year. Employer contributions
on behalf of any Participant shall include: (i) any Elective Deferrals
made pursuant to the Participant's Elective Deferral Agreement,
including Excess Elective Deferrals of Highly-Compensated Employees, but
excluding Excess Elective Deferrals of Non-Highly Compensated Employees
that arise solely from Elective Deferrals made under the Plan or plans
of this Employer. The actual deferral ratio for a Participant who fails
to make Elective Deferrals is zero. For purposes of determining the
deferral ratio of a Participant who is a five percent (5%) owner or one
of the ten (10) most highly-paid Highly Compensated Employees, the
deferral ratio and the Compensation of such Participant shall include
the deferral ratio and the Compensation for the Plan Year of Family
Members (as defined in Code Section 414(q)(6)). Family Members, with
respect to Highly Compensated Employees, shall be disregarded as
separate Employees in determining the deferral ratio both for
Participants who are Non-Highly Compensated -and for Participants who
are Highly Compensated Employees.
Section 2.3 Beneficiary shall mean the person, persons or entity
designated in accordance with the Plan to receive payments in the event
of a Participant's death.
Section 2.4 Board of Directors shall mean the Board of Directors
of the Sponsor.
Section 2.5 Break in Service shall mean a Plan Year in which an
Employee or a Participant is credited with fewer than 501 Hours of
Service with the Employer or a member of the Employer's Controlled
Group.
Section 2.6 Code shall mean the Internal Revenue Code of 1986,
as amended.
Section 2.7 Compensation shall mean a Participant's total
earnings, wages, salaries, and fees for services and other amounts
(without regard to whether or not the amount is paid in cash) received
for services actually rendered in the course of employment with the
Employer maintaining this Plan to the extent such amounts are includable
in gross income.
Compensation shall not include the following:
(a) Reimbursements or other expense allowances, fringe
benefits (cash or noncash), moving expenses, deferred
compensation and welfare benefits.
(b) Employer contributions to a deferred compensation
plan to the extent that, before the application of the limitation
under Code Section 415 to that plan, the contributions are not
includable in the Employee's gross income for the taxable year in
which contributed; Employer contributions under a SEP to the
extent such contributions are deductible by the Employee are not
includable in the Employee's gross income for the taxable year in
which contributed; or any distribution from a deferred
compensation plan, regardless of whether such amounts are
includable in the gross income of the Employee when distributed.
Notwithstanding the foregoing, Compensation shall include any
amount that is deferred by a Participant pursuant to a salary
deferral agreement with respect to which the Employer makes a
contribution on behalf of a Participant and which is not
includable in the gross income of the Participant under Code
Sections 125, 402(e)(3), 402(h) or 403(b).
(c) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property)
held by an Employee either becomes freely transferable or is no
longer subject to a substantial risk of forfeiture.
(d) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option.
Compensation shall include only that compensation which is
actually paid or made available to the Participant during the Plan Year.
Compensation shall not be limited to the period of time during the Plan
Year that an Employee is treated as a Participant.
For Plan Years beginning after December 31, 1988, the Plan shall
not take into account Compensation for any Participant in excess of
$200,000. This limitation shall be adjusted by the Secretary of the
Treasury at the same time and in the same manner as prescribed under
Code Section 415(d) for cost of living increases, except that the dollar
increase in effect on January 1 of any calendar year shall be effective
for the Plan Year beginning in such calendar year and the first
adjustment to the $200,000 limitation shall become effective on January
1, 1990. If Compensation for any prior Plan Year is taken into account
in determining a Participant's allocations or benefits for the current
Plan Year, the Compensation for such prior Plan Year is subject to the
applicable Compensation in effect for that prior Plan Year. For this
purpose, for Plan Years beginning before January 1, 1990, the applicable
Compensation Limitation is $200,00. If the period for determining
Compensation used in calculating a Participant's allocation for a Plan
Year which is a short Plan Year (i.e., fewer than 12 months), the
Compensation limitation shall be an amount equal to the $200,000
limitation (as adjusted for cost of living increases) multiplied by the
fraction, the numerator of which is the number of months in the short
Plan Year, and the denominator of which is 12 months.
In determining the Compensation of a Participant, the family
aggregation rules of Code Section 414(q)(6) shall apply, except that in
applying such rules, the term "family" shall include only the spouse of
the Participant and any lineal descendants of the Participant who have
not attained age 19 before the close of the Plan Year. If the aggregate
Compensation for the family group exceeds $200,000 (as indexed), then
the Compensation of each family member shall be proportionately reduced
so the total equals $200,000 (as indexed)."
Section 2.8 Controlled Group shall mean those entities which
constitute a controlled group of corporations as defined in Code Section
414(b), trades or business under common control as defined in Code
Section (c), or an affiliated service group as defined in Code Section
414(m), and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o).
Section 2.9 Effective Date shall mean January 1, 1989, the date
on which the provisions of this amended and restated Plan became
effective, unless noted elsewhere; provided however, it is intended that
the provision relating strictly to the operation of this plan as an ESOP
are effective December 31, 1989 and the provisions relating to its
operation as a 401(k) plan are effective April 15, 1993.
Section 2.9A Elective Deferrals or Elective Deferral
Contributions shall mean any Employer contributions made to the Plan at
the election of the Participant, in lieu of cash compensation, and shall
include contributions made pursuant to a salary deferral agreement or
other written deferral election. With respect to any taxable year of a
Participant, a Participant's Elective Deferral is the sum of all
Employer contributions made on behalf of such Participant pursuant to an
election to defer under any qualified cash or deferred arrangement as
described in Code Section 401(k), any simplified employee pension cash
or deferred arrangement as described in Code Section 402(h)(1)(B), any
eligible deferred compensation plan under Code Section 457, any plan as
described under Code Section 501(c)(18), and any employer contributions
made on the behalf of a Participant for the purchase of any annuity
contract under Code Section 403(b) pursuant to a salary deferral
agreement. Elective Deferrals shall not include any deferrals properly
distributed as excess annual additions. Elective Deferrals made under
this Plan, or any other qualified plan, shall be limited to the dollar
amount in Code Section 402(g) as in effect at the beginning of such
taxable year.
Section 2.10 Employees shall mean any person employed by the
Employer other than independent contractors. Employee shall include
leased employees within the meaning of Code Section 414(n)(2) unless
such leased employees constitute less than 20 percent of the Employer's
nonhighly compensated Employees within the meaning of Code Section
414(n)(1)(C)(ii) and such leased employees are covered by a plan
described in section 414(n)(5) of the Code.
Section 2.11 Employer shall mean G.R. Herberger's, Inc., Fandel
Company (a wholly-owned subsidiary of G. R. Herberger's, Inc.) and any
successor entity thereto which adopts this Plan. Employer shall also
include any other employer who, with the written consent of the Board of
Directors, adopts this Plan.
Section 2.12 Employer Stock shall mean shares of common stock of
G.R. Herberger's, Inc. (or of a Controlled Group member) having, a
combination of voting power and dividend rights equal to or in excess of
any other class of common stock of G.R. Herberger's, Inc. (or of a
Controlled Group member). Employer stock shall also include noncallable
preferred stock if such stock is convertible at any time into common
stock meeting the foregoing requirements.
Section 2.13 Employment Year shall mean a consecutive twelve
month period measured from an Employee's initial date of hire (or latest
date of rehire if the Employee has terminated employment) or from any
anniversary thereof An Employee's initial date of hire shall be the date
on which the Employee first is credited with an Hour of Service.
Section 2.14 ERISA shall mean the Employee Retirement Income
Security Act of -1974 as enacted in P.L 93-406, including any amendments
thereto.
Section 2.14A Excess Contributions shall mean with respect to any
Plan Year, the excess of:
(a) The aggregate amount of Employer contributions
actually taken into account in computing the ADP of Highly
Compensated Employees for such Plan Year, over
(b) The maximum amount of such contributions for the
Highly Compensated Employees permitted by the ADP test
(determined by reducing contributions made on behalf of Highly
Compensated Employees in order of the ADP, beginning with the
highest of such percentages).
Section 2.14B Excess Elective Deferrals shall mean those Elective
Deferrals that are includable in a Participant's gross income under Code
Section 402(g) to the extent such Participant's Elective Deferrals for
a taxable year exceed the dollar limitation under such Code Section.
Determination of such Excess Elective Deferrals shall be made pursuant
to Section 4.lA(f) of the Plan. Excess Elective Deferrals shall be
treated as annual additions under the Plan, unless such amounts are
distributed no later than the first April 15 following the close of the
Participant's taxable year.
Section 2.15 Fair Market Value Per Share shall mean that value
per share as determined by the Board of Directors, provided that in
determining Fair Market Value Per Share the Board of Directors shall
obtain and rely upon a valuation made by an independent appraiser,
provided such appraiser satisfies requirements similar to those
contained in the Regulations prescribed under Section 170(a)(1) of the
Code.
Section 2.16 Fiduciary shall mean the Employer, the Plan
Administrator and the Trustee, or any other person who exercises any
discretionary authority or discretionary control respecting the Plan or
Trust, but only with respect to the specific responsibilities of each
for the administration of the Plan and Trust. For the purposes of
ERISA, the Sponsor shall be a Named Fiduciary and the Sponsor may from
time to time appoint one or more additional named Fiduciaries.
Section 2.17 Financed Shares shall mean shares of Employer Stock
acquired by the Trust with the proceeds of an Acquisition Loan.
(a) Allocated Financed Shares shall mean Financed Shares
that have been released from the Shares Suspense Account and
allocated to Participant Accounts.
(b) Unallocated Financed Shares shall mean Financed
Shares that are being held in the Shares Suspense Account.
(c) Shares Suspense Account shall mean an account
maintained by the Trustee wherein the Financed Shares are held
until they are allocated to Participant Accounts.
Section 2.18 Forfeitures shall mean the nonvested portion of a
Participant's Account which may be reallocated to other Participants in
accordance with Sections 4.4 and 6.4 hereof
Section 2.19 Highly Compensated Employee shall mean:
(a) Any Employee who at any time during such Plan Year
or the preceding Plan Year,
(1) Was a five percent (5%) owner of the Employer (as
defined in Code Section 416(i)(1));
(2) Received more than $75,000 (or such greater amount
as announced by the Secretary of Treasury to reflect
cost of living increases), in annual compensation
(as defined in Code Section 414(q)(7)) from the
Employer;
(3) Earned more than $50,000 (or such greater amount as
announced by the Secretary of Treasury to reflect
cost of living increases), in annual compensation
from the Employer and was a member of the "top paid
group" (as defined in Code Section 414(q)(4)) for
such Plan Year; or
(4) Was an officer of the Employer (within the meaning
of Code Section 416(i)) and received compensation in
excess of 50 percent of the amount in effect under
Code Section 415(b)(1)(A) for the Plan Year.
(i) If an Employer has no officers who meet the
requirements of (4) above; the top paid
officer will be treated as Highly
Compensated, regardless of the level of
compensation.
(ii) In addition, in no event will an Employer
have more than 50 officers (or, if less, the
greater of three Employees or ten percent of
the Employees) who are considered to be
Highly Compensated Employees merely by reason
of their status as officers. Only those 50
officers with the highest compensation will
be affected.
(iii) An Employee who was not Highly Compensated
for the prior Plan Year will not be treated
as Highly Compensated for the current Plan
Year as a result of officer status, or of
earning more than $50,000 or $75,000 (as
adjusted for cost of living increases) unless
the Employee is one of the top 100 Employees
by compensation.
(b) The definition of Highly Compensated Employee is
made by taking into account total compensation as defined in
Section 415 of the Code, and including elective deferrals and
salary reduction contributions to a cafeteria arrangement.
(c) The "top paid group" includes all active Employees
who are in the top 20 percent of the Employer's workforce on the
basis of compensation.
(1) In determining the size of the top paid group (but
not for identifying those Employees who may be part
of the group), the following Employees shall be
excluded:
(i) Employees who have not completed six months
of service;
(ii) Employees who normally work less than 17 1/2
hours per week;
(iii) Employees who normally work not more than six
months a year;
(iv) Employees who have not attained age 21;
(v) Except to the extent provided in regulations,
Employees who are covered in a unit of
Employees covered by a collective bargaining
agreement; and
(vi) Employees who, are nonresident aliens with no
U.S. source of income.
(d) If an individual is a member of the family of a five
percent (5%) owner or of a Highly Compensated Employee in the
group consisting of the ten (10) Highly Compensated Employees
paid the greatest compensation from the Employer during the Plan
Year, then:
(1) Such individual shall not be considered a separate
Employee, and
(2) Any compensation paid to such individual (and any
applicable contribution on behalf of such
individual) shall be treated as if it were paid to
(or on behalf of) the five (5%) percent owner or the
Highly Compensated Employee. Family means, with
respect to an Employee, such Employee's spouse and
lineal ascendants or descendants.
(e) A former Employee shall be treated as a Highly
Compensated Employee if such Employee was a Highly Compensated
Employee when he separated from service, or such Employee was a
Highly Compensated Employee at any time after attaining age 55.
(f) For purposes of determining the Employees who are
Highly Compensated Employees, the Employer shall include the
Employer's Controlled Group.
Section 2.20 Hour of Service shall mean:
(a) Each hour for which an Employee is paid, or entitled
to payment, by the Employer for the performance of duties;
(b) Each hour for which an Employee is paid, or entitled
to payment by the Employer for a period of time during which no
duties are performed (whether or not the employment relationship
has terminated) due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty or leave
of absence (but not in excess of 501 hours in any continuous
period during which no duties are performed). A payment shall be
deemed to be made by or due from the 'Employer regardless of
whether such payment is made by or due from the""Employer
directly, or indirectly, through a trust fund, insurer or other
entity to which the Employer contributes or pays premiums;
provided, however, that no such Hours of Service shall be
credited to the Employee if such direct or indirect & payment is
made or due under a plan maintained solely for the purpose of
complying with applicable worker's compensation, unemployment
compensation or disability insurance laws, or only reimburses the
Employee for medical or medically related expenses incurred by
the Employee;
(c) Each hour for which back pay, irrespective of
mitigation of damages, has been either awarded or agreed to by
the Employer;
(d) Hours of Service, for purposes of determining
whether a Break in Service has occurred, shall include each hour
credited for a Parental Absence pursuant to Article VII hereof;
(e) Each hour for which an Employee could have worked
during a period of time in which he performs no duties and for
which he is neither paid nor entitled to payment while absent on
an approved leave of absence.
(1) No more than 501 Hours of Service shall be credited
with respect to a single computation period during
which the Employee performs no duties, and crediting
for Hours of Service during an approved Leave of
Absence shall not be permitted to cause an
Employee's total Hours of Service for any Plan Year
to equal or exceed 1,000 or more Hours, unless such
Employee was entitled to 1,000 or more Hours for
actual service or performance of duties as an
Employee.
(2) Approved leave of absence shall mean any absence
authorized by the Employer under the Employer's
standard personnel practices, provided that all
persons in similar circumstances must be treated
alike in the granting of such approved leaves of
absence, and provided further that the Participant
returns at the end of the authorized absence. An
absence due to service in the Armed Forces of the
United States shall be considered an approved leave
of absence, provided that the absence is caused by
war or other emergency, or provided that the
Employee is required to serve under the laws of
conscription in time of peace, and further provided
that the Employee returns to employment with the
Employer within the period provided by law.
Hours of Service shall be determined and applied to the appropriate
computation periods in accordance with Department of Labor Regulations,
Section 2530.200b-2(b) and (c) from the Employer's records of hours
worked and hours for which payment is made or due. Hours of Service
equivalencies shall be in accordance with Department of Labor
Regulations Section 2530-200b-3 and for each pay period in which a
salaried Employee is paid, such Employee shall be credited with the
number of Hours which correspond to his pay period under the following
equivalencies:
Pay Period Hours of Service
------------ ----------------
Weekly 45
Biweekly 90
Semimonthly 95
Monthly 190
Section 2.21 Limitation Year shall mean the Plan Year or such
other twelve consecutive month period designated by the Board of
Directors.
Section 2.22 Non-Highly Compensated Employee shall mean any
Employee who is neither a Highly Compensated Employee nor a family
member of a Highly Compensated Employee.
Section 2.23 Normal Retirement Age shall mean age 65.
Section 2.24 Parental Absence shall mean, for Plan Years beginning
after December 31, 1984, an absence from work for any period by reason
of the Participant's pregnancy, birth of the Participant's child,
placement of a child with the Participant in connection with the
adoption of such child, or any absence for the purpose of caring for
such child for a period immediately following such birth or placement.
Section 2.25 Participant shall mean an Employee or former Employee
of the Employer participating in this Plan pursuant to the provisions of
Article III hereof.
Section 2.26 Plan shall mean the G. R. Herberger's, Inc. 401(k)
Employee Stock Purchase Plan and Employee Stock Ownership Plan as
amended and continued by this instrument.
Section 2.27 Plan Administrator shall mean the Sponsor or such
other person or committee as the Employer may designate pursuant to the
provisions of this Plan to act on behalf of the Employer.
Section 2.28 Plan Year shall mean a consecutive twelve month
period beginning each January 1 and ending on the subsequent December
31.
Section 2.29 Sponsor shall mean G.R. Herberger's, Inc.
Section 2.30 Trust shall mean the Trust created under the
Agreement and Declaration of Trust entered into by the Employer and
Trustee pursuant to this Plan.
Section 2.31 Trust Fund shall mean all of the assets of the Plan
held by the Trustee at any time under the Trust Agreement.
Section 2.32 Trustee shall mean the person, persons or entity
appointed by the Board of Directors to administer the Trust or any duly
appointed and qualified successor Trustee.
Section 2.33 Valuation Date shall mean the last day of each Plan
Year, and each interim date, if any, as selected by the Plan
Administrator, upon which the Trust Fund is valued.
Section 2.34 Year of Service shall mean (for purposes other than
vesting) a consecutive twelve month computation period during which an
Employee has completed at least one thousand (1,000) Hours of Service
with the Employer or predecessor employer if the Employer maintains the
plan of such employer. An Employee shall be credited with all Hours of
Service completed with any Employer, as defined in Section 2.11, or any
other member of the Employer's Controlled Group.
Section 2.35 Year of Service for Participation shall mean the
completion of 1,000 Hours of Service during an eligibility computation
period as defined in Section 3.2 and shall include all Years of Service
prior to the Effective Date of this Plan.
Section 2.36 Year of Service for Vesting shall mean the completion
of any vesting computation period as defined in Section 6.5, and shall
include the completion of all computation periods prior to the Effective
Date of this amended and restated Plan.
ARTICLE III - ELIGIBILITY AND PARTICIPATION
Section 3.1 Eligibility for Participation
(a) Each Employee who was a Participant in the G.R.
Herberger's, Inc. Profit Sharing Plan the day before the Effective
Date shall become a Participant in the Plan as of the Effective
Date.
(b) Thereafter, except for any leased Employee or any
Employee who is covered by a collective bargaining agreement which
does not provide for inclusion in this Plan, an Employee shall
become a Participant in this Plan as of the first day of January
or July next following the date on which the Employee has completed
a Year of Service and attained age 21.
(c) An Employee shall become a Participant only if he is an
Employee on the date on which he would otherwise, be, entitled to
commence participation.
(d) Effective as of the Plan Year, commencing January 1,
1990, an Employee may, subject to the approval of the Employer,
elect not to participate in the Plan for any Plan Year by executing
an "Election Not to Participate" form effective upon execution by
the employee and acceptance by the Employer. Such election shall
be a one time election and shall be irrevocable.
Section 3.2 Eligibility Computation Periods
The initial eligibility computation period shall coincide with an
Employee's first Employment Year. If an Employee does not complete a
Year of Service during such period, then subsequent eligibility
computation periods shall be Plan Years beginning with the Plan Year
which includes the last day of the Employee's first Employment Year.
Section 3.3 Participation Upon Reemployment
(a) A Participant or former Participant who returns to the
employment of the Employer after a termination of employment may
resume participation on the Participant's reemployment commencement
date (the date on which the Employee is first credited with an Hour
of Service upon reemployment).
(b) Any other Employee whose employment terminates prior to
becoming a Participant, shall enter the Plan in accordance with the
provisions of Section 3.1 hereof.
(c) For purposes of this Section 3.3, the Plan shall take
into account all of an Employee's Years of Service.
Section 3.4 Participation After Normal Retirement Age
Any Participant who remains in the employ of the Employer after
Normal Retirement Age shall continue as a Participant and shall be
entitled to share in the Employer contributions, if any, pursuant to
Article IV until such time as such Participant terminates employment
with the Employer.
Section 3.5 Collective Bargaining Agreement
An Employee who is excluded from participation in the Plan under
Section 3.1 solely by reason of being covered by a collective bargaining
agreement which does not provide for inclusion in this Plan shall be
eligible to commence participation in the Plan as of the date such
Employee is no longer covered by such a collective bargaining agreement.
A Participant who becomes covered by a collective bargaining agreement
which does not provide for inclusion in this Plan will not be eligible
to share in and will not receive Employer contributions or allocations
of Forfeitures for the Plan Years during which he is covered for the
entire Plan Year by such a collective bargaining agreement. A
Participant who is covered by such a collective bargaining agreement for
part of a Plan Year and is otherwise eligible to share in Employer
contributions under Section 4.3 will be eligible to share in Employer
contributions or allocations of Forfeitures for such Plan Year, but only
with respect to Compensation received while the Participant was not
covered by such a collective bargaining agreement.
ARTICLE IV - CONTRIBUTIONS
Section 4.1 Employer ESOP Contribution
With respect to each Plan Year, the Employer shall contribute an
amount or amounts, if any, as the Board of Directors of the Employer
shall determine in its absolute discretion. The Employer will make
sufficient contributions to provide for the payment of the principal of
and interest on an Acquisition Loan used to purchase Financed Shares.
The amount contributed by the Employer shall not exceed the maximum
amount deductible by it for federal income tax purposes under section
404(a)(3) of the Code.
Section 4.lA Employer Contributions Pursuant to Participation Elective
Deferral Agreement
During each Plan Year, a Participant may elect to enter into a
written agreement with the Employer (the "Agreement"), the terms of
which shall provide that the Participant agrees to defer a portion of
such Participant's Compensation from the Employer equal to any dollar
amount of Compensation per payroll period, but not. less than twenty-five
dollars ($25.00) per biweekly payroll period and not to exceed
eleven percent (11%) of such Compensation or such other maximum
percentage announced from time to time by the Employer. In
consideration of the Agreement the Employer will make an Elective
Deferral Contribution to the Participant's Elective Deferral Account for
such Plan Year in an amount equal to the total amount by which the
Participant's Compensation was deferred during the Plan Year pursuant to
the Agreement.
The Agreements shall be governed by the following rules:
(a) Agreements and amendments thereto shall be effective as
of the Payroll period next following the date the Agreement or
amendment is executed by the Participant and the Employer, and
shall apply to each Payroll Period thereafter until amended or
revoked in accordance with the Plan. An Agreement will continue
in effect from Plan Year to Plan Year unless and until amended or
revoked in accordance with the Plan. For purposes of this Section,
the Participant's Payroll Period is the period for which a
Participant is paid regular periodic Compensation by the Employer.
(b) For the 1993 Plan Year, all Employees who have met the
eligibility and participation requirements for the Plan as of April
1, 1993, shall be eligible to enter into an Agreement effective as
of the Payroll Period commencing after April 15, 1993. Otherwise,
a Participant's initial Agreement shall be effective as of the
first day of the Plan Year or the first day of the seventh month
of the Plan Year most immediately following the date the Employee
becomes a Participant and the Agreement is submitted to the Plan
Administrator.
(c) The Agreement may be amended by a Participant during the
Plan Year, but only to reduce prospectively the amount of such
Participant's Elective Deferral. The Agreement may be revoked by
a Participant at any time. If a Participant revokes an Agreement
or fails to enter into an Agreement upon becoming eligible to
participate, such Participant shall be precluded from entering into
a new Agreement until the Payroll Period commencing after the next
April 15.
(d) Any Participant whose Elective Deferral Agreement has
been suspended pursuant to Section 8.14(c)(3) relating to hardship
distributions, may enter into a new Agreement first as of the
Payroll Period following the date on which the Participant's
Elective Deferral Agreement has been suspended for twelve (12)
months. Such new Agreement shall be effective as of the Payroll
Period next following the execution of the new Agreement.
(e) The Employer may prospectively revoke or amend any
Agreement if the Employer determines such revocation or amendment
is necessary to insure that a Participant's Annual Addition does
not exceed the maximum permissible amount under Section 4.6 hereof,
or to satisfy the nondiscrimination tests of Code Section 401(k),
as set forth in Section 4.13 of the Plan for such Plan Year, but
in the latter case, amendments of the amounts deferred shall be
made by a pro rata decrease in the percentage of Elective Deferral
among highly Compensated Employees.
(f) Elective Deferral Contributions made by a Participant
under this Plan or any other qualified plan maintained by the
Employer for any taxable year shall not exceed the limitation set
out in Code Section 402(g) in effect at the beginning of such
taxable year, or such higher amount as adjusted pursuant to Code
Section 402(g)(5) for cost-of-living increases, which for the
calendar year 1993 is $8,994. If a Participant participates in
more than one salary deferral arrangement and the total of such
Elective Deferrals for the taxable year exceed the amount
excludable from gross income, the Excess Elective Deferrals and
earnings thereon shall be returned to the Participant if, by the
following March 1, the Participant notifies the Plan Administrator
in writing of the Excess Elective Deferrals he allocates to this
Plan. A Participant is deemed to notify the Plan Administrator of
Excess Elective Deferrals if such arise solely by taking into
account only those Elective Deferrals made to this Plan, and any
other plans of the Employer.
(g) Notwithstanding any other provision of the Plan, any
Excess Elective Deferrals, plus income and minus any loss allocable
thereto, shall be returned to the Participant by April 15 following
the taxable year such Excess Elective Deferrals were made. The
amount of income or loss allocable to such Excess Elective
Deferrals shall be equal to the sum of income or loss allocable to
the Participant's Elective Deferral Account for the taxable year
multiplied by a fraction, the numerator of which is such
Participant's Excess Elective Deferrals for the taxable year and
the denominator which is the Participant's account balance
attributable to Elective Deferrals without regard to any income or
loss occurring during such taxable year.
(h) Notwithstanding anything contained in this Section to
the contrary, a Participant's Elective Deferral Contributions will
be suspended for a Payroll Period in which a Participant's
Compensation is insufficient, after any statutory deductions and
deductions authorized by the Participant or any other deductions
made and required by operation of law, to permit deducting a
Participant's Elective Deferral Contribution for that Payroll
Period.
Section 4.2 Time of Payment and Form of Contribution
The Employer contributions, if any, shall be paid to the Trustee
either in cash or Employer Stock as the Board of Directors may from time
to time determine. In determining the amount of the Employer
contributions, shares of Employer Stock will be valued at their then
Fair Market Value Per Share. The Employer contributions shall be paid
to the Trustee on or before the due date for filing its federal income
tax return including extensions, for the fiscal year of the Employer
with respect to which the contributions were made.
Elective Deferral Contributions shall be paid to the Trustee as
soon as the amount can be reasonably identified and separated from the
Employer's other assets. Payment shall in any event be made within 30
days after the Participant would otherwise have received the amount
withheld from Compensation on account of the Elective Deferral.
Section 4.3 Allocation of Employer ESOP Contribution
(a) If at the time of such Employer ESOP contribution,
principal and interest is unpaid on any Acquisition Loan and is
then due, then so much of the Employer ESOP contribution as is
required shall be applied to the payment of interest or principal
on the Acquisition Loan which is then due and Financed Shares shall
be released in accordance with Section 4.3(b). The Employer ESOP
contribution with respect to a Plan Year along with any Forfeitures
for such Plan Year shall be allocated by the Plan Administrator to
the Accounts of eligible Participants as of the last day of the
Plan Year in the same proportion that the Compensation of each
Participant for the Plan Year bears to the Compensation of all
Participants for such Plan Year, provided, however, that
Compensation of any Employee who becomes a Participant during a
Plan Year shall be limited to Compensation paid after commencement
of participation.
(1) No allocation of the Employer's ESOP contribution for
a Plan Year shall be made to a Participant unless such
Participant is credited with 1,000 Hours of Service
during the Plan Year and is in the employ of the
Employer on the last day of the Plan Year.
(2) Any Participant who is not in the employ of the
Employer on the last day of the Plan Year due to
retirement on or after such Employee's Normal
Retirement Age, death or Disability, shall nonetheless
receive an allocation of the Employer's ESOP
contribution for such Plan Year, regardless of whether
such Participant was credited with 1,000 Hours of
Service prior to such retirement, Disability or death.
Allocations shall be made on the basis of actual
Compensation received during such Plan Year.
(b) Financed Shares acquired with the proceeds of an
Acquisition' Loan under Section 4.3 of the Trust shall be added to
and maintained in a Shares Suspense Account. As the Employer makes
ESOP contributions to the Plan for a Plan Year and the Trustee
makes payments of principal and interest on the Acquisition Loan,
such Financed Shares shall be released from the Shares Suspense
Account and allocated as of the last day of the Plan Year for which
the contribution was made to the Accounts of the Participants in
the manner provided in paragraph (a) above. The number of Financed
Shares to be released from the Shares Suspense Account for each
Plan Year shall be based upon the ratio that the payment of
principal and interest on the Acquisition Loan for that Plan Year
bears to the total projected payments of principal and interest
over the duration of the Acquisition Loan repayment period.
(c) If Financed Shares acquired with the proceeds of an
Acquisition Loan are sold before being released from the Shares
Suspense Account, the proceeds from such sale shall be applied to
the payment of principal and interest on the Acquisition Loan. Any
sale proceeds remaining after payment of all principal and interest
on the Acquisition Loan shall be treated as a general investment
gain and allocated to the Accounts of Participants under Section
5.1.
(d) If the Plan has acquired Employer Stock and the seller
has elected to qualify for nonrecognition of gain on the sale of
such securities under Section 1042 or Section 2057 of the Code,
then no portion of the assets of the Trust Fund attributable to (or
allocable in lieu of) such Employer Stock shall be allocated for
the benefit of such seller, any person related to such seller under
section 267(b) of the Code (except as excluded by Section
409(n)(3)(A) of the Code) or any other person who owns (after
application of Section 318(a) of the Code, -but without regard to
the employee trust exception in paragraph (2)(B)(i)), more than 25%
(by value) of the Employer or members of the Controlled Group (all
within the meaning of Code Section 409(n)).
(e) With respect to certain dividends used to make payments
on an Acquisition Loan, the special allocation rules of Section
4.11 of this Plan shall apply.
(f) If the Financed Shares acquired with the proceeds of an
Acquisition Loan are sold or redeemed prior to being released from
the Shares Suspense Account and the Acquisition Loan is not
prepaid, then the sale or redemption proceeds, or investments
acquired with such proceeds, shall continue to be held in the
Shares Suspense Account as collateral for the Acquisition Loan and
shall continue to be subject to the release requirements of Section
4.3(b). Any proceeds remaining after repayment of the Acquisition
Loan shall be treated as a general investment gain and allocated
to the Accounts of Participants under Section 5.1.
Section 4.4 Allocation of Forfeitures
Forfeitures shall, as of the last day of each Plan Year, be
allocated among the Accounts of all Participants as a part of and on the
same basis as the Employer contribution is allocated among such
Participants pursuant to Section 4.3. No portion of Employer Stock -shall
be forfeited until any other assets allocated to his Account are
first forfeited.
Section 4.5 Advance Employer Contributions
In the event that a part or all of an Employer's contribution for
a Plan Year is paid before the last day of a Plan Year, such advance
contribution shall be held by the Trustee as a separate fund, and along
with the net income and any change in value of such separate fund,
allocated among the Accounts of the Participants as of the last day of
the Plan Year pursuant to Section 4.3. In the event that the Plan is
terminated before the last day of the Plan Year, all such advance
contributions, including any amount treated as an advance contribution
under Section 4.6, shall be returned to the Employer.
Section 4.6 Limitations on Allocations
(a) No Annual Addition shall be allocated to the Account of
any Participant with respect to any Limitation Year which exceeds
the lesser of:
(1) Thirty Thousand Dollars ($30,000.00), (or if greater,
one-fourth of the defined benefit dollar limitation set
forth in Code Section 415(b)(1) as in effect for the
Limitation Year), or,
(2) Twenty-five percent (25%) of the compensation received
by such Participant from the Employer for such
Limitation Year.
(b) For purposes of this Section 4.6, Compensation shall
have the same meaning as defined under Section 2.7, except as
follows:
(1) Compensation shall include reimbursements or other
expense allowances, taxable filing benefits, moving
expenses, deferred compensation, or taxable welfare
benefits.
(2) Compensation shall not include any amount that is
deferred by a Participant pursuant to a salary deferral
agreement with respect to which the Employer makes a
contribution on behalf -of the Participant and which is
not includable in the gross income of the Participant
under Code Sections 125, 402(e)(3), 402(h) or 403(b).
(c) For purposes of this Section, Annual Addition means the
sum of:
(1) All Employer contributions allocable to the Participant
for a Limitation Year under this Plan and under all
other defined contribution plans maintained by the
Employer or any member of the Controlled Group;
(2) All Employee contributions to such plans allocable to
the Participant for a Limitation Year;
(3) Forfeitures (based upon the Fair Market Value Per Share
of Employer Stock as of the end of the Plan Year)
allocable to the Participant under such plans;
(4) Amounts allocated to an individual medical account, as
defined in Code Section 415(l)(1), which is part of a
defined benefit or annuity plan maintained by the
Employer or a Controlled Group member; and
(5) Amounts allocated, after December 31, 1985, to a
separate account of a Key Employee under an Employer or
Controlled Group Member sponsored welfare benefit fund,
as defined in Code Section 419(e), which will provide
post-retirement health or life insurance benefits.
(d) For any Plan Year in which any Employer contributions
are applied by the Trustee (not later than the due date, including
extensions, for filing the Employer's federal income tax return for
that Plan Year) to pay principal or interest on an Acquisition Loan
and not more than one-third (1/3) of the Employer Contributions are
allocated to Highly Compensated Employees, Annual Additions shall
not include any Financed Shares which are allocated as Forfeitures
or Employer contributions used to pa y interest on an Acquisition
Loan. The Trustee may reallocate such Employer contributions in
order to satisfy this special limitation.
(e) The limitation contained in Section 4.6(a) shall be
determined by aggregating the contributions made by the Employer
to all defined contribution plans maintained by it or any members
of the Controlled Group during the Plan Year.
(f) If as a result of the allocation of Forfeitures, a
reasonable error in estimating a Participant's Compensation, a
reasonable error in determining the amount of Elective Deferrals
that may be made with respect to the Participant under the limits
of Code Section 415, or other facts and circumstances to which
Treas. Reg. Section 1.415-6(b)(6) shall be applicable, the Annual Addition
with respect to any Participant exceeds the limitation contained
in this Section, the Trustee shall, at the direction of the Plan
Administrator, in the following order and in an amount sufficient
to meet the limitations of Code Section 415:
(1) Return or refuse to accept all or a portion of any
Elective Deferral Contribution made by any such
Participant. Such returned amounts shall be
disregarded for purposes of the ADP test and the Code
Section 402(g) limit.
(2) Reallocate pursuant to Section 4.4 (disregarding such
Participant's Compensation), all or a portion of any
Forfeitures in an amount up to any remaining excess.
(3) Reallocate pursuant to Section 4.3 (disregarding such
Participant's Compensation), a portion of the Employer
ESOP Contribution in an amount up to any remaining
excess.
(4) As an alternative to (3) and at the direction of the
Plan Administrator, treat any remaining excess amount
as an Advance Employer Contribution for the succeeding
Plan Year to be held in a suspense account in
accordance with Section 4.5 hereof. Such excess amount
shall be allocated to reduce the Employer ESOP
contribution, including any allocation of Forfeitures,
for such Participant in the next Limitation Year and
subsequent Limitation Years, if necessary, unless such
excess amount was attributable to a Participant who is
no longer covered by the Plan. In such event, the
excess amount shall be held unallocated in a suspense
account and be used to reduce the Employer ESOP
contribution for all remaining Participants in the next
Limitation Year and subsequent Limitation Years, if
necessary.
Section 4.7 Defined Benefit and Defined Contribution Plans
In the event that a Participant also participates in a defined
benefit plan maintained by the Employer, there shall not be allocated to
the Account of such Participant an Annual Addition that will cause the
sum of such Participants defined benefit plan fraction and his defined
contribution plan fraction, as such terms are defined herein and in
section 415(e) of the Internal Revenue Code, to exceed 1.
Section 4.8 No Contributions by Participants
Employee contributions are neither required nor permitted under
this Plan.
Section 4.9 Make-Up Contributions for Omitted Participants
If, after the Employer's annual contribution for a Plan Year has
been made and allocated it should appear that, through oversight or a
mistake of fact or law, a Participant (or an Employee who should have
been considered a Participant) who should have been entitled to share in
such contribution received no allocation or received an allocation-which
was less than he should have received, the Employer may, at its
election, and in lieu of reallocating such contribution, make a special
make-up contribution for the Account of such Participant in an amount
adequate to provide for him the same percentage of his Compensation for
such Plan Year as was allocated to the Accounts of other Participants
for such omitted Plan Year and earnings attributable thereto.
Section 4.10 Exclusive Benefit; Refund of Employer Contribution
(a) All contributions made by the Employer are made for the
exclusive benefit of the Participants and their Beneficiaries, and
such contributions shall not be used or diverted to purposes other
than for the exclusive benefit of the Participants and their
Beneficiaries.
(b) Notwithstanding the foregoing, amounts contributed to
the Trust by the Employer may be refunded to the Employer only
under the following circumstances:
(i) Disallowance of Deduction. To the extent that an
income tax deduction is disallowed for the contribution
made by the Employer, the Trustee shall immediately
refund to the Employer the amount so disallowed upon
presentation, within one (1) year of the date of such
disallowance, of evidence thereof and a demand by the
Employer for such refund.
(ii) Denial of Qualified Status. If it is determined that
the Plan does not initially constitute a qualified
plan, there shall be returned to the Employer, upon
demand, any contribution made by the Employer with
respect to any Plan year in which qualified status is
denied, provided that demand is made by the Employer
and refund is made by the Trustee within one (1) year
of the date of denial of qualification of the Plan.
(iii) Mistake of Fact. In the case of a contribution
which is made in whole or in part by reason of a
mistake of fact, so much of such contribution as
is attributable to the mistake of fact shall be
returned to the Employer on demand. The Employer
shall present evidence of the mistake of fact to
the Trustee as well as calculations as to the
impact of such mistake. Demand and repayment
must be effectuated within one (1) year after the
payment of the contribution to which the mistake
applies.
(c) In the event that any refund is paid to the Employer
hereunder, such refund shall be made without interest and shall be
apportioned among the Accounts of the Participants as an investment
loss except to the extent that the amount of the refund can be
attributed to one or more specific Participants (such as in the
case of mistakes of fact, disallowances of compensation resulting
in reduction of deductible contribution) in which case the amount
of the refund attributable to each Participant's Account shall be
debited directly against such Account.
(d) Notwithstanding any other provision of this Section, no
refund shall be made to the Employer which is specifically
chargeable to the Account of any Participant in excess of 100% of
the amount of such Account which is derived from the Employer's
contributions, nor shall a refund be made by the Trustee of any
funds, otherwise subject to refund hereunder, which have been
distributed to Participants and/or Beneficiaries. In the case that
such distributions become refundable, the Employer shall have a
claim directly against the distributees to the extent of the refund
to which it is entitled. All refunds pursuant to this Section
shall be limited in amount, circumstances and timing to the
provisions of Section 403(c) of the ERISA.
Section 4.11 Dividends
(a) Any cash dividends received by the Trustee on Employer
Stock allocated to the Accounts of Participants (or former
Participants -or Beneficiaries) may be: (i) retained in the
Participants' applicable Accounts; (ii) used to make payments on
an Acquisition Loan the proceeds of which were used to acquire the
Employer Stock with respect to which the dividend is paid; or (iii)
paid to such Participants, former Participants or Beneficiaries;
(in a nondiscriminatory manner) at the sole discretion of the
Employer. Any current payment in cash to the Participants, former
Participants or Beneficiaries must be made within 90 days of the
end of the Plan Year in which the dividends are received by the
Trustee. The Employer may elect to pay any cash dividend directly
to the Participants or Beneficiaries. Any such payment of cash
dividend on shares of Employer Stock shall not be treated as a
distribution under the Plan.
(b) In the event a dividend on Employer Stock used to make
payments on an Acquisition Loan, then released Employer Stock
shall be allocated in accordance with the following:
(1) A portion (or all) of the Employer Stock released from
the Shares Suspense Account pursuant to Section 4.3(b)
as a result of the use of the cash dividend on Employer
Stock acquired with the proceeds of the Acquisition
Loan (whether such Employer Stock is allocated or
unallocated) to pay principal on the Acquisition Loan
shall first be allocated to Participants' Accounts in
accordance with this Section 4.1 1 (b)(1). That
portion of the released Employer Stock having a Fair
Market Value per Share equal to the dividends paid on
shares of Employer Stock which have been allocated to
Participants' Accounts on or before the date such
dividends are paid shall be allocated to each Account
pro rata based on the amount of the dividends
attributable to Employer Stock held in such Account.
If the dividends paid on allocated Employer Stock
exceeds the fair market value of the Employer Stock
released in accordance with Section 4.3(b), then the
Sponsor shall contribute to the Plan such additional
amounts of Employer Stock to the Trust necessary to
cause the fair market value of the total amount of
Employer Stock allocated under this Section 4.4(b)(1)
to equal the value of the cash dividends attributable
to the Employer Stock held in Participants' Accounts.
(2) If there remains any released and unallocated shares of
Employer Stock after the allocation under Section
4.11(b)(1), above, then such Employer Stock shall be
allocated in the same manner as an Employer
Contribution under Section 4.3(a).
(c) Any cash dividend received by the Trustee on Employer
Stock allocated to a Participant's Elective Deferral Account shall
be paid to Participants, former Participants or Beneficiaries in
cash if and only if the Plan Administrator has determined that such
dividends will be deductible by the Employer under Code Section
404(k).
Section 4.12 Rollover Contributions
Rollover contributions are not permitted under this Plan.
Section 4.13 Non-Discrimination Requirements
(a) In General. For each Plan Year, the Plan shall satisfy
the non-discrimination test in Code Section 401(k) in accordance
with Final Treasury Regulation Section 1.401(k)-l. The Code and
Regulation Sections are incorporated herein by this reference.
(b) The ADP Test. In accordance with Code Section
401(k)(3), the ADP for the group of eligible Participants for any
Plan Year who are Highly Compensated Employees must satisfy one of
the following tests:
(1) The ADP for the Highly Compensated Employees may not be
more than the ADP for all Non-Highly Compensated
Employees multiplied by 1.25; or
(2) The ADP for the group of Highly Compensated Employees
is not more than the ADP for all Non-Highly Compensated
Employees multiplied by two (2) and the difference
between the ADP is not more than two (2) percentage
points.
(c) Special Rules. For purposes of 4.13(b):
(1) If two or more plans which include cash or deferred
arrangements (as defined under Treas. Reg. Section
1.401(k)-l(a)(2) and referred to for purposes of this
Section as "Arrangements") are considered one plan for the
purposes of Code Section 401(a)(4) or 410(b), and to
satisfy Code Section 401(k), the Arrangements included
in such plans shall be treated as one Arrangement
provided the Arrangements have the same Plan Year.
(2) If a Highly Compensated Employee is a Participant under
two (2) or more Arrangements of the Employer or a
member of the Employer's Controlled Group, all such
Arrangements shall be treated as one Arrangement for
the purpose of determining the ADP with, respect to
such Highly Compensated Employee. Any Arrangement
ending with or within the same calendar year shall be
aggregated for purposes of determining the ADP with
respect to such Highly Compensated Employee. However,
plans required to be disaggregated under 401(k)
regulations shall be treated as separate plans.
(3) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ADP test.
(4) The determination and treatment of the ADP amounts of
any Participant shall satisfy such other requirements
as may be prescribed by the Secretary of the Treasury.
(d) Correcting Excess Contributions. If the ADP of the
Highly Compensated Employees would exceed the limits in 4.13(b),
the Plan Administrator shall correct the ADP and determine the
amount of Excess Contributions by reducing Elective Deferral
Contributions of the Highly Compensated Employees and distributing
such Excess Contributions as follows:
(1) The ADP of the Highly Compensated Employee with the
highest ADP shall be reduced first to the level of the
ADP of the Highly Compensated Employee with the next
highest ADP, or if a lesser reduction will permit, to
the level of the ADP at which the ADP test is
satisfied.
(2) If the ADP test of the Highly Compensated Employees
continues to exceed the limits in Section 4.13(b) after
reducing the ADP of the Highly Compensated Employee
with the highest ADP, then the Plan Administrator will
continue to reduce the ADP similarly by this method of
leveling to the ADP of the Highly Compensated Employee
with the next highest ADP until such ADP test is
satisfied.
(3) The amount of Excess Contributions determined above
shall be distributed to the Highly 'Compensated
Employees on the basis of their relative portions of
the Excess Contributions attributable to each of them.
The amount to be distributed as Excess Contributions
pursuant to this Section 4.13(d) shall be reduced by
any Excess Elective Deferrals which may be distributed
for such taxable year -ending in the same Plan Year in
which the Excess Contributions apply. In addition,
Excess Elective Deferrals which may be distributed for
such taxable year shall be reduced by any Excess
Contributions previously distributed with respect to
the Employee for the Plan Year beginning in such
taxable year. Excess Contributions shall be
distributed from the Participant's Elective Deferral
Account.
(4) Under no circumstances shall the amount of a Highly
Compensated Employee's Elective Deferral Contributions
distributed to correct Excess Contributions exceed the
amount of the Highly Compensated Employee's Elective
Deferral Contributions.
(e) When to Distribute Excess Amounts. Distribution of such
Excess Contributions shall be made no later than the last day of
the Plan Year after the Plan Year in which such excess amounts
apply. If such excess amounts are distributed more than 2-1/2
months after the last day of the Plan Year in which the excess
occurred, a ten percent (10%) excise tax is imposed on the Employer
with respect to such amounts.
(f) Correction of Excess Contributions for "Family Members".
Excess Contributions of Participants who are subject to the "family
member" aggregation rules shall be allocated among the "family
members" in proportion to the Elective Deferrals (and amounts
treated as Elective Deferrals) of each family member that is
combined to determine the combined ADP.
(g) Income Allocable to Excess Contributions. Any income
allocable to Excess Contributions for the Plan Year in which such
excess amounts apply shall be distributed along with distributions
designated as Excess Contributions for the Plan Year. Income
allocable to such Excess Contributions shall be equal to allocable
gains and income, less allocable losses and expenses for such Plan
Year. The Plan shall allocate income for this Section in the same
manner as set forth in Section 5.1 of the Plan. No income shall
be allocated to Excess Contributions for the period between the end
of the Plan Year and the date of distribution (the "gap period").
(h) When to Distribute Excess Amounts. Distribution of such
Excess Contributions shall be made no later than the last day of
the Plan Year immediately following the last day of the Plan Year
in which such excess amounts apply. If such excess amounts are
distributed more than 2-1/2 months after the last day of the Plan
Year in which such excess amounts arose, the Code imposes a ten
percent (10%) excise tax on the Employer with respect to such
amounts.
Section 4.14 Elective Deferral Accounts
(a) All Elective Deferrals made pursuant to a Participant's
Elective Deferral Agreement shall be deposited in the Participant's
Elective Deferral Account. A separate subaccount will be
maintained for each type of contribution included in the
Participant's Elective Deferral Account. Each such account shall
be credited with income applicable to such contribution. Elective
Deferral Accounts shall be subject to the following special rules:
(1) A Participant's Elective Deferral Account shall at all
times be 100% nonforfeitable.
(2) Except in the case of hardship, as defined in Section
8.14, a Participant's Elective Deferral Account may not
be distributed to a Participant (or Beneficiary) before
the earliest of the Participant's death, disability,
separation from service or attainment of age 59-1/2.
ARTICLE V - DETERMINATION OF VALUE
OF PARTICIPANT'S ACCOUNTS
Section 5.1 Trust Fund and Allocation of Earnings
The Trustee shall maintain or cause to be maintained Accounts which
shall reflect, from time to time, the value of the interest of each
Participant in the resulting from the contributions of the Employer
allocated to each Participant. In this condition the Accounts shall
reflect each Participant's share of interest, dividends, realized and
unrealized gains and income from all sources, less realized and
unrealized losses and expenses (other than those to be borne by the
Employer in accordance with this Plan). Such sum shall be determined as
of the Valuation Date of each Plan Year and, after allocating the (i)
Employer ESOP Contributions, and (ii) Elective Deferral Contributions
for such Plan Year, allocated as a credit or charge to the Account of
each Participant in the same proportion that the balance of the Account
of each Participant as of the date following the last Valuation Date
bears to the total of the balances of the Accounts of all Participants
as of such date; provided, however, that distribution payments made
during, but prior to the Valuation Date shall first be deducted from
such balances.
Section 5.2 Determination of Market Value
The Trustee shall, as provided in the Agreement and Declaration of
Trust, ascertain and certify the fair market value of the Trust Fund as
of the Valuation Date. Such valuation shall include the Employer's
contribution with respect to such Plan Year. Similar valuations shall
be made at such other times as necessary for the purpose of determining
the value of a Participant's Account. In determining the fair market
value of the Fund, the Trustee shall use the Fair Market Value Per Share
of the Employer Stock.
Section 5.3 Diversification of Investments
(a) Each Participant who has attained age 55 and completed
10 Years of Service for participation under the Plan (including
Years of Service under the Plan prior to its conversion to an ESOP)
shall be permitted to direct the Plan Administrator as to the
investment of 25 percent of the value of the Participant's Account
balance but only to the extent such portion exceeds the amount to
which a prior election under this Section 5.3 applied. Such
direction shall be permitted within 90 days after the last day of
each Plan Year during the Participant's Qualified Election Period.
Within 90 days after the close of the last Plan Year in the
Participant's Qualified Election Period, a Participant may direct
the Plan Administrator as to the investment of 50 percent of the
value of his Account balance. Such direction as to the investment
of the Participant's Account balance shall constitute a request to
distribute that portion of the Participant's Account covered by the
election.
(b) A participant's Qualified Election Period shall be the
six Plan Year period beginning on the later of (i) the Plan Year
in which the Participant attains age 55; or (ii) the Plan Year in
which the Participant first becomes qualified under subparagraph
(a) above.
(c) The Participant's direction shall be provided to the
Plan Administrator in writing and shall be effective no later than
180 days after the close of the Plan Year to which the direction
applies to the Participant.
(d) This Section 5.3 shall apply to all Employer Stock,
whenever acquired under the Trust.
Section 5.4. Investment Selection by Participants
(a) Elective Deferral Contributions to the Plan together
with any earnings thereon shall be deposited in the Trust Fund and
held temporarily in a stable income or similar fund designed to
protect principal at a rate of return competitive with money market
funds (the 'Fund") until such monies are used to acquire Employer
Stock.
(b) Once each Plan Year on or about April 15, each
Participant shall be given the right to direct the Trustee in
writing on forms provided by the Plan Administrator not to acquire
Employer Stock with the monies held in the Fund. Such written
direction shall be submitted to the Plan Administrator not less
than fifteen (15) days before the date of purchase of Employer
Stock, unless the Plan Administrator provides otherwise.
(c) The Plan Administrator, in its discretion, may offer to
all Participants additional or different investment categories than
the Fund and may at any time cease to offer such investment
categories as it sees fit.
(d) The Participant's Elective Deferral Account which is
invested in the Fund at the annual purchase date shall be used to
purchase Employer Stock unless otherwise directed by the
Participant, in which case such monies shall continue to be
invested in accordance with paragraph (a), above, until the next
annual purchase of Employer stock.
(e) In the absence of a written direction by a Participant
not to invest such Participant's interest in the Fund in Employer
Stock, the Trustee shall invest such funds in Employer Stock.
ARTICLE VI - RETIREMENT AND OTHER TERMINATION
OF PARTICIPATION; VESTING
Section 6.1 Full Vesting; Retirement, Death or Disability
(a) A Participant shall be one hundred percent (100%) vested
in the portion of his Account attributable to Employer
Contributions upon:
(1) Attaining Normal Retirement Age;
(2) Death; or
(3) Total and Permanent Disability. For this purpose,
Total and Permanent Disability shall mean a physical or
mental condition which totally and permanently prevents
a Participant from rendering further service in a job
classification that is satisfactory to the Employer.
Total and Permanent Disability shall be established by
a medical opinion rendered by a doctor approved by the
Plan Administrator."
(b) A Participant shall at all times be one hundred percent
(100%) vested in the portion of such Participant's Account
attributable to Elective Deferral Contributions.
Section 6.2 Other Termination of Employment; Participant's Vested
Percentage
(a) A Participant who terminates employment on or after
January 1, 1989, with the Employer and with all members of the
Employer's Controlled Group, prior to attaining Normal Retirement
Age (other than by reason of Total and Permanent Disability or
death), shall have his interest in Account in accordance with the
following schedule:
Years of Service Vested Percentage
------------------ ---------------------
Fewer than three years None
3 years but fewer than 4 20%
4 years but fewer than 5 40%
5 years but fewer than 6 60%
6 years but fewer than 7 80%
7 years or more 100%
(b) A Participant who terminated employment prior to January
1, 1989, with the Employer and with all members of the Employer's
Controlled Group, prior to attaining Normal Retirement Age (other
than by reason of total and permanent Disability or death), shall
have his interest in Account determined in accordance with the
following schedule:
Years of Service Vested Percentage
------------------ ---------------------
Fewer than 4 years None
4 years but fewer than 5 40%
5 years but fewer than 6 45%
6 years but fewer than 7 50%
7 years but fewer than 8 60%
8 years but fewer than 9 70%
9 years but fewer than 10 80%
10 years but fewer than 11 90%
11 years or more 100%
(c) Notwithstanding the foregoing, the vested percentage of
a Participant's Account who had been covered under the provisions
of the Plan before the Effective Date, shall not be less than the
vested percentage the Participant would have had if the provisions
of the Plan as in effect immediately prior to the Effective Date
had continued without change.
Section 6.3 Vesting Upon Termination of the Plan
A Participant shall become 100 percent vested in that portion of
his Account attributable to Employer contributions upon termination of
the Plan pursuant to Article XV.
Section 6.4 Forfeiture of Nonvested Benefit
A Forfeiture of a Participant's nonvested benefit shall occur under
the Plan:
(a) As of the last day of the Plan Year in which occurs the
fifth consecutive break in Service for the Participant due to the
termination of employment; or
(b) If earlier than (a), and if applicable; "on the date the
Participant receives a lump sum distribution of the nonforfeitable
percentage of his Account as a result of the Participant's
termination of participation in the Plan, subject to restoration
under Section 8.6. A distribution is deemed to be made due to the
termination of participation in the Plan if it is made no later
than the close of the second Plan Year following the Plan Year in
which such termination of participation occurs.
A Participant who has incurred a Break in Service and who resumes
participation as described in Section 3.3 hereof shall forfeit the
amount of any contribution made on his behalf for the Plan Year which
includes his date of reemployment if he terminates employment prior to
the first anniversary of such date of reemployment.
Section 6.5 Computation of Years of Service and Breaks in Service
For purposes of determining Years of Service and Breaks in Service
under this Article VI, the definitions and rules of this Section 6.5 and
of Sections 6.6 through 6.7 shall be applied.
(a) "Employment Commencement Date" means the date on which
an Employee first performs an Hour of Service as defined in Section
2.20(a).
(b) "Severance from Service Date" means the date on which-
the earlier of the following occurs:
(1) The date the Employee quits, retires, is discharged or
dies; or
(2) The date 12 months after an Employee remains absent
from service with an Employer (with or without
receiving his regular Compensation) for any reason
other than a quit, retirement, discharge or death.
(c) "Period of Service" means a period of time commencing
on an Employee's Employment Commencement Date or Reemployment
Commencement Date, as the case may be, and ending on the Employee's
Severance from Service Date, and shall include past service with
an Employer's predecessor employer if the Employer maintains the
plan of such employer. Period of Service shall include a Period
of Severance of less than one year's duration.
(d) "Period of Severance" means a period of time commencing
on an Employee's Severance from Service Date and ending on the date
on which such Employee again performs an Hour of Service within the
meaning of Section 2.20(a).
(e) "Reemployment Commencement Date" means the date on which
the Employee performs his first Hour of Service (within the meaning
of Section 2.20(a)) after a Period of Severance of at least one
year's duration.
(f) "Year of Service" means the aggregate number of 365-day
periods within an Employee's applicable Period(s) of Service. For
this purpose, and except as provided in Section 6.6 all of an
Employee's nonsuccessive Periods of Service shall be aggregated.
(g) "Break in Service" means a twelve (12) consecutive month
period during which an Employee does not perform an Hour of Service
(as defined in Section 2.20(a) hereof) with an Employer. Breaks
in Service are measured from the Employee's Severance from Service
Date and subsequent anniversaries thereof until the Employee again
performs an Hour of Service (as defined in Section 2.20(a) hereof).
However, see the provisions of Article VII relating to Parental
Absences and their effect on Breaks in Service.
Section 6.6 Years of Service
A Participant shall be credited with all Years of Service except
the following:
(a) Years of Service prior to the Participant incurring five
consecutive Breaks in Service unless:
(1) at the time of the Breaks in Service the Participant
was vested under Section 6.2; or
(2) for nonvested Participants, the aggregate number of
Years of Service prior to the consecutive Breaks in
Service exceeds the Period of Severance; and
(b) Years of Service after five consecutive Breaks in
Service shall not be taken into account for purposes of determining
a Participant's vested percentage in his Account prior to the
consecutive Breaks in Service. Any years prior to the five
consecutive Breaks in Service shall not be counted until the
Participant completes a Year of Service after his date of
reemployment.
Section 6.7 Forfeiture Due to Discharge of Employment for Cause
(a) Notwithstanding anything herein to the contrary, in the
event a Participant terminates employment with the Employer prior
to his completion of seven (7) Years of Service for Employee
misconduct, such Participant shall have his interest in Account
determined in accordance with the following schedule:
Years of Service Vested Percentage
------------------ ---------------------
Fewer than 6 years 0%
6 years but fewer than 7 80%
7 years or more 100%
Such vesting shall be applicable for Plan Years beginning on or
after January 1, 1989 but only with respect to Participants terminating
employment on or after January 1, 1989.
(b) A Participant who, prior to January 1, 1989, terminated
his employment with the Employer due to Employee misconduct, shall
have his vested interest in Account, determined in accordance with
the following schedule:
Years of Service Vested Percentage
------------------ ---------------------
10 years but fewer than 11 0%
11 years or more 100%
(c) For purposes of this Section, Employee misconduct is any
misdemeanor, felony or any other act evidencing fraud or dishonesty
on the part of the Employee. Any portion of a Participant's
Account forfeited for cause shall be available for reallocation to
the Accounts of the remaining Participants pursuant to Section 4.4
as of the close of the Plan Year in which such Forfeiture occurs.
(d) This Section 6.7 shall not apply to a Participant if (i)
such Participant has attained Normal Retirement Age; (H) the Top-Heavy
Plan vesting provisions of Section 9.5 of this Plan apply to
such Participant; (iii) the Plan has been totally or partially
terminated; or (iv) there has been a complete discontinuance of
contributions under the Plan.
ARTICLE VII - PARENTAL ABSENCE PROVISIONS
Section 7.1 Effective Date of Article VII
The provisions of this Article VII shall be effective with respect
to any Parental Absence which commences on or after January 1, 1985.
Section 7.2 Hours of Service Credited for Parental Absence
Solely for the purposes of determining whether a Break in Service
has occurred, the Plan Administrator shall credit to an Employee on
Parental Absence:
(a) the Hours of Service which otherwise would normally have
been credited to such individual but for such absence; or
(b) if the Plan Administrator is unable to determine the
Hours of Service pursuant to paragraph (a), eight Hours of Service
per normal work day.
The total number of Hours of Service credited under this Section 7.2 by
reason of any Parental Absence shall not exceed 501.
Section 7.3 Plan Years to Which Hours of Service are Credited
The Hours of Service credited under Section 7.2 shall be treated
as Hours of Service in the Plan Year:
(a) in which the Parental Absence begins, if a Participant
would be prevented from incurring a Break in Service in such year
solely because of the Hours of Service credited under Section 7.2;
or
(b) in any other case, in the Plan Year immediately
following the Plan Year in which the Parental Absence began.
A Participant shall be credited with Hours of Service in only one
of the Plan Years noted above.
Section 7.4 - Information to Plan Administrator
No Hours of Service credit shall be given under Section 7.2 unless
the Employee furnishes to the Plan Administrator such timely information
as the Plan Administrator may reasonably require in order to establish
that the absence from work was a Parental Absence as defined in Section
2.24, and the number of days for which there was such an absence.
ARTICLE VIII - DISTRIBUTIONS
Section 8.1 Time of Distribution
(a) Normal Time for Distribution. Upon a Participant's
retirement or other termination of employment and upon the
direction of the Plan Administrator, the Trustee shall, after the
value of the Participant's Account has been determined in
accordance with Article V, make or commence distribution of such
Account. Upon the request of a Participant (which shall be treated
as consent under Section 8.1(b)) distribution of a Participant's
Account attributable to Employer Stock acquired on or after January
1, 1987, shall be commenced as follows:
(i) If the Participant separates from service by reason of
the attainment of Normal Retirement Age, death, or
disability, the distribution of the Participant's
Account balance will begin not later than one year
after the end of the Plan Year in which such event
occurs.
(ii) If the Participant separates from service for any
reason other than those enumerated in paragraph (i)
above, and is not reemployed by the Employer at the end
of the fifth Plan Year following the Plan Year of such
separation from service, distribution of the
Participant's Account balance will begin not later than
one year after the end of the fifth Plan Year following
the Plan Year in which the Participant separated from
service.
Notwithstanding anything contained in this Article VIII
to the contrary, any Participant who is eligible to
receive a distribution and who requests an immediate
distribution of such Participant's Elective Deferral
Account in the form of cash, shall receive a
distribution of such Elective Deferral Account in cash
as soon as practicable following such request.
Amounts to be distributed under this Section 8.1(a)(ii)
prior to the end of the fifth Plan Year following the
Plan Year in which the Participant separated from
service may only be distributed in the form of cash.
Any request by a Participant that such distribution be
made in the form of Employer Stock will be treated as
an election to have such distribution made at the
latest date permitted under this Section 8.1(a)(ii).
The Plan Administrator shall make distributions prior
to such fifth Plan Year if a written request for an
earlier distribution is made by a Participant. Such
distribution of the Participant's vested Account
balance shall be made following the end of each or any
of the five Plan Years next following the Plan Year
during which the Participant's employment with the
Employer terminates.
The amount of any such earlier distribution shall be
made in an amount up to the full amount of the
Participant's vested Account balance but not in excess
of a maximum distribution amount as determined by the
Plan Administrator for the Plan Year in which the
request is made. The amount determined by the Plan
Administrator shall be determined for each Plan Year as
of the last day of the Plan Year, and may be changed
from year to year.
(iii) If any portion of a Participant's Account balance
includes Employer Stock which was acquired with
the proceeds of an Acquisition Loan that has not
been repaid in full, then distribution of such
Employer Stock need not commence until the close
of the Plan Year following the Plan, Year in
which the Acquisition Loan is fully repaid.
(b) Consent to Distribution Prior to Normal Retirement Age
(1) If a Participant terminates his employment with the
Employer and the value of his vested Account balance is
not greater than $3,500, the Plan Administrator shall
direct the distribution of such vested Account balance
in a lump sum without the Participant's consent.
(2) If the value of the Participant's vested Account
balance is greater than $3,500, the Plan Administrator
may direct the distribution of such vested Account
balance only with the written consent of the
Participant. In the event of the Participant's death,
the Participant's surviving spouse, if a Beneficiary,
must consent in writing to such distribution.
(c) Required Distributions Before Death
(1) General Rule. Effective January 1, 1989, distribution
of Account balances must be made or commenced to the
Participant not later than April 1 of the calendar year
following the calendar year in which the Participant
attains age 70 1/2, regardless of whether the Participant
has actually retired.
(2) 1988 Terminations. Distributions to Participants who
were not five percent (5%) owners, had not retired by
January 1, 1989, and who attained age 70 1/2 during 1988
must be made or commenced by April 1, 1990.
(3) Transition Rule. Distributions to Participants who
were not five percent (5%) owners as defined in Code
Section 416(i)(1)(B) and have attained age 70 1/2 before
January 1, 1988, must be made or commenced by April 1
of the calendar year following the calendar year in
which the Participant attains age 70 1/2, or the calendar
year in which the Participant retires, if later.
(d) Except as limited by Section 8.1(a) and in the absence
of a request for distribution, the Plan Administrator shall direct
the Trustee to make or commence distribution on or before the 60th
day following the end of the Plan Year in which occurs the latest
of the following events:
(1) the date on which the Participant attains Normal
Retirement Age; or
(2) the date on which the Participant terminates his
employment with the Employer.
Section 8.2 Manner of Distribution
(a) The Plan Administrator, pursuant to any election made
by a Participant (or Beneficiary) shall direct the Trustee to make
distribution of the Participant's Account to him or to his
Beneficiary or Beneficiaries, as the case may be, in one or more
of the following methods:
(i) In one (1) lump sum; or
(ii) In periodic payments of substantially equal amounts,
payable not less frequently than annually for a period
not extending beyond the life expectancy of the
Participant or the joint life expectancies of the
Participant and a Designated Beneficiary. (Designated
Beneficiary shall mean any individual designated as a
Beneficiary by a Participant.)
(b) Notwithstanding the above, the Plan Administrator may
direct the Trustee to distribute to a Participant or his
Beneficiary, Employer Stock in substantially equal monthly,
quarterly, semiannual, or annual installments over a period of not
longer than five (5) years. In the case of a Participant with an
account balance in the Plan in excess of $500,000, the five (5)
year period shall be extended one (1) additional year (but not more
than five (5) additional years) for each $100,000 or fraction
thereof by which such balance exceeds $500,000. The foregoing
dollar limits shall be adjusted to reflect cost of living increases
as announced by the Secretary of Treasury.
(c) In no event shall the amount paid to the Participant and
his Designated Beneficiary exceed the amount of his Account.
(d) Periodic distributions to a Participant who has attained
age 70-1/2, must equal or exceed an amount determined in accordance
with the rules provided in Prop. Treas. Reg. Section 1.401(a)(9)-l,
whether in proposed or final form.
Section 8.3 Form of Distribution
(a) Distribution of a Participant's Account shall be made
in whole shares of Employer Stock valued at their Fair Market Value
Per Share as of the date set forth in Section 5.2, cash, or a
combination of both Balances representing fractional shares will
be distributed in cash. In the event Employer Stock is not
available for distribution on the date a distribution is due
hereunder, the Trustee shall hold such amount until Employer Stock
is acquired. Notwithstanding the preceding, the Plan Administrator
may distribute the amount of the Participant's Account in cash,
provided that, in such case, the Participant shall have the right
to demand in writing that such distribution be in the form of
Employer Stock.
(b) If the Employer's articles or bylaws restrict ownership
of substantially all shares of Employer Stock to Employees and the
Trust, the distribution of a Participant's Account may be made
entirely in cash without granting the Participant the right to
demand distribution in shares of Employer Stock.
Section 8.4 Required Distribution After Death
If a Participant dies prior to distribution of his entire vested
Account balance, then distribution thereof after the death of the
Participant must be made no later than and in accordance with the
following:
(a) If, prior to the death of the Participant, the
distribution has commenced, the remaining portion of the Account
balance shall be distributed at least as rapidly as under the
method of distribution being used as of the date of death.
(b) If, prior to the death of the Participant, the
distribution has not commenced, the entire Account balance of the
Participant must be distributed by December 31 of the fifth
calendar year after the death of the Participant, except as
provided in subparagraph (c) hereinbelow.
(c) Restrictions of subparagraph (b) shall not apply to any
portion of a Participant's Account balance which is payable to or
for the benefit of a designated Beneficiary if:
(1) Such a portion will be distributed over the life of
such designated Beneficiary or over a period certain
not extending beyond the Beneficiary's life expectancy,
and the distribution commences on or before December 31
of the calendar year immediately following the calendar
year of the date of the Participant's death; or
(2) If the Beneficiary is the spouse of the Participant,
distributions are not required to begin earlier than
the later of (i) December 31 of the calendar year
immediately following the calendar year in which the
Participant died, or (ii) December 31 of the calendar
year in which the Participant would have attained age
70-1/2. If the surviving spouse dies before the
distributions to such spouse begin, then the 5-year
distribution requirement of subparagraph (b) shall
apply as if the spouse were the Participant.
Section 8.5 Put Option
(a) Employer Stock distributed pursuant to Section 8.3
hereof, shall be subject to a Put Option for two separate periods
of time permitting the Participant, his donees or beneficiaries to
sell such stock to the Employer. The first option period shall be
a period of sixty days commencing on the date the stock subject to
the option is distributed. The second option period shall be a
period of sky days beginning on the date a Participant is notified
of the Fair Market Value Per Share in the next Plan Year. The
Participant shall be given written notice of the new Fair Market
Value Per Share and of his option to have the Employer repurchase
his stock at the new Fair Market Value Per Share.
(b) The selling price of Employer Stock sold pursuant to
such Put Option shall be the Fair Market Value as of the last
valuation under Section 5.2.
(c) If the Employer Stock was distributed to the Participant
as part of a lump sum distribution, then payment of the purchase
price under the Put Option may be deferred if the following
conditions are satisfied:
(1) The amount deferred is adequately secured;
(2) A reasonable rate of interest is charged on the unpaid
principal balance; and
(3) Periodic payments are made at least annually in
substantially equal installments over a period not to
exceed 5 years from the date the Put Option is
exercised, provided, the first such installment is paid
within 30 days of said exercise date.
In all other events the Employer Stock shall be repurchased no
later than 30 days after the Participant exercises the Put Option.
(d) In the event that the Employer Stock subject to the Put
Option was purchased by the Trustee with the proceeds of a loan,
the period specified in subparagraph (c)(3) above may be extended
to a date no later than the earlier of 10 years from the date the
Put Option is exercised or the date the proceeds of the loan used
by the Trust to acquire the stock subject to the Put Option are
entirely repaid
(e) Notwithstanding the preceding, the Trustee may, but
shall not be required to, assume the rights and obligations of the
Employer under the Put Option.
Section 8.6 Right of First Refusal
(a) If any Participant, his Beneficiary or any other person
to whom shares of employer Stock are distributed from the Plan
(the "Selling Participant") shall, at any time, desire to sell
some or all of such shares (the "Offered Shares") to a third party
(the "Third Party"), the Selling Participant shall give written
notice of such desire to the Employer and the Administrator, which
notice shall contain the number of shares offered for sale, the
proposed terms of the sale and the names and addresses of both the
Selling Participant and Third party. Both the Trust Fund and the
Employer shall each have the right of first refusal for a period
of fourteen (14) days from the date the Selling Participant gives
such written notice to the Employer and the Administrator (such
fourteen (14) day period to run concurrently against the Trust Fund
and the Employer) to acquire the Offered Shares. As between the
Trust Fund and the Employer, the Trust Fund shall have priority to
acquire the shares pursuant to the right of first refusal. The
selling price and terms shall be the same as offered by the Third
Party.
(b) If the Trust Fund and the Employer do not exercise their
right of first refusal within the required fourteen (14) day period
provided above, the Selling Participant shall have the right, at
any time following the expiration of such fourteen (14) day period,
to dispose of the Offered Shares to the Third party; provided,
however, that (i) no disposition shall be made to the Third Party
on terms more favorable to the Third Party than those set forth in
the written notice delivered by the Selling Participant above, and
(ii) if such disposition shall not be made to a third party on the
terms offered to the Employer and the Trust Fund, the offered
Shares shall again be subject to the right of first refusal set
forth above.
(c) The closing pursuant to the exercise of the right of
first refusal under Section 8.6(a) above shall take place at such
place agreed upon between the Administrator and the Selling
Participant, but not later than ten (10) days after the Employer
or the Trust Fund shall have notified the Selling Participant of
the exercise of the right of first refusal. At such closing, the
Selling Participant shall deliver certificates representing the
Offered Shares duly endorsed in blank for transfer, or with stock
powers attached duly executed in blank with all required transfer
tax stamps attached or provided for, and the Employer or the Trust
Fund shall deliver the purchase price, or an appropriate portion
thereof to the Selling Participant.
(d) Except as provided in this paragraph (d), no Employer
Stock acquired with the proceeds of an Acquisition Loan shall be
subject to a right of first refusal. Employer Stock, which is
acquired with the proceeds of any Acquisition Loan which is
distributed to a Participant or Beneficiary shall be subject to the
right of first refusal, provided for in paragraph (a) of this
Section only so long as the Employer Stock is not publicly traded.
In addition, in the case of Employer Stock which was acquired with
the proceeds of an Acquisition Loan, the selling price and other
terms under the right must not be less favorable to the seller than
the greater of the value of the security determined under
Regulation 54.4975-11(d)(5), or the purchase price and other terms
offered by a buyer (other than the Employer or the Trust Fund),
making a good faith offer to purchase the security. The right of
first refusal must lapse no later than fourteen (14) days after the
security holder gives notice to the holder of the right that an
offer by a third party to purchase the security has been made. The
right of first refusal shall comply with the provisions of
paragraphs (a), (b) and (c) of this Section, except to the extent
those provisions may conflict with the provisions of this
paragraph.
(e) Certificates for shares distributed pursuant to the Plan
shall contain the following legend:
"The shares represented by this certificate are
transferable only upon compliance with the terms of The
G. R. HERBERGER'S, INC. EMPLOYEE STOCK OWNERSHIP PLAN
(the "Plan") effective as of December 31, 1989, which
grants to G. R. Herberger's, Inc. and the Plan a right
of first refusal, a copy of said Plan being on file in
the office of G. R. Herberger's, Inc."
Section 8.7 Distribution Prior to a Five Consecutive Breaks in
Service, Restoration of Forfeited Account
(a) Conditions for Restoration. If a terminated Participant
who incurred a Forfeiture under Section 6.4(b) is reemployed by the
Employer prior to incurring five (5) consecutive one-year Breaks
in Service and the reemployed Participant repays within five (5)
years of his date of reemployment the amount of the distribution,
if any, he received at his previous termination of employment, then
the Plan Administrator shall restore the Participant's Account with
the amount of the Forfeiture and the repaid amount.
(b) Time and Method of Restoration. If the Participant has
the right to make a repayment of his lump sum distribution under
Section 8.7(a), then the Plan Administrator shall restore the
Participant's Account as of the last day of the Plan Year in which
the repayment is made. To restore the Participant's Account, the
Plan Administrator, to the extent necessary, shalt allocate to the
Participant's Account first, the amount, if any of Participant
Forfeitures for the Plan Year; second, the amount of any special
Employer contribution made for the purpose of restoring a
Participant's Account; and third, the amount, if any of the Trust
Fund net income or gain for the Plan Year. To the extent the
amounts available for restoration under the immediately preceding
sentence are insufficient to make the required restoration, the
Employer shall contribute, without regard to any requirement or
condition of Sections 4.1 or 4.8, such additional amount as is
necessary to enable the Plan Administrator to make the required
restoration.
(c) Segregated Account for Repaid Amount. Until the Plan
Administrator restores the Participant's Account balance under
Section 8.7(b), the Trustee shall invest the amount the Participant
has repaid in a segregated account maintained solely for that
Participant. Until commingled with the balance of the Trust Fund
on the date the Plan Administrator restores the Participant's
Account, the Participant's segregated account shall remain a part
of the Trust, but it alone shall share in any income it earns and
it alone shall bear any expense or loss it incurs. Unless the
repayment qualifies as a Rollover contribution, the Plan
Administrator shall direct the Trustee to repay to the Participant
as soon as is administratively practicable, the fun amount of the
Participant's segregated account if the Plan Administrator
determines that one or more of the conditions preventing repayment
and restoration under Section 8.7(a) is applicable.
Section 8.8 Reemployment After Distribution Has Been Made or Commenced
In the event that a former Participant is reemployed by the
Employer after distribution to him has been made or commenced, the
following rules shall apply:
(a) Further distribution of his Account shall be suspended
and the undistributed remainder shall continue to be held in, the
Trust Fund, it being the intent hereof that no distribution shall
be made while a Participant is employed with the Employer.
(b) Such former Participant shall again become a Participant
in the Plan upon satisfaction of the requirements set forth in
Section 3.3.
Section 8.9 Designation of Beneficiaries
(a) Each Participant may designate on forms to be furnished
by the Plan Administrator, a Beneficiary or Beneficiaries to
receive his Account in the event of his death and may change or
revoke any such designation from time to time. No such
designation, change or revocation shall be effective unless
executed by the Participant and delivered to the Plan Administrator
during the Participant's lifetime. In the event that a Participant
shall have failed to designate a Beneficiary, or Beneficiaries, or
the Beneficiary or Beneficiaries, as the case may be, shall have
failed to survive the Participant, the Participant's Account shall
be payable to the first class of the following classes of
Beneficiaries then surviving and, except in the case of his
surviving issue, in equal shares if there are then more than one
in each class:
(1) Participant's surviving spouse,
(2) Participant's surviving issue per stirpes and not per
capita,
(3) Participant's surviving parents,
(4) Participant's surviving brothers and sisters,
(5) Representatives of the Participant's estate.
For this purpose, "per stirpes" means in equal shares among living
children and the issue of deceased children, the latter taking by
right of representation, and "issue" means all persons who are
descended from the person referred to, either by legitimate birth
or legal adoption.
(b) If a Participant designates a Beneficiary other than
such Participant's spouse to receive his Account in the event of
his death, such designation shall not take effect unless:
(1) The Participant's spouse consents in writing to the
election, and such consent acknowledges the effect of
such election and is witnessed by a Plan representative
or a Notary Public; or
(2) It is established by the Participant in writing to the
satisfaction of the Plan Administrator that the consent
required under subparagraph (1) may not be obtained
because there is no spouse; because the spouse cannot
be located; or because of such other circumstances
provided by regulations issued under the Code.
Any consent by a spouse (or establishment that the consent of a
spouse may not be obtained) under subparagraph (2) above shall be
effective only with respect to such spouse.
Section 8.10 Minors and Persons Under Intel Disability
If any person to whom a benefit is, payable hereunder is a minor,
or if the Plan Administrator determines that any person to whom such
benefit is payable is incompetent by reason of physical or mental
disability, the Trustee shall have power to cause the payment becoming
due to such person to be made to another for his benefit. Any payment
made pursuant to such power shall, as to such payment operate as a
complete discharge of the Trustee, provided that due care is exercised
in selecting the recipient.
Section 8.11 Interest of Persons Who Cannot Be Located
In the event that a Participant or Beneficiary who has been
determined to be entitled to a distribution hereunder cannot be located
by the Trustee after reasonable, good faith effort, said funds shall be
reallocated among the Participants as a Forfeiture. Thereafter if the
Participant or Beneficiary entitled to the vested Account balance is
located or claims the vested Account balance, such vested Account
balance shall be reinstated from Forfeitures for such Plan Year or from
any special Employer contributions made for the purpose of restoring a
Participant's Account. Such Account balance shall then be distributed
to the Participant or Beneficiary in accordance with this Article VIII.
Section 8.12 Non-alienation of Benefits
Except in the case of Qualified Domestic Relations Orders, pursuant
to Article XII hereof, benefits payable under the provisions of this
Plan shall not be subject, in any manner, to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, charge, garnishment,
execution or levy of any kind either voluntary or involuntary, prior to
actually being received by the person entitled to the benefit under the
terms of the Plan and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of any
right to benefits payable hereunder shall be void. The Trust shall not
in any manner be liable for or subject to the debts, contracts,
liabilities, engagements or torts of any person entitled to benefits
hereunder.
Section 8.13 Distribution Upon Attaining Age 59-1/2
(a) A Participant who has not terminated employment but who
has attained age 59-1/2 may elect to withdraw all or any portion
of his vested account balance as of the end of a Plan Year.
(b) If a Participant elects to withdraw all or part of his
vested Account balance by making a written request for a
distribution, then a distribution of the Participants' vested
Account balance shall be made within one year after the end of the
Plan Year to which the election applies. The amount of such
distribution shall be equal to the requested amount, but not more
than the greater of (i) an amount determined by the Plan
Administrator or (ii) the maximum annual distribution allowed under
Section 498OA(c)(1) for non-lump sum distributions without
incurring an excise tax, for the Plan Year in which the request is
made. The amount to be determined by the Plan Administrator shall
be determined for each Plan Year as of the last day of the Plan
Year, and may be changed from year to year.
Section 8.14 Distribution Due to Hardship
(a) At any time, the Plan Administrator, in accordance with
regulations and/or rules adopted and implemented by it in a
uniform, nondiscriminatory manner, may allow a Participant to
withdraw all or a portion of the Participant's Elective Deferral
Account attributable solely to the Participant's Elective Deferral
Contributions (without any income attributable thereto) after
receiving a written request from a Participant, but only if such
withdrawal is made necessary by reason of a Participant's financial
hardship.
(b) For this purpose, "financial hardship" shall mean such
circumstances of a Participant which create an immediate and heavy
financial need for which funds are not reasonably available from
other resources of the Participant. The Plan Administrator shall,
in its sole discretion, determine all requests for a hardship
distribution hereunder in a uniform and nondiscriminatory manner.
A distribution under this Section 8.14 shall be permitted only if
the distributions is on account of any of the following
circumstances:
(1) Accident or illness of the Participant, the
Participant's spouse or any dependents of the
Participant (as defined in Code Section 152), but only
to the extent necessary to defray expenses of medical
and/or hospital care, described in Code Section 213(d),
reasonably attributable to such accident or illness or
M health or to preserve the health of such Participant
or such dependent;
(2) The payment of tuition and related educational fees for
the next twelve (12) months of post-secondary education
for the Participant, the Participant's spouse or
children, or any dependent of the Participant (as
defined in Code Section 152);
(3) The cost of purchase or construction of the principal
residence of the Participant, not including making
mortgage payments;
(4) The cost of preventing eviction or mortgage foreclosure
on the principal residence of the Participant;
(5) Such distributions as specifically permitted under
regulations issued by the IRS; or
(6) Funeral expenses for a member of the Participant's
family.
(c) No more shall be distributed than is actually required
to meet the hardship, plus the amount necessary to pay any federal,
state or local income taxes or penalties resulting from the
distribution. For purposes of this requirement, no distribution
shall be made under this Section 8.14, unless the Plan
Administrator determines, upon the Participant's representation and
such other facts as are known to the Administrator, that all of the
following conditions are satisfied:
(1) The distribution does not exceed the amount of the
need, plus the "gross up" for federal, state or local
taxes and penalties anticipated on the distribution;
(2) Hardship distribution aside, the Employee has obtained
all distributions and all nontaxable loans currently
available under all plans maintained by the Employer;
(3) Any elective deferral agreement(s), whether under this
Plan or any other plan maintained by the Employer, of
any Participant who obtains a hardship distribution,
shall be suspended for at least twelve (12) months
after receipt of the hardship distribution; and
(4) Elective Deferral Contributions of such Participant for
the taxable year immediately following the taxable year
of the hardship distribution may not exceed the
applicable limit on elective deferrals under Code
Section 402(g), minus the Participant's Elective
Deferral Contributions for the taxable year of the
hardship distribution. (For purposes of this rule,
Elective Deferral Contributions shall include such
elective deferrals under all plans maintained by the
Employer.)
Notwithstanding the suspension from participation as set out above,
an Employee will still be considered an eligible Employee for
purposes of Section 4.13.
(d) The Plan Administrator may rely upon a notarized
affidavit of a Participant which states that he has a financial
need (specific as to the nature and amount) and that he has no
other funds which are reasonably suitable from other sources,
except to the extent that the persons to whom the Plan
Administrator has designated the responsibility administering the
provision have knowledge that such representations are not true.
(e) Hardship distributions shall be treated and reported as
taxable distributions for the Participant's taxable year during
which the withdrawal occurs.
(f) Except as otherwise provided in this Section 8.14,
Elective Deferrals shall be distributed in accordance with the
other provisions of Article VIII hereof.
Section 8.15 Direct Rollovers
(a) Election. This Section 8.15 applies to distributions
made on or after January 1, 1993. Notwithstanding any provision
of this Plan to the contrary that would otherwise limit a
"distributee's" election under this Section, a "distributes" may
elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an "eligible rollover
distribution" paid directly to an "eligible retirement plan"
specified by the "distributes" in a "direct rollover."
(b) Administration. The election in Section 8.15(a) shall
be subject to such reasonable procedures and requirements as may
be prescribed by the Plan Administrator.
(c) Definitions. For purposes of this Section 8.15, the
following terms are defined as follows:
(1) "Eligible rollover distribution:" An eligible rollover
distribution is any distribution of all or any portion
of the balance to the credit of the distributee, except
that an eligible rollover distribution does not
include: any distribution that is one of a series of
substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the distributes or the joint lives (or
joint life expectancies) of the distributes and the
distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution
to the extent such distribution is required under Code
Section 401(a)(9); and the portion of any distribution
that is not includable in gross income (determined
without regard to the "exclusion for net unrealized
appreciation with respect to employer securities).
(2) "Eligible retirement plan:" An eligible retirement
plan is an individual retirement account described in
Code Section 408(a); an individual retirement annuity
described in Code Section 408(b); an annuity plan
described in Section 403(a) of the Code; or a qualified
trust described in Section 401(a) of the Code, that
accepts the distributee's eligible rollover
distribution. However, in the case of an eligible
rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement
account or individual retirement annuity.
(3) "Distributee:" A distributee includes an Employee or
former Employee. In addition, the Employee's or former
Employee's surviving spouse and the Employee's or
former Employee's spouse or former spouse who is the
alternate payee under a qualified domestic relations
order, as defined in Code Section 414(p), are
distributees with regard to the interest of the spouse
or former spouse.
(4) "Direct rollover:" A direct rollover is a payment by
the Plan to the eligible retirement plan specified by
the distributee.
ARTICLE IX - TOP-HEAVY PLAN PROVISIONS
Section 9.1 Definitions
As used in this Article IX the following terms shall mean:
(a) "Top-heavy" Plan. The Plan will be Top-Heavy if, as of
the Determination Date for such Plan Year:
(1) The aggregate of the Account(s) of Key Employees under
the Plan exceeds sixty percent (60%) of the aggregate
of the Accounts of all Participants under the Plan,
unless the Plan is part of an Aggregation Group which
is not Top-Heavy; or
(2) the Plan is part of an Aggregation Group which is Top-Heavy.
For purposes of determining whether on each Determination Date the
Plan is a Top-Heavy Plan, the Accounts of Non-Key Employees who
during any prior Plan Year were Key Employees shall be disregarded.
If an Employee has not performed any services for the
Employer at any time during the five year period ending on the
Determination Date, the Account balance of such Employee shall be
disregarded.
(b) "Aggregation Group"
(1) A required Aggregation Group consists of the following
plans:
(i) Each plan of an Employer in which a Key Employee
is a participant in the plan year containing the
Determination Date, or any of the four preceding
plan years; and
(ii) Each plan of an Employer which enables a plan
described in clause (i) to meet the requirements
of Code Sections 401(a)(4) or 410.
(2) A permissive Aggregation Group consists of the
following plans:
(i) Any plan included in (b)(1), and
(ii) Any other plan designated by an Employer provided
that by including such plan, the Aggregation
Group would continue to meet the requirements of
Sections 401(a)(4) and 410 of the Code.
(c) Top-heavy Aggregation Group. An Aggregation Group is
Top-Heavy if the sum of:
(1) the present value of the cumulative accrued benefits
for Key Employees under all defined, benefit plans
included in such group, and
(2) the aggregate of the accounts of Key Employees under
all defined contribution plans included, in such group,
exceeds sixty percent (60%) of a similar sum determined for all
Employees.
(d) A "Key Employee" is any Employee or former Employee
(including a Beneficiary of such Employee) who at any time during
the Plan Year or any of the four preceding Plan Years is:
(1) an officer of the Employer with annual compensation
greater than fifty percent (50%) of the dollar limit in
effect under Section 415(b)(1)(A) of the Code for such
Plan year (as adjusted for cost of living increases),
provided that no more than fifty employees, (or if
less, the greater of three Employees) or ten percent of
all Employees shall be treated as officers;
(2) one of the ten Employees who have annual compensation
from the Employer greater than the limitation in effect
under Section 415(c)(1)(A) of the Code for such Plan
Year (as adjusted for cost of living increases) and who
owns one of the largest interests (which interest is
more than a one-half percent (.05%) interest) in the
Employer;
(3) a five percent (5%) owner of the Employer; or
(4) a one percent (1%) owner of the Employer who has an
annual compensation of more than $150,000.00;
The constructive ownership rules of Section 318 of the Code
(substituting "5 percent" for "50 percent" in subparagraph (C) of
Section 318(a)(2)), shall be applicable to (2), (3) and (4) above. For
purposes of subparagraph (2), if two Employees have the same interest in
the Employer, the Employee having greater annual compensation from the
Employer shall be treated as having a larger interest.
The Plan Administrator will make the determination of who is a Key
Employee in accordance with Section 416(i)(1) of the Code and the
regulations issued thereunder, which this Plan hereby incorporates by
reference.
(e) A "Non-Key Employee" is an Employee who is not a Key
Employee, and includes the Beneficiary of such Employee.
(f) The "Determination Date," with respect to any Plan Year
commencing on or after January 1, 1984, means the last day of the
preceding Plan Year. In the case of a new Plan, the Determination
Date shall be the last day of the first Plan Year.
(g) The "Valuation Date" is the Determination Date as of
which account balances are valued for purposes of calculating the
top-heavy ratio.
(h) "Account" of a Participant, with respect to the Plan,
or (if applicable) the Aggregation Group of which the Plan is a
part, means as of any Determination Date:
(1) the Account balance(s) of such Participant; plus
(2) the contributions due as of the Determination Date;
plus
(3) the aggregate distributions made from the plan(s) to
such Participant within five (5) years thereof; less
(4) any rollover amount contributed to this Plan by a
Participant after December 31, 1983, but only to the
extent permitted by regulations issued under Section
416(i)(4)(A) of the Code.
Section 9.2 Determination of Top-Heavy
The Plan Administrator shall determine on each Determination Date
whether the Plan is Top-Heavy. In making its determination, the Plan
Administrator shall include all plans of a required Aggregation Group
and any plans of the permissive Aggregation Group it determines to be
appropriate for inclusion. The Determination of Account balances and
the present value of accrued benefits is made separately for each plan
and then the results of these determinations are aggregated by adding
together the results for each plan as of the Determination Date for such
plans that fall within the same calendar years. For purposes of
determining whether the Plan is Top Heavy, if the Employer is a member
of a Controlled Group, then all employees of the Controlled Group shall
be treated as Employees of the Employer and all qualified plans
maintained by the Controlled Group shall be treated as maintained by the
Employer.
Section 9.3 Minimum Contribution
For Plan Years during which the Plan is determined to be Top-Heavy,
allocation of the Employer contributions, if any, shall be subject to
the following rules:
(a) Each Participant employed on the last day of the Plan
Year shall receive a minimum allocation of the Employer
contributions to his Account of not less than three percent (3%)
of the Participant's compensation (within the meaning of Section
415 of the Code and regulations issued thereunder), whether or not
such Participant had sufficient Hours of Service to entitle such
Participant to any allocation provided, however, that such minimum
allocation shall not exceed the highest percentage of Employer
contributions allocated to any Key Employee for such Plan Year.
(b) Any allocation made hereunder shall be offset by any
Employer contribution allocation made to the Participant's account
in another qualified plan maintained by the Employer which is in
an Aggregation Group with this Plan.
(c) After the satisfaction of the minimum allocation rule
of subsection (a), any remaining Employer contributions shall be
allocated to Participants' Accounts in accordance with Section 4.3.
Section 9.4 Limitation on Compensation Taken Into Account
Prior to January 1, 1989, for any Plan Year during which the Plan
is Top-Heavy, the Plan shall not for any purposes take into account
Compensation for any Participant in excess of $200,000 or such greater
amount announced by the Secretary of the Treasury to reflect cost-of-living
increases.
Section 9.5 Vesting for Top-Heavy Plan
(a) Commencing on the first day of any Plan Year for which
the Plan is determined to be Top-Heavy, the following vesting
schedule shall be substituted for the vesting schedule of Section
6.2 and Section 6.7 of this Plan:
Years of Service
with Employer Vested Percentage
------------------ ---------------------
Fewer than 2 years None
2 years but fewer than 3 20%
3 years but fewer than 4 40%
4 years but fewer than 5 60%
5 years but fewer than 6 80%
6 years or more 100%
(b) All Years of Service shall be calculated without regard
to whether the Plan was Top-Heavy during the applicable Plan Year.
(c) If the Plan becomes Top-Heavy and thereafter ceases to
be Top-Heavy, the foregoing vesting schedule shall continue to
apply in determining the nonforfeitable interest of any Participant
who had at least three (3) Years of Service of the last day of the
Plan Year in which the Plan was Top-Heavy. For other Participants,
the above schedule shall apply only to their Account as of the last
day of the last Plan Year in which the Plan was Top-Heavy.
Section 9.6 Combined Plan Limitations
For any Plan Year during which the Plan is Top-Heavy, the dollar
limitation percentages in the Defined Benefit Plan fraction and Defined
Contribution Plan fraction of Section 4.7 shall be one hundred percent
(100%) rather than one hundred twenty-five percent (125%).
This Section 9.6 shall not be effective and the limitation
percentages shall remain at 125% if the Plan would satisfy Section 9.3
if "four percent (4%)" were substituted for "three percent (3%)"
therein, and the Plan, or Aggregation Group of which the Plan is a part,
would not be Top-Heavy under Section 9.1(a) or 9.1(c), as applicable, if
"ninety percent (90%)" were substituted for "sixty percent (60%)"
therein.
ARTICLE X - PLAN ADMINISTRATION
Section 10.1 Employer Responsibility
The Employer, or if there is more than one Employer, the Sponsor
shall be the Plan Administrator.
Section 10.2 Powers and Duties of the Plan Administrator
(a) The Plan Administrator shall be responsible for and
shall control and manage the operation and administration of the
Plan.
(b) The Plan Administrator shall administer the Plan in
accordance with its terms and shall have all powers necessary to
carry out the provisions of the Plan.
(c) The Plan Administrator shall direct-the Trustee
concerning all payments which shall be made out of the Trust
pursuant to the Plan.
(d) At the end of each Plan Year the Employer shall submit
to the Plan Administrator the names of all Participants and the
amount of contribution to be made by the Employer. The Plan
Administrator shall then allocate the Employer contribution to all
eligible Participants and shall transmit this information to the
Trustee.
(e) The Plan Administrator shall interpret the Plan and
shall determine all questions arising in the administration,
interpretation, and application of the Plan, including but not
limited to questions of eligibility and the status and rights of
Participants, Beneficiaries and other persons. Any such
determination by the Plan Administrator shall be made in its sole
discretion and shall be presumptively conclusive and binding on any
persons. The regularly kept records of the Employer shall be
conclusive and binding upon all persons with respect to an
Employee's Hours of Service, date and length of employment, time
and amount of Compensation and the manner of payment thereof, type
and length of any absence from work and all other matters contained
therein relating to Employees.
(f) The Plan Administrator may require each Participant and
each Beneficiary of a deceased Participant to furnish evidence,
data or information as the Plan Administrator considers necessary
or desirable for purposes of administering the Plan, including his
post office address and any change in post office address.
(g) AU rules and determinations of the Plan Administrator
shall be uniformly and consistently applied to all persons in
similar circumstances.
(h) The Plan Administrator may appoint accountants, counsel,
specialists, and other persons as it deems necessary or desirable
in connection with the administration of this Plan. The Plan
Administrator shall be entitled to rely conclusively upon, and
shall be fully protected in any action taken by it in good faith
in relying upon, any opinions or reports which shall be furnished
to it by any such accountant, counsel, specialist or other person.
Section 10.3 Records and Reports of the Plan Administrator
The Plan Administrator shall keep a record of all its proceedings
and acts and shall keep all such books of account, records, and other
data as may be necessary for proper administration of the Plan. The
Plan Administrator shall notify the Trustee and the Employer of any
action taken by it and, when required, shall notify any other interested
person or persons. The Plan Administrator shall have a copy, of this
Plan and a copy of the Trust Agreement available at the principal office
of the Employer during business hours. Such of its records as may
pertain solely to a particular Participant shall be made available to
such Participant, either by periodic reports of presentation for
examination by such Participant during business hours.
Section 10.4 Plan Administrative Committee
The Board of Directors of the Sponsor may, in its discretion,
appoint a committee of one or more persons, to be known as the Plan
Administrative Committee (Committee) to act as the agent of the Sponsor
in performing the duties of the Sponsor. The members of the Committee
shall serve at the pleasure of the Board of Directors; they may be
officers, directors, or Employees of the Employer or any other
individuals. Any member may resign by delivering his written
resignation to the Board of Directors and to the Committee. Vacancies
in the Committee arising by resignation, death, removal or otherwise,
shall be filled by the Board of Directors. The Sponsor shall advise the
Trustee in writing of the names of the members of the Committee and of
changes in membership from time to time.
Section 10.5 Organization and Operation of the Plan Administrative
Committee
(a) If the Board of Directors of the Sponsor appoints a
Committee, the Committee shall act by majority vote of its members
at the time in office, and such action may be taken either by a
vote at a meeting or in writing without a meeting. The signatures
of a majority of the members will be sufficient to authorize
Committee action. A Committee member shall not participate in
discussions of or vote upon matters pertaining to his own
participation in the Plan.
(b) The Committee may authorize any of its members or any
other person to execute any document or documents on behalf of it,
in which event the Committee shall notify the Trustee in writing
of such action and the name or names of such member or person. The
Trustee thereafter shall accept and rely upon any document executed
by such members or persons as representing action by the Plan
Administrator, until the Committee shall file with the Trustee a
written revocation of such designation.
(c) The Committee may adopt such bylaws and regulations as
it deems desirable for the conduct of its affairs. These rules may
be made available to the Employer and the Participants as
determined by the Committee.
Section 10.6 Compensation and Responsibility for Payment of Expenses of
the Plan Administrator
The Plan Administrator or members of the Committee who are
Employees of the Employer shall serve without compensation for services,
as such, but all proper expenses incurred by the Plan Administrator
incident to the ' functioning of the Plan may be paid in whole or in
part by the Employer and any expenses not paid by the Employer shall be
paid by the Trustee out of - the principal or income of the Trust Fund;
provided, however, that unusual costs and expenses of litigation
involving the Plan and losses, if any, of the Plan of any kind or
character, shall be deemed expenses of the Plan and shall be borne by,
and paid out of the Plan assets, except to the extent the Board of
Directors elects to have such expenses paid directly by the Employer.
Section 10.7 Indemnity of Plan Administrator or Plan Administrative
Committee Members
The Sponsor shall indemnify and defend the Plan Administrator or,
if the Board of Directors of the Sponsor has appointed a Committee each
member of the Committee and each of its other Employees against any and
all claims, loss, damages, expenses (including reasonable attorneys
fees), and liability arising in connection with the administration of
the Plan, except when the same is judicially determined to be due to the
gross negligence or willful misconduct of such member or other Employee.
The Employer may purchase liability insurance to cover the Plan
Administrator or members of the Committee against loss, claims, damages
or expense.
Section 10.8 Claims Procedure
Claims for benefits under the Plan shall be made in writing to the
Plan Administrator. Within 30 days after the filing of such a claim,
the Plan Administrator shall, notify the claimant in writing whether his
claim is upheld or denied. A notice of denial shall be written in a
manner calculated to be understood by the claimant, and shall contain
(i) the specific reason or reasons for denial of the claim, (ii) a
specific reference to the pertinent Plan provisions upon which the
denial is based, (iii) a description of any additional material or
information necessary for the claimant to perfect the claim, together
with an explanation of why such material or information is necessary,
and (iv) an explanation of the Plan's review procedure. Within sixty
(60) days of the receipt by the claimant of the written notice of denial
of the claim, the claimant or his duly authorized agent may file a
written request with the Plan Administrator that it conduct a full and
fair review hearing of the denial of the claimant's claim for benefits.
In connection with the claimant's appeal of the denial of his benefit,
the claimant or his duly authorized representative may review pertinent
documents and may submit issues and comments in writing within 30 days
of filing such request for review. The Plan Administrator shall render
a decision on the claim appeal promptly, but not later than sixty (60)
days after the receipt of the claimant's request for review, unless
special circumstances (such as the need to hold a hearing, if necessary)
require an extension of time for processing, in which case the sixty
(60) day period may be extended to one hundred and twenty (120) days.
The Plan Administrator shall notify the claimant in writing of any such
extension. The decision upon review shall be communicated to the
claimant within thirty days of the hearing and shall (i) include
specific reasons for the decision, (ii) be written in a manner
calculated to be understood by the ' claimant and (iii) contain specific
references to the pertinent Plan provisions upon which the decision is
based.
Section 10.9 Voting Right
(a) In accordance with the requirements of Code Section
409(e), a Participant shall be entitled to direct the Trustee as
to the manner in which voting rights of Employer Stock which is
acquired by the Trust and allocated to his Account are to be
exercised only with respect to any corporate matters which involve
the voting of such shares with respect to the approval or
disapproval of any corporate merger or consolidation,
recapitalization, reclassification, liquidation, dissolution, sale
of substantially all assets of a trade or business, or such similar
transaction as may be prescribed by regulations.
(b) A Participant shall be entitled to direct the Trustee
as to the manner in which voting rights of the Employer Stock which
was acquired with the proceeds of an Acquisition Loan entitled to
the interest exclusion under Section 133 of the Code and allocated
to his Account are to be exercised with respect, to all corporate
matters subject to shareholder vote.
(c) On matters subject to vote by shareholders, the Trustee
shall vote the shares of (i) Employer Stock in the Account of a
Participant to which no voting instructions have been received
(whether or not the Participant has voting rights with respect to
such matter), and (ii) unallocated Employer Stock held in the
Shares Suspense Account, held as an advance Employer Contribution
or held pending reallocation as a Forfeiture. The Trustee shall
vote the shares of such Employer Stock in the manner directed by
the Board of Directors of the Sponsor.
(d) Before each meeting of shareholders which involves
matters that Participants have the right to direct the Trustee as
to the manner of voting allocated shares, the Committee shall,
within a reasonable time before such meeting, provide each
Participant or Beneficiary entitled under this section to direct
the voting of Employer Stock with notice of such meeting, together
with an appropriate form requesting directions on how such shares
of Employer Stock allocated to such Participant's Account shall be
voted on each such matter subject to direction.
Section 10.10 Bonding
Every Fiduciary, except a bank or an insurance company, unless
exempted by ERISA, shall be bonded in an amount not less than 10% of the
amount of the Trust funds such Fiduciary handles with a minimum bond of
$1,000 and a maximum bond of $500,000. The cost of such bond(s), shall
be an expense of and may, at, the election of the Employer, be paid from
the Trust Fund or by the Employer.
ARTICLE XI - PLAN LOANS
Section 11.1 Plan Loans
Loans to Participants are not permitted under this Plan.
ARTICLE XII - QUALIFIED DOMESTIC RELATIONS ORDERS
Section 12.1 Permissible Assignment
Notwithstanding any provision to the contrary herein, the Plan
Administrator may assign the interest of a Participant in the Plan (or
in a succeeding plan of the Employer or in the plan of a successor
Employer) to an Alternate Payee pursuant to a Qualified Domestic
Relations Order. The provisions of this Article shall control in the
event the Plan receives a Qualified Domestic Relations Order with
respect to a Participant's interest in the Trust Fund.
Section 12.2 Definitions
(a) Alternate Payee shall mean a
(1) spouse,
(2) former spouse,
(3) child, or
(4) other dependent
of a Participant who is recognized by a Qualified Domestic
Relations Order as having a right to receive all, or a portion of,
a Participant's benefits under the Plan. An Alternate Payee is
treated as a Beneficiary for all purposes under the Plan.
(b) Earliest Retirement Date under this Plan for purposes
of this Article XII shall mean the earliest of (1) the date on
which the Participant is entitled to a distribution under the Plan;
or (2) the earliest date on which the Participant could begin
receiving benefits under the Plan if the Participant had separated
from service, as provided under Article VIII of the Plan.
(c) Qualification Procedures shall mean written procedures
adopted by the Plan Administrator to determine whether domestic
relations orders meet the requirements set out in paragraph (d),
below, and to administer distributions under such orders. The
procedures shall be implemented within a reasonable time after
receipt of a domestic relations order by the Plan Administrator.
Qualification Procedures must permit an Alternate Payee to
designate a representative for receipt of copies of notices sent
to the Alternate Payee with respect to a Qualified Domestic
Relations Order.
(d) Qualified Domestic Relations Order shall mean a
judgment, decree or order, including approval of a property
settlement agreement, that relates to provision of child support,
alimony payments, or marital property rights to an Alternate Payee,
is made pursuant to state domestic relations law, including a state
community property law, and creates an Alternate Payee's right to
all or a portion of the benefits payable to a Participant under the
Plan. A Qualified Domestic Relations Order must specify:
(1) the name and last known mailing address of each
Alternate Payee,
(2) the amount or percentage of the Participant's benefits
to be paid to the Alternate Payee or the manner in
which the amount is to be determined,
(3) the number of payments or period for which payments are
required, and
(4) each plan to which the order relates. An order does
not qualify under this definition if it:
(i) requires the Plan Administrator to provide a
benefit or option not available under the Plan,
(ii) requires the Plan to provide increased benefits
or
(iii) requires payment of benefits to an Alternate
Payee that are required to be paid to
another Alternate Payee under a previously
existing Qualified Domestic Relations Order.
Section 12.3 Notification
The Plan Administrator shall promptly give written notification to
the Participant and to the Alternate Payee of receipt of a domestic
relations order and of Plan Qualification Procedures. The Plan
Administrator shall then proceed with Qualification Procedures to
determine whether the order is a Qualified Domestic Relations Order and
shall notify the Participant and Alternate (or the Alternate Payee's
designated representative) of its determination.
Section 12.4 Disposition of Disputed Funds
(a) During the period in which the Plan Administrator is
making its determination of the qualified status of the Domestic
Relations Order, a separate accounting shall be maintained for any
amounts which would be payable to the Participant.
(b) if the order is determined to be a Qualified Domestic
Relations Order within the 18-month period beginning on the date
on which the first payment would be required to be made under the
order, the Plan Administrator shall direct the Trustee to
distribute the amounts in accordance with the order.
(c) if the Plan Administrator determines that the order is
not a Qualified Domestic Relations Order, or has not made a
determination within the 18-month period described in (b) the Plan
Administrator shall direct the Trustee to pay such amounts to the
persons who would have received the amounts if the order had not
been issued.
(d) If an order is qualified after expiration of the 18-month
period described in (b), payment-of benefits to an Alternate
Payee shall proceed prospectively and the Plan shall not be liable
to an Alternate Payee for benefits attributable to the period prior
to qualification.
Section 12.5 Payment of Benefits
The Plan Administrator shall comply with any Qualified Domestic
Relations Order requiring that benefits be paid to an Alternative Payee
beginning not earlier than the Participant's Earliest Retirement Date,
provided, however, that in determining the time, manner and form of
distribution under Article VIII, the Alternate Payee shall be treated in
the same manner as a Participant who has separated from service.
Section 12.6 Form of Payment
Payment of benefits pursuant to a Qualified Domestic Relations
Order shall be made only as permitted under the Plan.
ARTICLE XIII - AMENDMENTS AND ACTION BY SPONSOR/EMPLOYER
Section 13.1 Amendments
The Sponsor reserves the right to make from time to time any
amendment or amendments to this Plan in any manner it deems necessary or
advisable. However, no amendment shall be made which authorizes or
permits any of the Trust Fund, other than the part which is required to
pay taxes and administration expenses, to be used for or diverted to
purposes other than for the exclusive benefit of the Participants or
Beneficiaries. No amendment shall cause or permit any portion of the
Trust Fund to revert to or become a property of the Employer, and no
amendment which affects the rights, duties or responsibilities of the
Trustee, Plan Administrator, or an Employer may be made without the
written consent of the affected party.
Section 13.2 Action by Sponsor/Employer
Any action by the Sponsor or an Employer under this Plan may be by
resolution of its Board of Directors or by any person or persons, duly
authorized by resolution of the Board of Directors to take action.
However, neither the Trustee nor the Plan Administrator (if other than
the Sponsor) shall have any obligation or responsibility with respect to
any action required by the Plan to be taken by the Sponsor or the
Employer, any Participant or eligible Employee, nor for the failure of
any of those period to act or make any payment or contribution, or to
otherwise provide any benefit contemplated under this Plan. The Trustee
or the Plan Administrator (if other than the Sponsor or the Employer)
shall not be required to collect any contribution required under the
Plan, or determine the correctness of the amount of the Employer
contribution.
Section 13.3 Plan Ceases to Constitute an ESOP
In the event that the Plan is terminated pursuant to Section 15.1
hereof, or is amended in a manner which causes the Plan to cease being
an ESOP, any Employer Stock distributed to the Participants in
liquidation of the Trust Fund, or held by the Trustee if the Trust Fund
is not liquidated, which was acquired with Acquisition Loan proceeds
shall continue to be subject to the provisions of Section 8.5, relating
to the Put Option requirement, and the Trust Agreement.
ARTICLE- XIV - SUCCESSOR SPONSOR AND MERGER
OR CONSOLIDATION OF PLANS
Section 14.1 Successor Sponsor
In the event of the dissolution, merger, consolidation or
reorganization of the Sponsor, provisions may be made by which the Plan
and Trust will be continued by the successor. In that event, such
successor shall be substituted for the Sponsor under the Plan. The
substitution of the successor shall constitute an assumption of the Plan
liabilities by the successor and the successor shall have all the
powers, duties and responsibilities of the Employer under the Plan.
Section 14.2 Plan Assets
In the event of the merger or consolidation of this Plan with, or
transfer of assets and liabilities of this Plan to, any other Plan, each
Participant shall be entitled (if such other Plan had then terminated)
to receive a benefit immediately after the merger, consolidation or
transfer which is not less than the benefit he would have been entitled
to receive immediately before the merger, consolidation or transfer (if
this Plan had then terminated).
ARTICLE XV - PLAN TERMINATION
Section 15.1 Termination of Plan and Trust
The Employer shall have the right, at any time, to suspend or
discontinue its contributions under the Plan, and to terminate, at any
time, this Plan and the Trust created thereunder. The Plan shall
terminate (as to any Employer) upon the first to occur of the following:
(a) The date terminated by action of the Board of Directors,
provided the Board gives the Trustee thirty (30) days' prior
written notice of the termination;
(b) The date the Employer shall be judicially declared
bankrupt or insolvent;
(c) The dissolution, merger, consolidation or reorganization
of the Employer, or the sale by such Employer of all or
substantially all of its assets,
unless the successor or purchaser makes provision to continue the Plan,
in which event the successor or purchaser shall substitute itself as
such Employer.
Section 15.2 Full Vesting
Notwithstanding any other provision in this Plan to the contrary,
upon a full or partial termination of the Plan, or upon complete
discontinuance of contributions, an affected Participant's right to his
Account shall be one hundred percent (100%) nonforfeitable.
Section 15.3 Distribution of Trust Fund
Upon a termination of the Plan, the Employer at its option may
direct and require the Trustee to liquidate the Trust Fund or the
applicable portion thereof, and distribute the same to interested
Participants. If the Employer does not direct the Trustee to liquidate
the Trust Fund upon a termination of the Plan, then the provisions of
Article VIII shall remain operative, and the Trust shall continue until
the Trustee has distributed all of the benefits under the Plan. On each
Valuation Date, the Plan Administrator shall credit any part of a
Participant's Account retained in the Trust Fund with its proportionate
share of the Trust Fund's income, expenses, gains and losses, both
realized and unrealized, until such Account has been fully distributed.
ARTICLE XVI - MISCELLANEOUS
Section 16.1 Non-Guaranty of Employment
Nothing contained in this Plan shall be construed as a contract of
employment between the Employer and any Employee or as a right of any
Employee to be continued in the employment of the Employer or as a
limitation of the right of the Employer to discharge any of its
Employees with or without cause.
Section 16.2 Rights to Trust Assets
No Employee shall have any right to or interest in any assets of
the Trust Fund upon termination of his employment or otherwise, except
as provided from time to time under this Plan and then only to the
extent of the benefits payable under the Plan to such Employee out of
the assets of the Trust Fund. Except as otherwise may be provided under
Title IV of ERISA, all payments of benefits as provided for in this.
Plan shall be made solely out of the assets of the Trust Fund and none
of the Fiduciaries shall be liable therefor in any manner.
Section 16.3 Word Usage
Words used in the masculine shall apply to the feminine where
applicable; and wherever the context of the Plan dictates, the plural
shall be read as the singular and the singular as the plural.
G.R. HERBERGER'S, INC
EMPLOYEE STOCK OWNERSHIP TRUST
AGREEMENT AND DECLARATION OF TRUST
TABLE OF CONTENTS
PAGE
ARTICLE I - ESTABLISHMENT OF TRUST FUND. . . . . . . . . . . . . . . .1
Section 1.1 Establishment of Trust Fund. . . . . . . . . . .1
Section 1.2 Other Trusts . . . . . . . . . . . . . . . . . .1
ARTICLE II - COMPOSITION OF TRUST FUND . . . . . . . . . . . . . . . .1
ARTICLE III - TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . .2
Section 3.1 Appointment and Resignation of Trustees. . . . .2
Section 3.2 Change of Trustees . . . . . . . . . . . . . . .2
Section 3.3 Final Accounting . . . . . . . . . . . . . . . .2
ARTICLE IV - MANAGEMENT AND INVESTMENT OF THE FUND . . . . . . . . . .3
Section 4.1 Duties of Trustee. . . . . . . . . . . . . . . .3
Section 4.2 Trustee Investment Responsibility. . . . . . . .3
Section 4.3 Loans by Trustee . . . . . . . . . . . . . . . .3
Section 4.4. Collective Investment Trust. . . . . . . . . . .4
Section 4.5 Insurance. . . . . . . . . . . . . . . . . . . .4
Section 4.6 Other Powers . . . . . . . . . . . . . . . . . .4
Section 4.7 Loans to Participants. . . . . . . . . . . . . .5
Section 4.8 Voting of Employer Stock . . . . . . . . . . . .6
ARTICLE V - VALUATION OF PLAN ASSETS . . . . . . . . . . . . . . . . .6
ARTICLE VI - RECORDKEEPING AND ACCOUNTINGS BY TRUSTEE. . . . . . . . .6
ARTICLE VII - REQUIREMENT OF WRITTEN REQUESTS AND
INSTRUCTIONS TO TRUSTEE. . . . . . . . . . . . . . . . . . . . .6
ARTICLE VIII - STANDARD OF CONDUCT . . . . . . . . . . . . . . . . . .7
ARTICLE IX - TERMINATION OF THE PLAN . . . . . . . . . . . . . . . . .7
ARTICLE X - AMENDMENT OF TRUST AGREEMENT . . . . . . . . . . . . . . .7
ARTICLE XI - ADMINISTRATIVE EXPENSES AND COMPENSATION OF
TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE XII - SITUS. . . . . . . . . . . . . . . . . . . . . . . . . .8
AGREEMENT AND DECLARATION OF TRUST
This Agreement and Declaration of Trust, is made by and between the
undersigned, hereinafter referred to respectively as the "Employer" and
the "Trustee".
WHEREAS, the Employer has adopted an employee stock ownership plan
and amended it to include a Section 401(k) plan to be known as the G.R.
Herberger's, Inc. 401(k) Employee Stock Purchase Plan and Employee Stock
Ownership Plan ("Plan"), the provisions of which are incorporated herein
by reference and a copy of which is annexed hereto, for the benefit of
the Participants as therein defined and their Beneficiaries; and
WHEREAS, the Employer deems it to be appropriate to amend the
Agreement and Declaration of Trust;
NOW, THEREFORE, the Employer and Trustee do hereby agree and
declare each with the other as follows:
ARTICLE I - ESTABLISHMENT OF TRUST FUND
Section 1.1 Establishment of Trust Fund
The Employer hereby establishes with the Trustee, pursuant to the
Plan, a trust comprised of contributions by the Employer and
Participants and earnings and profits thereon, together with such other
payments acceptable to the Trustee as shall from time to time be paid or
delivered to the Trustee by or on behalf of the Employer or any other
employer authorized to maintain the Plan and the earnings and profits
thereon. AR such money and property, all investments made therewith and
proceeds thereof and all earnings and profits thereon, less payments
which at the time of reference shall have been made by he Trustee, as
authorized herein, are referred to herein as the 'Trust Fund!'. ne Trust
Fund shall be held by the Trustee in trust and dealt with in accordance
with the provisions of this Agreement and Declaration of Trust.
Section 1.2 Other Trusts
Nothing contained in this Agreement and Declaration of Trust shall
be construed to prevent the same Trustee named herein from acting as
Trustee for plans of other employers.
ARTICLE II - COMPOSITION OF TRUST FUND
The Trust Fund shall be composed of all sums of money and of all
property acceptable to the Trustee, and received by the Trustee to be
held in trust hereunder as evidenced by its receipts, from whatever
source received together with all investments made therewith, the
proceeds thereof, and all earnings and accumulations thereon, or the
part thereof from time to time remaining.
ARTICLE- III - TRUSTEES
Section 3.1 Appointment and Resignation of Trustees
Appointment of Trustees shall be the responsibility of the Board
of Directors of the Sponsor. Any Trustee may resign at any time on
giving sixty days notice in writing to the Sponsor or the Sponsor may
discharge any Trustee on similar notice, unless the Sponsor and Trustee
agree in writing to forego such notification period. In the event of
the resignation, discharge, death, refusal to act, or inability to act
of any Trustee, the Board of Directors of the Sponsor shall select a
successor Trustee who shall have the same powers and duties as those
conferred upon the Trustee in this Agreement. Any Trustee appointed
hereunder shall signify his acceptance in writing to the Board of
Directors.
Section 3.2 Change of Trustees
All power and authority of a Trustee who resigns or is removed
shall be terminated at the end of the sixty-day period, at which time
all"such power and authority shall be vested in the successor Trustee
without any further act or deed; provided, however, that if a successor
Trustee will not have been appointed and qualified at the end of such
period the power and authority of the former Trustee shall continue
until the later appointment and qualification of a successor Trustee at
which time said power and authority shall be so vested in such successor
Trustee. The former Trustee shall, as of the time the successor Trustee
assumes office, assign, transfer, and set over to the successor Trustee
the funds and property then constituting the Trust Fund; provided,
however, that the former Trustee may retain in reserve such sums of
money, or may liquidate assets and from the proceeds thereof reserve
such funds, as they may deem to be sufficient for the payment of their
expenses in connection with the settlement of their accounts or
otherwise, and, after the payment of such expenses, they shall pay the
balance of such reserved funds then remaining to the successor Trustee
then qualified and acting.
Section 3.3 Final Accounting
Within sixty days after a change of Trustee has become effective,
the former Trustee shall file with the Employer an accounting of the
administration of the Trust for the period subsequent to their latest
accounting, containing the same information required to be contained in
their annual accounts. No successor Trustee shall be liable or
responsible in any way for anything done or omitted prior to the date as
of which he becomes a Trustee.
ARTICLE IV - MANAGEMENT AND INVESTMENT OF THE FUND
Section 4.1 Duties of Trustee
It shall be the duty of the Trustee (a) to hold the Trust Fund, (b)
to invest and reinvest the Trust Fund, (c) to keep accurate and detailed
accounts of all investments, receipts, disbursements and other
transactions hereunder, and (d) to pay monies to or on the order of the
Plan Administrator provided for under the Plan, including, when the Plan
Administrator shall so order, payments to the Participants or their
Beneficiaries under the Plan. Such order need not specify the purpose
of such payments so ordered and the Trustee shall not be responsible in
any way respecting the purposes of such payments or for the general
administration of the Plan by the Plan Administrator. The Trustee shall
be under no duty to enforce payment of any contribution.
Section 4.2 Trustee Investment Responsibility
Employer contributions made in cash, and other cash received by the
Trustee, shall first be applied to pay for Employer Stock acquired
pursuant to Section 8.5 or 8.6 of the Plan and after such application
may be applied to acquire additional shares of Employer stock from the
shareholders of the Employer or from the Employer as directed by the
Plan Administrator. The investment policy of the Plan shall be to
invest primarily in Employer Stock, including up to 100% of the Trust.
To the extent funds are available thereafter the Trustees may invest
funds temporarily in savings accounts, certificates of deposit, stocks,
bonds, or other investments deemed desirable for the Trust, or such
funds may be held in cash or cash equivalents. In addition, at the
direction of the Plan Administrator, the Trustee may borrow funds
pursuant to Section 4.3 of the Trust to purchase Employer Stock from the
Employer or its shareholders.
The Board of Directors of the Sponsor shall have the fiduciary
responsibility for decisions regarding the acquisition, holding,
disposition and voting (subject to Section 4.8 of the Agreement) of
Employer Stock and shall have the exclusive power, authority and
responsibility to determine whether to sell, purchase or hold Employer
stock.
Section 4.3 Loans by Trustee
In the event the Trustee borrows funds as provided under Section
4.2 of the Trust, the proceeds of such loan shall be used within a
reasonable time only for the following purposes:
(a) To acquire Employer Stock;
(b) To repay such loan; and
(c) To repay a prior loan made under this Section 4.3.
Except as provided in Section 8.5 and 8.6 of the Plan, no Employer Stock
acquired with the proceeds of a loan may be subject to a put, call,
other option, or a buy-sell or similar arrangement while held by the
Trustee, or when distributed from the Plan, whether or not that Plan is
then an ESOP. The Trustee and the Plan Administrator shall take all
action necessary to insure that any loan made under this Section 4.3
constitutes an "exempt loan" as defined in Section 4975(d)(3) of the
Code.
Section 4.4. Collective Investment Trust
The Declaration of Trust executed by Norwest Bank Minnesota,
National Association, on April 3. 1989, establishing Norwest Bank
Collective Funds for Employee Benefit Plans is hereby incorporated by
reference into this agreement, and, notwithstanding any other provision
of this trust agreement to the contrary, the Trustee may cause part or
all of the money of this Trust, without limitation as to amount, to be
invested in and commingled with the money of trusts created by others
and invested and reinvested as a part of any one or more of the Funds
heretofore or hereafter created by said Declaration of Trust, and money
of this Trust so added to any of the said Funds heretofore or hereafter
created by said Declaration of Trust shall be subject to all of the
provisions of said Declaration of Trust as it is amended from time to
time.
Section 4.5 Insurance
The Trustee shall not invest any of the assets of the Trust Fund
in annuity or insurance contracts.
Section 4.6 Other Powers
In addition to the powers conferred upon them elsewhere in this
instrument, the Trustees shall be authorized and empowered:
(a) To purchase and subscribe for any securities or other
property and to retain such securities or other property in the Trust
Fund.
(b) To sell, exchange, convey, transfer or otherwise dispose of
any property held by it, by private contract or at public auction, and
no person dealing with the Trustee shall be bound to see to the
application of the purchase money or to inquire into the validity,
expediency, or propriety of any such sale or other disposition.
(c) To adjust, settle, contest, compromise and arbitrate any
claims, debts, or damages due or owing to or from the Trust Fund, and to
sue, commence or defend any legal proceedings in reference thereto.
(d) To vote upon any stocks, bonds, or other securities, to give
general or special proxies or powers of attorney with or without power
of substitution, to exercise any conversion privileges, subscription
rights, or other options and to make any payments, incidental thereto,
to consent to or otherwise participate in corporate securities and to
delegate discretionary powers and to pay assessments or charges in
connection therewith, and generally to exercise any of the powers of an
owner with respect to stocks, bonds, securities, or other property held
in the Trust Fund.
(e) To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other instruments
that may be necessary or appropriate to carry out the powers herein
granted.
(f) To register any investments held in the Trust Fund in its own
name or in the name of a nominee and to hold any investment in bearer
form, but the books and records of the Trustee shall at all times show
that all such investments are part of the Fund.
(g) To manage, administer, operate, lease for any number of
years, regardless of any restrictions on leases made by fiduciaries,
develop, improve, repair, alter, demolish, mortgage, pledge, grant
options with respect to, or otherwise deal with any real property or
interest therein at any time held by it.
(h) To employ suitable agents and counsel and to pay their
reasonable expenses and compensation.
(i) To borrow or raise monies for the purpose of the Trust from
any source and for any sum so borrowed to issue its promissory notes as
Trustee and to secure the repayment thereof by pledging all or any part
of the Trust Fund. No person loaning money to the Trustee shall be
bound to see to the application of the money loaned or to inquire into
the validity, expediency, or propriety of any such borrowing.
(j) To deposit any portion of the Trust fund in bank accounts,
certificates of deposit, time deposit open accounts and other similar
investments which bear a reasonable rate of interest, in the banking
department of any bank or trust company, including the banking
department of the Trustee or any affiliate or affiliates of the Trustee.
Section 4.7 Loans to Participants
Loans to Participants shall not be permitted.
Section 4.8 Voting of Employer Stock
The Trustee shall vote the Employer Stock held in the Trust Fund
as provided in Section 10.9 of the Plan and subject to Fiduciary duties
set forth in Section 404 of ERISA.
ARTICLE V - VALUATION OF PLAN ASSETS
Within sixty days after the receipt of the Employers' contribution
for a Plan Year, the Trustee shall ascertain and certify to the Employer
the market values of the assets of the Trust Fund, as of the last day of
the Plan Year. Such market values may be determined either by the
Trustee itself or by such person or persons believed by the Trustee to
be competent to make such determination as the Trustee may select. Any
determination of values so made shall, for all purposes of the Plan,
conclusively establish such values.
ARTICLE VI - RECORDKEEPING AND ACCOUNTINGS BY TRUSTEE
The Trustee shall keep accurate and detailed accounts of all
investments, receipts, disbursements, and other transactions hereunder,
and, all accounts, books and records relating thereto shall be open to
inspection and audit at all reasonable times by any person designated by
the Board of Directors. Within sixty days following receipt of
Employer's contributions for each Plan Year, and within sixty days after
the removal or resignation of a Trustee as provided in Article III
hereof, the Trustee shall file with the Board of Directors a written
account setting forth all investments, receipts, disbursements, and
other transactions effected by it during such Plan Year or during the
period from the close of the last Plan Year to the date of such removal
or resignation, which account so filed shall be open to inspection
during business hours by the Employer, the Plan Administrator and by
Participants and their Beneficiaries.
ARTICLE VII - REQUIREMENT OF WRITTEN REQUESTS
AND INSTRUCTIONS TO TRUSTEE
Any action by the Board of Directors of the Sponsor pursuant to any
of the provisions of this Plan and Trust shall be evidenced by a
resolution of the Board of Directors certified to the Trustee over the
signature of the Secretary or Assistant Secretary with the corporate
seal, if any, affixed, and the Trustee shall be fully protected in
acting in accordance with such resolution so certified to it. All
orders, requests, and instructions of the Plan Administrator to the
Trustee shall be in writing and the Trustee shall act and shall be fully
protected in acting in accordance with such orders, requests, and
instructions. The Sponsor shall furnish the Trustee from time to time
with certified copies of resolutions of its Board of Directors
evidencing the appointment and termination of office of the Plan
Administrator or any members of the Plan Administrative Committee and
the appointment of successors thereto.
ARTICLE VIII - STANDARD OF CONDUCT
The Trustee shall be bound to perform his duties for the purpose
of providing benefits to Participants and their Beneficiaries and
defraying reasonable expenses of administering the Trust. He shall act
in accordance with the care, skill, prudence and diligence that would
characterize the actions of a prudent man, knowledgeable in the
performance of such duties in similar circumstances with similar
objectives. Unless under the circumstances it is clearly imprudent, he
shall diversify the investments of the Plan so as to minimize the risk
of large losses.
If according to the provisions of the Plan and Trust, the Trustee
shall be subject in the management and control of the Fund to the
directions of the Plan Administrator or Sponsor, the Trustees in acting
pursuant to and in reliance on, such directions shall be fully and
completely indemnified and held harmless by the Employer from any
liability, loss or expense (including legal fees) arising out of its
actions so directed. The Trustee shall be indemnified under these
circumstances notwithstanding that such directions, and the Trustee's
conduct pursuant thereto, may constitute a breach of fiduciary
obligations to the Plan, the Participants and Beneficiaries.
ARTICLE IX - TERMINATION OF THE PLAN
The Plan may be terminated at any time by the Board of Directors
of the Sponsor, in which event the Trust Fund shall be liquidated by the
Trustee in accordance with the written directions of the Sponsor
pursuant to the Plan. However, in no event, may the Trust Fund revert
to the Employer except as specifically provided by the Plan.
ARTICLE X - AMENDMENT OF TRUST AGREEMENT
The Sponsor reserves the right at any time and from time to time,
by action of its Board of Directors, to modify or amend, in whole or in
part, any or all of the provisions of this Agreement and Declaration of
Trust, and provided that no modification or amendment which affects the
rights, duties or responsibilities of the Trustee may be made without
its consent in writing and further provided that no such modification or
amendment shall authorize or permit, at any time, any part of the corpus
or income of the Trust Fund to be used for or diverted to purposes other
than for the exclusive benefit of Participants and their Beneficiaries
under the Plan.
ARTICLE XI - ADMINISTRATIVE EXPENSES AND
COMPENSATION OF TRUSTEE
The Trust Fund shall bear all brokerage costs and transfer taxes
incurred in connection with the investment and reinvestment of the Trust
Fund and all income taxes or other taxes of any kind whatsoever which
may be levied or assessed under existing or future laws upon or in
respect of the Trust Fund, all expenses incurred in connection with the
acquisition or holdings of real property, any interest therein or
mortgage thereon, and all interest which may be payable or money
borrowed by the Trustee for the purposes of the Trust. All other
administrative expenses incurred by the Trustee in the performance of
its duties, including fees for legal services rendered to the Trustee,
such compensation to the Trustee as may be agreed upon in writing from
time to time between the Employer and the Trustee, and all other proper
charges and disbursements of the Trustee, shall be paid by the Employer
and, in the event not paid by the Employer, shall be paid by the Trust
Fund; provided, however, no person serving as Trustee who is also an
Employee of the Employer shall receive any compensation from the Trust
Fund, except for reimbursement of expenses properly and actually
incurred.
ARTICLE XII - SITUS
This Agreement and Declaration of Trust shall be administered,
construed and enforced according to the laws of the State of Minnesota
when not superseded by federal law.
WITNESS WHEREOF, the parties have executed this Agreement this 26th
day of May 1993.
EMPLOYER:
G. R. HERBERGER'S, INC.
By: ____________________________
Its: President
By: _____________________________
Its: Vice President
FANDEL COMPANY
By: _____________________________
Its: President
By: _____________________________
Its: Vice President
TRUSTEE:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By: ___________________________
Its: Asst. Vice President
By: ___________________________
Its: Asst. Vice President
AMENDMENT NO. 1
TO
G. R. HERBERGER'S, INC.
401(K) EMPLOYEE STOCK PURCHASE PLAN
AND EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, G. R. Herberger's, Inc. (the "Employer") has adopted and
currently maintains the G. R. Herberger's, Inc. 401(k) Employee Stock
Purchase Plan and Employee Stock Ownership Plan (the "ESOP") and has
established the related Employee Stock Ownership Trust (the "Trust");
WHEREAS, the Employer wishes to amend the ESOP as requested by the
IRS in determining the Plan's status as a qualified plan;
NOW, THEREFORE, the Employer hereby amends the ESOP as follows:
1. Section 6.5 Computation of Years of Service and Breaks in
Service shall be amended by adding the following to the end of the first
paragraph of Section 6.5:
"Hours of Service for purposes of determining Years of Service and
Breaks in Service under this Section 6.5 shall include Hours of
Service with any member of the Employer's Controlled Group."
2. Section 6.5(g) shall be amended by deleting the last sentence
of Section 6.5(g) and replacing it with the following sentence:
"In the case of a Participant's absence from service for a Parental
Absence as provided under Article VII, the twelve (12) consecutive
month period beginning on the Employee's Severance from Service
Date shall not constitute a Break in Service."
3. Section 8.1(b) Consent to Distribution Prior to Normal
Retirement Age shall be amended by restating Section 6.l(b)(1) in its
entirety to read as follows:
"(1) If a Participant terminates his employment with
the Employer and the value of his vested Account balance is
not and never was greater than $3,500, the Plan Administrator
shall direct the distribution of such vested Account balance
in a lump sum without the Participant's consent."
4. Section 9.3 Minimum Contribution, shall be amended by adding
a new Section 9.3(d) to read as follows:
"(d) For purposes of determining whether or to what
extent a minimum contribution is required, there shall be
treated as an Employer Contribution any Elective Deferral
Contribution made on behalf of a Participant who is a Key
Employee for the Plan Year. Any Elective Deferral
Contribution made on behalf of any Participant who is a Non--
key Employee for the Plan Year shall not, however, be treated
as an Employer's contribution for purposes of satisfying the
minimum contribution requirement of Section 9.3(a)."
5. Section 9.5(c) shall be amended replacing the phrase "five
(5) Years of Service" with the phrase "three (3) Years of Service" where
it appears in such Section 9.5(c).
6. The foregoing provisions shall be effective as of the
Effective Date of the restatement of the Plan, namely January 1, 1989.
IN WITNESS WHEREOF, the parties have executed this Amendment No.
1 as of the dates indicated below.
G. R. HERBERGER'S, INC.,
Employer,
Dated: ________________ By ___________________________
Its: President
Dated: ________________ By _____________________________
Its Vice President of
Operations
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
Dated: ________________ By _____________________________
Its Asst. Vice President
IN WITNESS WHEREOF, the parties have executed this Amendment No.
2 as of the date indicated below.
Dated: ____________________ G. R. HERBERGER'S, INC., Sponsor
By _____________________________
Its Vice President - Finance and
Operations
By _____________________________
Its President
Dated: ____________________ NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By _____________________________
Its Asst. Vice President
By _____________________________
Its Vice President
AMENDMENT NO. 2
TO
G.R. HERBERGER'S, INC.
401(k) EMPLOYEE STOCK PURCHASE PLAN
AND
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, G.R. Herberger's, Inc. (the "Sponsor") has adopted and
currently maintains the G.R. Herberger's Inc. 401(k) Employee Stock
Purchase Plan and Employee Stock Ownership Plan (the "Plan") and has
established the related Employee Stock Ownership Trust (the "rust"); and
WHEREAS, the Omnibus Budget Reconciliation Act of 1993 ("OBRA '93")
requires that beginning in 1994 a qualified plan such as the Plan may
not take into account compensation in excess of $150,000, indexed for
cost-of-living adjustments in increments of $10,000;
WHEREAS, the Sponsor wishes to amend the Plan to comply with the
requirements of OBRA '93;
WHEREAS, the Sponsor wishes to amend the Plan to clarify the
treatment of forfeitures of terminated participants who are 0% vested in
their Account balance; and
WHEREAS, the Plan needs to be amended, to correctly reflect the
diversification requirements applicable to the Plan.
NOW, THEREFORE, the Sponsor hereby amends the Plan as follows:
1. Section 2.7 Compensation shall be amended by deleting the
last paragraph of such Section 2.7 and adding the following language to
the end of Section 2.7:
"In addition to other applicable limitations set forth
in the Plan, and notwithstanding any other provision of the
Plan to the contrary, for Plan Years beginning on or after
January 1, 1994, the annual compensation of each Employee
taken into account under the Plan shall not exceed the OBRA
'93 annual compensation limit. The OBRA '93 annual
compensation limit is $150,000, as adjusted by the
Commissioner for increases in the cost of living in
accordance with Code Section 401(a)(17)(B). The cost-of-living
adjustment in effect for a calendar year applies to
any period, not exceeding 12 months, over which compensation
is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer
than 12 months, the OBRA '93 annual compensation limit will
be multiplied by a fraction, the numerator of which is the
number of months in the determination period, and the
denominator of which is 12.
For Plan Years beginning on or after January 1, 1994,
any reference in this Plan to the limitation under Code
Section 401(a)(17) shall mean the OBRA '93 annual
compensation limit set forth in this provision.
If Compensation for any prior determination period is
taken into account in determining an Employee's benefits
accruing in the current Plan Year, the Compensation for that
prior determination period is subject to the OBRA '93 annual
compensation limit in effect for that prior determination
period. For this purpose, for determination periods
beginning before the first day of the first Plan Year
beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000
In determining the Compensation of a Participant, the
family aggregation rules of Code Section 414(q)(6) shall
apply, except that in applying such rules, the term "family"
shall include only the spouse of the Participant and any
lineal descendants of the Participant who have not attained
age 19 before the close of the Plan Year. If the aggregate
Compensation for the family group exceeds the limitation
under Code Section 401(a)(17), then the Compensation of the
family member shall be proportionately reduced so the total
equals the compensation limit set forth in Code Section
401(a)(17)."
2. Section 6.4 of the Plan shall be amended by adding the
following unnumbered paragraph to the end of Section 6.4:
"For purposes of this Section 6.4 and subject to
Section 8.1(b), if upon termination of employment, a
Participant is 0% vested in his Account balance, such
Participant shall be deemed to have received a lump sum
distribution of such vested Account balance and shall
immediately forfeit the nonvested portion of his Account
balance, subject to restoration under Section 8.4."
3. Section 5.3(b) of the Plan shall be amended effective as of
January 1, 1989 to read as follows:
(b) A participant's Qualified Election Period shall be the six
Plan Year period beginning on the latter of (i) the Plan Year in which
the Participant attains age 55; or (ii) the Plan Year in which the
Participant first becomes qualified under subparagraph (a) above.
4. Unless specifically provided otherwise, this Amendment No. 2
shall be effective January 1, 1994.
AMENDMENT NO. 3
TO
G.R. HERBERGER'S, INC.
401(k) EMPLOYEE STOCK PURCHASE PLAN
AND
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, G.R. Herberger's, Inc. (the "Sponsor") has adopted and
currently maintains the G.R. Herberger's, Inc. 401(k) Employee Stock
Purchase Plan and Employee Stock Ownership Plan (the "Plan") and has
established the related Employee Stock Ownership Trust (the "Trust");
and
WHEREAS, the Sponsor wishes to amend the Plan to allow for employer
matching contributions to be made with respect to certain Elective
Deferrals made by Participants to the Plan; and
WHEREAS, the Sponsor wishes to make several additional modifications to
the Plan.
NOW, THEREFORE, the Sponsor hereby amends the Plan as follows:
1. Section 2.1 shall be amended and restated as follows:
Section 2. 1 Account shall mean the entire interest of each
Participant in the Trust. The Trustee shall create and maintain
a separate account for each Participant and shall credit thereto
the amount of contributions to the Plan and all gains and losses
allowable thereto. Within each Participant's Account, separate
accountings shall be maintained for: (i) Elective Deferral
Contributions, (ii) Matching Contributions, and (iii) Employer
Discretionary Contributions, if any, and all gains and losses
thereon. That portion of a Participant's Account attributable to
Elective Deferral Contributions, if any, shall be referred to as
the Participant's Elective Deferral Account, and that portion of
a Participant's Account attributable to Matching Contributions, if
any, shall be referred to as the Participant's Matching Account.
2. There shall be added to the Plan a new Section 2.2A to read as
follows:
Section 2.2A Actual Contribution Percentage ("ACP") shall mean for
a specified group of Participants for a Plan Year, the average of
the ratios (calculated separately for each Participant in such
group to the nearest one-hundredth of one percent) of the amount
of Matching Contributions made under the Plan on behalf of the
Participant for the Plan Year to the Participant's Compensation,
as defined under Section 2.7, for the Plan Year. Such ACP shall
not include Matching Contributions that a-re for-felted either to
correct Excess Aggregate Contributions or because the contributions
to which they relate are Excess Deferrals, Excess Contributions,
or Excess Aggregate Contributions. Compensation shall include
Compensation for the entire Plan Year, even if the Employee is not
a Participant for the entire Plan Year, unless a different result
is required by regulation or statute. For purposes of determining
the ratio, of a Participant who is a five percent (5%) owner or one
of the ten (10) most highly paid Highly Compensated Employees, the
ratio and the Compensation of such Participant shall include the
ratio and the Compensation for the Plan Year of Family Members (as
defined in Code Section 414(q)(6). Family Members, with respect
to Highly Compensated Employees, shall be disregarded as separate
Employees in determining the ratio both for Participants who are
Non-Highly Compensated and for Participants who are Highly
Compensated Employees.
3. Section 2.2A shall be renumbered 2.2B and amended and restated as
follows:
Section 2.2B. Actual Deferral Percentage ("ADP") shall mean, for
a specified group of Participants for a Plan Year, the average of
the ratios (calculated separately for each Participant in such
group to the nearest one-hundredth of one percent) of the amount
of Employer Contributions actually paid over to the Trust on behalf
of such Participant for the Plan Year to the Participant's
Compensation, as defined under Section 2.7, for such Plan Year.
Compensation shall include Compensation for the entire Plan Year
even if the Employee is not a Participant for the entire Plan Year
unless a different result is required by regulation or statute.
Employer contribution on behalf of any Participant shall include:
(i) any Elective Deferrals made pursuant to the Participant's
Elective Deferral Agreement, including Excess Elective Deferrals
of Highly-Compensated Employees, but excluding Excess Elective
Deferrals of Non-Highly Compensated Employees that arise solely
from Elective Deferrals made under the Plan or plans of this
Employer; and (ii) at the election of the Employer, Matching
Contributions. The actual deferral ratio for a Participant who
fails to make Elective Deferrals is zero. For purposes of
determining the deferral ratio of a Participant who is a five
percent (5 %) owner or one of the ten (10) most highly-paid Highly
Compensated Employees, the deferral ratio and the Compensation of
such Participant shall include the deferral ratio and the
Compensation for the Plan Year of Family Members (as defined in
Code Section 414(q)(6)). Family Members, with respect to Highly
Compensated Employees, shall be disregarded as separate Employees
in determining the deferral ratio both for Participants who are
Non-Highly Compensated and for Participants who are Highly
Compensated Employees.
4. There shall be added to the Plan a new Section 2.14A to read as
follows:
Section 2.14A Excess Aggregate Contribution shall mean with respect
to any Plan Year, the excess of:
(a) The aggregate amount of Matching Contributions actually taken
into account in computing, the ACP of Highly Compensated Employees
for such Plan Year over,
(b) The maximum amount of such Matching Contributions for the
Highly Compensated Employees permitted by the ACP test (determined
by reducing Matching Contributions made on behalf of Highly
Compensated Employees in order of the ACP beginning with the
highest of such percentages). Such determination shall be made
after first determining Excess Elective Deferrals pursuant to
Section 2.14C and then determining Excess Contributions pursuant
to Section 2.14B.
5. Section 2.14A shall be renumbered 2.14B.
6. Section 2.14B shall be renumbered 2.14C.
7. There shall be added to the Plan a new Section 2.21A to read as
follows:
Section 2.21A Matching Contribution shall mean an Employer
contribution made to this Plan or any other defined contribution
plan on behalf of a Participant on account of a Participant's
Elective Deferral, under a plan maintained by the Employer.
8. There shall be added to the Plan a new Section 4. 1 B to read as
follows:
Section 4.1B Employer Matching Contributions
For each Plan Year, the Employer may contribute. on behalf of each
Participant who has made Elective Deferral Contributions for the
Plan Year, pursuant to an Agreement under Section 4.1A of the Plan,
and has elected to invest such Elective Deferral Contributions in
Employer Stock, pursuant to Section 5.4 of the Plan, a
discretionary Matching Contribution of an amount equal to a
percentage of' the Participant's Compensation contributed as an
Elective Deferral Contribution and invested in Employer Stock
(which is not subsequently returned to the Participant as a
corrective distribution, pursuant to Section 4.13), the exact
percentage of which is to be determined each year by the Employer.
9. Section 4.2 shall be amended and restated as follows:
Section 4.2 Time of Payment and Form of Contribution
The Employer contributions, if any, shall be paid to the Trustee
either in cash or Employer Stock as the Board of Directors may from
time to time determine. In determining the amount of the Employer
contributions, shares of Employer Stock will be valued at their
then Fair Market Value Per Share. The Employer contributions shall
be paid to the Trustee on or before the due date for filing its
federal income tax return including extensions, for the fiscal year
of the Employer with respect to which the contributions were made.
Elective Deferral Contributions shall be paid to the Trustee as
soon as the amount can be reasonably identified and separated from
the Employer's other assets. Payment shall in any event be made
within 30 days after the Participant would otherwise have received
the amount withheld from Compensation on account of the Elective
Deferral.
The Employer Matching Contributions, if any, shall be paid to the
Trustee as soon as the amount can be reasonably computed and
identified and separated from the Employer's other assets. The
Employer Matching Contributions shall be paid to the Trustee on or
before the due date for filing its federal income tax return,
including extensions, for the fiscal year of the Employer with
respect to which the contributions were made.
10. Paragraph (b) of Section 4.3 of the Plan shall be amended and
restated to read as follows:
(b) Financed Shares acquired with the proceeds of an Acquisition
Loan under Section 4.3 of the Trust shall be added to and
maintained in a Shares Suspense Account. As the Employer makes
ESOP contributions to the Plan for a Plan Year and the Trustee
makes payments on the Acquisition Loan, such Financed Shares shall
be released from the Shares Suspense Account and allocated as of
the last day of the Plan Year for which the contribution was made
to the Accounts of the Participants in the manner provided in
paragraph (a) above. The Number of Financed Shares to be released
from the Shares Suspense Account for each Plan Year shall be in an
amount equal to the number of currently encumbered Financed Shares
multiplied by one of the two fractions provided in subparagraphs
(1) and (2) below. The Plan Administrator shall deter-mine which
fraction to use at the time of each such loan, provided, however,
that the Plan Administrator may use the fraction in subparagraph
(2) only if the following rules apply: (i) the loan must provide
for annual payments of ' principal and interest at a cumulative
rate that is not less rapid at any time than level annual payments
of such amounts for 10 years; and (ii) interest included in any
payment is disregarded only to the extent that it would be deter-mined
to be interest under standard loan amortization tables. In
addition, subparagraph (2) is not applicable from such time . that,
by reason of a renewal, extension, or refinancing, the sum of the
expired duration of the loan, the renewal period, the extension
period, and the duration of a new loan exceeds 10 years. If such
loan fails to comply with these rules, the Plan Administrator shall
use the method set forth in subparagraph (1).
(1) The numerator of the fraction is the total payments of
principal and interest made during the Plan Year, and the
denominator of the fraction is the total payments of
principal and interest made during the Plan Year plus the
total payments of principal and interest due under the loan
for all future Plan Years.
(2) Thee numerator of the fraction is the total payments of
principal made during the Plan Year, and the denominator of
the fraction is the total payments of principal made during
the Plan Year plus the total payments of principal due under
the loan for all future Plan Years.
If the interest rate under the loan is variable the above
calculation must be made using the interest rate which is
applicable as of the end of the Plan Year in which such calculation
is made. Financed Shares of different classes must be released
from encumbrance in equal percentages.
11. There shall be added to the Plan a new Section 4.3A to read as
follows:
Section 4.3A Allocation of Matching Contributions
Any Matching Contributions made to the Plan with respect to the
Plan year shall be allocated to the Account of each eligible
Participant who made an Elective Deferral and invested such
Elective Deferral in Employer Stock, as of the last day of the Plan
Year on the same basis as the Employer makes the Matching
Contributions under Section 4.1B of the Plan.
12. Section 4.5 of the Plan shall be amended and restated to read as
follows:
Section 4.5 Advance Employer Contributions
In the event that a part or all of an Employer's contribution
(other than pursuant to Participant's Elective Deferral
Contributions or Matching Contributions) for a Plan Year is paid
before the last day of a Plan Year, such advance contribution shall
be held by the Trustee as a separate fund, and, along with the net
income and any change in value of such separate fund, allocated
among the Accounts of the Participants as of the last day of the
Plan Year pursuant to Section 4.3. In the event that the Plan is
terminated before the last day of the Plan Year, all such advance
contributions, including any amount treated as an advance
contribution under Section 4.6, shall be returned to the Employer
to the extent provided in Section 4.10.
13. Paragraph (a) of Section 4. 1 1 shall be amended and restated to
read as follows:
(a) Any cash dividends received by the Trustee on Employer Stock
allocated to the Accounts of Participants (or former Participants
or Beneficiaries) may be: (i) retained in the Participants'
applicable Accounts (and invested by the Trustee under the same
rules as for the other assets of such Accounts); (ii) used to make
payments on an Acquisition Loan the proceeds of which were used to
acquire the Employer Stock with respect to which the dividend is
paid (provided that the applicable requirements of Code Section
404(k)(2) are satisfied); and/or (iii) paid to such Participants
(or former Participants or Beneficiaries), all at the sole
discretion of the Employer (to be applied in a nondiscriminatory
manner). If the dividends are to be paid to the Participants (or
former Participants or Beneficiaries) the dividends may, at the
election of such Participants (or former Participants or
Beneficiaries), be paid to the applicable Participants (or former
Participants or Beneficiaries) in a current payment in cash or be
retained in the Trust. Any such dividends for which a current cash
payment is to be made must be made within 90 days of the end of the
Plan Year in which the dividends are received by the Trustee. The
Employer may elect to pay any such cash dividend directly to the
Participants or Beneficiaries. Any such payment of cash dividends
on shares of Employer Stock shall not be treated as a distribution
under the Plan.
14. The first sentence of subparagraph (b)(1) of Section 4. 1 1 shall
be amended and restated to read as follows:
A portion (or all) of the Employer Stock released from the Shares
Suspense Account pursuant to Section 4.3(b) as a result of the use
of the cash dividend on Employer Stock acquired with the proceeds
of the Acquisition Loan (whether such Employer Stock is allocated
or unallocated) to make payments on the Acquisition Loan shall
first be allocated to Participants' Accounts in accordance with
this Section 4. 1 1 (b)(1).
15. Paragraph (a) of Section 4.13 shall be amended and restated to read
as follows:
(a) In General. For each Plan Year, the Plan shall satisfy the
non-discrimination test in Code Section 40 1 (k) and 40 1 (m) in
accordance with Final Treasury Regulation Section 1.401(k)-l and
Final Treasury Regulation Sections 1.401(m)-l and -2. The Code and
Regulation Sections are incorporated herein by this reference.
16. Paragraph (h) of Section 4.13 shall be revoked.
17. Section 4.13 shall be amended to add to the end thereto new
Paragraphs (h) through (o) which shall read as follows:
(h) The ACP Test. In accordance with Code Section 401(m), the
ACP for the group of eligible Participants for any Plan Year who
are Highly Compensated Employees must satisfy one of the following
tests:
(1) The ACP for the Highly Compensated Employees may not be
more than the ACP for all Non-Highly Compensated Employees
multiplied by 1.25; or
(2) The ACP for the group of Highly Compensated Employees
is not more than the ACP for all Non-Highly Compensated
Employees multiplied by two (2) and the difference between
the ACP is not more than two (2) percentage points.
(i) Special Rules. For purposes of Section 4.13(b):
(1) Matching Contributions will be considered made for a
Plan Year if made no later than the end of the twelve month
period beginning on the day after the close of the Plan Year.
(2) If two or more plans which include cash or defer-red
arrangements (as defined under Treas. Reg. Section 1.401(k)-I(a)(2)
and referred to for purposes of this Section as
"Arrangements") are considered one plan for the purposes of
Code Section 401(a)(4) or 401(b), and to satisfy Code Section
401(m), the Arrangements included in such plans shall be
treated as one Arrangement provided the Arrangements have the
same Plan Year.
(3) If a Highly Compensated Employee is a Participant under
two (2) or more Arrangements of the Employer or a member of
the Employer's Controlled Group and such Arrangements are
aggregated on a mandatory or permissive basis to satisfy the
requirements Of Code Sections 401(m), 401(a)(4) or 410(b),
all such Arrangements shall be treated as one Arrangement for
the purpose of determining the ACP with respect to such
Highly Compensated Employee. Any Arrangement ending with or
within the same calendar year shall be aggregated for
purposes of determining the ACP with respect to such Highly
Compensated Employee and the aggregate ACP shall be treated
as if made under each Arrangement. However, plans required
to be disaggregated under Code Section 401(m) regulations
shall be treated as separate plans.
(4) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ACP test.
(5) The determination and treatment of the ACP amounts of
any Participant shall satisfy such other requirements as may
be prescribed by the Secretary of the Treasury.
(j) Correction Excess Aggregate Contributions. If the ACP of the
Highly Compensated Employees would exceed the limits in 4.13(h),
the Plan Administrator shall correct the ACP, determine the amount
of Excess Aggregate Contributions and reduce such Excess Aggregate
Contributions as follows:
(1) The ACP of the Highly Compensated Employee with the
highest ACP shall be reduced by having his/her Excess
Aggregate Contributions under 4.13(h) be forfeited, if
forfeitable, or distributed to the Highly Compensated
Employee to whom they apply on a pro rata basis from the
Highly Compensated Employee's Matching Contribution Account.
(2) If the ACP test of the Highly Compensated Employees
continues to exceed the limits in Section 4.13(h) after
reducing the ACP of the Highly Compensated Employee with the
highest ACP, then the Plan Administrator will continue to
reduce the ACP similarly by this method of leveling to the
ACP of the Highly Compensated Employee with the next highest
ACP until such ACP test is satisfied.
(3) Forfeitures of Excess Aggregate Contributions shall be
reallocated to the Accounts of Non-Highly Compensated
Employees. After the allocation of all other Forfeitures of
the Plan, Forfeitures of Excess Aggregate Contributions shall
be reallocated to the Matching Contribution Account of each
Non-Highly Compensated Employee, who made Elective Deferral
Contributions to the Plan for the Plan Year during which such
Excess Aggregate Contributions are attributable, in the ratio
which each of such Non-Highly Compensated Employee's
Compensation bears to the Compensation of all such Non-Highly
Compensated Employees' Compensation for the Plan Year.
(k) Multiple Use of Alternative Limitation. To satisfy the ADP
test and the ACP test, both tests may not rely on the alternative
method, namely Section 4.13(b)(2) and Section 4.13(h)(2) above.
The ADP test and the ACP test must satisfy the following "aggregate
limit", which is the sum of:
(1) 125 percent of the greater of (1) the ADP for the Non-Highly
Compensated Employees for the Plan Year, or (ii) the
ACP of the Non-Highly Compensated Employees, and
(2) Two (2) plus the lesser of the ADP or ACP for the Non-Highly
Compensated Employees, but not more than 200% of the
lesser of such ADP or ACP.
"Lesser" shall be substituted for "greater" in (1) above,
and,"greater" shall be substituted for "lesser" after "Two (2) plus
the" in (2) above, if a larger "aggregate limit" results.
The Plan Administrator will correct multiple use of the alternative
limitation by first reducing the ACP of Highly Compensated
Employees in order of their contribution percentages beginning with
the highest of such percentages and as further specified in Section
4.130) above.
(l) When to Distribute Excess Amounts. Distribution of such
Excess Contributions and Excess Aggregate Contributions shall be
made no later than the last day of the Plan Year immediately
following the last day of the Plan Year in which such excess
amounts apply. If such excess amounts are distributed more than
2 1/2 months after the last day of the Plan Year in which such excess
amounts arose, the Code imposes a ten percent (10%) excise tax on
the Employer with respect to such amounts.
(m) Correction of Excess Aggregate Contributions for "Family
Members". Excess Aggregate Contributions of Participants who are
subject to "family member" aggregation rules shall be allocated
among the "family members" in proportion to the Matching
Contributions (or amounts treated as Matching Contributions) of
each "family member" that is combined to determine the combined
ACP.
(n) Income Allocable to Excess Aggregate Contributions. The
income allocable to Excess Aggregate Contributions for the Plan
Year in which such excess amounts apply shall be distributed along
with distributions designated as Excess Aggregate Contributions for
the Plan Year. Income allocable to such Excess Aggregate
Contributions shall be equal to allocable gains and income, less
allocable losses and expenses for such Plan Year. The Plan shall
allocate income for this section in the same manner as set forth
in Section 5. 1 of the Plan.
No income shall be allocated to Excess Aggregate Contributions for
the period between the end of the Plan Year and the date of
distribution (the "gap period").
(o) Excess Aggregate Contributions as Annual Additions. Any
Excess Aggregate Contributions made pursuant to this Section shall
be treated as an Annual Addition under Section 4.6 of the Plan.
18. There shall be added to the Plan a new Section 4.15:
Section 4.15. Matching Contribution
(1) All Matching Contributions made by the Employer shall
be deposited in the appropriate Participant's Account. Each
such Matching Contribution Account shall be credited with
income applicable to such Matching Contribution.
19. Section 5.1 of the Plan shall be amended and restated as follows:
Section 5. 1. Trust Fund and Allocation of Ear
The Trustee shall maintain or cause to be maintained Accounts which
shall accurately reflect, from time to time, the value of the
interest of each Participant in the Trust Fund resulting from the
contributions of the Employer allocated to each Participant. In
this condition the Accounts shall reflect each Participant's share
of interest, dividends, realized and unrealized gains and income
from all source ' s, less realized and unrealized losses and
expenses (other than those to be borne by the Employer in
accordance with this Plan). Such sum shall be determined as of the
Valuation Date of each Plan Year and, after allocating the (i)
Employer ESOP Contributions, (ii) Elective Deferral Contributions,
and (iii) Matching Contributions for such Plan Year, allocated as
a credit or charge to the Account of each Participant in the same
proportion that the balance of the Account of each Participant as
of the date following the last Valuation Date bears to the total
of the balances of the Accounts of all Participants as of such
date; provided, however, that distribution payments made during the
Plan Year, but prior to the Valuation Date shall first be deducted
from such balances.
20. Section 5.4 of the Plan shall be amended and restated as follows:
(a) Elective Deferral Contributions and Matching Contributions to
the Plan together with any earnings thereon shall be deposited in
the Trust Fund and held temporarily in a stable income or similar
fund designed to protect principal at a rate of return competitive
with money market funds (the "Fund") until such monies are used to
acquire Employer Stock.
(d) The Participant's Elective Deferral Account and Matching
Contribution Account which is invested in the Fund at the annual
purchase date shall be used to purchase Employer Stock unless
other-wise directed by the Participant as to the Participant's
Elective Deferral Contributions, in which case such monies shall
continue to be invested in accordance with paragraph (a) above,
until the next annual purchase of Employer stock.
21. The vesting schedule contained in Paragraph (a) of Section 6.7 of
the Plan shall be amended and restated to provide as follows:
Fewer than 5 years 0%
5 years but fewer than 6 60%
6 years but fewer than 7 80%
7 years of more 100%
22. Subparagraph (c)(1) of Section 8.5 of the Plan shall be amended in
its entirety to provide as follows:
(1) The amount deferred is adequately secured in the following
manner: a promissory note shall be given to the Participant, the
full payment of which could be required by the holder if the
repurchaser defaults in the payment of a scheduled installment
payment, together with a pledge of the Employer Stock being
repurchased as adequate security for the outstanding amount of the
note. In addition, if the term of the installment obligation
exceeds five (5) years, the repurchaser must give the holder
additional adequate security for the outstanding amount of the
note.
23. Paragraph (b) of Section 8.13 shall be amended and restated to read
as follows:
(b) If a Participant elects to withdraw all or part of his vested
Account balance by making a written request for a distribution,
then the distribution of the Participant's vested Account balance
for which an election is made shall be made as follows: A
distribution shall be made within one year after the end of the
Plan Year to which the election applies in an amount equal to the
requested amount, but not more than the greater of (i) an amount
determined by the Plan Administrator for such Plan Year or (ii) the
maximum annual distribution allowed under Section 498OA(c)(1) for
non-lump sum distributions without incurring an excise tax, for the
Plan Year in which the request is made. The amount to be
determined by the Plan Administrator shall be determined for each
Plan Year as of the last day of the Plan Year, and may be changed
from year to year. Any requested amount which exceeds the amount
to be distributed in the first year shall be distributed in
substantially equal installments over a period not to exceed ten
(10) years, commencing with the year following the year in which
the initial distribution is made.
24. Paragraph (a) of Section 8.15 shall be amended to add to the end
thereto the following language:
The Plan Administrator shall provide a Distributee with notice of
this right not less than 30 days or more than 90 days before the
distribution, provided that distributions may commence less than 30
days after notice is given if:
The Plan Administrator clearly informs the Distributee that
the Distributee has a right to a period of at least 30 days
after receiving- the notice to consider the decision of
whether or not to elect a distribution (and, if applicable, a
particular distribution option), and
The Distributee after receiving the notice, affirmatively elects a
distribution.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
dates indicated below.
G.R. HERBERGER'S, INC., Employer
Dated: ________________________ By: ____________________________
Its: President
By: ____________________________
Its: Vice President
NORWEST BANK MINNEAPOLIS, NATIONAL
ASSOCIATION, as Trustee
Dated: _________________________ By: _____________________________
Its: Asst. Vice President
By: _____________________________
Vice President
NO. 4
TO
G.R. HERBERGER'S, INC.
401(k) EMPLOYEE STOCK PURCHASE PLAN
AND
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, G.R. Herberger's, Inc. (the "Sponsor") has adopted and
currently maintains the G.R. Herberger's, Inc. 401(k) Employee Stock
Purchase Plan and Employee Stock Ownership Plan (the "Plan") and has
established the related Employee Stock Ownership Trust (the "Trust");
and
WHEREAS, the Sponsor wishes to amend the Plan to clarify certain
provisions of the Plan; NOW, THEREFORE, the Sponsor hereby amends the
Plan as follows:
1. Section 2.15 shall be amended and restated as follows:
Section 2.15 Fair Market Value Per Share shall mean that value per
share as determined by the Plan Administrative Committee, provided
that in determining Fair Market Value Per Share the Plan
Administrative Committee shall obtain and rely upon a valuation
made by an independent appraiser, who satisfies the requirements
contained in Section 170(a)(1) of the Code and the Regulations
prescribed thereunder.
2. Section 5.2 shall be amended and restated as follows:
Section 5.2 Determination of Market Value
The Trustee shall, as provided in the Agreement and Declaration of
Trust, ascertain and certify the fair market value of the Trust
Fund as of the Valuation Date. Such valuation shall include the
Employer's contribution with respect to such Plan Year. Similar
valuations shall be made at such other times as necessary for the
purpose of determining the value of a Participant's Account. In
determining the fair market value of the Fund, the Trustee shall
use the Fair Market Value Per Share of the Employer Stock.
3. The fifth paragraph of Paragraph (a)(ii) of Section 8.1 shall be
amended and restated as follows:
The amount of any such earlier distribution shall be made in an
amount up to the full amount of the Participant's vested Account
balance but not in excess of a maximum distribution amount as
determined by the Plan Administrator for the Plan Year in which the
request is made. The amount determined by the Plan Administrator
shall be determined for each Plan Year as of the last day of the
Plan Year, and may be changed from year to year. Any requested
amount which exceeds the amount to be distributed in the first year
shall be distributed in substantially equal installments over a
period not to exceed ten (10) years, commencing with the year
following the year in which the initial distribution is made;
provided, however, that each subsequent installment will be subject
to the maximum amount for such Plan Year, as determined pursuant to
this Section 8. 1 (a)(ii).
4. Paragraph (b) of Section 8.13 shall be amended and restated as
follows:
(b) If a Participant elects to withdraw all or part of his vested
Account balance by making a written request for a distribution,
then the distribution of the Participant's vested Account balance
for which an election is made shall be made as follows: A
distribution shall be made within one year after the end of the
Plan Year to which the election applies in an amount equal to the
requested amount, but not more than the greater of (i) an amount
determined by the Plan Administrator for such Plan Year or (ii) the
maximum annual distribution allowed under Section 498OA(c)(1) for
non-lump sum distributions without incurring an excise tax, for the
Plan Year in which the request is made. The amount to be
determined by the Plan Administrator shall be determined for each
Plan Year as of the last day of the Plan Year, and may be changed
from year to year. Any requested amount which exceeds the amount
to be distributed in the first year shall be distributed in
substantially equal installments over a period not to exceed ten
(10) years, commencing with the year following the year in which
the initial distribution is made; provided, however, that each
subsequent installment will be subject to the maximum amount for
such Plan Year, as determined pursuant to this Section 8.13(b).
5. Section 10.4 shall be amended and restated as follows:
Section 10.4 Plan Administrative Committee
The Board of Directors of the Sponsor may, in its discretion,
appoint a committee of one or more persons, to be known as the Plan
Administrative Committee (Committee) to act as the Plan
Administrator in performing the duties of the Sponsor; provided,
however, that in determining the Fair Market Value Per Share
pursuant to Section 2.15, the Committee shall act as agents of the
Trustee and not as Plan Administrator. The members of the
Committee shall serve at the pleasure of the Board of Directors;
they may be officers, directors, or Employees of the Employer or
any other individuals. Any member may resign by delivering his
written resignation to the Board of Directors and to the Committee.
Vacancies in the Committee arising by resignation, death, removal
or otherwise, shall be filled by the Board of Directors. The
Sponsor shall advise the Trustee in writing of the names of the
members of the Committee and of changes in membership from time to
time.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
dates indicated below.
G.R. HERBERGER'S, INC., Employer
Dated: ________________________ By: ____________________________
Its: President
By: ____________________________
Its: Vice President
NORWEST BANK MINNEAPOLIS, NATIONAL
ASSOCIATION, as Trustee
Dated: _________________________ By: _____________________________
Its: Asst. Vice President
By: _____________________________
Vice President
AMENDMENT NO. 5 TO
G.R. HERBERGER'S, INC.
401 (k) EMPLOYEE STOCK PURCHASE PLAN AND
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, G.R. Herberger's, Inc. (the "Sponsor") has adopted and
currently maintains the G. R. Herberger's, Inc. 401 (k) Employee Stock
Purchase Plan and Employee Stock Ownership Plan (the "Plan") and has
established the related Employee Stock Ownership Trust (the "Trust");
and
WHEREAS, the Sponsor has retained the right to amend. the Plan
under Section 13.1 of the Plan; and
WHEREAS, due to the changing nature of the Employer Stock it may
hold in the future, when such Employer Stock is publicly traded;
NOW, THEREFORE, the Sponsor hereby amends the Plan in the following
respects:
1. Section 2.15, "Fair Market Value Per Share" shall mean that
value per share determined as follows:
(a) If the Employer Stock is traded on a national securities
exchange or admitted to unlisted trading privileges on such
exchange, the fair market value on any given day shall be the
closing sales price for the Employer Stock on such day, as reported
in the Wall Street Journal or other newspaper of general
circulation;
(b) If the Employer Stock is not listed on a national securities
exchange, the fair market value on any given day shall be the
closing sale price for the Employer Stock on the NASDAQ National
Market System on such date, as reported in the Wall Street Journal
or other newspaper of general circulation;
(c) If the Employer Stock is not listed on a national securities
exchange, is not admitted to unlisted trading privileges on any
such exchange, and is not eligible for inclusion on the NASDAQ
National Market System, the fair market value on any given day
shall be the average of the closing representative's bid and asked
prices on such day, as reported on the NASDAQ National Market
System, and if not reported on such system, then as reported by the
National Quotation Bureau, Inc. or such other publicly available
compilation of the bid and asked prices of such common stock in any
over-the-counter market on which the Employer Stock is traded;
(d) If no public trading market for the Employer Stock exists, the
fair market value on any given day shall be an amount determined by
the Plan Administrator provided that in determining Fair Market
Value Per Share, the Plan Administrator shall obtain and rely upon
an evaluation made by an independent appraiser, provided such
appraiser satisfies requirements similar contained in the
Regulations prescribed under Section 170(a)(i) of the Code.
2. Subsection 2.19(d) shall be deleted in its entirety.
3. Section 2.33, "Valuation Date" shall be amended by deleting
the section and replacing it with the following language:
"Valuation Date" shall mean the last day of each Plan Year and, in
addition, any day of the Plan Year upon which the Fair Market Value
Per Share of Employer Stock and the fair market value of all other
investments can be determined in accordance with Sections 2.15 and
5.2."
4. Subsection 4.13(m) shall be deleted in its entirety.
5. A new subsection (f) shall be added to Section 5.4 to read as
follows:
"The Trustee shall purchase Employer Stock required for employee
investment under the 401 (k) Employee Stock Purchase Plan on the
open market or otherwise, with no obligation being imposed on the
Plan Sponsor or any member of its Controlled Group to sell Employer
Stock to the Trustee."
6. Subsection 6.2(a) shall be amended by deleting the text in the
third line which immediately follows the parenthetical, and replacing it
with the following:
"shall have his interest in that portion of this Account
attributable to Employer and Matching Contributions determined in
accordance with the following schedule:"
7. Subsection 6.2(b) shall be amended by deleting the text in the
third line which immediately follows the parenthetical, and replacing it
with the following:
"shall have his interest in that portion of this Account
attributable to Employer and Matching Contributions determined in
accordance with the following schedule:"
8. Subsection 6.7(a) shall be amended by deleting the third line,
and replacing it with the following:
"his interest in that portion of this Account attributable to
Employer and Matching Contributions determined in accordance with
the following schedule:"
9. Subsection 6.7(b) shall be amended by deleting the second line
and replacing it with the following:
"Employee misconduct shall have his vested interest in that portion
of this Account attributable to Employer and Matching Contributions
determined in accordance with the following schedule:"
10. Section 8.1, subsection (a)(ii) shall be amended by deleting
the second paragraph of subsection (a)(ii) and replacing it with the
following language:
"Notwithstanding anything contained in this Article VIII to the
contrary, any Participant who is eligible to receive a distribution
and who requests an immediate distribution of such Participant's
Elective Deferral Account shall receive a distribution of such
Elective Deferral Account in Employer Stock as soon as practicable
following such request unless the Participant has directed that his
Elective Deferral Account be held in cash, in which case, the
Elective Deferral Account shall be distributed in cash."
11. Section 8.1, subsection (a)(ii) Small be amended by deleting
the third paragraph of that Section and replacing it with the following
language:
"Amounts to be distributed under this Section 8.'l (a) (ii) prior
to the end of the fifth Plan Year following the Plan Year in which
Participant separated from service shall be distributed in the form
of Employer Stock except that partial shares, any Participant
Elective Deferral Account assets held in cash subject to the
Participant's direction and any dividends shall be paid in cash."
The remainder of Section 8.1 (a) (ii) shall remain in its current form.
12. Section 8.1, subsection (c)(i) shall be deleted and replaced
with the following language:
"(c) Required Distributions Before Death
(i) General Rule. Effective January 1, 1997, distribution of a
Participant's Account must be made or commenced to the Participant
not later than April 1 of the calendar year following the calendar
year in which the later of two events occurs: (A) the Participant
attains age 70@; or (B) the Participant retires from active
employment. Between January 1, 1989 and January 1, 1997,
distribution of a Participant's Account must be made or commenced
to the Participant not later than April 1 of the calendar year
following the calendar year in which the Participant attains age
70%, regardless of whether the Participant is actually retired from
active employment."
13. Section 8.3 "Form of Distribution" shall be amended by
deleting subparagraph (a) and replacing it with the following language:
"(a) Distribution of a Participant's Account shall be made in whole
shares of Employer Stock valued at its Fair Market Value Per Share
as of the date set forth in Section 5.2. Balances representing
fractional shares, dividends and Elective Deferral Account assets
held in cash at the Participant's direction will be distributed in
cash. In the event Employer Stock is not available for
distribution on the date a distribution is due hereunder, the
trustee shall hold such amount until Employer Stock is acquired."
14. Section 8.5 "Put Option" shall be amended by adding the
following sentence at the beginning of the Section:
"(a) This Section 8.5 shall only apply if the Employer Stock is not
publicly traded at the time of distribution."
The remaining subsections of Section 8.5 shall be redesignated (b)
through (f).
15. Section 8.6 "Right of First Refusal" shall be amended by
adding the following sentence at the beginning of the Section:
"(a) This Section 8.6 shall only apply if the Employer Stock is not
publicly traded at the time of distribution."
The remaining subsections of Section 8.6 shall be renumbered (b) through
(f).
16. Section 8.13 "Distribution Upon Attaining Age 59@" shall be
amended by adding a new subsection (c) to read as follows:
"(c) Any distributions under this Section shall be made in Employer
Stock with respect to whole shares, valued at their Fair Market
Value Per Share as of the date set forth in Section 5.2 hereof.
Balances representing fractional shares, dividends and Elective
Deferral Account assets held in cash at the direction of the
Participant will be distributed in cash."
17. Section 8.14 shall be amended by adding a new subsection (g)
to read as
follows:
"(g) Any distributions under this Section shall be made in Employer
Stock with respect to whole shares, valued at their Fair Market
Value Per Share as of the date set forth in Section 5.2 hereof.
Balances representing fractional shares, dividends and account
assets held in cash at the direction of the Participant will be
distributed in cash."
18. Subsection 10.2(a) shall be deleted and replaced with the
following:
"The Plan Administrator shall be responsible for, and shall have
the discretionary authority to control and manage, the operation
and administration of the Plan."
19. The first sentence of Subsection 10.2(b) shall be deleted and
replaced with the following:
"The Plan Administrator shall have the discretionary authority to
interpret the Plan and shall determine all questions arising in the
administration, interpretation, and application of the Plan,
including but not limited to questions of eligibility and the
status and rights of Participants, Beneficiaries and other
persons."
20. Section 10.4 shall be deleted in its entirety and replaced
with the following:
"10.4 Plan Administrative Committee. The Board of Directors of the
Sponsor may, in its discretion, appoint a committee of one or more
persons, to be known as the Plan Administrative Committee
("Committee") to act as the Plan Administrator. The members of the
Committee shall serve at the pleasure of the Board of Directors,
they may be officers, directors, or Employees of the Employer or
any other individuals. Any member may resign by delivering his
written resignation to the Board of Directors and to the Committee.
Vacancies in the Committee arising by resignation, death, removal
or otherwise, shall be filled by the Board of Directors. The
Sponsor shall advise the Trustee in writing of the names of the
members of the Committee and of changes in membership from time to
time."
21. Section 10.9 shall be amended by adding a new subsection (c)
to read as
follows:
" (c) If the Employer Stock is publicly traded, a Participant shall
be entitled to direct the Trustee as to the manner in which voting
rights of the Employer Stock allocated to his Account are to be
exercised with respect to all corporate matters subject to
shareholder vote."
Subsections (c) and (d) shall be redesignated (d) and (e).
22. The first sentence of Section 13.1 shall be amended by
inserting a period immediately following "advisable" and deleting the
remainder of the sentence.
23. Article XIII shall be amended by adding the following Section
13.4:
"13.4 Amendment of Vesting Schedule. At any time that the vesting
schedule of the Plan is amended, or the Plan is amended in any way
that directly or indirectly affects the computation of the
Participant's nonforfeitable interest in his Account, each
Participant who has completed at least three Years of Service,
whether or not consecutive, may elect to have his vested interest
in his Employer and Matching Contributions Accounts determined
under the vesting schedule in effect prior to such amendment. A
Participant shall deliver such written election to the Plan
Administrator at any time within 60 days after the later of the
date: (a) the amendment is adopted; (b) the amendment becomes
effective; or (c) the Participant is issued written notice of the
amendment.
"An election under this Section shall be irrevocable. For purposes
of this Section, a Participant shall be considered to have
completed three Years of Service if he shall have completed such
years prior to the end of the period during which he could make an
election hereunder."
Except as where otherwise noted, this Amendment shall be effective
January 1, 1997.
IN WITNESS WHEREOF, the parties have executes this Agreement as of
the dates indicated below:
G.R. HERBERGER'S, INC., Sponsor
Dated: ________________________ By: ____________________________
Its: President
By: ____________________________
Its: Vice President
NORWEST BANK MINNEAPOLIS, NATIONAL
ASSOCIATION, as Trustee
Dated: _________________________ By: _____________________________
Its: Asst. Vice President
By: _____________________________
Vice President
THIRD AMENDMENT AND RESTATEMENT
OF
THE PARISIAN, INC.
STOCK OPTION PLAN FOR OFFICERS
TABLE OF CONTENTS
Article Page
1 - INTRODUCTION, PURPOSE AND INTENT . . . . . . . . . . . . . . . . 1
2 - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3 - PARTICIPATION. . . . . . . . . . . . . . . . . . . . . . . . . . 5
4 - CONVERSION AND GRANT OF OPTIONS. . . . . . . . . . . . . . . . . 5
5 - FORFEITURE OF OPTIONS. . . . . . . . . . . . . . . . . . . . . . 8
6 - EXERCISE OF OPTIONS. . . . . . . . . . . . . . . . . . . . . . . 9
7 - TRANSFERS OF SHARES. . . . . . . . . . . . . . . . . . . . . . . 12
8 - AMENDMENT AND TERMINATION. . . . . . . . . . . . . . . . . . . . 13
9 - BENEFICIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . 13
10 - ASSIGNABILITY . . . . . . . . . . . . . . . . . . . . . . . . . 14
11 - ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . 14
12 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 15
THIRD AMENDMENT AND RESTATEMENT
OF
THE PARISIAN, INC.
STOCK OPTION PLAN FOR OFFICERS
On April 26, 1988, Parisian, Inc., an Alabama corporation (the
"Corporation") adopted the Parisian, Inc. Stock Option Plan for
Officers (the "Plan"). On May 12, 1989 and May 21, 1990, the
Corporation, having obtained the written consent of all of the
Participant Representatives, amended and restated the Plan. On November
17, 1992 and April 8, 1996, the Corporation, having obtained the consent
of all of the Participant Representatives, amended the Plan.
Pursuant to an Agreement and Plan of Merger, dated July 8, 1996, among
Proffitt's, the Corporation and a wholly-owned subsidiary of Proffitt's,
Inc., a Tennessee corporation ("Proffitt's") (the "Merger Agreement"),
said subsidiary shall merge with and into the Corporation on the date
which includes the "Effective Time" (as that term is defined in the
Merger Agreement). As a result of said merger, the Corporation shall
become a wholly-owned subsidiary of Proffitt's.
Pursuant to Section 4.4 of the Plan as in effect immediately prior to
this Third Amendment and Restatement (the "Pre-Merger Plan"), said
merger requires an equitable adjustment of the number and option prices
of the options granted by the Corporation pursuant to this Plan (the
"Parisian Options") so as to preserve their aggregate value. Pursuant
to Section 1.5 (d) of the Merger Agreement, Proffitt's is required to
assume the Pre-Merger Plan and the Corporation's obligations thereunder.
Proffitt's and the Corporation have determined that the Pre-Merger Plan
should be amended and restated to reflect the equitable adjustment of
number and option prices of the Parisian Options and that the same does
not deprive any Participant, Beneficiary or Plan Shareholder of any
right or benefit which has accrued under the Pre-Merger Plan as of the
Effective Date. Accordingly, in order to comply with Section 4.4 of the
Pre-Merger Plan and Section 1.5(d) of the Merger Agreement and having
obtained the written consent of all of the Participant Representatives,
Proffitt's and the Corporation, pursuant to the provisions of Article 8
of the Pre-Merger Plan, hereby amend and restate the Pre-Merger Plan
effective as of the Effective Date.
ARTICLE 1 - INTRODUCTION, PURPOSE AND INTENT
Proffitt's owns all of the issued and outstanding shares of the capital
stock of the Corporation. The Corporation owns and operates a chain of
specialty apparel department stores. In order to conduct and advance
its business effectively, the Corporation must attract and retain
qualified executives and provide them with meaningful financial
incentives. Accordingly, Proffitt's and the Corporation have
established this Plan to provide the Officers with long-range financial
incentives and shall maintain and administer this Plan for the exclusive
benefit of the Participants and their Beneficiaries.
ARTICLE 2 - DEFINITIONS
Unless otherwise provided herein, the following terms shall have the
following meanings:
2.1 ADMINISTRATOR: The party determined pursuant to Article 11.
2.2 BENEFICIARY. With respect to a Participant, the party who,
pursuant to Article 9, owns any options owned by such Participant at the
time of his death.
2.3 BOARD: With respect to Proffitt's or the Corporation, as
applicable, its Board of Directors.
2.4 COMMISSION: The Securities and Exchange Commission.
2.5 CORPORATION: Parisian, Inc., an Alabama corporation.
2.6 DISABILITY: A Participant's physical or mental inability to
perform the normal duties of his employment by the Corporation which
continues for more than 180 consecutive days and which is not
attributable to chronic or excessive use of intoxicants, drugs or
narcotics, intentional self-inflicted injury or self-induced sickness or
any felonious act or enterprise on the part of the Participant. If
there is any disagreement between the Corporation and a Participant as
to the Participant's Disability or as to the date any such Disability
began, the same shall be determined by a physician to be selected by the
Administrator who shall make such determination after an examination of
the Participant by such physician. The Participant shall be available
for such an examination at any reasonable time. The determination of
such physician shall be conclusive evidence of the Disability or
non-Disability of the Participant and of the date any such Disability
began. If the Participant fails or refuses to cooperate in such
examination, the determination of the Participant's Disability or
non-Disability and the date any such Disability began shall be made by
the Administrator in its sole discretion.
2.7 EFFECTIVE DATE: The date which includes the "Effective Time" (as
that term is defined in the Merger Agreement).
2.8 OFFICER: Any person who is an employee of the Corporation and
either the President or an Executive Vice President, Senior Vice
President or Vice President of the Corporation or Proffitt's.
2.9 OPTION: The right to purchase one Share from Proffitt's for the
Option Price and upon the terms and conditions set forth in this Plan.
2.10 OPTIONHOLDER: The owner of an Option.
2.11 OPTION PRICE: With respect to an Option, the price determined
pursuant to Article 4 for which one Share may be purchased from
Proffitt's upon the exercise of such Option.
2.12 OPTION TRANSFEREE. With respect to a Participant, his spouse and
lineal descendants who have attained age 21 and a Qualified Trust, the
sole beneficiaries of which may not include anyone other than such
Participant, his spouse and lineal descendants.
2.13 PARISIAN OPTION: An option granted by the Corporation pursuant to
this Plan prior to this Third Amendment and Restatement which entitles
the holder thereof to purchase from the Corporation one share of the One
Cent ($0.01) par value common stock of the Corporation for the option
price and upon the terms and conditions of the Pre-Merger Plan.
2.14 PARTICIPANT: At any relevant time, an Officer or former Officer who
is a Participant pursuant to Article 3.
2.15 PARTICIPANT REPRESENTATIVES: The Corporation's Chief Executive
Officer, D. Warren Bailey and Steven B. Corenblum; provided, however,
that if either of said named individuals ceases to be a Participant,
Proffitt's shall give written notice of that fact to the other
Participants who shall elect another Participant to succeed said named
individual as a Participant Representative. Each Participant shall have
one vote in the election of such successor regardless of the number of
Options and Shares owned by such Participant. Any action required or
permitted to be taken by the Participant Representatives hereunder or
any consent, approval or notice required or permitted to be given by the
Participant Representatives hereunder shall be taken or given by a
majority of the Participant Representatives.
2.16 PLAN SHAREHOLDER: An owner of Shares.
2.17 PRE-MERGER PLAN: This Plan as in effect immediately prior to this
Third Amendment and Restatement.
2.18 PROFFITT'S: Proffitt's, Inc., a Tennessee corporation.
2.19 QUALIFIED EMPLOYEE: A person who, on April 8, 1996, was an Officer
of the Corporation.
2.20 QUALIFIED TRUST: A trust established pursuant to a written document
which has been approved in writing by the Corporation in its sole
discretion and which, by its terms:
(a) authorizes the trustee of such trust to:
(i) acquire, own and dispose of shares of stock and other
securities and options to purchase shares of stock and other
securities;
(ii) exercise any such options;
(iii) grant proxies to vote any securities owned by such trust;
and
(iv) enter into agreements with respect to such securities, the
term of which may extend beyond the term of such trust; and
(b) provides that Options and Shares held by the trustee of such trust
shall only be distributed to a beneficiary of such trust if such
beneficiary (i) is an Option Transferee of the grantor of such trust and
(ii) prior to such distribution, has agreed in writing, in form and
substance satisfactory to the Corporation, in its sole discretion, that
such beneficiary and the options and Shares distributed to him shall be
bound by the provisions of this Plan including, without limitation,
those of Articles 4 and 7 hereof;
(c) cannot be amended without the prior written approval of the
Corporation, which approval may be withheld by the Corporation in its
sole discretion;
(d) provides that any such amendment which is not so approved by the
Corporation shall be invalid; and
(e) contains such other terms and provisions as the Corporation, in its
sole discretion, shall determine to be appropriate.
2.21 RULE 144: Rule 144 under the Securities Act or any similar
provision then in force promulgated under the Securities Act.
2.22 SECURITIES ACT: The Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
2.23 SHARES: The shares of the Ten Cent ($0.10) par value common stock
of Proffitt's purchased from Proffitt's pursuant to the terms and
conditions set forth in this Plan and any shares of Stock received upon
the conversion of such shares but excluding any shares of Stock acquired
other than pursuant to this Plan.
2.24 STOCK: All classes of the preferred and common capital stock of
Proffitt's.
2.25 TRANSFEROR: With respect to an Option Transferee, the Participant
to whom the Options owned by such Option Transferee were originally
granted.
ARTICLE 3 - PARTICIPATION
3.1 PARTICIPATION. Any person who, on the Effective Date, was an
Officer or a former Officer of the Corporation and held any Parisian
Options shall be a Participant as of the Effective Date. An Officer who
is not a Participant on the Effective Date shall become a Participant if
and when Options are granted to him pursuant to Article 4.
3.2 TERMINATION OF PARTICIPATION. A Participant shall cease to be a
Participant on the date on which he exercises all Options then owned by
him.
ARTICLE 4 - CONVERSION AND GRANT OF OPTIONS
4.1 CONVERSION OF PARISIAN OPTIONS. Pursuant to Section 4.4 of the
Pre-Merger Plan, the Parisian Options are hereby converted into Options
in accordance with the provisions of this Section. As a result of said
conversion, the Parisian Options are hereby cancelled and the owner of
such Parisian Options shall have no further right to purchase from the
Corporation any of the shares of its capital stock but such owners shall
receive the number of Options determined pursuant to the provisions of
this Section.
(a) Number of Options. The Parisian Options held by each owner of
Parisian Options are hereby converted into a number of Options equal to
80% of the number of such Parisian Options; provided, however, that if
an owner of Parisian Options would receive a fractional Option, then, as
determined by the Participant Representatives in their sole discretion,
such owner shall receive the next lowest or next highest whole number of
Options; provided, further, however, that the total number of Options
received by all such owners shall equal 80% of the number of Parisian
Options held by them.
(b) Option Price. If the option price of the Parisian Option from
which an Option is hereby converted was $18.00, the Option Price of such
Option shall be $22.50. If the option price of the Option from which an
Option is converted was $20.40, the Option Price of such Option shall be
$25.50.
(c) Agreements. Upon its receipt of a certificate evidencing Parisian
Options, Proffitt's shall execute and deliver to the holder of such
Parisian Options an agreement evidencing his ownership of the Options
into which said Parisian Options have been converted and reflecting the
Option Prices of such Options.
4.2 FULL VESTING OF OPTIONS. All of the Options are and, unless and
until forfeited in accordance with the provisions of Article 5, shall
remain fully vested.
4.3 GRANT OF FORFEITED OPTIONS. In the event any Options are forfeited
pursuant to Article 5, then, on the third business day following its
receipt of written notice from a majority of the Participant
Representatives, Proffitt's shall grant to each Officer named in such
notice the number of such Options specified therein. The Option Price
of each Option granted pursuant to any such notice shall be:
(a) with respect to an Option granted to a Qualified Employee, $22.50;
and
(b) with respect to an Option granted to an Officer who is not a
Qualified Employee, $25.50.
4.4 GRANT OF OPTIONS TO PARTICIPANT REPRESENTATIVE. Notwithstanding
the foregoing provisions of this Section, the Corporation shall not
grant any of the Options referred to in a written notice described in
Section 4.3 to any Officer named in such notice unless:
(a) none of such Officers is a Participant Representative;
(b) the Corporation's Board approves Proffitt's grant of such Options
to such Officers prior to the date such Options are to be granted
pursuant to such notice; or
(c) pursuant to such notice, each Participant is to be granted his
pro-rata portion of such Options.
For purposes of this Section 4.4, a Participant's pro-rata portion of
such Options shall be a fraction, the numerator of which shall be the
number of Options and Shares owned by such Participant and his Permitted
Transferees, Transferees, Pledgees and Remote Transferees (as such terms
are defined in the Pre-Merger Plan) on the date of such notice and the
denominator of which shall be the number of Options and Shares owned by
all Participants on such date.
4.5 ADJUSTMENTS. If, at any time prior to the termination of this
Plan, there is an increase or decrease or other change in the shares of
Stock by reason of stock dividends (or payment of a dividend consisting
of money or other property to the extent the recipient thereof
immediately reinvests such dividend in Proffitt's and receives from
Proffitt's in exchange therefor additional shares of Stock), split-ups,
recapitalizations, combinations, conversions, exchanges of shares or the
like, then, as of the date of such increase, decrease or other change,
there shall be an equitable adjustment of the number and Option Prices
of the Options then owned by the Participants and Beneficiaries so as to
preserve the aggregate value of such Options determined as of such date.
4.6 EVIDENCE OF OPTIONS. All Options shall be evidenced by an
agreement reflecting the name of the owner of such Options and the
number and Option Price of such Options and bearing a conspicuous notice
of (a) the restrictions imposed by this Plan on the exercise and
transferability of such Options and the transferability of the Shares
purchased pursuant to such exercise and (b) such other matters relating
to the Options, the Shares and this Plan as the Administrator shall deem
appropriate.
4.7 RESTRICTIONS ON TRANSFER OF OPTIONS. Except as permitted by this
Section 4.7, no Optionholder may sell, transfer, assign, convey or
otherwise dispose of or alienate any of his options or any right or
interest therein (whether voluntarily, by operation of law, by gift or
otherwise) or enter into any contract or agreement or grant any option
with respect to the sale, transfer, assignment, conveyance or other
disposition of his Options or any right or interest therein. Any
purported transfer of Options in violation of this Section shall be void
and ineffective and shall not operate to transfer any interest in or
title to such options to the purported transferee and Proffitt's shall
not record any such purported transfer in its transfer records.
(a) Permitted Transfers Of Options By Participants. Upon ten (10) days
prior written notice to Proffitt's (or such lesser number of days as
Proffitt's may agree to in writing) , a Participant may sell, transfer
or assign all or any number of his Options to a transferee who (or
which) is an Option Transferee only if, prior to such transfer, such
transferee has agreed in writing, in form and substance satisfactory to
Proffitt's, in its sole discretion, that such transferee and the Options
transferred to him shall be bound by the provisions of this Plan
including, without limitation, those of this Article 4. Such notice
shall specify the name and address of the proposed transferee, the
relationship between the Participant and the proposed transferee which
establishes the proposed transferee as an Option Transferee of the
Participant and the number and Option Prices of the Options to be
transferred to such proposed transferee. Notwithstanding the foregoing
provisions of this Section, if Options are transferred to an Option
Transferee which is a Qualified Trust and the written document pursuant
to which such Qualified Trust was established is later amended without
the prior written approval of Proffitt's then, on the effective date of
such amendment, ownership of all Options then owned by such Qualified
Trust shall revert to its Transferor.
(b) Permitted Transfers Of Options By Other Optionholders. Upon ten
(10) days prior written notice to Proffitt's (or such lesser number of
days as Proffitt's may agree to in writing), an Optionholder other than
a Participant may sell, transfer or assign all or any number of his
Options to his Transferor if, prior to such transfer, such Transferor
has agreed in writing, in form and substance satisfactory to Proffitt's,
that such Transferor and the Options transferred to him shall be bound
by the provisions of this Plan including, without limitation, those of
this Article 4. Such notice shall specify the number and Option Prices
of the options to be transferred to such Transferor.
4.8 EFFECT OF TRANSFER OF OPTIONS. The provisions of this Section 4.8
shall apply in the event a Participant transfers Options to an Option
Transferee pursuant to Section 4.7.
(a) Forfeitures of Options. All of an Option Transferee's Options shall
be forfeited on the date any Options owned by his Transferor are or
would be forfeited pursuant to Article 5. On the date an Option
Transferee's Options are forfeited pursuant to this Section 4.8(a), the
rights of such Option Transferee shall be terminated and, thereafter,
such Options shall be granted to the Participants pursuant to the
provisions of Section 4.3.
(b) Exercise of Options. An Option Transferee shall be entitled to
exercise his Options at such times, in such manner, upon such terms and
subject to such conditions, limitations and restrictions as his
Transferor is or would be entitled to exercise any Options owned by such
Transferor.
(c) Beneficiaries. Upon an Option Transferee's receipt of any Options
pursuant to Section 4.7, the provisions of Article 9 (governing the
determination of a Participant's Beneficiary) shall apply to such Option
Transferee as if such Option Transferee was a Participant.
(d) Deemed Ownership of Options. Each Participant shall be deemed to
own all of the Options actually owned by his Option Transferees for the
purpose of determining:
(1) the number of Options to be granted to a Participant pursuant to
Section 4.4; and
(2) whether Proffitt's has obtained the consent of the Participants
required by Section 8.1.
ARTICLE 5 - FORFEITURE OF OPTIONS
5.1 EFFECT OF FORFEITURES. On the date any Options are forfeited
pursuant to the following provisions of this Article, the rights of the
Participant or Beneficiary then owning such Options shall be terminated
and, thereafter, such Options shall be granted to the Participants
pursuant to the provisions of Section 4.3.
5.2 FORFEITURES UPON TERMINATION FOR CERTAIN CAUSES. If a Participant's
employment with the Corporation is terminated by the Corporation on
account of the Participant's:
(a) proven dishonesty, theft, fraud or embezzlement;
(b) breach of any fiduciary duty or duty of loyalty to the Corporation;
(c) involvement or participation (whether direct or indirect) in any
business competitive with that of the Corporation or Proffitt's without
the Administrator's prior written consent;
(d) usurpation of any business opportunity of the Corporation or
Proffitt's without the Administrator's prior written consent;
(e) conviction of a felony or a crime involving moral turpitude; or
(f) divulgence to a party unrelated to the Corporation or Proffitt's of
any material non-public confidential information concerning the
Corporation or Proffitt's or their businesses or activities,
then, on the effective date of such termination, all Options then owned
by him or his Beneficiary shall be forfeited.
5.3 FORFEITURES FOR CERTAIN CAUSES AFTER TERMINATION. If, during the
120 day period following the effective date of the termination of a
Participant's employment with the Corporation, the Administrator shall
determine that, prior to the effective date of such termination, such
Participant engaged in any conduct described in Section 5.2, then, as of
the date of such determination, all Options then owned by him or his
Beneficiary shall be forfeited.
5.4 FORFEITURES AFTER FIFTEEN YEARS. If not previously forfeited
pursuant to the foregoing provisions of this Section, each Option shall
be forfeited on the fifteenth anniversary of the date on which the
Parisian Option from which such Option was converted pursuant to Section
4.1 became a "Vested Option" (as that term is defined in the Pre-Merger
Plan).
ARTICLE 6 - EXERCISE OF OPTIONS
6.1 RIGHT TO EXERCISE. Subject to Section 6.5, each Participant shall
be entitled to exercise any or all of his Options at any time.
6.2 METHOD OF EXERCISE. A Participant may elect to exercise his
Options only by written notice (the "Exercise Notice") to Proffitt's.
In order to be effective, such Exercise Notice must:
(a) specify the number and Option Prices of the Options to be
exercised;
(b) be received by Proffitt's prior to the date such Options are
forfeited;
(c) be accompanied by the certificate evidencing such Participant's
ownership of such Options;
(d) specify the date on which such Options are to be exercised which
shall not be earlier than the third business day following Proffitt's
receipt of such Exercise Notice; and
(e) specify whether such Participant shall exercise such Options (1) by
paying their aggregate Option Price pursuant to Section 6.3 or (2)
pursuant to the cashless exercise program referred to in Section 6.4.
6.3 PAYMENT FOR SHARES. If a Participant's Exercise Notice specifies
that such Participant shall exercise the Options which are the subject
of such Exercise Notice pursuant to this Section 6.3, then, on the date
determined pursuant to Section 6.2(d):
(a) the Participant shall deliver to Proffitt's:
(1) a certified or cashier's check, made payable to the order of
Proffitt's, in an amount equal to the aggregate Option Price of the
Options which are the subject of such Exercise Notice; and
(2) if the same shall be requested by Proffitt's in order for
Proffitt's issuance of Shares pursuant to the exercise of such
Options to satisfy one or more exemptions from the registration
requirements of the Securities Act, a certificate pursuant to which
such Participant shall (A) represent that he is exercising such
Options and acquiring the Shares issued upon such exercise for
investment purposes only for his own account and not with a view to
the distribution thereof and (B) acknowledge that such Shares have
not been registered under the Securities Act and may not be resold
or otherwise transferred in the absence of an effective
registration statement under the Securities Act or an opinion of
counsel satisfactory to the Corporation that such registration is
not required; and
(b) Proffitt's shall deliver to such Participant:
(1) a stock certificate evidencing his ownership of a number of
Shares equal to the number of such Options exercised pursuant to
such Exercise Notice and bearing a conspicuous notice of the
restrictions on the transferability of such Shares which may be
required by the applicable provisions of the Securities Act and
those which are imposed by Article 7; and
(2) to the extent necessary, a certificate evidencing his
ownership of any Options not exercised pursuant to such Exercise
Notice.
6.4 CASHLESS EXERCISE. If a Participant's Exercise Notice specifies
that such Participant shall exercise the Options which are the subject
of such Exercise Notice pursuant to this Section 6.4, then such
Participant shall exercise such Options in accordance with the
applicable provisions of the cashless exercise program then maintained
by Proffitt's in connection with any stock option plan then available to
employees of Proffitt's.
6.5 RESTRICTION ON EXERCISE OF OPTIONS. Notwithstanding anything to
the contrary contained herein, a Participant may not exercise any of his
Options unless entitled to do so pursuant to this Section.
(a) Registration. A Participant shall be entitled to exercise his
Options if, on the date of his Exercise Notice, the Shares to be issued
upon such exercise are the subject of an effective registration
statement under the Securities Act.
(b) Exemption. If, on the date of a Participant's Exercise Notice, the
Shares to be issued upon such exercise are not the subject of an
effective registration statement under the Securities Act, he shall be
entitled to exercise his Options only if an exemption from such
registration is available. For purposes of this Article, the
availability of such an exemption shall be determined in the manner set
forth in this Section 6.5(b).
(i) Upon request by such Participant, Proffitt's shall seek an
opinion of counsel of recognized standing in securities law as to
whether such an exemption is available. If, in the opinion of such
counsel, such an exemption is available, the Participant shall be
entitled to exercise such Options on such date, not later than the
tenth day following the date of such opinion, as Proffitt's and
such Participant shall agree.
(ii) If, in the opinion of such counsel, such an exemption is not
available, the Participant may seek an opinion of another counsel
of recognized standing in securities law (which counsel shall be
reasonably satisfactory to Proffitt's) as to whether such an
exemption is available. If, in the opinion of such other counsel
(the "Participant's Counsel"), such an exemption is not available,
the Participant shall not be entitled to exercise such Options
until the date the Shares to be issued upon such exercise are the
subject of an effective registration statement under the Securities
Act.
(iii) If, in the opinion of the Participant's Counsel, such an
exemption is available, then, promptly upon its receipt of such
opinion, Proffitt's shall:
(A) request the Participant Representatives to determine
whether or not Proffitt's should seek a no-action letter from
the Commission as to whether such an exemption is available;
and
(B) reimburse the Participant for the cost of obtaining such
opinion.
(iv) If a majority of the Participant Representatives determine
that Proffitt's should not seek such no-action letter, the
Participant shall be entitled to exercise such Options on such
date, not later than the tenth day following the date of such
determination, as Proffitt's and such Participant shall agree.
(v) If a majority of the Participant Representatives determine
that Proffitt's should seek such no-action letter, Proffitt's shall
use its reasonable good faith efforts to seek such no-action
letter.
(vi) If such no-action letter indicates that such an exemption is
not available, the Participant shall not be entitled to exercise
such Options until the date the Shares to be issued upon such
exercise are the subject of an effective registration statement
under the Securities Act.
(vii) If such no-action letter indicates that such an exemption
is available, the Participant shall exercise such Options on such
date, not later than the tenth day following the date of such
no-action letter, as Proffitt's and such Participant shall agree.
(c) Insider Trading. A Participant shall not be entitled to exercise
his Options in any manner or at any time which is prohibited by
Proffitt's insider trading policies then in effect.
ARTICLE 7 - TRANSFERS OF SHARES
7.1 REGISTRATION. As soon as reasonably practical following the
Effective Date but in no event later than the tenth (10th) day following
the Effective Date, Proffitt's shall take such action and file such
documents with the Commission as may be necessary to cause the Shares to
be the subject of an effective registration statement under the
Securities Act.
7.2 GENERAL RESTRICTIONS. No Plan Shareholder may sell, transfer,
assign, convey or otherwise dispose of or alienate any of his Shares or
any right, or interest therein (whether voluntarily, by operation of
law, by gift or otherwise) or enter into any contract or agreement or
grant any option with respect to the sale, transfer, assignment,
conveyance or other disposition of his Shares or any right or interest
therein, unless such sale, transfer, assignment, conveyance or other
disposition is:
(a) required or permitted by this Plan;
(b) made in accordance with Proffitt's insider trading policies then in
effect;
(c) made pursuant to (i) an effective registration statement under the
Securities Act or (ii) an exemption from registration under the
Securities Act; and
(d) made in compliance with applicable federal and state securities
laws;
provided, however, that if the Plan Shareholder is an "affiliate"
(within the meaning of the Securities Act) of Proffitt's or his Shares
were issued by Proffitt's pursuant to Section 6.5(b), he may not sell,
transfer, assign, convey or otherwise dispose of his Shares pursuant to
Section 7.1(b)(ii) prior to the tenth (10th) day following Proffitt's
receipt of an opinion of counsel (which opinion and counsel shall be
reasonably satisfactory to the corporation) or a no-action letter from
the Commission to the effect that such exemption is available.
Any purported transfer of Shares in violation of this Section shall be
void and ineffective and shall not operate to transfer any interest in
or title to such Shares to the purported transferee and Proffitt's shall
not record any such purported transfer in its transfer records.
7.3 PUBLIC SALES. A Plan Shareholder may sell all or any number of his
Shares on any date if:
(a) such sale is made pursuant to Rule 144 (provided that such transfer
complies with paragraph (f) of such Rule) or otherwise on a national
securities exchange or in the over-the-counter market; and
(b) on such date, such sale is permitted under Section 7.2.
ARTICLE 8 - AMENDMENT AND TERMINATION
8.1 REQUIRED CONSENT. This Plan cannot be amended or terminated
without the consent of a majority of the Participant Representatives who
are then Participants; provided, however, that if less than two
Participant Representatives are then Participants, Proffitt's may not
amend or terminate this Plan without the consent of the Participants who
own at least 66.67% of the number of Options and Shares then owned by
the Participants.
8.2 EFFECTIVE DATE. No amendment or termination of the Plan shall be
effective as of any date prior to the date on which Proffitt's obtains
the consent required by this Article.
8.3 RESTRICTIONS ON AMENDMENTS. Notwithstanding anything to the
contrary contained herein, no amendment to this Plan shall deprive any
Participant, Beneficiary or Plan Shareholder of any right or benefit
which had accrued prior to the effective date of such amendment.
Without limiting the generality of the foregoing, no such amendment
shall cause any Option to be forfeited, adversely affect the right of a
Participant or Beneficiary to exercise any Option or adversely affect
any Plan Shareholder's right to sell any Shares in accordance with the
provisions of Article 7.
8.4 EFFECT OF TERMINATION. In the event Proffitt's terminates this
Plan in accordance with the provisions of this Article:
(a) none of the Options forfeited pursuant to Article 5 after such
effective date shall be granted to any Participant pursuant to this
Plan; and
(b) the rights of the Participants, Beneficiaries and Plan Shareholders
hereunder (including, without limitation, their rights to exercise
Options pursuant to Article 6 and to sell Shares pursuant to Article 7)
shall survive such termination.
ARTICLE 9 - BENEFICIARIES
Upon becoming eligible to participate in this Plan, each Participant,
pursuant to a written instrument delivered to the Administrator, shall
designate a Beneficiary who shall own any Options owned by such
Participant at the time of his death and who shall be entitled to
exercise any of such Options. Such designation may be changed by the
Participant from time to time by written notice to the Administrator.
In the event a Participant does not designate a Beneficiary or a
Beneficiary designated by a Participant predeceases such Participant and
no new Beneficiary has been designated, then such Participant's
Beneficiary shall be his surviving spouse, if any, or if none, his
estate.
Upon a Beneficiary's receipt of any Options pursuant to this Article,
the provisions of this Article shall apply to such Beneficiary and such
Options as if such Beneficiary was a Participant.
ARTICLE 10 - ASSIGNABILITY
No Participant or Beneficiary shall alienate, sell, transfer, assign,
pledge or otherwise encumber any interest in this Plan or any Option
granted to him pursuant to this Plan without the prior written consent
of the Administrator. Any attempt by a Participant or Beneficiary to
alienate, sell, transfer, assign, pledge or encumber any such interest
or Option in contravention of this Article shall be ineffective.
ARTICLE 11 - ADMINISTRATION
11.1 ADMINISTRATOR. The Administrator shall be the Corporation's Board
or, as designated by it in writing, the Executive Committee or any other
committee of said Board.
11.2 ADMINISTRATION. The Administrator shall administer the Plan and
shall have all powers necessary or appropriate to enable it to carry out
its duties including, without limitation, the power to interpret the
Plan, to decide all issues arising under the Plan, to make, establish
and change rules and procedures with respect to the operation of the
Plan, and all other powers conferred upon it herein. The Administrator
shall have the authority to decide all questions relating to
eligibility, participation, vesting and forfeitures. The Administrator
may rely and act on any information provided by Proffitt's and the
Corporation without further inquiry or liability.
11.3 EXCULPATION AND INDEMNIFICATION. No Participant Representative,
officer of Proffitt's or Corporation or member of either Board shall be
responsible or liable for any mistake or error of judgment in connection
with their responsibilities, obligations or duties with respect to this
Plan. Proffitt's shall indemnify each Participant Representative,
officer of Proffitt's or the Corporation and member of either Board to
the full extent of any liabilities, expenses, penalties, damages or
other pecuniary loss, including attorney's fees, which he may suffer as
a result of his responsibilities, obligations or duties in connection
with this Plan. Such indemnification shall be paid by Proffitt's to the
extent that liability insurance is not available to cover the payment of
such items. Proffitt's may purchase and maintain such insurance on
behalf of such individuals.
11.4 REPORTS TO PARTICIPANTS. The Administrator shall, from time to
time in its sole discretion, but at least annually, notify each
Participant of the number and Option Prices of the Options then owned by
him and such other information as the Administrator, in its sole
discretion, deems to be reasonable under the circumstances. No
Participant other than a Participant Representative shall be entitled to
receive or review any information or data with regard to the number or
Option Prices of Options owned by any other Participant. Such
information shall only be disclosed to Participants to the extent the
Administrator deems it to be appropriate and in the best interest of
Proffitt's and the Corporation.
ARTICLE 12 - MISCELLANEOUS
12.1 NO RIGHT TO EMPLOYMENT. Nothing contained herein shall give any
Officer the right to be employed by Proffitt's or the Corporation, nor
shall this Plan interfere with the right of Proffitt's or the
Corporation to discharge any Officer at any time, to change the duties
of any Officer at any time or to change the title or position of any
Participant at any time.
12.2 GRANT OF OPTIONS TO OTHERS. If the Administrator shall determine
that Options are to be granted hereunder to any person who is incapable
or unable to care for his affairs due to minority or any other
incapacity, whether or not such incapacity has been judicially
determined, then, in the discretion of the Administrator, all or any
number of such Options may be granted to and, pursuant to the provisions
of this Plan, exercised by his spouse, a relative of such person, an
institution maintaining or having custody of such person or any person
deemed by the Administrator to be a proper party for such purpose.
Alternatively, the Administrator may, in its discretion, delay the grant
of such Options until a legal representative is appointed for such
person. Any grant of options made pursuant to this Section shall
constitute a complete discharge of the liabilities of the Administrator,
Proffitt's and the Corporation to such person hereunder.
12.3 SUBORDINATION OF RIGHTS. If, and only to the extent that, a
majority of the Participant Representatives and a majority of the
members of the Corporation's Board deem such subordination to be in
Proffitt's or the Corporation's best interests, the rights of each
Participant, Beneficiary and Plan Shareholder hereunder shall be
subordinate to the provisions of any loan agreement, note, bond,
indenture, debenture, capitalized lease or other evidence of Proffitt's
or the Corporation's indebtedness.
12.4 GOVERNING LAW. This Plan shall be construed according to the laws
of the State of Alabama.
12.5 NUMBER AND GENDER. Whenever the context so requires, the singular
number shall include the plural and the plural shall include the
singular and the gender of any pronoun shall include the other genders.
12.6 NOTICE. Any notice required or permitted to be given hereunder
shall be in writing and signed by the party making the same and shall
specify the Section hereof pursuant to which it is given. Any such
notice shall be deemed given (i) on the date delivered, if delivered in
person and (ii) on the fifth business day after mailing, if mailed. Any
such notice shall be mailed registered or certified first class mail,
return receipt requested (with postage and other fees prepaid) as
follows:
If to Proffitt's, to: Proffitt's, Inc.
115 North Calderwood
Alcoa, Tennessee 37701
Attention: Senior Vice President of
Investor Relations
If to the Corporation, to: Parisian, Inc.
750 Lakeshore Parkway
Birmingham, Alabama 35211
Attention: President
If to the Administrator, to: Parisian, Inc.
750 Lakeshore Parkway
Birmingham, Alabama 35211
ttention: Administrator, Parisian,
Inc. Stock Option Plan for Officers
and, if to a Participant, Beneficiary or Plan Shareholder, to such
Participant's, Beneficiary's or Plan Shareholder's last known residence
or office address appearing in the Corporation's employment or other
records. If any such notice is given to Proffitt's, the Corporation or
the Administrator, a copy thereof shall be given to:
(a) Donald E. Hess (or such other person who is then the President of
the Corporation) at the address of the Corporation set forth above; and
(b) D. Warren Bailey and Steven B. Corenblum at the address of the
Corporation set forth above (or if either of them ceases to be an
Officer, at his last known residence address); provided, however, that
if either of said individuals ceases to be a Participant, such notice
shall not be given to him but shall instead be given to the Participant
who succeeds him as a Participant Representative at the address of the
Corporation set forth above.
12.7 SEVERABILITY. The invalidity of this Plan with respect to one or
more persons shall not affect the rights and obligations of any other
person hereunder in any manner whatsoever. The invalidity of one or
more provisions of this Plan shall not affect the validity of any other
provision of this Plan in any manner whatsoever.
12.8 RIGHTS OF TRANSFEREES. Notwithstanding anything to the contrary
contained in this Plan:
(a) the rights of an Option Transferee with respect to all Options
owned by such Option Transferee shall be the same as those of the
Participant who first owned such Option determined as if such
Participant then owned such Option; and
(b) the rights of a Plan Shareholder who is not a Participant with
respect to a Share owned by such Plan Shareholder shall be the same as
those of the Participant who first owned such Share determined as if
such Participant then owned such Option.
IN WITNESS WHEREOF, Proffitt's and the Corporation have executed this
Third Amendment and Restatement on ______________, 1996.
PROFFITT'S, INC. PARISIAN, INC.
By:__________________________ By:_______________________
_____________,____________ Donald E. Hess, President
X:\WPDATA\JAS\PROFFITT\SECURITI\10-K.497\EX-10-44.ASC
FIRST AMENDMENT AND RESTATEMENT
OF
THE PARISIAN, INC.
MANAGEMENT INCENTIVE PLAN
TABLE OF CONTENTS
Article Page
1 - INTRODUCTION, PURPOSE AND INTENT . . . . . . . . . . . . . . . . 1
2 - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3 - PARTICIPATION. . . . . . . . . . . . . . . . . . . . . . . . . . 4
4 - CONVERSION AND GRANT OF OPTIONS. . . . . . . . . . . . . . . . . 4
5 - FORFEITURE OF OPTIONS. . . . . . . . . . . . . . . . . . . . . . 5
6 - EXERCISE OF OPTIONS. . . . . . . . . . . . . . . . . . . . . . . 6
7 - TRANSFERS OF SHARES. . . . . . . . . . . . . . . . . . . . . . . 9
8 - AMENDMENT AND TERMINATION. . . . . . . . . . . . . . . . . . . . 10
9 - BENEFICIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . 10
10 - ASSIGNABILITY . . . . . . . . . . . . . . . . . . . . . . . . . 11
11 - ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . 11
12 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 12
FIRST AMENDMENT AND RESTATEMENT
OF
THE PARISIAN, INC.
MANAGEMENT INCENTIVE PLAN
On July 2, 1990, Parisian, Inc., an Alabama corporation (the
"Corporation") adopted the Parisian, Inc. Management Incentive Plan (the
"Plan"). On April 8, 1996, the Corporation, having obtained the consent
of all of the Participant Representatives, amended the Plan.
Pursuant to an Agreement and Plan of Merger, dated July 8, 1996, among
Proffitt's, Inc., a Tennessee corporation ("Proffitt's"), the
Corporation and a wholly-owned subsidiary of Proffitt's (the "Merger
Agreement"), said subsidiary shall merge with and into the Corporation
on the date which includes the "Effective Time" (as that term is defined
in the Merger Agreement). As a result of said merger, the Corporation
shall become a wholly-owned subsidiary of Proffitt's.
Pursuant to Section 4.4 of the Plan as in effect immediately prior to
this First Amendment and Restatement (the "Pre-Merger Plan"), said
merger requires an equitable adjustment of the number and option prices
of the options granted by the Corporation pursuant to this Plan (the
"Parisian Options") so as to preserve their aggregate value. Pursuant
to Section 1.5 (d) of the Merger Agreement, Proffitt's is required to
assume the Pre-Merger Plan and the Corporation's obligations thereunder.
Proffitt's and the Corporation have determined that the Pre-Merger Plan
should be amended and restated to reflect the equitable adjustment of
number and option prices of the Parisian Options and that the same does
not deprive any Participant, Beneficiary or Plan Shareholder of any
right or benefit which has accrued under the Pre-Merger Plan as of the
Effective Date. Accordingly, in order to comply with Section 4.4 of the
Pre-Merger Plan and Section 1.5(d) of the Merger Agreement and having
obtained the written consent of all of the Participant Representatives,
Proffitt's and the Corporation, pursuant to the provisions of Article 8
of the Pre-Merger Plan, hereby amend and restate the Pre-Merger Plan
effective as of the Effective Date.
ARTICLE 1 - INTRODUCTION, PURPOSE AND INTENT
Proffitt's owns all of the issued and outstanding shares of the capital
stock of the Corporation. The Corporation owns and operates a chain of
specialty apparel department stores. In order to conduct and advance
its business effectively, the Corporation must attract and retain
qualified management personnel and provide them with meaningful
financial incentives. Accordingly, Proffitt's and the Corporation have
established this Plan to provide the Managers with long-range financial
incentives and shall maintain and administer this Plan for the exclusive
benefit of the Participants and their Beneficiaries.
ARTICLE 2 - DEFINITIONS
Unless otherwise provided herein, the following terms shall have the
following meanings:
2.1 ADMINISTRATOR: The party determined pursuant to Article 11.
2.2 BENEFICIARY. With respect to a Participant, the party who,
pursuant to Article 9, owns any Options owned by such Participant at the
time of his death.
2.3 BOARD: With respect to Proffitt's or the Corporation, as
applicable, its Board of Directors.
2.4 COMMISSION: The Securities and Exchange Commission.
2.5 CORPORATION: Parisian, Inc., an Alabama corporation.
2.6 DISABILITY: A Participant's physical or mental inability to
perform the normal duties of his employment by the Corporation which
continues for more than 180 consecutive days and which is not
attributable to chronic or excessive use of intoxicants, drugs or
narcotics, intentional self-inflicted injury or self-induced sickness or
any felonious act or enterprise on the part of the Participant. If
there is any disagreement between the Corporation and a Participant as
to the Participant's Disability or as to the date any such Disability
began, the same shall be determined by a physician to be selected by the
Administrator who shall make such determination after an examination of
the Participant by such physician. The Participant shall be available
for such an examination at any reasonable time. The determination of
such physician shall be conclusive evidence of the Disability or
non-Disability of the Participant and of the date any such Disability
began. If the Participant fails or refuses to cooperate in such
examination, the determination of the Participant's Disability or
non-Disability and the date any such Disability began shall be made by
the Administrator in its sole discretion.
2.7 EFFECTIVE DATE: The date which includes the "Effective Time" (as
that term is defined in the Merger Agreement).
2.8 MANAGER: An employee of the Corporation who:
(a) has been designated as a Manager in writing by the Corporation's
Board; and
(b) at the time of such designation, has never been an "Officer" as
that term is defined in the Senior Plan.
2.9 OPTION: The right to purchase one Share from Proffitt's for the
Option Price and upon the terms and conditions set forth in this Plan.
2.10 OPTIONHOLDER: The owner of an Option.
2.11 OPTION PRICE: With respect to an Option, the price determined
pursuant to Article 4 for which one Share may be purchased from
Proffitt's upon the exercise of such Option.
2.12 PARISIAN OPTION: An option granted by the Corporation pursuant to
this Plan prior to this First Amendment and Restatement which entitles
the holder thereof to purchase from the Corporation one share of the One
Cent ($0.01) par value common stock of the Corporation for the option
price and upon the terms and conditions of the Pre-Merger Plan.
2.13 PARTICIPANT: At any relevant time, a Manager or former Manager who
is a Participant pursuant to Article 3.
2.14 PARTICIPANT REPRESENTATIVES: The individual or individuals who are
the "Participant Representatives" as that term is defined in the Senior
Plan; provided, however, that if there are no such "Participant
Representatives", the Participant Representatives shall be the two
Participants who own the largest number of Options. Any action required
or permitted to be taken by the Participant Representatives hereunder or
any consent, approval or notice required or permitted to be given by the
Participant Representatives hereunder shall be taken or given by a
majority of the Participant Representatives.
2.15 PLAN SHAREHOLDER: An owner of Shares.
2.16 PRE-MERGER PLAN: This Plan as in effect immediately prior to this
Third Amendment and Restatement.
2.17 PROFFITT'S: Proffitt's, Inc., a Tennessee corporation.
2.18 RULE 144: Rule 144 under the Securities Act or any similar
provision then in force promulgated under the Securities Act.
2.19 SECURITIES ACT: The Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
2.20 SENIOR PLAN. The Parisian, Inc. Stock Option Plan for Officers.
2.21 SHARES: The shares of the Ten Cent ($0.10) par value common stock
of Proffitt's purchased from Proffitt's pursuant to the terms and
conditions set forth in this Plan and any shares of Stock received upon
the conversion of such shares but excluding any shares of Stock acquired
other than pursuant to this Plan.
2.22 STOCK: All classes of the preferred and common capital stock of
Proffitt's.
ARTICLE 3 - PARTICIPATION
3.1 PARTICIPATION. Any person who, on the Effective Date, was a
Manager or a former Manager of the Corporation and held any Parisian
Options shall be a Participant as of the Effective Date. A Manager who
is not a Participant on the Effective Date shall become a Participant if
and when Options are granted to him pursuant to Article 4.
3.2 TERMINATION OF PARTICIPATION. A Participant shall cease to be a
Participant on the date on which he exercises all Options then owned by
him.
ARTICLE 4 - CONVERSION AND GRANT OF OPTIONS
4.1 CONVERSION OF PARISIAN OPTIONS. Pursuant to Section 4.4 of the
Pre-Merger Plan, the Parisian Options are hereby converted into Options
in accordance with the provisions of this Section. As a result of said
conversion, the Parisian Options are hereby cancelled and the owner of
such Parisian Options shall have no further right to purchase from the
Corporation any of the shares of its capital stock but such owners shall
receive the number of Options determined pursuant to the provisions of
this Section.
(a) Number of Options. The Parisian Options held by each owner of
Parisian Options are hereby converted into a number of Options equal to
80% of the number of such Parisian Options; provided, however, that if
an owner of Parisian Options would receive a fractional Option, then, as
determined by the Participant Representatives in their sole discretion,
such owner shall receive the next lowest or next highest whole number of
Options; provided, further, however, that the total number of Options
received by all such owners shall equal 80% of the number of Parisian
Options held by them.
(b) Option Price. If the option price of the Parisian Option from
which an Option is hereby converted was $18.00, the Option Price of such
Option shall be $22.50. If the option price of the Parisian Option from
which an Option is converted was $20.40, the Option Price of such Option
shall be $25.50.
(c) Agreements. Upon its receipt of a certificate evidencing Parisian
Options, Proffitt's shall execute and deliver to the holder of such
Parisian Options an agreement evidencing his ownership of the Options
into which said Parisian Options have been converted and reflecting the
Option Prices of such Options.
4.2 FULL VESTING OF OPTIONS. All of the Options are and, unless and
until forfeited in accordance with the provisions of Article 5, shall
remain fully vested.
4.3 GRANT OF FORFEITED OPTIONS. In the event any Options are forfeited
pursuant to Article 5, then, on the third business day following its
receipt of written notice from a majority of the Participant
Representatives, Proffitt's shall grant to each Manager named in such
notice the number of such Options specified therein. The Option Price
of each Option granted pursuant to any such notice shall be $22.50.
4.4 ADJUSTMENTS. If, at any time prior to the termination of this
Plan, there is an increase or decrease or other change in the shares of
Stock by reason of stock dividends (or payment of a dividend consisting
of money or other property to the extent the recipient thereof
immediately reinvests such dividend in Proffitt's and receives from
Proffitt's in exchange therefor additional shares of Stock), split-ups,
recapitalizations, combinations, conversions, exchanges of shares or the
like, then, as of the date of such increase, decrease or other change,
there shall be an equitable adjustment of the number and Option Prices
of the Options then owned by the Participants and Beneficiaries so as to
preserve the aggregate value of such Options determined as of such date.
4.5 EVIDENCE OF OPTIONS. All Options shall be evidenced by an
agreement reflecting the name of the owner of such Options and the
number and Option Price of such Options and bearing a conspicuous notice
of (a) the restrictions imposed by this Plan on the exercise and
transferability of such Options and the transferability of the Shares
purchased pursuant to such exercise and (b) such other matters relating
to the Options, the Shares and this Plan as the Administrator shall deem
appropriate.
ARTICLE 5 - FORFEITURE OF OPTIONS
5.1 EFFECT OF FORFEITURES. On the date any Options are forfeited
pursuant to the following provisions of this Article, the rights of the
Participant or Beneficiary then owning such Options shall be terminated
and, thereafter, such Options shall be granted to the Participants
pursuant to the provisions of Section 4.3.
5.2 FORFEITURES UPON TERMINATION FOR CERTAIN CAUSES. If a Participant's
employment with the Corporation is terminated by the Corporation on
account of the Participant's:
(a) proven dishonesty, theft, fraud or embezzlement;
(b) breach of any fiduciary duty or duty of loyalty to the Corporation;
(c) involvement or participation (whether direct or indirect) in any
business competitive with that of the Corporation or Proffitt's without
the Administrator's prior written consent;
(d) usurpation of any business opportunity of the Corporation or
Proffitt's without the Administrator's prior written consent;
(e) conviction of a felony or a crime involving moral turpitude; or
(f) divulgence to a party unrelated to the Corporation or Proffitt's of
any material non-public confidential information concerning the
Corporation or Proffitt's or their businesses or activities,
then, on the effective date of such termination, all Options then owned
by him or his Beneficiary shall be forfeited.
5.3 FORFEITURES FOR CERTAIN CAUSES AFTER TERMINATION. If, during the
120 day period following the effective date of the termination of a
Participant's employment with the Corporation, the Administrator shall
determine that, prior to the effective date of such termination, such
Participant engaged in any conduct described in Section 5.2, then, as of
the date of such determination, all Options then owned by him or his
Beneficiary shall be forfeited.
5.4 FORFEITURES AFTER FIFTEEN YEARS. If not previously forfeited
pursuant to the foregoing provisions of this Section, each Option shall
be forfeited on the fifteenth anniversary of the date on which the
Parisian Option from which such Option was converted pursuant to Section
4.1 became a "Vested Option" (as that term is defined in the Pre-Merger
Plan).
ARTICLE 6 - EXERCISE OF OPTIONS
6.1 RIGHT TO EXERCISE. Subject to Section 6.5, each Participant shall
be entitled to exercise any or all of his Options at any time.
6.2 METHOD OF EXERCISE. A Participant may elect to exercise his
Options only by written notice (the "Exercise Notice") to Proffitt's.
In order to be effective, such Exercise Notice must:
(a) specify the number and Option Prices of the Options to be
exercised;
(b) be received by Proffitt's prior to the date such Options are
forfeited;
(c) be accompanied by the certificate evidencing such Participant's
ownership of such Options;
(d) specify the date on which such Options are to be exercised which
shall not be earlier than the third business day following Proffitt's
receipt of such Exercise Notice; and
(e) specify whether such Participant shall exercise such Options (1) by
paying their aggregate Option Price pursuant to Section 6.3 or (2)
pursuant to the cashless exercise program referred to in Section 6.4.
6.3 PAYMENT FOR SHARES. If a Participant's Exercise Notice specifies
that such Participant shall exercise the Options which are the subject
of such Exercise Notice pursuant to this Section 6.3, then, on the date
determined pursuant to Section 6.2(d):
(a) the Participant shall deliver to Proffitt's:
(1) a certified or cashier's check, made payable to the order of
Proffitt's, in an amount equal to the aggregate Option Price of the
Options which are the subject of such Exercise Notice; and
(2) if the same shall be requested by Proffitt's in order for
Proffitt's issuance of Shares pursuant to the exercise of such
Options to satisfy one or more exemptions from the registration
requirements of the Securities Act, a certificate pursuant to which
such Participant shall (A) represent that he is exercising such
Options and acquiring the Shares issued upon such exercise for
investment purposes only for his own account and not with a view to
the distribution thereof and (B) acknowledge that such Shares have
not been registered under the Securities Act and may not be resold
or otherwise transferred in the absence of an effective
registration statement under the Securities Act or an opinion of
counsel satisfactory to the Corporation that such registration is
not required; and
(b) Proffitt's shall deliver to such Participant:
(1) a stock certificate evidencing his ownership of a number of
Shares equal to the number of such Options exercised pursuant to
such Exercise Notice and bearing a conspicuous notice of the
restrictions on the transferability of such Shares which may be
required by the applicable provisions of the Securities Act and
those which are imposed by Article 7; and
(2) to the extent necessary, a certificate evidencing his
ownership of any Options not exercised pursuant to such Exercise
Notice.
6.4 CASHLESS EXERCISE. If a Participant's Exercise Notice specifies
that such Participant shall exercise the Options which are the subject
of such Exercise Notice pursuant to this Section 6.4, then such
Participant shall exercise such Options in accordance with the
applicable provisions of the cashless exercise program then maintained
by Proffitt's in connection with any stock option plan then available to
employees of Proffitt's.
6.5 RESTRICTION ON EXERCISE OF OPTIONS. Notwithstanding anything to
the contrary contained herein, a Participant may not exercise any of his
Options unless entitled to do so pursuant to this Section.
(a) Registration. A Participant shall be entitled to exercise his
Options if, on the date of his Exercise Notice, the Shares to be issued
upon such exercise are the subject of an effective registration
statement under the Securities Act.
(b) Exemption. If, on the date of a Participant's Exercise Notice, the
Shares to be issued upon such exercise are not the subject of an
effective registration statement under the Securities Act, he shall be
entitled to exercise his Options only if an exemption from such
registration is available. For purposes of this Article, the
availability of such an exemption shall be determined in the manner set
forth in this Section 6.5(b).
(i) Upon request by such Participant, Proffitt's shall seek an
opinion of counsel of recognized standing in securities law as to
whether such an exemption is available. If, in the opinion of such
counsel, such an exemption is available, the Participant shall be
entitled to exercise such Options on such date, not later than the
tenth day following the date of such opinion, as Proffitt's and
such Participant shall agree.
(ii) If, in the opinion of such counsel, such an exemption is not
available, the Participant may seek an opinion of another counsel
of recognized standing in securities law (which counsel shall be
reasonably satisfactory to Proffitt's) as to whether such an
exemption is available. If, in the opinion of such other counsel
(the "Participant's Counsel"), such an exemption is not available,
the Participant shall not be entitled to exercise such Options
until the date the Shares to be issued upon such exercise are the
subject of an effective registration statement under the Securities
Act.
(iii) If, in the opinion of the Participant's Counsel, such an
exemption is available, then, promptly upon its receipt of such
opinion, Proffitt's shall:
(A) request the Participant Representatives to determine
whether or not Proffitt's should seek a no-action letter from
the Commission as to whether such an exemption is available;
and
(B) reimburse the Participant for the cost of obtaining such
opinion.
(iv) If a majority of the Participant Representatives determine
that Proffitt's should not seek such no-action letter, the
Participant shall be entitled to exercise such Options on such
date, not later than the tenth day following the date of such
determination, as Proffitt's and such Participant shall agree.
(v) If a majority of the Participant Representatives determine
that Proffitt's should seek such no-action letter, Proffitt's shall
use its reasonable good faith efforts to seek such no-action
letter.
(vi) If such no-action letter indicates that such an exemption is
not available, the Participant shall not be entitled to exercise
such Options until the date the Shares to be issued upon such
exercise are the subject of an effective registration statement
under the Securities Act.
(vii) If such no-action letter indicates that such an exemption
is available, the Participant shall exercise such Options on such
date, not later than the tenth day following the date of such
no-action letter, as Proffitt's and such Participant shall agree.
(c) Insider Trading. A Participant shall not be entitled to exercise
his Options in any manner or at any time which is prohibited by
Proffitt's insider trading policies then in effect.
ARTICLE 7 - TRANSFERS OF SHARES
7.1 REGISTRATION. As soon as reasonably practical following the
Effective Date but in no event later than the tenth (10th) day following
the Effective Date, Proffitt's shall take such action and file such
documents with the Commission as may be necessary to cause the Shares to
be the subject of an effective registration statement under the
Securities Act.
7.2 GENERAL RESTRICTIONS. No Plan Shareholder may sell, transfer,
assign, convey or otherwise dispose of or alienate any of his Shares or
any right, or interest therein (whether voluntarily, by operation of
law, by gift or otherwise) or enter into any contract or agreement or
grant any option with respect to the sale, transfer, assignment,
conveyance or other disposition of his Shares or any right or interest
therein, unless such sale, transfer, assignment, conveyance or other
disposition is:
(a) required or permitted by this Plan;
(b) made in compliance with Proffitt's insider trading policies in
effect;
(c) made pursuant to (i) an effective registration statement under the
Securities Act or (ii) an exemption from registration under the
Securities Act; and
(d) made in compliance with applicable federal and state securities
laws;
provided, however, that if the Plan Shareholder is an "affiliate"
(within the meaning of the Securities Act) of Proffitt's or his Shares
were issued by Proffitt's pursuant to Section 6.5(b), he may not sell,
transfer, assign, convey or otherwise dispose of his Shares pursuant to
Section 7.2(b)(ii) prior to the tenth (10th) day following Proffitt's
receipt of an opinion of counsel (which opinion and counsel shall be
reasonably satisfactory to the corporation) or a no-action letter from
the Commission to the effect that such exemption is available.
Any purported transfer of Shares in violation of this Section shall be
void and ineffective and shall not operate to transfer any interest in
or title to such Shares to the purported transferee and Proffitt's shall
not record any such purported transfer in its transfer records.
7.3 PUBLIC SALES. A Plan Shareholder may sell all or any number of his
Shares on any date if:
(a) such sale is made pursuant to Rule 144 (provided that such transfer
complies with paragraph (f) of such Rule) or otherwise on a national
securities exchange or in the over-the-counter market; and
(b) on such date, such sale is permitted under Section 7.2.
ARTICLE 8 - AMENDMENT AND TERMINATION
8.1 REQUIRED CONSENT. This Plan cannot be amended or terminated
without the consent of a majority of the Participant Representatives.
8.2 EFFECTIVE DATE. No amendment or termination of the Plan shall be
effective as of any date prior to the date on which Proffitt's obtains
the consent required by this Article.
8.3 RESTRICTIONS ON AMENDMENTS. Notwithstanding anything to the
contrary contained herein, no amendment to this Plan shall deprive any
Participant, Beneficiary or Plan Shareholder of any right or benefit
which had accrued prior to the effective date of such amendment.
Without limiting the generality of the foregoing, no such amendment
shall cause any Option to be forfeited, adversely affect the right of a
Participant or Beneficiary to exercise any Option or adversely affect
any Plan Shareholder's right to sell any Shares in accordance with the
provisions of Article 7.
8.4 EFFECT OF TERMINATION. In the event Proffitt's terminates this
Plan in accordance with the provisions of this Article:
(a) none of the Options forfeited pursuant to Article 5 after such
effective date shall be granted to any Participant pursuant to this
Plan; and
(b) the rights of the Participants, Beneficiaries and Plan Shareholders
hereunder (including, without limitation, their rights to exercise
Options pursuant to Article 6 and to sell Shares pursuant to Article 7)
shall survive such termination.
ARTICLE 9 - BENEFICIARIES
Upon becoming eligible to participate in this Plan, each Participant,
pursuant to a written instrument delivered to the Administrator, shall
designate a Beneficiary who shall own any Options owned by such
Participant at the time of his death and who shall be entitled to
exercise any of such Options. Such designation may be changed by the
Participant from time to time by written notice to the Administrator.
In the event a Participant does not designate a Beneficiary or a
Beneficiary designated by a Participant predeceases such Participant and
no new Beneficiary has been designated, then such Participant's
Beneficiary shall be his surviving spouse, if any, or if none, his
estate.
Upon a Beneficiary's receipt of any Options pursuant to this Article,
the provisions of this Article shall apply to such Beneficiary and such
Options as if such Beneficiary was a Participant.
ARTICLE 10 - ASSIGNABILITY
No Participant or Beneficiary shall alienate, sell, transfer, assign,
pledge or otherwise encumber any interest in this Plan or any Option
granted to him pursuant to this Plan without the prior written consent
of the Administrator. Any attempt by a Participant or Beneficiary to
alienate, sell, transfer, assign, pledge or encumber any such interest
or Option in contravention of this Article shall be ineffective.
ARTICLE 11 - ADMINISTRATION
11.1 ADMINISTRATOR. The Administrator shall be the Corporation's Board
or, as designated by it in writing, the Executive Committee or any other
committee of said Board.
11.2 ADMINISTRATION. The Administrator shall administer the Plan and
shall have all powers necessary or appropriate to enable it to carry out
its duties including, without limitation, the power to interpret the
Plan, to decide all issues arising under the Plan, to make, establish
and change rules and procedures with respect to the operation of the
Plan, and all other powers conferred upon it herein. The Administrator
shall have the authority to decide all questions relating to
eligibility, participation, vesting and forfeitures. The Administrator
may rely and act on any information provided by Proffitt's and the
Corporation without further inquiry or liability.
11.3 EXCULPATION AND INDEMNIFICATION. No Participant Representative,
officer of Proffitt's or Corporation or member of either Board shall be
responsible or liable for any mistake or error of judgment in connection
with their responsibilities, obligations or duties with respect to this
Plan. Proffitt's shall indemnify each Participant Representative,
officer of Proffitt's or the Corporation and member of either Board to
the full extent of any liabilities, expenses, penalties, damages or
other pecuniary loss, including attorney's fees, which he may suffer as
a result of his responsibilities, obligations or duties in connection
with this Plan. Such indemnification shall be paid by Proffitt's to the
extent that liability insurance is not available to cover the payment of
such items. Proffitt's may purchase and maintain such insurance on
behalf of such individuals.
11.4 REPORTS TO PARTICIPANTS. The Administrator shall, from time to
time in its sole discretion, but at least annually, notify each
Participant of the number and Option Prices of the Options then owned by
him and such other information as the Administrator, in its sole
discretion, deems to be reasonable under the circumstances. No
Participant shall be entitled to receive or review any information or
data with regard to the number or Option Prices of Options owned by any
other Participant. Such information shall only be disclosed to
Participants to the extent the Administrator deems it to be appropriate
and in the best interest of Proffitt's and the Corporation.
ARTICLE 12 - MISCELLANEOUS
12.1 NO RIGHT TO EMPLOYMENT. Nothing contained herein shall give any
Manager the right to be employed by Proffitt's or the Corporation, nor
shall this Plan interfere with the right of Proffitt's or the
Corporation to discharge any Manager at any time, to change the duties
of any Manager at any time or to change the title or position of any
Participant at any time.
12.2 GRANT OF OPTIONS TO OTHERS. If the Administrator shall determine
that Options are to be granted hereunder to any person who is incapable
or unable to care for his affairs due to minority or any other
incapacity, whether or not such incapacity has been judicially
determined, then, in the discretion of the Administrator, all or any
number of such Options may be granted to and, pursuant to the provisions
of this Plan, exercised by his spouse, a relative of such person, an
institution maintaining or having custody of such person or any person
deemed by the Administrator to be a proper party for such purpose.
Alternatively, the Administrator may, in its discretion, delay the grant
of such Options until a legal representative is appointed for such
person. Any grant of options made pursuant to this Section shall
constitute a complete discharge of the liabilities of the Administrator,
Proffitt's and the Corporation to such person hereunder.
12.3 SUBORDINATION OF RIGHTS. If, and only to the extent that, a
majority of the Participant Representatives and a majority of the
members of the Corporation's Board deem such subordination to be in
Proffitt's or the Corporation's best interests, the rights of each
Participant, Beneficiary and Plan Shareholder hereunder shall be
subordinate to the provisions of any loan agreement, note, bond,
indenture, debenture, capitalized lease or other evidence of Proffitt's
or the Corporation's indebtedness.
12.4 GOVERNING LAW. This Plan shall be construed according to the laws
of the State of Alabama.
12.5 NUMBER AND GENDER. Whenever the context so requires, the singular
number shall include the plural and the plural shall include the
singular and the gender of any pronoun shall include the other genders.
12.6 NOTICE. Any notice required or permitted to be given hereunder
shall be in writing and signed by the party making the same and shall
specify the Section hereof pursuant to which it is given. Any such
notice shall be deemed given (i) on the date delivered, if delivered in
person and (ii) on the fifth business day after mailing, if mailed. Any
such notice shall be mailed registered or certified first class mail,
return receipt requested (with postage and other fees prepaid) as
follows:
If to Proffitt's, to: Proffitt's, Inc.
115 North Calderwood
Alcoa, Tennessee 37701
Attention: Senior V.P. of Investor
Relations
If to the Corporation, to: Parisian, Inc.
750 Lakeshore Parkway
Birmingham, Alabama 35211
Attention: President
If to the Administrator, to: Parisian, Inc.
750 Lakeshore Parkway
Birmingham, Alabama 35211
Attention: Administrator, Parisian,
Inc. Management Incentive Plan
and, if to a Participant, Beneficiary or Plan Shareholder, to such
Participant's, Beneficiary's or Plan Shareholder's last known residence
or office address appearing in the Corporation's employment or other
records. If any such notice is given to Proffitt's, the Corporation or
the Administrator, a copy thereof shall be given to:
(a) Donald E. Hess (or such other person who is then the President of
the Corporation) at the address of the Corporation set forth above; and
(b) D. Warren Bailey and Steven B. Corenblum at the address of the
Corporation set forth above (or if either of them ceases to be an
"Officer," as that term is defined in the Senior Plan, at his last known
residence address); provided, however, that if either of said
individuals ceases to be a Participant Representative, such notice shall
not be given to him but shall instead be given to the individual who
succeeds him as a Participant Representative at the address of the
Corporation set forth above.
12.7 SEVERABILITY. The invalidity of this Plan with respect to one or
more persons shall not affect the rights and obligations of any other
person hereunder in any manner whatsoever. The invalidity of one or
more provisions of this Plan shall not affect the validity of any other
provision of this Plan in any manner whatsoever.
IN WITNESS WHEREOF, Proffitt's and the Corporation have executed this
First Amendment and Restatement on ______________, 1996.
PROFFITT'S, INC. PARISIAN, INC.
By:_______________________ By:____________________________
___________,___________ Donald E. Hess, President
X:\WPDATA\JAS\PROFFITT\SECURITI\10-K.497\EX-10-45.ASC
AMENDMENT TO YOUNKERS, INC.
DEFERRED COMPENSATION AGREEMENT
It is agreed that the distribution provisions of each of
the Deferred Compensation Agreements between Younkers, Inc.
("Younkers") and W. Thomas Gould (the "Employee"), dated June 10,
1985, January 1, 1986, January 1, 1987, January 1, 1988 and
December 28, 1988, as amended effective September 30, 1991 (the
"1991 Amendment"), are hereby amended effective February 13, 1997,
as follows:
1. The first sentence of Paragraph 2 (a) of the 1991 Amendment is
amended to read in its entirety as follows:
(a) Following termination of the services of the
Employee with Proffitt's, Inc. ("Proffitt's") for any
reason (including but not limited to death, total and
limited disability, retirement and voluntary or involuntary
termination as an employee), Proffitt's shall distribute to
Employee or his beneficiary(ies), pursuant to paragraph (b)
below, shares of Proffitt's stock represented by the units
in said Stock Account, together with any assets credited to
the Cash Account (including interest).
2. Paragraph 2 (b) of the 1991 Amendment is amended to read in
its entirety as follows:
(b) Upon the first to occur of the Employee's
termination of employment, death or total and permanent
disability, all benefits payable hereunder (including
without limitation, all interest credits thereon) shall be
paid on the first business day in January of the year
immediately following such event.
IN WITNESS WHEREOF, the parties have executed this
Amendment on the date and year first above written.
PROFFITT'S, INC.
By: _____________________________
R. Brad Martin
Chairman of the Board of
Directors and Chief
Executive Officer
EXECUTIVE
____________________________
W. Thomas Gould
AMENDMENT TO EMPLOYMENT AGREEMENT
The Employment Agreement, dated as of October 22, 1995, by and
between PROFFITT'S, INC., a Tennessee Corporation (the "Company"), and
W. Thomas Gould (the "Executive"), is hereby amended, effective as of
February 13, 1997, by amending Section 3.2 of the Employment Agreement
as set forth below.
1. Section 3.2 of the Employment Agreement is deleted, and
replaced in its entirety as follows:
Section 3.2. Severance Amounts. If the Executive's employment
terminates for any reason, other than by the Company upon conviction of
the Executive of, or plea by the Executive of guilty or nolo contendere
to, a felony involving moral turpitude with respect to the business of
the Company, the Company shall, in addition to the payments under
Section 3.1, (a) continue to pay Executive (or his designated
beneficiary), through February [2], 2001, his base compensation
($750,000), payable at such intervals as such base compensation would
ordinarily be paid, (b) continue to allow the Executive (or his
designated beneficiary) to exercise his Option (and any subsequently
granted options) to purchase common stock of the Company pursuant to the
terms set forth in the LTIP (other than any provisions in the LTIP that
terminate the exercise period for the Option) until the first to occur
of (i) February [2], 2001 or (ii) the second anniversary of the
Executive's Date of Termination, (c) continue to provide, through
February [2], 2001, medical and life insurance coverage in accordance
with such Company's programs for similarly situated senior management
(and their dependents) as it may exist from time to time and
(d) continue to allow the Executive (or his designated beneficiary) to
exercise all outstanding stock options granted to Executive by Younkers,
Inc., and assumed by the Company, until the first to occur of (i) the
regularly scheduled expiration of the term of the stock option or
(ii) the first anniversary of the Executive's Date of Termination. If
the Executive's employment is terminated by his death, the Company shall
direct that all amounts described in Section 3.1 and this Section 3.2 be
paid to the Executive's designated beneficiaries, or to the executors,
administrators or other legal representatives of the Executive (in such
order of priority) as the Executive may have filed with the Company.
IN WITNESS WHEREOF, the parties have executed this Amendment
on the date and year first above written.
PROFFITT'S, INC.
By:____________________________
R. Brad Martin
Chairman of the Board of
Directors and Chief
Executive Officer
EXECUTIVE
____________________________
W. Thomas Gould
X:\WPDATA\JAS\PROFFITT\SECURITI\10-K.497\EX-10-58.ASC
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of
the 24th day of March 1997, by and between Proffitt's, Inc.
("Company"), and Frank E. Kulp ("Executive").
Company and Executive agree as follows:
1. Employment. Company hereby employs Executive as President
and Chief Executive Officer of its Herberger's Division or in such
other capacity with Company and its subsidiaries as Company's Board
of Directors shall designate.
2. Duties. During his employment, Executive shall devote
substantially all of his working time, energies, and skills to the
benefit of Company's business. Executive agrees to serve Company
diligently and to the best of his ability and to use his best
efforts to follow the policies and directions of Company's Board of
Directors.
3. Compensation. Executive's compensation and benefits under
this Agreement shall be as follows:
(a) Base Salary. Company shall pay Executive a base salary
("Base Salary") at a rate of no less than $290,000 per year.
Executive's Base Salary shall be paid in installments in accordance
with Company's normal payment schedule for its senior management.
All payments shall be subject to the deduction of payroll taxes and
similar assessments as required by law.
(b) Bonus. In addition to the Base Salary, Executive shall
be eligible, as long as he holds the position stated in paragraph
1, for a yearly cash bonus of up to 40% of Base Salary based upon
his performance in accordance withspecific annual objectives, set
in advance, all as approved by the Board of Directors.
(c) Incentive Compensation. Executive shall be and hereby is
granted a non-qualified option as of March 24, 1997, ("Option") to
purchase thirty thousand (30,000) shares of Company common stock at
an option price equal to the closing price of the stock on March
24, 1997, as reported in the Wall Street Journal. The Option is
granted pursuant to Company's 1994 Long-Term Incentive Plan ("1994
LTIP"), and shall be subject to the terms and conditions thereof.
The Option shall be exercisable on or after March 24, 1997, (the
"Grant Date") to the extent of 20% of the shares covered thereby;
exercisable to the extent of an additional 20% of the shares
covered thereby on and after the first anniversary of the Grant
Date; exercisable to the extent of an additional 20% of the shares
covered thereby on and after the second anniversary of the Grant
Date; exercisable to the extent of an additional 20% of the shares
covered thereby on an after the third anniversary of the Grant
Date; and exercisable to the extent of any remaining shares on and
after the fourth anniversary of the Grant Date; provided, however,
that no portion of the Option shall be exercisable any earlier than
six months from the Grant Date. The Option may be exercised (as
provided in the 1994 LTIP) up to ten (10) years from the Grant
Date. Any portion of the Option not exercised within said ten (10)
year period shall expire.
(d) Effect of Change of Control on Options. In the event of
a Change of Control (as defined in the Company's 1994 Long-Term
Incentive Plan), any Options granted to Executive prior to such
Change of Control shall immediately vest.
4. Insurance and Benefits. Company shall allow Executive to
participate in each employee benefit plan and to receive each
executive benefit that Company provides for senior executives at
the level of Executive's position.
5. Term. The term of this Agreement shall be for two years,
provided, however, that Company may terminate this Agreement at any
time upon thirty (30) days' prior written notice (at which time
this Agreement shall terminate except for Section 9, which shall
continue in effect as set forth in Section 9). In the event of
such termination by Company, Executive shall be entitled to receive
his Base Salary (at the rate in effect at the time of termination)
through the end of the term of this Agreement. Such Base Salary
shall be paid thereafter in regular payroll installments.
In addition, this Agreement shall terminate upon the death of
Executive, except as to: (a) Executive's estate's right to exercise
any unexercised stock options pursuant to Company's stock option
plan then in effect, (b) other entitlements under this contract
that expressly survive death, and (c) any rights which Executive's
estate or dependents may have under COBRA or any other federal or
state law or which are derived independent of this Agreement by
reason of his participation in any plan maintained by Company.
6. Termination by Company for Cause. (a) Company shall have
the right to terminate Executive's employment under this Agreement
for cause, in which event no salary or bonus shall be paid after
termination for cause. Termination for cause shall be effective
immediately upon notice sent or given to Executive. For purposes
of this Agreement, the term "cause" shall mean and be strictly
limited to: (i) conviction of Executive, after all applicable
rights of appeal have been exhausted or waived, for any crime that
materially discredits Company or is materially detrimental to the
reputation or goodwill of Company; (ii) commission of any material
act of fraud or dishonesty by Executive against Company or
commission of an immoral or unethical act that materially reflects
negatively on Company, provided that Executive shall first be
provided with written notice of the claim and with an opportunity
to contest said claim before the Board of Directors; or (iii)
Executive's material breach of his obligations under paragraph 2 of
the Agreement, as so determined by the Board of Directors.
(b) In the event that Executive's employment is terminated,
Executive agrees to resign as an officer and/or director of Company
(or any of its subsidiaries or affiliates), effective as of the
date of such termination, and Executive agrees to return to Company
upon such termination any of the following which contain
confidential information: all documents, instruments, papers,
facsimiles, and computerized information which are the property of
Company or such subsidiary or affiliate.
7. Change in Control. If Executive's employment is
terminated primarily as a result of a Change in Control of Company
or a Potential Change in Control of Company, as defined below,
Executive shall receive his Base Salary then in effect for a period
of two years or through the end of the term of this Agreement,
whichever is longer.
As used herein, the term "Change in Control" means the
happening of any of the following:
(a) Any person or entity, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended, other than Company, a subsidiary of Company, or any
employee benefit plan of Company or its subsidiaries, becomes the
beneficial owner of Company's securities having 25 percent or more
of the combined voting power of the then
outstanding securities of Company that may be cast for the election
for directors of Company (other than as a result of an issuance of
securities initiated by Company in the ordinary course of
business); or
(b) As the result of, or in connection with, any cash tender
or exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the foregoing
transactions, less than a majority of the combined voting power of
the then outstanding securities of Company or any successor
corporation or entity entitled to vote generally in the election of
directors of Company or such other corporation or entity after such
transaction, are held in the aggregate by holders of Company's
securities entitled to vote generally in the election of directors
of Company immediately prior to such transactions; or
(c) During any period of two consecutive years, individuals
who at the beginning of any such period constitute the Board of
Directors of Company cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for
election by Company's stockholders, of each director of Company
first elected during such period was approved by a vote of at least
two-thirds of the directors of Company then still in office who
were directors of Company at the beginning of any such period.
As used herein, the term "Potential Change in Control" means
the happening of any of the following:
(a) The approval by stockholders of an agreement by Company,
the consummation of which would result in a Change of Control of
Company; or
(b) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than Company, a
wholly-owned subsidiary thereof or any employee benefit plan of
Company or its subsidiaries (including any trustee of such plan
acting as trustee)) of securities of Company representing 5 percent
or more of the combined voting power of Company's outstanding
securities and the adoption by the Board of Directors of Company of
a resolution to the effect that a Potential Change in Control of
Company has occurred for purposes of this Agreement.
8. Disability. If Executive becomes disabled at any time
during the term of this Agreement, he shall after he becomes
disabled continue to receive all payments and benefits provided
under the terms of this Agreement for a period of twelve
consecutive months, or for the remaining term of this Agreement,
whichever period is longer. For purposes of this Agreement, the
term "disabled" shall mean the inability of Executive (as the
result of a physical or mental condition) to perform the duties of
his position under this Agreement with reasonable accommodation and
which inability is reasonably expected to last at least one (1)
full year.
9. Non-competition; Unauthorized Disclosure.
(a) Non-competition. During the period Executive is
employed under this Agreement, and for a period of one year
thereafter, Executive:
(i) shall not engage in any activities, whether as
employer, proprietor, partner, stockholder (other than the holder
of less than 5% of the stock of a corporation the securities of
which are traded on a national securities exchange or in the
over-the-counter market), director, officer, employee or otherwise,
in competition with (i) the businesses conducted at the date hereof
by Company or any subsidiary or affiliate, or (ii) any business in
which Company or any subsidiary or affiliate is substantially
engaged at any time during the employment period;
(ii) shall not do business with any vendor that is one of
the top 100 vendors of the businesses conducted by Company or its
affiliates at the date hereof or at any time during the term of
this Agreement; and
(iii) shall not induce or attempt to persuade any
employee of Company or any of its divisions, subsidiaries or then
present affiliates to terminate his or her employment relationship
in order to enter into competitive employment.
(b) Unauthorized Disclosure. During the period Executive is
employed under this Agreement, and for a further period of one year
thereafter, Executive shall not, except as required by any court or
administrative agency, without the written consent of the Board of
Directors, or a person authorized thereby, disclose to any person,
other than an employee of Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the
performance by Executive of his duties as an executive for Company,
any confidential information obtained by him while in the employ of
Company; provided, however, that confidential information shall not
include any information now known or which becomes known generally
to the public (other than as a result of unauthorized disclosure by
Executive).
(c) Scope of Covenants; Remedies. The following provisions
shall apply to the covenants of Executive contained in this Section
9:
(i) the covenants contained in paragraph (i) and (ii) of
Section 9(a) shall apply within all the territories in which
Company or its affiliates or subsidiaries are actively engaged in
the conduct of business while Executive is employed under this
Agreement, including, without limitation, the territories in which
customers are then being solicited;
(ii) without limiting the right of Company to pursue all
other legal and equitable remedies available for violation by
Executive of the covenants contained in this Section 9, it is
expressly agreed by Executive and Company that such other remedies
cannot fully compensate Company for any such violation and that
Company shall be entitled to injunctive relief to prevent any such
violation or any continuing violation thereof; provided, however,
Company shall be entitled to injunctive relief only to protect
itself from unfair competition of the type protected under
Tennessee law.
(iii) each party intends and agrees that if, in any
action before any court or agency legally empowered to enforce the
covenants contained in this Section 9, any term, restriction,
covenant or promise contained therein is found to be unreasonable
and accordingly unenforceable, then such term, restriction,
covenant or promise shall be deemed modified to the extent
necessary to make it enforceable by such court or agency; and
(iv) the covenants contained in this Section 9 shall
survive the conclusion of Executive's employment by Company.
10. General Provisions.
(a) Notices. Any notice to be given hereunder by either
party to the other may be effected by personal delivery, in writing
or by mail, registered or certified, postage prepaid with return
receipt requested. Mailed notices shall be addressed to the
parties at the addresses set forth below, but each party may change
his or its address by written notice in accordance with this
Section 10 (a). Notices shall be deemed communicated as of the
actual receipt or refusal of receipt.
If to Executive: Frank E. Kulp
G.R. Herberger's, Inc.
518 Mall Germain
St. Cloud, MN 56302
If to Company: Brian J. Martin
Proffitt's, Inc.
Post Office Box 9388
Alcoa, TN 37701
(b) Partial Invalidity. If any provision in this Agreement
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall, nevertheless,
continue in full force and without being impaired or invalidated in
any way.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Tennessee.
(d) Entire Agreement. Except for any prior grants of
options, restricted stock, or other forms of incentive compensation
evidenced by a written instrument or by an action of the Board or
Directors, this Agreement supersedes any and all other agreements,
either oral or in writing, between the parties hereto with respect
to employment of Executive by Company and contains all of the
covenants and agreements between the parties with respect to such
employment. Each party to this Agreement acknowledges that no
representations, inducements or agreements, oral or otherwise, that
have not been embodied herein, and no other agreement, statement or
promise not contained in this Agreement, shall be valid or binding.
Any modification of this Agreement will be effective only if it is
in writing signed by the party to be charged.
(e) No Conflicting Agreement. By signing this Agreement,
Executive warrants that he is not a party to any restrictive
covenant, agreement or contract which limits the performance of his
duties and responsibilities under this Agreement or under which
such performance would constitute a breach.
(f) Headings. The Section, paragraph, and subparagraph
headings are for convenience or reference only and shall not define
or limit the provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
PROFFITT'S, INC.
BY: _____________________
Brian J. Martin
Senior Vice President
_____________________
Frank E. Kulp
Executive
X:\WPDATA\JAS\PROFFITT\SECURITI\10-K.497\EX-10-71.ASC
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of the
1st day of April 1997, by and between Proffitt's, Inc. ("Company"), and
Donald E. Wright ("Executive"), with Executive being directly employed
by Company's subsidiary, McRae's, Inc.
Company and Executive agree as follows:
1. Employment. Company hereby employs Executive as Senior Vice
President of Finance and Accounting or in such other capacity with
Company and its subsidiaries as Company's Board of Directors shall
designate.
2. Duties. During his employment, Executive shall devote
substantially all of his working time, energies, and skills to the
benefit of Company's business. Executive agrees to serve Company
diligently and to the best of his ability and to use his best efforts to
follow the policies and directions of Company's Board of Directors.
3. Executive's compensation and benefits under this Agreement
shall be as follows:
(a) Base Salary. Company shall pay Executive a base salary
("Base Salary") at a rate of no less than $250,000 per year.
Executive's Base Salary shall be paid in installments in accordance with
Company's normal payment schedule for its senior management. All
payments shall be subject to the deduction of payroll taxes and similar
assessments as required by law.
(b) Initial Stock Award. As soon as practicable after April
1, 1997, Company shall issue Executive 2,500 shares of Company stock as
an initial bonus; provided, however, Executive may cause Company to
withhold some shares of the Company stock to satisfy Executive's and
Company's tax-withholding obligations.
(c) Bonus. In addition to the Base Salary, Executive shall
be eligible, as long as he holds the position stated in paragraph 1, for
a yearly cash bonus of up to 50% of Base Salary based upon his
performance in accordance with specific annual objectives, set in
advance, all as approved by the Board of Directors.
(d) Incentive Compensation. Executive shall be and hereby is
granted a non-qualified option as of April 1, 1997, ("Option") to
purchase thirty-five thousand (35,000) shares of Company common stock at
an option price equal to the closing price of the stock on April 1,
1997, as reported in the Wall Street Journal. The Option is granted
pursuant to Company's 1994 Long-Term Incentive Plan ("1994 LTIP"), and
shall be subject to the terms and conditions thereof. The Option shall
be exercisable on or after April 1, 1997, (the "Grant Date") to the
extent of 20% of the shares covered thereby; exercisable to the extent
of an additional 20% of the shares covered thereby on and after the
first anniversary of the Grant Date; exercisable to the extent of an
additional 20% of the shares covered thereby on and after the second
anniversary of the Grant Date; exercisable to the extent of an
additional 20% of the shares covered thereby on an after the third
anniversary of the Grant Date; and exercisable to the extent of any
remaining shares on and after the fourth anniversary of the Grant Date;
provided, however, that no portion of the Option shall be exercisable
any earlier than six months from the Grant Date. The Option may be
exercised (as provided in the 1994 LTIP) up to ten (10) years from the
Grant Date. Any portion of the Option not exercised within said ten
(10) year period shall expire.
(e) Effect of Change of Control on Options. In the event of
a Change of Control (as defined in the Company's 1994 Long-Term
Incentive Plan), any Options granted to Executive prior to such Change
of Control shall immediately vest.
(f) Additional Stock Compensation. As compensation for his
services, Company shall issue 2,500 shares of Company stock to Executive
as soon as practicable after each of the first three anniversary dates
of Executive's first date of employment with Company (for a total of
7,500 shares), provided that Executive remains employed by Company on
such dates. In the event that Executive's employment is terminated by
Company, 7,500 shares of stock, less any amounts already awarded under
this Section 3(f), shall be awarded to Executive as soon as practicable
after termination.
4. Insurance and Benefits. Company shall allow Executive to
participate in each employee benefit plan and to receive each executive
benefit that Company provides for senior executives at the level of
Executive's position, including the revised relocation package agreed to
by Executive and Company.
5. Term. The term of this Agreement shall be for three years,
provided, however, that Company may terminate this Agreement at any time
upon thirty (30) days' prior written notice (at which time this
Agreement shall terminate except for Section 9, which shall continue in
effect as set forth in Section 9). In the event of such termination by
Company, Executive shall be entitled to receive his Base Salary (at the
rate in effect at the time of termination) through the end of the term
of this Agreement. Such Base Salary shall be paid thereafter in regular
payroll installments.
In addition, this Agreement shall terminate upon the death of
Executive, except as to: (a) Executive's estate's right to exercise any
unexercised stock options pursuant to Company's stock option plan then
in effect, (b) other entitlements under this contract that expressly
survive death, and (c) any rights which Executive's estate or dependents
may have under COBRA or any other federal or state law or which are
derived independent of this Agreement by reason of his participation in
any plan maintained by Company.
6. Termination by Company for Cause. (a) Company shall have the
right to terminate Executive's employment under this Agreement for
cause, in which event no salary or bonus shall be paid after termination
for cause. Termination for cause shall be effective immediately upon
notice sent or given to Executive. For purposes of this Agreement, the
term "cause" shall mean and be strictly limited to: (i) conviction of
Executive, after all applicable rights of appeal have been exhausted or
waived, for any crime that materially discredits Company or is
materially detrimental to the reputation or goodwill of Company; (ii)
commission of any material act of fraud or dishonesty by Executive
against Company or commission of an immoral or unethical act that
materially reflects negatively on Company, provided that Executive shall
first be provided with written notice of the claim and with an
opportunity to contest said claim before the Board of Directors; or
(iii) Executive's material breach of his obligations under paragraph 2
of the Agreement, as so determined by the Board of Directors.
(b) In the event that Executive's employment is terminated,
Executive agrees to resign as an officer and/or director of Company (or
any of its subsidiaries or affiliates), effective as of the date of such
termination, and Executive agrees to return to Company upon such
termination any of the following which contain confidential information:
all documents, instruments, papers, facsimiles, and computerized
information which are the property of Company or such subsidiary or
affiliate.
7. Change in Control. If Executive's employment is terminated
primarily as a result of a Change in Control of Company or a Potential
Change in Control of Company, as defined below, Executive shall receive
his Base Salary (in accordance with the schedule in Section 3(a)) for a
period of three years or through the end of the term of this Agreement,
whichever is longer. In addition, in the event of a Change in Control
or a Potential Change in Control of Company, Executive may terminate
this Agreement for "cause" and be entitled to receive his Base Salary
for a period of three years or through the end of the term of this
Agreement, whichever is longer. The term "cause" for this purpose shall
be strictly limited to the following two circumstances: (a) Company has
required Executive to relocate from the greater Birmingham, Alabama area
or (b) Company has materially reduced Executive's responsibilities so
that a reasonable person would view the changes as a material demotion.
As used herein, the term "Change in Control" means the happening of
any of the following:
(a) Any person or entity, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
other than Company, a subsidiary of Company, or any employee benefit
plan of Company or its subsidiaries, becomes the beneficial owner of
Company's securities having 25 percent or more of the combined voting
power of the then outstanding securities of Company that may be cast for
the election for directors of Company (other than as a result of an
issuance of securities initiated by Company in the ordinary course of
business); or
(b) As the result of, or in connection with, any cash tender
or exchange offer, merger or other business combination, sale of assets
or contested election, or any combination of the foregoing transactions,
less than a majority of the combined voting power of the then
outstanding securities of Company or any successor corporation or entity
entitled to vote generally in the election of directors of Company or
such other corporation or entity after such transaction, are held in the
aggregate by holders of Company's securities entitled to vote generally
in the election of directors of Company immediately prior to such
transactions; or
(c) any period of two consecutive years, individuals who at
the beginning of any such period constitute the Board of Directors of
Company cease for any reason to constitute at least a majority thereof,
unless the election, or the nomination for election by Company's
stockholders, of each director of Company first elected during such
period was approved by a vote of at least two-thirds of the directors of
Company then still in office who were directors of Company at the
beginning of any such period.
As used herein, the term "Potential Change in Control" means the
happening of any of the following:
(a) The approval by stockholders of an agreement by Company,
the consummation of which would result in a Change of Control of
Company; or
(b) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than Company, a
wholly-owned subsidiary thereof or any employee benefit plan of Company
or its subsidiaries (including any trustee of such plan acting as
trustee)) of securities of Company representing 5 percent or more of the
combined voting power of Company's outstanding securities and the
adoption by the Board of Directors of Company of a resolution to the
effect that a Potential Change in Control of Company has occurred for
purposes of this Agreement.
8. Disability. If Executive becomes disabled at any time during
the term of this Agreement, he shall after he becomes disabled continue
to receive all payments and benefits provided under the terms of this
Agreement for a period of twelve consecutive months, or for the
remaining term of this Agreement, whichever period is longer. For
purposes of this Agreement, the term "disabled" shall mean the inability
of Executive (as the result of a physical or mental condition) to
perform the duties of his position under this Agreement with reasonable
accommodation and which inability is reasonably expected to last at
least one (1) full year.
9. Non-competition; Unauthorized Disclosure.
(a) Non-competition. During the period Executive is employed
under this Agreement, and for a period of one year thereafter,
Executive:
(i) shall not engage in any activities, whether as
employer, proprietor, partner, stockholder (other than the holder of
less than 5% of the stock of a corporation the securities of which are
traded on a national securities exchange or in the over-the-counter
market), director, officer, employee or otherwise, in competition with
(i) the businesses conducted at the date hereof by Company or any
subsidiary or affiliate, or (ii) any business in which Company or any
subsidiary or affiliate is substantially engaged at any time during the
employment period;
(ii) shall not do business with any vendor that is one of
the top 100 vendors of the businesses conducted by Company at the date
hereof or of any business in which Company is substantially engaged at
any time during the term of this Agreement; and
(iii) shall not induce or attempt to persuade any
employee of Company or any of its divisions, subsidiaries or then
present affiliates to terminate his or her employment relationship in
order to enter into competitive employment.
(b) Unauthorized Disclosure. During the period Executive is
employed under this Agreement, and for a further period of one year
thereafter, Executive shall not, except as required by any court or
administrative agency, without the written consent of the Board of
Directors, or a person authorized thereby, disclose to any person, other
than an employee of Company or a person to whom disclosure is reasonably
necessary or appropriate in connection with the performance by Executive
of his duties as an executive for Company, any confidential information
obtained by him while in the employ of Company; provided, however, that
confidential information shall not include any information now known or
which becomes known generally to the public (other than as a result of
unauthorized disclosure by Executive).
(c) Scope of Covenants; Remedies. The following provisions
shall apply to the covenants of Executive contained in this Section 9:
(i) the covenants contained in paragraph (i) and (ii) of
Section 9(a) shall apply within all the territories in which Company is
actively engaged in the conduct of business while Executive is employed
under this Agreement, including, without limitation, the territories in
which customers are then being solicited;
(ii) without limiting the right of Company to pursue all
other legal and equitable remedies available for violation by Executive
of the covenants contained in this Section 9, it is expressly agreed by
Executive and Company that such other remedies cannot fully compensate
Company for any such violation and that Company shall be entitled to
injunctive relief to prevent any such violation or any continuing
violation thereof; provided, however, Company shall be entitled to an
injunction only to prevent the type of unfair competition protected by
Tennessee law.
(iii) each party intends and agrees that if, in any
action before any court or agency legally empowered to enforce the
covenants contained in this Section 9, any term, restriction, covenant
or promise contained therein is found to be unreasonable and accordingly
unenforceable, then such term, restriction, covenant or promise shall be
deemed modified to the extent necessary to make it enforceable by such
court or agency; and
(iv) the covenants contained in this Section 9 shall
survive the conclusion of Executive's employment by Company.
10. General Provisions.
(a) Notices. Any notice to be given hereunder by either
party to the other may be effected by personal delivery, in writing or
by mail, registered or certified, postage prepaid with return receipt
requested. Mailed notices shall be addressed to the parties at the
addresses set forth below, but each party may change his or its address
by written notice in accordance with this Section 10 (a). Notices shall
be deemed communicated as of the actual receipt or refusal of receipt.
If to Executive: Donald E. Wright
Proffitt's, Inc.
750 Lakeshore Parkway
Birmingham, AL 35211
If to Company: Brian J. Martin
Proffitt's, Inc.
Post Office Box 9388
Alcoa, TN 37701
(b) Partial Invalidity. If any provision in this Agreement
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall, nevertheless, continue in
full force and without being impaired or invalidated in any way.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Tennessee.
(d) Entire Agreement. Except for any prior grants of
options, restricted stock, or other forms of incentive compensation
evidenced by a written instrument or by an action of the Board or
Directors, this Agreement supersedes any and all other agreements,
either oral or in writing, between the parties hereto with respect to
employment of Executive by Company and contains all of the covenants and
agreements between the parties with respect to such employment. Each
party to this Agreement acknowledges that no representations,
inducements or agreements, oral or otherwise, that have not been
embodied herein, and no other agreement, statement or promise not
contained in this Agreement, shall be valid or binding. Any
modification of this Agreement will be effective only if it is in
writing signed by the party to be charged.
(e) No Conflicting Agreement. By signing this Agreement,
Executive warrants that he is not a party to any restrictive covenant,
agreement or contract which limits the performance of his duties and
responsibilities under this Agreement or under which such performance
would constitute a breach.
(f) Headings. The Section, paragraph, and subparagraph
headings are for convenience or reference only and shall not define or
limit the provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
PROFFITT'S, INC.
MCRAE'S, INC.
BY: _____________________
Brian J. Martin
Senior Vice President
_____________________
Donald E. Wright
Executive
X:\WPDATA\JAS\PROFFITT\SECURITI\10-K.497\EX-10-72.ASC
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of the
3rd day of April 1997, by and between Parisian, Inc. ("Company"), a
wholly owned subsidiary of Proffitt's, Inc., and William D. Cappiello
("Executive").
Company and Executive agree as follows:
1. Employment. Company hereby employs Executive as President
and Chief Executive Officer of Company, reporting to the President of
the Proffitt's Merchandising Group, or in such other position mutually
agreeable by Executive, Company and Proffitt's. Executive shall also
be elected to Company's Board of Directors.
2. Duties. During his employment, Executive shall devote
substantially all of his working time, energies, and skills to the
benefit of Company's business. Executive agrees to serve Company
diligently and to the best of his ability and to use his best efforts
to follow the policies and directions of Company's and Proffitt's
Boards of Directors. Executive shall be based at the Parisian home
office in Birmingham, Alabama, and shall be required to travel
temporarily from time to time on Company business. Executive's duties
shall be consistent with the duties of a chief executive officer of a
company of a comparable size to Parisian.
3. Compensation. Executive's compensation and benefits under
this Agreement shall be as follows:
(a) Base Salary. Company shall pay Executive a base salary
("Base Salary") at a rate of no less than $450,000 per year; provided,
however, Executive's Base Salary shall be increased by at least 10%
annually (over the then existing Base Salary) during the term of this
Agreement. Executive's Base Salary shall be paid in installments in
accordance with Company's normal payment schedule for its senior
management. All payments shall be subject to the deduction of payroll
taxes and similar assessments as required by law.
(b) Bonus. In addition to the Base Salary, Executive shall
be eligible for a yearly cash bonus of up to 50% of the Base Salary
then in effect, based upon his performance in accordance with specific
annual objectives, set in advance, all as approved by Proffitt's Board
of Directors. Executive shall be guaranteed a minimum bonus for his
fiscal year 1997 performance in the amount of $100,000.
(c) Initial Bonus. Company shall pay Executive $175,000 on
his first date of employment, and shall cause Proffitt's to issue
Executive 10,000 shares of unrestricted common stock as soon as
practicable, but in no event later than 30 days after Executive's
first day of employment with the Company.
(d) Incentive Compensation. Executive shall be and hereby
is granted a non-qualified option as of his first date of employment
("Option") to purchase seventy-five thousand (75,000) shares of
Proffitt's common stock at an option price equal to the closing price
of the stock on Executive's first day of employment, as reported in
the Wall Street Journal. The Option will be granted pursuant either
to Proffitt's 1994 Long-Term Incentive Plan ("1994 LTIP") or 1997
Long-Term Incentive Plan ("1997 LTIP"), and shall be subject to the
terms and conditions thereof. The Option shall be exercisable on or
after the grant date (the "Grant Date") to the extent of 20% of the
shares covered thereby; exercisable to the extent of an additional 20%
of the shares covered thereby on and after the first anniversary of
the Grant Date; exercisable to the extent of an additional 20% of the
shares covered thereby on and after the second anniversary of the
Grant Date; exercisable to the extent of an additional 20% of the
shares covered thereby on an after the third anniversary of the Grant
Date; and exercisable to the extent of any remaining shares on and
after the fourth anniversary of the Grant Date; provided, however,
that no portion of the Option shall be exercisable any earlier than
six months from the Grant Date. The Option may be exercised up to ten
(10) years from the Grant Date. Any portion of the Option not
exercised within said ten (10) year period shall expire.
(e) Effect of Change of Control on Options. In the event
of a Change of Control (as defined in the 1994 LTIP), any Options
granted to Executive prior to such Change of Control shall immediately
vest.
(f) Service Stock Grant. In addition to the shares of
unrestricted common stock referred to Section 3(c), Company shall
cause Proffitt's to issue to Executive a total of 20,000 shares of
Proffitt's unrestricted common stock in the following amounts and at
the following times, provided that Executive shall have completed
continuous and uninterrupted service with Company at the time of each
grant: 5,000 shares on each of the first four anniversary dates of
Executive's first date of employment with Company. These numbers
shall be adjusted in the event of any change in the outstanding stock
of Proffitt's of the type set forth in paragraph 20 of the 1994 LTIP.
4. Insurance and Benefits. Company shall provide those
benefits to Executive and allow Executive to participate in each
employee benefit plan and to receive executive benefits that Company
and Proffitt's provide for their senior most executives.
5. Term. The term of this Agreement shall be for three years.
6. Company's Early Termination and Severance. Company shall
have the right, at its election, to terminate Executive's employment
prior to the termination date, without cause, upon 30 days prior
written notice to Executive, In the event of such termination by
Company, Executive shall be entitled to receive as severance his base
salary, with the yearly increases referred to in Paragraph 3(a) for
the greater of: (i) the end of the Term; or (ii) two years. Should
Company elect to terminate Executive's employment without cause,
Company shall also guarantee that 80% of all options granted to
Employee under Section 3(d) of this Agreement shall be vested, and 80%
of the stock to be issued under Section 3(f) of this Agreement shall
be issued. Employee shall also be entitled to receive all benefits
under Section 4 of this Agreement for two years after termination.
This severance provision shall continue to apply after the term of
this Agreement if Executive remains employed by Company and has not
entered into another employment agreement with Company. It is the
intent of the parties to provide Employee with two years of severance,
with the yearly increases referred to in Section 3(a), in one lump sum
at the time of termination without cause. In all events, provided
Employee does not voluntarily terminate his employment with Company,
he shall nevertheless be entitled to all severance benefits set forth
herein.
7. Termination as a Result of Death. This Agreement shall
terminate upon the death of Executive, except as to: (a) Executive's
estate's right to exercise any unexercised stock options pursuant to
Company's stock option plan then in effect with a guarantee that at
least 40% of the options under Section 3(d) shall be vested, (b) at
least 8,000 shares of common stock under Section 3(f) shall have been
awarded Executive or his estate, (c) other entitlements under this
contract that expressly survive death, and (d) any rights which
Executive's estate or dependents may have under COBRA or any other
federal or state law or which are derived independent of this
Agreement by reason of his participation in any plan maintained by
Company.
8. Termination by Company for Cause. Company shall have the
right to terminate Executive's employment under this Agreement for
cause, in which event no salary or bonus shall be paid after
termination for cause. Termination for cause shall be effective
immediately upon notice sent or given to Executive. For purposes of
this Agreement, the term "cause" shall mean and be strictly limited
to: (i) Executive's conviction of any crime or criminal offense
involving monies or other property, or any felony, after applicable
rights of appeal have been exhausted or waived and which is materially
detrimental to the reputation or goodwill of the Company; (ii)
Executive's breach of any of his fiduciary duties of loyalty as an
officer of the Company after having received written notice from the
Board of Directors of Proffitt's, Inc. and Executive has been given a
reasonable opportunity to cure; or (iii) Executive's willful and
continual neglect or disregard of his duties as President and Chief
Executive Officer of the Company, after written notice of such neglect
or disregard has been given Executive by the Board of Directors of
Proffitt's, Inc. and Executive has been given a reasonable opportunity
to cure.
(b) In the event that Executive's employment is terminated
for cause or otherwise, Executive agrees to resign as an officer
and/or director of Company (or any of its subsidiaries or affiliates),
effective as of the date of such termination, and Executive agrees to
return to Company upon such termination any of the following which
contain confidential information: all documents, instruments, papers,
facsimiles, and computerized information which are the property of
Company or such subsidiary or affiliate.
9. Change in Control. If Executive's employment is terminated
primarily as a result of a Change in Control of Proffitt's or a
Potential Change in Control of Proffitt's, as defined below, Executive
shall receive all shares of common stock under Section 3(f) that have
not already been awarded, and his Base Salary then in effect for a
period of three years.
As used herein, the term "Change in Control" means the happening
of any of the following:
(a) Any person or entity, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
other than Proffitt's, a subsidiary of Proffitt's, or any employee
benefit plan of Proffitt's or its subsidiaries, becomes the beneficial
owner of Proffitt's securities having 25 percent or more of the
combined voting power of the then outstanding securities of Proffitt's
that may be cast for the election for directors of Proffitt's (other
than as a result of an issuance of securities initiated by Proffitt's
in the ordinary course of business); or
(b) As the result of, or in connection with, any cash
tender or exchange offer, merger or other businessc combination, sale
of assets or contested election, or any combination of the foregoing
transactions, less than a majority of the combined voting power of the
then outstanding securities of Proffitt's or any successor corporation
or entity entitled to vote generally in the election of directors of
Proffitt's or such other corporation or entity after such transaction,
are held in the aggregate by holders of Proffitt's securities entitled
to vote generally in the election of directors of Proffitt's
immediately prior to such transactions; or
(c) During any period of two consecutive years, individuals
who at the beginning of any such period constitute the Board of
Directors of Proffitt's cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for election
by Proffitt's stockholders, of each director of Proffitt's first
elected during such period was approved by a vote of at least
two-thirds of the directors of Proffitt's then still in office who
were directors of Proffitt's at the beginning of any such period.
As used herein, the term "Potential Change in Control" means the
happening of any of the following:
(a) The approval by stockholders of an agreement by
Proffitt's, the consummation of which would result in a Change of
Control of Proffitt's; or
(b) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than Proffitt's, a
wholly-owned subsidiary thereof or any employee benefit plan of
Proffitt's or its subsidiaries (including any trustee of such plan
acting as trustee) of securities of Proffitt's representing 5 percent
or more of the combined voting power of Proffitt's outstanding
securities and the adoption by the Board of Directors of Proffitt's of
a resolution to the effect that a Potential Change in Control of
Proffitt's has occurred for purposes of this Agreement.
10. Disability. If Executive becomes disabled at any time
during the term of this Agreement, he shall after he becomes disabled
continue to receive all payments and benefits provided under the terms
of this Agreement for a period of twelve consecutive months, or for
the remaining term of this Agreement, whichever period is longer. For
purposes of this Agreement, the term "disabled" shall mean the
inability of Executive (as the result of a physical or mental
condition) to perform the duties of his position under this Agreement
with reasonable accommodation and which inability is reasonably
expected to last at least one (1) full year.
11. Non-competition; Unauthorized Disclosure.
(a) Non-competition. During the period Executive is
employed under this Agreement, and for a period of one year
thereafter, Executive:
(i) shall not engage in any activities, whether as
employer, proprietor, partner, stockholder (other than the holder of
less than 5% of the stock of a corporation the securities of which are
traded on a national securities exchange or in the over-the-counter
market), director, officer, employee or otherwise, in competition with
(i) the businesses conducted at the date hereof by Company, or (ii)
any business in which Company is substantially engaged at any time
during the employment period; and
(ii) shall not induce or attempt to persuade any
employee of Company to terminate his or her employment relationship in
order to enter into competitive employment.
(b) Unauthorized Disclosure. During the period Executive
is employed under this Agreement, and for a further period of one year
thereafter, Executive shall not, except as required by any court or
administrative agency, without the written consent of the Board of
Directors, or a person authorized thereby, disclose to any person,
other than an employee of Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance
by Executive of his duties as an executive for Company, any
confidential information obtained by him while in the employ of
Company; provided, however, that confidential information shall not
include any information now known or which becomes known generally to
the public (other than as a result of unauthorized disclosure by
Executive).
(c) Scope of Covenants; Remedies. The following provisions
shall apply to the covenants of Executive contained in this Section
11:
(i) the covenants contained in paragraphs (i) and (ii)
of Section 11(a) shall apply within all the market areas in which
Company is actively engaged in the conduct of business during the
Executive's employment and for one year thereafter, and it is
expressly agreed that Company is not in competition in the same market
areas with Macy's West, Inc.;
(ii) without limiting the right of Company to pursue
all other legal and equitable remedies available for violation by
Executive of the covenants contained in this Section 11, it is
expressly agreed by Executive and Company that such other remedies
cannot fully compensate Company for any such violation and that
Company shall be entitled to injunctive relief to prevent any such
violation or any continuing violation thereof; provided, however,
Company shall be entitled to injunctive relief only to protect itself
from unfair competition of the type protected under Tennessee law.
(iii) each party intends and agrees that if, in any
action before any court or agency legally empowered to enforce the
covenants contained in this Section 11, any term, restriction,
covenant or promise contained therein is found to be unreasonable and
accordingly unenforceable, then such term, restriction, covenant or
promise shall be deemed modified to the extent necessary to make it
enforceable by such court or agency; and
(iv) the covenants contained in this Section 11 shall
apply only if Executive voluntarily terminates his employment with
Company, and in such case, the covenants shall survive the conclusion
of Executive's employment by Company.
12. General Provisions.
(a) Notices. Any notice to be given hereunder by either
party to the other may be effected by personal delivery, in writing or
by mail, registered or certified, postage prepaid with return receipt
requested. Mailed notices shall be addressed to the parties at the
addresses set forth below, but each party may change his or its
address by written notice in accordance with this Section 12(a).
Notices shall be deemed communicated as of the actual receipt or
refusal of receipt.
If to Executive: William E. Cappiello
750 Lakeshore Drive
Birmingham, AL 35211
If to Company: Brian J. Martin
Parisian, Inc.
750 Lakeshore Drive
Birmingham, AL 35211
(b) Partial Invalidity. If any provision in this Agreement
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall, nevertheless, continue
in full force and without being impaired or invalidated in any way.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Tennessee.
(d) Attorney's Fees. If any action is necessary to enforce
the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorney's fees and costs, in addition to any other relief
to which he or it may be entitled.
(e) Modifications and Waivers. Any modification or waiver
of the provisions of this Agreement will be effective only if it is in
writing signed by the party to be charged.
(f) Headings. The Section, paragraph, and subparagraph
headings are for convenience or reference only and shall not define or
limit the provisions hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
PARISIAN, INC.
BY: _____________________
Brian J. Martin
Senior Vice President
_____________________
William D. Cappiello
Executive
X:\WPDATA\JAS\PROFFITT\SECURITI\10-K.497\EX-10-73.ASC
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF HISTORICAL EARNINGS PER COMMON SHARE
PROFFITT'S, INC. AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Year Ended
------------------------------
2/1/97 2/3/96 1/28/95
--------- --------- ---------
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
======== ======== ========
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.
EXHIBIT 11.1 (continued)
STATEMENT RE: COMPUTATION OF HISTORICAL EARNINGS PER COMMON SHARE
PROFFITT'S, INC. AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Year Ended
------------------------------
2/1/97 2/3/96 1/28/95
--------- --------- ---------
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
======= ======= ========
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.
X:\WPDATA\JAS\PROFFITT\SECURITI\10-K.497\EX-11-1.ASC
1996 ANNUAL REPORT
PROFFITT'S INC.
Style
Quality
Service
Integrity
The production of this Proffitt's, Inc. Annual Report was based on our
committment to provide accurate, timely information about the Company
while incurring only modest production costs.
The financial statements of this report are printed on 100% recycled
paper.
Who We Are
Proffitt's, Inc. is one of the fastest growing specialty retailers in
the United States. The Company's stores offer a wide selection of
fashion apparel, accessories, cosmetics, and decorative home
furnishings, featuring assortments of premier brands and unique
specialty merchandise. Proffitt's commitment to style, quality,
service, and integrity is the cornerstone of the Company's culture and
provides the foundation for its future growth.
1 Financial Highlights
2 Report to Shareholders
7 Five-Year Financial Summary
8 Management's Discussion
and Analysis
15 Consolidated Financial
Statements
19 Notes to Consolidated
Financial Statements
33 Report of Independent
Accountants
33 Report of Management
34 Market Information
35 Directors and Officers
36 Store Locations
38 Shareholder Information
Inside Back Cover Corporate Information
1996 was certainly the most extraordinary year in our Company's
history.
Financial Highlights
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------
February 1, February 3, January 28,
1997 1996 1995
---------- ----------- ---------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Net sales $1,889,779 $1,661,056 $1,513,444
Net income before special
and non-recurring charges* $ 52,151 $ 38,392 $ 37,448
Fully diluted earnings per common
share before special and
non-recurring charges* $ 1.94 $ 1.54 $ 1.52
Net income* $ 37,399 $ 641 $ 37,448
Fully diluted earnings
per common share* $ 1.41 $ 0.03 $ 1.52
Fully diluted weighted average
common shares 28,204 23,166 26,301
Total assets $1,403,796 $ 919,013 $ 967,667
Shareholders' equity $ 539,898 $ 327,371 $ 337,007
*Prior to extraordinary item.
</TABLE>
To Our Partners
We will maintain our focus on generating solid operating results and
cash flow, which should permit us to substantially increase the value
of the enterprise.
1996 was certainly the most extraordinary year in our Company's
history. It was marked by further dramatic growth, outstanding
operating results, and substantial investment in the future of our
business.
Just prior to the beginning of our fiscal year, we completed our
merger with Younkers, Inc., a department store company based in Des
Moines, Iowa. In October of 1996, we acquired Parisian, Inc., a
mall-based anchor specialty store chain, headquartered in Birmingham,
Alabama. On February 1, 1997, immediately before the end of the fiscal
year, we completed our business combination with G.R. Herberger's,
Inc., a department store company based in St. Cloud, Minnesota. Today
your Company operates five divisions: Proffitt's, McRae's, Younkers,
Parisian, and Herberger's that comprise 175 stores in 24 states. Our
annualized revenues are in excess of $2.3 billion, and we are
privileged to enjoy the commitment of nearly 27,000 associates.
In the midst of this dramatic growth, we again generated solid
financial results with sales and earnings, prior to charges associated
with the business combinations, reaching record levels. Compared to
our 1991 annual report, we have realized compound annual earnings per
share growth of 20%, and our share price has grown at an average
compound rate of 24%. This operating and value-creating performance is
among the best in the retail industry.
Our strategy remains to tailor our merchandise offerings effectively
to our local customers through maintaining our regional focus. We
believe the ability to do so is a distinct competitive advantage for
the Company. To oversee our regional merchandising and marketing
operations, we recently created the Proffitt's Merchandising Group,
which is headquartered in Birmingham, Alabama. The Proffitt's
Merchandising Group will ensure the implementation of best practices
throughout our divisions while assuring we strengthen our corporate
relationships with our key suppliers. We believe the structure of our
individual divisions, combined with the leadership of the Proffitt's
Merchandising Group, will permit us to increase sales and merchandise
margins in the future.
We are continuing to aggressively focus on productivity improvement in
our back office functions. Cost reductions associated with the
elimination of duplicate functions and implementation of best
practices associated with our acquisition program generated cost
savings of $6 million in 1996, and we expect this number to grow to
$20 million in 1997 and $29 million in 1998.
We continue to find opportunities for new unit development in and
around our existing markets. During 1996, we opened new stores in
Selma, Alabama and Morgantown, West Virginia. Thus far this year, we
have opened new stores in Macon, Georgia and Tupelo, Mississippi.
Future store openings include a Proffitt's Division store in
Parkersburg, West Virginia; McRae's stores in Biloxi and Meridian,
Mississippi and Baton Rouge, Louisiana; Younkers stores in Grandville,
Michigan and Iowa City, Iowa; and Parisian stores in Birmingham,
Alabama and metropolitan Atlanta, Georgia. The regions of the United
States in which we operate have outstanding growth potential, and we
believe we have meaningful opportunities for further unit development
within or contiguous to our existing markets.
Our focus on productivity improvement includes store productivity, and
in 1996 we closed two stores and in April of 1997, sold seven
Proffitt's Division stores in Virginia. Each of these units did not
meet our long-term return on investment standards, and the
re-deployment of these resources will improve our sales productivity
and operating margins.
Our strong operating record and corporate culture have made us a
preferred partner for regional department store chains seeking
affiliation in our consolidating industry. We remain well positioned
to consider future acquisition opportunities.
I believe that by carefully executing our operating strategy, which
includes enhancing our sales productivity, improving merchandise
margins, and gaining operating efficiencies, we can maintain the
earnings per share growth pace of the past five years. We will
maintain our focus on generating solid operating results and cash
flow, which should permit us to substantially increase the value of
the enterprise.
Three members of our Board of Directors are retiring. Harwell
Proffitt, Richard McRae, and Tom Gould have enjoyed distinguished
careers at our predecessor companies and have subsequently served
Proffitt's, Inc. as members of our corporate board. We are all
grateful to these individuals for their outstanding contributions.
The financial information and graphs in this Annual Report indicate an
extraordinary history of the Company over the past five years. I think
we have even greater opportunity during the next five.
Sincerely,
/s/ R. Brad Martin
R. Brad Martin
Chairman of the Board and
Chief Executive Officer
Proffitt's, Inc.
For a discussion of risk factors, refer to Forward-Looking
Information contained in Management's Discussion and Analysis on page
14 of this Annual Report.
Today your Company operates five divisions: Proffitt's, McRae's,
Younkers, Parisian, and Herberger's that comprise 175 stores in 24
states.
OUR CORPORATE MISSION
Our Company will provide opportunities for its associates and will
create value for its shareholders through the exceptional operation of
retail enterprises. Our stores will feature outstanding assortments of
premier merchandise and will delight our guests with superior,
friendly, and personalized customer service. Our associates will
follow the highest level of ethical standards in conducting our
business affairs.
We are a preferred partner for regional department store chains
seeking affiliation in our consolidating industry.
Proffitt's
*19 department stores in 6 southeastern states
*1.8 million gross square feet
*Founded in 1919
McRae's
*29 department stores in 4 southeastern states
*2.9 million gross square feet
*Founded in 1902
*Acquired March 31, 1994
Younkers
*48 department stores in 7 midwestern states
*4.7 million gross square feet
*Founded in 1856
*Acquired February 3, 1996
Parisian
*40 specialty stores in 9 southeastern and midwestern states
*4.3 million gross square feet
*Founded in 1997
*Acquired October 11, 1996
Herberger's
*39 department stores in 10 midwestern states
*2.5 million gross square feet
*Founded in 1927
*Acquired February 1, 1997
Our strategy is to tailor our merchandise offerings to our local
customers.
<TABLE>
FIVE-YEAR FINANCIAL SUMMARY (in thousands, except per share amounts)
Proffitt's, Inc. and Subsidiaries
<CAPTION>
52 Weeks 53 Weeks 52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended Ended Ended
2/1/97 2/3/96 1/28/95 1/29/94 1/30/93
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Net sales, including leased
departments $1,889,779 $1,661,056 $1,513,444 $1,063,488 $858,754
COSTS AND EXPENSES:
Cost of sales 1,230,454 1,087,619 986,028 690,083 523,444
Selling, general and
administrative expenses 440,502 398,999 352,448 255,856 220,889
Other operating expenses 142,124 130,560 122,583 88,792 64,157
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 28,757 50,264
OTHER INCOME (EXPENSE):
Finance charge income, net 32,305 31,273 27,934 19,312 16,151
Interest expense (26,756) (29,389) (23,286) (11,286) (11,701)
Other income, net 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 68,985 6,688 61,859 40,846 54,947
Provision for income taxes 31,586 6,047 24,411 16,122 20,631
-------- --------- --------- --------- ---------
Income before extraordinary
loss and cumulative effect of
changes in accounting methods 37,399 641 37,448 24,724 34,316
Extraordinary loss (net of tax) (2,060) (1,088)
Cumulative effect of changes in
accounting methods (net of tax 1,904 (1,794)
-------- -------- -------- -------- -------
Net income (loss) $37,399 $(1,419) $37,448 $25,540 $32,522
======== ======== ======== ======== =======
Earnings (loss) per common share
before extraordinary loss and
cumulative effect of changes in
accounting methods
Primary $1.31 $(0.06) $1.55 $1.12 $1.97
Fully diluted $1.41(b) $(0.06) $1.52 $1.12 $1.97
Earnings (loss) per common
share (a)
Primary $1.31 $(0.15) $1.55 $1.15 $1.87
Fully diluted $1.41(b) $(0.15) $1.52 $1.15 $1.87
Weighted average common shares
Primary 25,564 23,157 23,046 22,167 17,396
Fully diluted 28,204 23,166 26,301 22,167 17,396
CONSILIDATED BALANCE SHEET DATA:
Working capital $344,410 $235,194 $301,270 $306,853 $203,977
Total assets $1,403,796 $919,013 $967,667 $653,680 $536,603
Senior long-term debt,
less current portion $276,810 $168,937 $225,232 $117,588 $216,985
Subordinated debt $225,767 $100,505 $100,269 $86,250
Shareholders' equity $539,898 $327,371 $337,007 $275,104 $122,582
(a) Losses per share attributable to extraordinary items were $.09 for the year ended February
3, 1996 and $.05 for the year ended January 29, 1994. Earnings (loss) per share
attributable to cumulative effect of changes in accounting methods were $.08 for the year
ended January 29, 1994 and ($.10) for the year ended January 30, 1993.
(b) See Note 1 of the Consolidated Financial Statements ("Earnings per Common Share").
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Proffitt's, Inc. ("Proffitt's" or the "Company") is a leading regional
department store company offering moderate to better brand name
fashion apparel, shoes, accessories, cosmetics, and decorative home
furnishings. The Company's stores are principally anchor stores in
leading regional or community malls. The Company currently operates
five store divisions, with a total of 175 stores in 24 states. The
Proffitt's Division, headquartered in Knoxville, Tennessee, operates
19 stores in Tennessee, Georgia, Kentucky, North Carolina, Virginia,
and West Virginia. The McRae's Division, headquartered in Jackson,
Mississippi, operates 29 stores in Alabama, Mississippi, Florida, and
Louisiana. The Younkers Division, headquartered in Des Moines, Iowa,
operates 48 stores in Iowa, Wisconsin, Nebraska, Michigan, Illinois,
Minnesota, and South Dakota. The Parisian Division, headquartered in
Birmingham, Alabama, operates 40 stores in Alabama, Georgia, Florida,
Ohio, South Carolina, Tennessee, Indiana, Michigan, and Mississippi.
The Herberger's Division, headquartered in St. Cloud, Minnesota,
operates 39 stores in Minnesota, Montana, Nebraska, Wisconsin, North
Dakota, South Dakota, Iowa, Colorado, Illinois, and Wyoming.
Merchandising and various related support functions are conducted at
the divisional level. The Proffitt's Merchandising Group,
headquartered in Birmingham, was formed in 1996 to ensure coordination
of merchandise planning and execution for the Company and was designed
to also support the Company's strategy to run separate divisions with
regional merchandise assortments. Certain administrative support
functions for the Company, such as accounting, credit, and management
information systems, are continuing to be centralized.
Proffitt's has experienced significant growth beginning in 1994. In
March 1994, Proffitt's acquired McRae's, a privately owned company
with 28 stores. In April 1995, the Company completed the purchase of
Parks-Belk Company, the owner/operator of four stores in northeast
Tennessee. Effective February 3, 1996, immediately preceding the
Company's prior fiscal year end, Proffitt's combined its business with
Younkers, a publicly-owned company with 51 stores. On October 11,
1996, Proffitt's acquired Parisian, a 38-store closely-held company.
Effective February 1, 1997, immediately preceding the Company's
current fiscal year end, Proffitt's combined its business with
Herberger's, an employee-owned company with 39 stores. The McRae's,
Parks-Belk, and Parisian transactions were accounted for using the
purchase method; the Younkers and Herberger's transactions were
accounted for as poolings of interests.
The Company periodically opens new stores and also eliminates
unproductive stores from its store base. In April 1997, the Company
sold seven Proffitt's Division stores located in Virginia (the
"Virginia Stores") to an unrelated third party.
Income statement information for each year presented has been restated
to reflect the Younkers and Herberger's mergers, which were accounted
for as poolings of interests. The operations of McRae's, Parks-Belk,
and Parisian have been included in the income statements subsequent
totheir respective purchase dates. The following table sets forth, for
the periods indicated, certain items from the Company's Consolidated
<TABLE>
Statements of Income, expressed as percentages of net sales:
<CAPTION>
52 Weeks Ended 53 Weeks Ended 52 Weeks Ended
February 1, February 3, January 28,
1997 ("1996") 1996 ("1995") 1995 ("1994")
------------- ------------ -------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 65.1 65.5 65.2
Selling, general, and administrative
expenses 23.3 24.0 23.3
Other operating expenses 7.5 7.9 8.1
Expenses related to hostile takeover
defense 0.2
Gains (losses) from long-lived assets 1.1
Merger, restructuring, and integration
costs 0.8 1.3
------- ------ ------
Operating income 3.3 0.0 3.4
Other income (expense):
Finance charge income, net 1.7 1.9 1.9
Interest expense (1.4) (1.8) (1.5)
Other income, net 0.1 0.3 0.3
------- ------ ------
Income before provision for income
taxes and extraordinary loss 3.7 0.4 4.1
Provision for income taxes 1.7 0.4 1.6
------- ------ ------
Income before extraordinary loss 2.0 0.0 2.5
Extraordinary loss (net of tax) (0.1)
------- ------ ------
Net income (loss) 2.0% (0.1)% 2.5%
======= ======= =======
</TABLE>
NET SALES
Total Company net sales increased by 14% and 10% in 1996 and 1995,
respectively. The 1996 increase primarily was due to a comparable
store sales increase of 3% and revenues generated from the Parisian
Division acquired in October 1996. The 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
Gross margins were 34.9%, 34.5%, and 34.8% in 1996, 1995, and 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 1996 to 34.9% from 34.5%
in 1995 was a result ofimproved 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
as 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 Division;
expansion of key brands (primarily at the newly acquired Herberger's
Division); 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
Selling, general, and administrative expenses ("SG&A") were 23.3% of
net sales in 1996, 24.0% of net sales in 1995, and 23.3% of net sales
in 1994. In 1996, primarily in conjunction with the Herberger's
business combination, 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 $.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 the
Virginia Stores. In 1995, primarily in conjunction with the Younkers
business combination, 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.
Excluding these fourth quarter charges, SG&A as a percentage of net
sales was 23.0% in 1996 and 23.2% in 1995. The reduction of the SG&A
percentage in 1996 over 1995 was due to increased economies of scale
and the implementation of the synergies outlined below.
Management has identified synergies and developed cost savings
programs in conjunction with the Younkers, Parisian, and Herberger's
business combinations. The implementation of these synergies and
programs reduced operating expenses by a total of $6 million in 1996
and is expected to produce annualized expense savings of $20 million
in 1997 and $29 million in 1998 (compared to the 1995 cost structure).
Cost reductions are being achieved through the elimination of
duplicate corporate expenses, economies of scale, implementation of
best practices, and consolidation of certain administrative support
functions. These changes should deliver future additional leverage on
expenses and will also contribute to the Company's competitive cost
structure.
OTHER OPERATING EXPENSES
Other operating expenses were 7.5% of net sales in 1996, compared to
7.9% in 1995 and 8.1% in 1994. Other operating expenses for 1996
include a $1.0 million charge, or 0.1% of net sales, related to the
sale of the Virginia Stores. Excluding this charge, other operating
expenses as a percentage of net sales were 7.4% in 1996. The percent
decline in 1996 over 1995 and 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 "Gains (Losses) from Long-Lived Assets" below).
EXPENSES RELATED TO HOSTILE TAKEOVER DEFENSE
During 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
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard 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 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 1996 and 1995, respectively. The 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 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
In connection with the merger of Proffitt's and Herberger's, the two
companies incurred certain costs in the fourth quarter of 1996 to
effect the transaction and other costs to restructure, integrate, and
combine the operations of the two companies. 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 $.9 million for the write-off of duplicate
administrative facilities. Management also expects to incur certain
additional integration costs in 1997, such as transition payroll,
training, and relocation expenses. These expenses are expected to
total approximately $3 to $4 million in 1997.
In connection with the merger of Proffitt's and Younkers, the two
companies incurred certain costs in the fourth quarter of 1995 to
effect the transaction and other costs to restructure, integrate, and
combine the operations of the two companies. 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 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
Net finance charge income was 1.7% of net sales in 1996 and 1.9% of
net sales in both 1995 and 1994.
For 1996, gross finance charge income (before allocation of finance
charges to the third party purchasers of accounts receivable (see
"Liquidity")) increased to 2.6% of net sales from 2.4% in 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 penalties on past due charge accounts for
the Proffitt's and McRae's Divisions.
For 1995, gross finance charge income increased to 2.4% of net sales
over 2.2% of net sales in 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 Divisions, and a full year's benefit of
the May 1994 implementation of late fee charges on past due charge
account balances at the Younkers Division.
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 1996; $8.8 million, or 0.5% of net sales, in 1995; and
$5.6 million, or 0.4% of net sales, in 1994. Utilization of the
Company's accounts receivable securitization programs increased each
year presented (see "Liquidity"), commensurate with the Company's
growth in proprietary charge card sales.
Each of the Company's Divisions, except for Herberger's, operates a
propriety card program. A proprietary card program is being designed
for and will be introduced to the Herberger's customer base in May
1997.
INTEREST EXPENSE
Interest expense as a percentage of net sales was 1.4% for 1996, 1.8%
for 1995, and 1.5% for 1994. Total interest expense was $26.8 million,
$29.4 million, and $23.3 million in 1996, 1995, and 1994,
respectively. The decrease in interest expense in 1996 over 1995 was
attributable to less average borrowings under the Company's revolving
credit facilities due to an increase in cash flow from operations and
a reduction in short-term interest rates. The increase in interest
expense in 1995 over 1994 was attributable to higher borrowings
associated with the purchase and operation of the Parks-Belk stores
acquired in April 1995 and the acquisition of McRae's in March 1994,
along with higher interest rates.
INCOME TAXES
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
Net income (prior to extraordinary item) was $37.4 million in 1996, or
2.0% of net sales, $.6 million in 1995, or 0.0% of net sales, and
$37.4 million in 1994, or 2.5% of net sales. Earnings in 1996 were
negatively affected by such items as fourth quarter charges to SG&A in
conjunction with the Herberger's transaction and the sale of the
Virginia Stores and merger, restructuring, and integration costs
previously discussed. Without these items, 1996 net income would have
totaled $52.2 million, or 2.8% of net sales. In 1995, earnings were
negatively affected by such items as fourth quarter charges to SG&A in
conjunction with the Younkers transaction, 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, 1995 net income would have
totaled $38.4 million, or 2.3% of net sales.
EXTRAORDINARY ITEM
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 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 1995.
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.
SEASONALITY
The Company's business, like that of most retailers, is subject to
seasonal influences, with asignificant 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.
LIQUIDITY AND CAPITAL RESOURCES
Proffitt's primary needs for liquidity are to acquire, renovate, or
construct stores and to provide working capital for new and existing
stores.
Net cash provided by operating activities was $82.5 million in 1996
and $66.6 million in 1995. In 1996 net income and depreciation and
amortization charges were offset by additional working capital needs
of $14.3 million. In 1995, working capital needs were reduced by $14.0
million.
Net cash used in investing activities was $174.7 million in 1996 of
which $119.1 million was for the acquisition of Parisian and $61.0
million was related to new store construction, store renovations,
systems enhancements, and other capital expenditures. Net cash used in
investing activities for 1995 totaled $62.0 million, of which $51.5
million related to new store construction, store renovations, systems
enhancements, and other capital expenditures and $10.5 million was the
cash portion of the Parks-Belk acquisition purchase price.
Net cash provided by financing activities for 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 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.
In January 1997, Proffitt's entered into a $300 million facility
agreement ("Accounts Receivable Facility") with a financial
institution for the sale of ownership interests in accounts
receivable, which expires in 1998. The Accounts Receivable Facility
requires a portion of finance charges earned be allocated to the
purchaser of the ownership interests in the accounts receivable,
sufficient to cover the yield on commercial paper utilized by the
purchaser to finance the transaction, plus fees and expenses. As of
March 21, 1997, the interest rate on the Accounts Receivable Facility
including program fees was approximately 5.8%, and $221 million of
receivables were sold on the Accounts Receivable Facility at that
date. $234 million of receivables were sold on the Accounts Receivable
Facility at February 1, 1997. Amounts sold are limited to 82% of
eligible accounts receivable.
The Accounts Receivable Facility replaced separate facilities
previously in place for: (i) Proffitt's Division and McRae's Division
receivables ($175 million facility) and (ii) Parisian receivables
($160 million facility). Maximum amounts sold under these facilities
in 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 merger,
Younkers replaced amounts borrowed under the securitization program
with the sale of: (i) a fixed ownership interest of $75 million and
(ii) a variable ownership interest of up to $50 million in its trade
receivables. The $75 million receivables sold under this arrangement
are from a pool of $91.5 million of tradereceivables and remain fixed
until 2000 at which time a portion of collections of outstanding
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%.
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 agreement expires in 2000.
As of March 21, 1997, the interest rate was approximately 5.8%, and $5
million of Younkers' receivables were sold under this facility at that
date. The maximum receivables sold under this facility in 1996 totaled
$90.0 million.
Proffitt's utilizes a $275 million revolving credit facility with
several banks ("Revolver"), which expires in 1999. The Revolver
provides various borrowing options, including prime rate and
Eurodollar rates. As of March 21, 1997, the LIBOR-based interest rate
on the $275 million Revolver was approximately 6.5%. Borrowings on the
Revolver are limited to 55% of merchandise inventories (increasing to
60% on a seasonal basis). As of March 21, 1997, the Company had
borrowings totaling $171.4 million outstanding under the Revolver and
unused availability of $103.6 million. The maximum amount outstanding
under the Revolver during 1996 was $176.7 million. At that time,
Proffitt's had unused availability on the Revolver of $98.3 million.
Proffitt's previous $125 million revolving credit facility was
replaced by the $275 million Revolver in October 1996 in conjunction
with the Parisian merger.
At February 1, 1997, total debt was 49% of total book capitalization,
up from 47% at February 3, 1996. Excluding subordinated debt of $226
million at February 1, 1997 and $101 million at February 3, 1996,
senior debt was 27% of total capitalization, down from 31% one year
ago.
As of February 1, 1997, Proffitt's carried $120 million of mortgage
debt related to its 27 owned store locations and other owned
properties. Management believes the market value of these properties
significantly exceeds the related indebtedness.
Proffitt's estimates capital expenditures for 1997 will approximate
$100 million, primarily for the construction of seven new stores
opening in 1997, initial construction related to five to seven stores
to be opened in 1998, several store expansions and renovations, and
enhancements to management information systems.
Proffitt's anticipates its capital expenditures and working capital
requirements relating to planned new and existing stores will be
funded through cash provided by operations and borrowings. Proffitt's
expects to generate adequate cash flows from operating activities to
sustain current levels of operations. Proffitt's maintains favorable
banking relations and anticipates the necessary credit agreements will
be extended or new agreements will be entered into in order to provide
future borrowing requirements as needed. Proffitt's 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 Proffitt's flexibility to capitalize on attractive
opportunities for growth, thereby enhancing shareholder value.
RESENT ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 125, "Accounting for
Transfers and Servicing of Financial Assets andExtinguishments 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 Standard 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 1996 and prior periods.
FORWARD-LOOKING INFORMATION
The forward-looking information presented in the letter to
shareholders entitled "To Our Partners" contained on pages 2 through 4
of the Annual Report as well as the forward-looking statements
contained throughout Management's Discussion and Analysis on pages 8
through 14 of the Annual Report are premised on many factors, some of
which are outlined below. Actual consolidated results might differ
materially from projected forward-looking information if there are any
material changes in management's assumptions.
The forward-looking information and statements are based on a series
of projections and estimates and involve certain risks and
uncertainties. Potential risks and uncertainties include such factors
as the level of consumer spending for apparel and other merchandise
carried by the Company, the competitive pricing environment within the
department and specialty store industries, the effectiveness of
planned advertising, marketing, and promotional campaigns, appropriate
inventory management, realization of planned synergies, and effective
cost containment.
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts)
Proffitt's, Inc. and Subsidiaries
<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 EXPESNES
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
======= ======== =======
*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.
</TABLE>
<TABLE>
CONSOLIDATED BALANCE SHEETS (in thousands)
Proffitt's, Inc. and Subsidiaries
<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
REDEEMABEL 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
========= =========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands, except per share amounts)
Proffitt's, Inc. and Subsidiaries
<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>
<TABLE>
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Proffitt's, Inc. and Subsidiaries
<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
Noncash investing and financing activities are further described in the accompanying notes.
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per
share amounts)
Proffitt's, Inc. and Subsidiaries
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 other than its special purpose receivables
securitization subsidiaries which are not consolidated. All
significant intercompany balances and transactions have been
eliminated.
USE IF 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.
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.
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 beenrestated for all periods to
include the results of operations and financial position of
Herberger's.
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 $45,574allocated 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.
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>
(Unaudited)
------------------------------
1996 1995
---------- ---------
<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 unconsolidated 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 unconsolidated subsidiary Younkers Credit
Corporation (a qualifying special purpose entity), replaced amounts
borrowed under the securitization 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>
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>
1996 1996
---------- ----------
<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>
NOTE 6 - INCOME TAXES
The components of income tax expense were as follows:
<TABLE>
Year Ended
-------------------------------
2/1/97 2/3/96 1/28/95
-------- -------- -------
<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>
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>
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>
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>
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.
At February 1, 1997, maturities of senior debt for the next five years
and thereafter, giving consideration to lenders' call privileges, were
as follows:
1997 $ 12,515
1998 35,010
1999 185,524
2000 10,192
2001 23,304
Thereafter 22,780
--------
$ 289,325
=========
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>
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.
At February 1, 1997, minimum rental commitments under operating leases
with terms in excess of one year were as follows:
1997 $ 58,821
1998 56,592
1999 54,252
2000 50,988
2001 49,338
Thereafter 445,972
---------
$ 715,963
==========
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 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 compensationexpense. 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:
Number of Shares
---------------------------
Allocated Unallocated
--------- ----------
Shares acquired on or prior to
January 30, 1994 387 152
Shares acquired after January 30, 1994 68 332
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>
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.
<TABLE>
A summary of the stock option plans for 1996, 1995 and 1994 is presented below:
<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
========= ========
Contemporaneous with the Parisian acquisition, outstanding Parisian stock options were
converted into Proffitt's options.
</TABLE>
<TABLE>
The following table summarizes information about stock options outstanding at February 1, 1997:
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------- -----------------------
Weighted-
Number Average Weighted- Number Weighted-
OutstandingRemaining Average Exercisable Average
Range of at Contractual Exercise at Exercise
Exercise Prices 2/1/97 Life (years) Price 2/1/97 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.
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 theimmediate 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:
Carrying Estimated
Amount Fair Value
---------- ----------
4.75% convertible debentures $ 86,250 $ 84,525
9.875% notes $ 125,000 $ 127,500
7.5% junior debentures $ 14,517 $ 14,517
NOTE 15 - MERGER, RESTRUCTURING AND INTEGRATION COSTS
Merger, restructuring and integration costs incurred in 1996 and 1995
were as follows:
1996
----------
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
=========
1995
---------
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
=========
A reconciliation of the above charges to the amounts remaining unpaid
at February 1, 1997 was as follows:
1996 1995
-------- -------
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
========== =========
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.
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>
(Unaudited)
----------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- --------- -------
<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.
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.
Birmingham, Alabama
March 20, 1997
REPORT OF MANAGEMENT
The accompanying consolidated financial statements, including the
notes thereto, and the other financial information presented in the
Annual Report have been prepared by management. The financial
statements have been prepared in accordance with generally accepted
accounting principles and include amounts that are based upon our best
estimates and judgments. Management is responsible for the
consolidated financial statements, as well as the other financial
information in this Annual Report.
The Company maintains an effective system of internal accounting
control. We believe that this system provides reasonable assurance
that transactions are executed in accordance withmanagement
authorization and that they are appropriately recorded in order to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to adequately safeguard,
verify, and maintain accountability of assets. Reasonable assurance is
based on the recognition that the cost of a system of internal control
should not exceed the benefits derived.
The consolidated financial statements and related notes have been
audited by independent certified public accountants. Management has
made available to them all of the Company's financial records and
related data and believes all representations made to them during
their audits were valid and appropriate. Their reports provide an
independent opinion upon the fairness of the financial statements.
The Audit Committee of the Board of Directors is composed of four
independent Directors. The Committee is responsible for recommending
the independent certified public accounting firm to be retained for
the coming year, subject to shareholder approval. The Audit Committee
meets periodically with the independent auditors, as well as with
management, to review accounting, auditing, internal accounting
control, and financial reporting matters. The independent auditors
have unrestricted access to the Audit Committee.
R. Brad Martin Douglas E. Coltharp
Chairman of the Board and Executive Vice President and
Chief Executive Officer Chief Financial Officer
MARKET INFORMATION
The Company's Common Stock trades on the NASDAQ National Market tier
of The NASDAQ Stock Market under the symbol PRFT. As of March 17,
1997, there were approximately 1,436 shareholders of record. Below is
a summary of the high and low bid quotations for the Company's Common
Stock for each quarterly period for the prior two years. The source of
these quotations is the Monthly Statistical Report of the National
Association of Securities Dealers, Inc. These quotations represent
inter-dealer prices for actual transactions, without adjustment for
retail markup, markdown, or commission.
The Company presently follows the policy of retaining earnings to
provide funds for the operation and expansion of the business and has
no present intention to declare cash dividends in the foreseeable
future. Future dividends, if any, will be determined by the Board of
Directors of the Company in light of circumstances then existing,
including the earnings of the Company, its financial requirements, and
general business conditions. The Company declared no dividends to
common shareholders in either 1996 or 1995.
<TABLE>
Fiscal Year Ended
--------------------------------------
February 1, 1997 February 3, 1996
---------------- ----------------
Price Range Price Range
------------- -------------
Quarter High Low High Low
- --------- ------- ------- -------- ------
<S> <C> <C> <C> <C>
First 33 3/4 23 1/2 26 1/2 20 3/4
Second 40 31 1/2 33 24
Third 42 35 1/2 34 1/4 23 1/8
Fourth 42 3/4 32 5/8 29 21 1/2
</TABLE>
DIRECTORS AND OFFICERS
PROFFITT'S, INC.
DIRECTORS
R. Brad Martin
Chairman of the Board of Directors and Chief Executive Officer of
Proffitt's, Inc.
Bernard E. Bernstein
Partner in the law firm of Bernstein, Stair & McAdams
Edmond D. Cicala
President of Edmond Enterprises, Inc. Retired Chairman and Chief
Executive Officer of the Goldsmith's Division of Federated Department
Stores
Ronald de Waal
Chairman of We International, B.V.
Gerard K. Donnelly
Chairman of Princeton Middletown Partners, Inc. Former President and
Chief Executive Officer of H.C. Prange Company
Donald F. Dunn
Retired Senior Vice President of Allied Stores Corporation
W. Thomas Gould
Former Chairman and Chief Executive Officer of Younkers, Inc.
Michael S. Gross
Vice President of Apollo Capital Management, Inc.
Donald E. Hess
Chairman of the Parisian Division
G. David Hurd
Emeritus Chairman and retired Chief Executive Officer of The Principal
Financial Group
Richard D. McRae
Former Chairman, President, and Chief Executive Officer of McRae s,
Inc.
C. Warren Neel
Dean of the College of Business Administration at the University of
Tennessee, Knoxville
Harwell W. Proffitt
Former Chairman, President, and Chief Executive Officer of Proffitt's,
Inc.
Marguerite W. Sallee
President and Chief Executive Officer of CorporateFamily Solutions
Gerald Tsai, Jr.
Chairman, President, and Chief Executive Officer of Delta Life
Corporation
PROFFITT'S, INC.
OFFICERS
R. Brad Martin
Chairman of the Board of Directors and Chief Executive Officer
James A. Coggin
President and Chief Operating Officer
Robert M. Mosco
President and Chief Executive Officer Proffitt's Merchandising Group
David W. Baker
Senior Vice President of Operations
Julia A. Bentley
Senior Vice President of Investor Relations and Planning and Secretary
Douglas E. Coltharp
Executive Vice President and Chief Financial Officer
Peggy Eskenasi
Senior Vice President of Private Label and Brand Development
Fran U. Jose
Senior Vice President of Marketing and Visual
Brian J. Martin
Senior Vice President of Human Resources and Law General Counsel
Michael R. Molitor
Senior Vice President of Merchandise Planning and Analysis
James E. VanNoy
Senior Vice President of Management Information Systems
John J. White
Senior Vice President of Profit Improvement and Special Projects
Sharron Williams
Senior Vice President and Corporate General Merchandise Manager of
Cosmetics
Donald E. Wright
Senior Vice President of Finance and Accounting
PROFFITT'S DIVISION
OFFICERS
A. Coleman Piper
Executive Vice President of Stores
Don M. Alexander
Vice President of Sales Promotion
Linda Kerr
Vice President and General Merchandise Manager
Max W. Jones
Vice President and General Merchandise Manager
McRAE'S DIVISION
OFFICERS
Gary L. Howard
President and Chief Executive Officer
Robert Oliver
Executive Vice President of Stores
Thomas M. Ford
Vice President of Sales Promotion
Laurence J. Donoghue
Senior Vice President and General Merchandise Manager
H.R. Harvey
Vice President and General Merchandise Manager
Joseph A. Sherman
Vice President and General Merchandise Manager
YOUNKERS DIVISION
OFFICERS
Toni E. Browning
Senior Vice President of Stores
Robert H. Ferguson
Senior Vice President of Marketing and Sales Promotion
Ric L. Anderson
Vice President and General Merchandise Manager
Alan E. Miller
Senior Vice President and General Merchandise Manager
John T. Parros
Senior Vice President and General Merchandise Manager
PARISIAN DIVISION
OFFICERS
Donald E. Hess
Chairman
William D. Cappiello
President and Chief Executive Officer
Howard R. Finkelstein
Executive Vice President of Merchandising
Jim W. Adams
Executive Vice President of Stores
Michael Green
Senior Vice President of Marketing
Ernest E. Brown
Vice President and General Merchandise Manager
W. Travis Saucer
Vice President and General Merchandise Manager
HERBERGER'S DIVISION
OFFICERS
Frank E. Kulp, III
President and Chief Executive Officer
John B. Brownson
Executive Vice President and Chief Operating Officer
Gary L. Pralle
Vice President of Stores
G. Stephen Lindgren
Vice President of Marketing
Mari J. Johnson
Vice President and General Merchandise Manager
William C. Lewis
Vice President and General Merchandise Manager
Joseph W. Thebert
Vice President and General Merchandise Manager
STORE LOCATIONS
PROFFITT'S STORES
GEORGIA
Dalton
Rome
KENTUCKY
Ashland
Elizabethtown
NORTH CAROLINA
Asheville
TENNESSEE
Athens
Chattanooga (2)
Cleveland
Greeneville
Johnson City
Kingsport
Knoxville (2)
Maryville
Morristown
Oak Ridge
VIRGINIA
Bristol
West Virginia
Morgantown
McRAE'S STORES
ALABAMA
Birmingham (5)
Dothan
Florence
Gadsden
Huntsville (2)
Mobile
Montgomery
Selma
Tuscaloosa
FLORIDA
Mary Esther
Pensacola
LOUISIANA
Monroe
MISSISSIPPI
Columbus
Gautier
Greenville
Hattiesburg
Jackson (3)
Laurel
Meridian
Natchez
Tupelo
Vicksburg
YOUNKERS STORES
ILLINOIS
Moline
IOWA
Ames
Bettendorf
Cedar Falls
Cedar Rapids (2)
Davenport
Des Moines (4)
Dubuque
Fort Dodge
Iowa City
Marshalltown
Mason City
Sioux City (2)
West Burlington
MICHIGAN
Bay City
Holland
Marquette
Port Huron
Traverse City
MINNESOTA
Austin
NEBRASKA
Grand Island
Lincoln
Omaha (3)
SOUTH DAKOTA
Sioux Falls
WISCONSIN
Appleton
Eau Claire
Fond du Lac
Green Bay
Madison (2)
Manitowoc
Marinette
Marshfield
Milwaukee (2)
Racine
Sheboygan
Sturgeon Bay
Superior
Wausau
Wisconsin Rapids
PARISIAN STORES
ALABAMA
Birmingham (6)
Decatur
Dothan
Florence
Huntsville (2)
Mobile
Montgomery (2)
Tuscaloosa
FLORIDA
Jacksonville
Orlando
Pensacola
Tallahassee
GEORGIA
Atlanta (4)
Columbus
Macon
Savannah
INDIANA
Indianapolis (2)
MICHIGAN
Livonia
MISSISSIPPI
Tupelo
OHIO
Cincinnati (3)
Dayton
SOUTH CAROLINA
Columbia (2)
Greenville
TENNESSEE
Chattanooga
Knoxville
Nashville
HERBERGER'S STORES
COLORADO
Grand Junction
ILLINOIS
Urbana
IOWA
Ottumwa
Waterloo
MINNESOTA
Albert Lea
Alexandria
Bemidji
Brainerd
Fergus Falls
Mankato
Minneapolis
Moorhead
New Ulm
St. Cloud
St. Paul
Stillwater
VIRGINIA
Willmar
MONTANA
Billings
Butte
Great Falls
Havre
Kalispell
NEBRASKA
Hastings
Kearney
Norfolk
North Platte
Scottsbluff
NORTH DAKOTA
Dickinson
Bismarck
Minot
SOUTH DAKOTA
Aberdeen
Rapid City
Watertown
WISCONSIN
Appleton
Beaver Dam
La Crosse
Rice Lake
WYOMING
Rock Springs
The regions of the United States in which we operate have outstanding
growth potential.
SHAREHOLDER INFORMATION
SALES RELESE DATES FOR 1997
Sales Period Release Date
------------ --------------
February 1997 3/6/97
March 1997 4/10/97
April 1997 5/8/97
May 1997 6/5/97
June 1997 7/10/97
July 1997 8/7/97
August 1997 9/4/97
September 1997 10/9/97
October 1997 11/6/97
November 1997 12/4/97
December 1997 1/8/98
January 1998 2/5/98
EARNINGS RELEASE DATES FOR 1997
Quarter Release Date
------------- --------------
First 5/22/97
Second 8/21/97
Third 11/20/97
Fourth To be determined
ANNUAL MEETING
The Annual Meeting of Shareholders of Proffitt's, Inc. will be held at
8:30 a.m., June 19, 1997, at Proffitt's West Town Mall Store, 7600
Kingston Pike, Knoxville, Tennessee 37919. Shareholders are cordially
invited to attend.
INQUIRIES REGARDING YOUR STOCK HOLDINGS
Registered shareholders (shares held by you in your name) should
address communications regarding address changes, lost certificates,
and other administrative matters to the Company's Transfer Agent and
Registrar:
Union Planters National Bank
P.O. Box 387
Memphis, Tennessee 38147
(901) 580-5513 (telephone)
(901) 580-5411 (facsimile)
In all correspondence or telephone inquiries, please mention
Proffitt's, Inc., your name as printed on your stock certificate, your
social security number, your address, and your phone number.
Beneficial shareholders (shares held by your broker in the name of the
brokerage house) should direct communications on all administrative
matters to your stockbroker.
FINANCIAL AND OTHER INFORMATION
Copies of Proffitt's Form 10-K and 10-Q reports as filed with the SEC
and quarterly shareholders' reports are available free of charge by
contacting:
Investor Relations
Proffitt's, Inc.
P.O. Box 9388
Alcoa, Tennessee 37701
(423) 983-7000, ext. 410
Security analysts, portfolio managers, representatives of financial
institutions, and other individuals with questions regarding
Proffitt's, Inc. are invited to contact:
Julia Bentley
Senior Vice President of Investor Relations
P.O. Box 9388
Alcoa, Tennessee 37701
(423) 981-6243 (telephone)
(423) 981-6336 (facsimile)
Financial results, corporate news, and other Company information are
available on Proffitt's web site:
http://www.proffitts.com
CORPORATE INFORMATION
LEGAL COUNSEL
Sommer & Barnard, P.C.
Indianapolis, Indiana
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Birmingham, Alabama
PROFFITT'S DIVISION HOME OFFICES
115 North Calderwood
Alcoa, Tennessee 37701
(423) 983-7000
McRAE'S DIVISION HOME OFFICES
3455 Highway 80 West
Jackson, Mississippi 39209
(601) 968-4400
YOUNKERS DIVISION HOME OFFICES
701 Walnut Street
Des Moines, Iowa 50397
(515) 244-1112
PARISIAN DIVISION HOME OFFICES
750 Lakeshore Parkway
Birmingham, Alabama 35211
(205) 940-4000
HERBERGER'S DIVISION HOME OFFICES
600 Mall Germain
St. Cloud, Minnesota 56301
(320) 251-5351
X:\WPDATA\JAS\PROFFITT\SECURITI\10-K.497\EX-13-1.ASC
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
PROFFITT'S, INC. AND SUBSIDIARIES
Name of Subsidiary State of Incorporation
G.R. Herberger's, Inc. Delaware
McRae's, Inc. Mississippi
McRae's of Alabama, Inc. Alabama
McRae's Stores Partnership, G.P. Mississippi
Parisian, Inc. Alabama
Proffitt's Credit Corporation Nevada
Younkers Credit Corporation Delaware
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statements on Form S-8 (File Nos. 33-88390 and 333-25213) of our
report dated March 20, 1997 on our audits of the consolidated
financial statements of Proffitt's, Inc. and Subsidiaries as of
February 1, 1997 and February 3, 1996, for each of the three years
in the period ended February 1, 1997 which report is incorporated
by reference in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
April 28, 1997
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in these
Registration Statements of Proffitts, Inc. on Form S-8 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, appearing in this Annual Report on
Form 10-K of Proffitts, Inc. for the year ended January 25,
1997.
Des Moines, Iowa
April 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<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>
